UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K

 

       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
   
For the fiscal year ended December 25, 2015
   
OR
   
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____________ to ____________
 
Commission file number: 001-35249
   
THE CHEFS’ WAREHOUSE, INC.
   
(Exact name of registrant as specified in its charter)

  

Delaware   20-3031526
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
100 East Ridge Road
Ridgefield, Connecticut
  06877
(Address of principal executive offices)   (Zip Code)
     
Registrant’s telephone number, including area code: (203) 894-1345
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class   Name of each exchange on which registered
Common Stock, $.01 par value per share   The Nasdaq Stock Market LLC (Nasdaq Global Select Market)
 
Securities registered pursuant to Section 12(g) of the Act: None
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐  No ☒

 

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 ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  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 amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☒
     
Non-accelerated filer ☐ (Do not check if a smaller reporting company)   Smaller reporting company ☐
     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second quarter (June 26, 2015): $437,284,042

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding at February 26, 2016
Common Stock, $.01 par value per share   26,282,260 shares

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Document   Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders
expected to be held on May 14, 2016 (Proxy Statement)
  Part III

 

 

 

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THE CHEFS’ WAREHOUSE, INC.

 

INDEX

         
    Description   Page
Number
         
Part I      
  Item 1 Business   4
  Item 1A Risk Factors   14
  Item 1B Unresolved Staff Comments   28
  Item 2 Properties   28
  Item 3 Legal Proceedings   28
  Item 4 Mine Safety Disclosures   29
         
Part II      
  Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   30
  Item 6 Selected Financial Data   32
  Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations   34
  Item 7A Quantitative and Qualitative Disclosures About Market Risk   46
  Item 8 Consolidated Financial Statements and Supplementary Data   47
  Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   72
  Item 9A Controls and Procedures   72
  Item 9B Other Information   74
         
Part III      
  Item 10 Directors, Executive Officers and Corporate Governance   74
  Item 11 Executive Compensation   74
  Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   74
  Item 13 Certain Relationships and Related Transactions, and Director Independence   74
  Item 14 Principal Accounting Fees and Services   74
         
Part IV      
  Item 15 Exhibits and Financial Statement Schedules   75
         
Signatures     81

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K of The Chefs’ Warehouse, Inc. contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations, our strategic plans and objectives, cost management, liquidity and ability to refinance our indebtedness as it matures, anticipated capital expenditures (and access to capital) required to complete projects, amounts of cash distributions to our stockholders in the future, if any, and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

 

Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. Investors in our common stock are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the following:

 

·our success depends to a significant extent upon general economic conditions, including disposable income levels and changes in consumer discretionary spending;

·a significant portion of our future growth is dependent upon our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions;

·we may not achieve the benefits expected from our acquisitions, including our recent acquisition of Del Monte, which could adversely impact our business and operating results;

·we may have difficulty managing and facilitating our future growth;

·conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network;

·our increased distribution of center-of-the-plate products, like meat, poultry and seafood, following our acquisitions of Michael’s Finer Meats, LLC (“Michael’s”), Allen Brothers, Inc. (“Allen Brothers”) and Del Monte Capital Meat Co. and related entities (“Del Monte”), involves risks that we have not historically faced;

·our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures;

·group purchasing organizations may become more active in our industry and increase their efforts to add our customers as members of these organizations;

·because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas;

·damage to our reputation or lack of acceptance of our specialty food products, center-of-the-plate products and/or the brands we carry in existing and new markets could materially and adversely impact our business, financial condition or results of operations;

·our customers are generally not obligated to continue purchasing products from us;

·we have experienced losses due to our inability to collect accounts receivable in the past and could experience increases in such losses in the future if our customers are unable to pay their debts to us in a timely manner or at all;

·product liability claims could have a material adverse effect on our business, financial condition or results of operations;

·Fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations;

·new information or attitudes regarding diet and health or adverse opinions about the health effects of the products we distribute could result in changes in consumer eating habits, which could have a material adverse effect on our business, financial condition or results of operations;

·we have significant competition from a variety of sources, and we may not be able to compete successfully;

·our substantial indebtedness may limit our ability to invest in the ongoing needs of our business;

·our ability to raise capital in the future may be limited;

·we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all;

·information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business;

·our investments in information technology may not produce the benefits that we anticipate;

 

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·we may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business;

·our business operations and future development could be significantly disrupted if we lose key members of our management team;

·our insurance policies may not provide adequate levels of coverage against all claims, and fluctuating insurance requirements and costs could negatively impact our profitability. In addition, if we fail to establish proper reserves and adequately estimate future expenses, the costs associated with our self-insured group medical, workers’ compensation liability and auto liability plans may adversely affect our business, financial condition or results of operations;

·increases in our labor costs, including as a result of labor shortages, the unionization of some of our associates, the price or unavailability of insurance and changes in government regulation, could slow our growth or harm our business;

·we are subject to significant governmental regulation and failure to comply could subject us to enforcement actions, recalls or other penalties, which could have a material adverse effect on our business, financial condition or results of operations;

·federal, state, provincial and local tax rules in the United States and Canada may adversely impact our business, financial condition or results of operations;
 ·the price of our common stock may be volatile and our stockholders could lose all or a part of their investment;

·concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions;

·if securities analysts or industry analysts downgrade our stock, publish negative research or reports or do not publish reports about our business, our stock price and trading volume could decline;

·we do not intend to pay dividends for the foreseeable future and our stock may not appreciate in value;

·our issuance of preferred stock or debt securities could adversely affect holders of our common stock and discourage a takeover; and

·some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

 

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. Investors in our common stock should carefully review the risks that are set forth under the caption “Risk Factors” included in Part I, Item 1A of this Form 10-K.

 

Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms “The Chefs’ Warehouse,” “we,” “our,” “our Company,” “the Company” or “us” as used in this Form 10-K refer to The Chefs’ Warehouse, Inc. and its subsidiaries.

 

Item 1.BUSINESS

 

We are a premier distributor of specialty food products in the United States and Canada. We are focused on serving the specific needs of chefs who own and/or operate some of the leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores in the United States and Canada. We believe that we have a distinct competitive advantage in serving these customers as a result of our extensive selection of distinctive and hard-to-find specialty and center-of-the-plate food products, our product knowledge and our customer service.

 

We define specialty food products as gourmet foods and ingredients that are of the highest grade, quality or style as measured by their uniqueness, exotic origin or particular processing method. Our product portfolio includes over 34,000 stock-keeping units (“SKUs”) from more than 1,700 different suppliers and is comprised primarily of imported and domestic specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate and pastry products. We also offer an extensive line of center-of-the-plate products, including custom cut beef, seafood and hormone-free poultry, as well as broadline food products, such as cooking oils, butter, eggs, milk and flour. When marketing our products to our customers, we focus our efforts on chefs, and we believe that, by offering a wide selection of both distinctive and hard-to-find products, together with center-of-the-plate proteins and staple broadline food products, we are able to differentiate ourselves from larger, traditional broadline foodservice distributors, while simultaneously enabling our customers to utilize us as their primary foodservice distributor. Additionally, as a result of our acquisition of Allen Brothers in December 2013, we market certain of our center-of-the-plate products directly to consumers through a mail and e-commerce platform.

 

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Since the formation of our predecessor in 1985, we have expanded our distribution network, product selection and customer base both organically and through acquisitions. From December 30, 2011 to December 25, 2015, our net revenues increased from approximately $401 million to approximately $1,059 million. During these periods and in prior years, our sales to both new and existing customers have increased as a result of an increase in the breadth and depth of our product portfolio, our commitment to customer service, the efforts of our experienced and sophisticated sales professionals, the increased use of technology in the operations and management of our business and our ongoing consolidation of the fragmented specialty foodservice distribution industry. Since April 2012, we have completed seven acquisitions which have increased our penetration in existing markets, expanded our footprint into new markets and/or enhanced our product capabilities. The up-front cash purchase prices for these seven acquisitions ranged from $2.0 million to $123.9 million, resulting in aggregate up-front cash consideration of more than $275.0 million, which we funded with borrowings under our existing senior secured credit facilities, a portion of which we repaid with proceeds from the issuance of $125.0 million of senior secured notes in April 2013 and April 2015, and the proceeds of our common stock offering completed in September 2013.

 

Excluding our direct-to-consumer business, we currently serve more than 26,000 customer locations in our fifteen primary geographic markets across the United States and Canada, including New York, Washington, D.C., Los Angeles, San Francisco, Las Vegas, Miami, Portland, Seattle, Columbus, Cincinnati, Chicago, Sacramento, Vancouver, Edmonton and Toronto. By leveraging an experienced and sophisticated sales force of approximately 416 sales and customer service professionals, we maintain collaborative relationships with thousands of chefs while also acting as a critical marketing arm and route-to-market for many of our suppliers. We operate 25 distribution centers and provide service six days a week in many of our service areas, utilizing our fleet of delivery trucks to fill our customers’ orders.

 

Competitive Strengths

 

We believe that, during our over 30-year history, we have achieved, developed and/or refined the following strengths which provide us with a distinct competitive position in the foodservice distribution industry and also the opportunity to achieve superior margins relative to most large broadline foodservice distributors:

 

Leading Distributor of Specialty Food Products in Many of the Key Culinary Markets. Based on our management’s industry knowledge and experience, we believe we are the largest distributor of specialty food products, as measured by net sales, in the New York, Washington, D.C., San Francisco and Los Angeles metropolitan markets. We believe these markets, along with a number of other markets we serve, including Las Vegas, Miami, Philadelphia, Boston, Napa Valley, Portland, Seattle, Chicago, Cincinnati, Vancouver and Toronto, create and set the culinary trends for the rest of the United States and Canada and provide us with valuable insight into the latest culinary and menu practices. Furthermore, we believe our established relationships with many of the top chefs, culinary schools and dining establishments in these key culinary markets have benefited us when we entered into new markets where we believe that chefs at our potential customers were generally knowledgeable of our brand and commitment to quality and excellence from their experience working in other markets which we serve or through their personal relationships throughout the culinary industry.

 

Expansive Product Offering. We offer an extensive portfolio of high-quality specialty food products, ranging from basic ingredients and staples, such as milk and flour, to custom cut steaks and seafood and pastries, as well as delicacies and specialty ingredients sourced from North America, Europe, Asia and South America, which we believe helps our customers distinguish their menu items. We carry more than 34,000 SKUs and we constantly evaluate our portfolio and introduce new products to address regional trends and preferences and ensure that we are on the leading edge of broader culinary trends. Through our importing division, we provide our customers with access to a portfolio of exclusive items, including regional olive oils, truffles and charcuterie from Italy, Spain, France and other Mediterranean countries. In addition, and as evidence of our commitment to aid our customers in creating unique and innovative menu items, we regularly utilize our sourcing relationships and industry insights to procure additional products that we do not regularly carry but that our customers specifically request. We believe that the breadth and depth of our product portfolio facilitates our customers’ ability to distinguish and enhance their menu offerings and differentiates us from larger traditional broadline foodservice distributors. For example, we provide a selection of more than 200 different varieties of olive oil, while large broadline foodservice distributors only carry, on average, 5-10 types of olive oil.

 

Critical Route-to-Market for Specialty Food Suppliers. We currently distribute products from more than 1,700 different suppliers. Our suppliers are located throughout North America, Europe, Asia and South America and include numerous small, family-owned entities and artisanal food producers. We are the largest customer for many of our suppliers. As a result, our experienced and sophisticated sales professionals, customer relationships and distribution platform are important to these suppliers’ route-to-market, which enables us to offer a wide range of products on an exclusive basis.

 

Expanding Base of Premier Customer Relationships. Our breadth and depth of product offerings coupled with our highly regarded customer service has allowed us to develop and retain a loyal customer base that is comprised of chefs who own or work at more than 26,000 of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores. Our focus on product selection, product knowledge and customer service has rewarded us with a number of long-term customer relationships, which often begin when chefs are introduced to us while attending the nation’s leading culinary schools, including The Culinary Institute of America and The French Culinary Institute, both of which have been customers of ours for more than eight years. Based on our management’s industry experience and our relationships and dealings with our customers, we believe we are the primary distributor of specialty food products to the majority of our customers that are not part of our direct-to-consumer center-of-the-plate business.

 

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Collaborative Professional and Educational Relationships with our Customers. We employ a sophisticated and experienced sales force of approximately 400 sales and customer service professionals, a significant number of whom have formal culinary training, degrees in the culinary arts or prior experience working in the culinary industry. Equipped with advanced culinary and industry knowledge, our sales professionals seek to establish a rapport with our customers’ chefs, so that they can more fully understand and anticipate the needs of and offer cost-effective food product solutions to the chefs who own or operate these businesses. We believe that the specialized knowledge base of our sales professionals enables us to take a more collaborative and educational approach to selling our gourmet foods and ingredients and to further differentiate ourselves from our traditional broadline competitors.

 

Expertise in Logistics and Distribution. We have built a first-class, scalable inventory management and logistics platform that enables us to efficiently fill our customers’ orders and to profitably meet our customers’ needs for varying drop sizes, high service levels and timely delivery. Our average distribution service level, or the percentage of in-stock items ordered by customers that are not part of our direct-to-consumer center-of-the-plate business that were delivered by the requested date, was in excess of 97% in 2015, which we believe is among the highest rates in the foodservice distribution industry. With 25 distribution centers located throughout the United States and Canada, we are able to leverage our geographic footprint and reduce our inbound freight costs. This scale enables us to maintain a portfolio of more than 34,000 SKUs, and through the operation of our sophisticated information technology, inventory management and logistics systems, we believe we provide our customers with some of the highest levels of customer service and responsiveness in our industry.

 

Experienced and Proven Management Team. Our senior management team has demonstrated the ability to grow the business through various economic environments. With collective experience of more than 90 years at The Chefs’ Warehouse, its predecessor and other foodservice distribution companies, our founders and senior management are experienced operators and are passionate about our future. Our senior management team is comprised of our founders, as well as experienced professionals with expertise in the foodservice distribution industry and in a wide range of functional areas, including finance and accounting, sales and marketing, operations, information technology, legal and human resources.

 

Our Growth Strategies

 

We believe substantial organic growth opportunities exist in our current markets through increased penetration of our existing customers and the addition of new customers, and we have identified new markets that we believe also present opportunities for future expansion. Key elements of our growth strategy include the following:

 

Increase Penetration with Existing Customers. We intend to sell more products to our existing customers by increasing the breadth and depth of our product selection and increasing the efficiency of our sales professionals, while at the same time continuing to provide excellent customer service. We are a data-driven and goal-oriented organization, and our management and sales professionals are highly focused on our weekly sales and gross profit contribution from each of our non-direct-to-consumer customers and increasing the number of unique products we distribute to such customers. We believe our acquisition activity since our initial public offering reflects this focus, as we have sought to complement our existing product offerings and enhance our product capabilities through our April 2015 acquisition of Del Monte, a supplier of high quality, USDA inspected beef, pork, lamb, veal, poultry and seafood products, our October 2014 acquisition of Euro Gourmet Inc. (“Euro Gourmet”), a wholesale specialty distributor of imported and domestic products, our December 2013 acquisition of Allen Brothers, a leading processor and distributor of premium quality meats, our May 2013 acquisition of Qzina Specialty Foods North America Inc. (“Qzina”), a leading supplier of gourmet chocolate, dessert and pastry products, and our August 2012 acquisition of Michael’s, a specialty protein distributor which specializes in custom cut beef, seafood and other center-of-the-plate products.

 

Expand our Customer Base Within our Existing Markets. As of December 25, 2015, we served more than 26,000 customer locations, excluding our direct-to-consumer business, in the United States and Canada. We plan to expand our market share in the fragmented specialty food distribution industry by cultivating new customer relationships within our existing markets through the continued penetration of menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores. We believe we have the opportunity to continue to gain market share in our existing markets by offering an extensive selection of specialty food products, as well as center-of-the-plate proteins and traditional broadline staple food products through our unique, collaborative and educational sales efforts and efficient, scalable distribution solution.

 

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Improve our Operating Margins. As we continue to grow, we believe that the investments we are making in our inventory management and logistics platform, along with improved efficiencies that we are working to achieve in our general and administrative functions, should yield both improved customer service and profitability. Utilizing our fleet of delivery trucks, we usually fill customer orders within 12-24 hours of order placement. We intend to continue to offer our customers this high level of customer service, while maintaining our focus on realizing efficiencies and economies of scale in purchasing, warehousing, distribution and general and administrative functions which, when combined with incremental fixed-cost leverage, we believe will lead to continued improvements in our operating margin over time.

 

Pursue Selective Acquisitions. Throughout our over 30-year history, we have successfully identified, consummated and integrated multiple strategic acquisitions, which were designed to increase our penetration in existing markets, expand our footprint into new markets and/or enhance our product capabilities. We believe that, over time, we will be able to improve the operations and overall profitability of each acquired company by leveraging our sourcing relationships to provide an expanded product portfolio, implementing our tested sales force training techniques and metrics and installing improved warehouse management and information systems. We believe we have the opportunity to capitalize on our existing infrastructure and expertise by continuing to selectively pursue opportunistic acquisitions in order to expand the breadth of our distribution network, increase our operating efficiency and add additional products and capabilities. Since our initial public offering (“IPO”), we have completed seven acquisitions which have increased our penetration in existing markets, expanded our footprint into new markets and enhanced our product capabilities. During fiscal 2014 we implemented an “integration team” that is dedicated to onboarding new acquisitions as quickly and efficiently as possible. We expect the integration team to help streamline the acquisition process and anticipate that it will enable us to achieve expected benefits and synergies more quickly. Having a team dedicated to integration will help us make sure the people, processes and products we add through acquisitions are consistent with the rest of our business and will allow our management team to focus its attention on our day-to-day operations.

 

Our Markets and the Customers that We Serve

 

Excluding our direct-to-consumer business, we distribute our specialty food products to over 26,000 distinct customer locations from distribution centers located in our primary markets, which include New York, Washington, D.C., San Francisco, Los Angeles, Las Vegas, Miami, Portland, Seattle, Columbus, Cincinnati, Chicago, Vancouver, Edmonton and Toronto. We also serve customers in a number of other markets, including Philadelphia, Boston and Napa Valley. We believe that many of these markets set the culinary trends for the rest of the United States and Canada and provide us with valuable insight into the latest culinary and menu trends. We have established collaborative professional and educational relationships with some of the United States’ and Canada’s most demanding chefs, which allows us to anticipate the needs of, and offer cost-effective food product solutions to, our customers while allowing our customers to locate ingredients that will enable them to create unique and differentiated menu items. Our target customers include menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores. We have no meaningful customer concentration as our top ten customers accounted for less than 12% of total net sales for our 2015 fiscal year.

 

Additionally, as a result of our acquisition of Allen Brothers in December 2013, we have also begun to market certain of our center-of-the-plate proteins directly to consumers through a mail and e-commerce platform.

 

Set forth below is a breakdown of the primary geographic markets we serve and the year we entered each market:

 

MARKET NAME   GEOGRAPHIES SERVED   YEAR ENTERED
New York   Boston to Atlantic City   1985
Washington, D.C.   Philadelphia to Richmond   1999
Los Angeles   Santa Barbara to San Diego   2005
San Francisco   Napa Valley to Monterey Bay   2005
Las Vegas   Las Vegas   2005
Miami   Miami   2010
Portland   Bend, OR to Seattle, WA   2011
Columbus   Midwest   2012
Cincinnati   Dayton, OH to Lexington, KY   2013
Chicago   Chicago   2013
Vancouver   Vancouver and Western Canada   2013
Edmonton   Edmonton and Calgary   2013
Toronto   Toronto   2013
Seattle   Seattle   2013
Sacramento   Sacramento   2015

 

We extend credit to virtually all of our non-direct-to-consumer customers on varying terms. Most of our customers have payment terms from 20-60 days. We complete a formal credit assessment of all new non-direct-to-consumer customers, and our Credit and Collections Department regularly evaluates credit terms for each such customer based upon several factors, including order frequency, average order size, the types of products purchased and the length of the relationship. We believe that we are skilled at managing customer credit.

 

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Our Specialty Food Products

 

We strive to be the primary food source solution for our customers, and, to this end, we offer our customers a comprehensive product portfolio that ranges from basic ingredients and staples, such as milk and flour, to custom-cut steaks and seafood and pastries, as well as delicacies and specialty ingredients sourced from North America, Europe, Asia and South America. We carry more than 34,000 SKUs and we are fully committed to utilizing our sourcing relationships and industry insights to procure products that we do not regularly carry but that our customers specifically request as they seek to create unique and innovative menu items.

 

The sales mix for the principal product categories for each of the 2015, 2014 and 2013 fiscal years is as follows (dollars in thousands):

 

    December 25, 2015   December 26, 2014   December 27, 2013
                         
Center of Plate   $ 497,378       47 %   $ 311,336       37 %   $ 214,004       32 %
Dry Goods     186,119       18 %     169,933       20 %     144,591       22 %
Pastries and other Bakery Products     143,806       14 %     140,865       17 %     118,876       18 %
Cheeses     88,589       8 %     83,065       10 %     76,400       11 %
Dairy Products     67,530       6 %     58,148       7 %     47,545       7 %
Oils and Vinegars     58,245       5 %     56,859       7 %     55,736       8 %
Kitchen Supplies     17,329       2 %     16,419       2 %     16,393       2 %
Total   $ 1,058,996       100 %   $ 836,625       100 %   $ 673,545       100 %

 

We continuously evaluate potential additions to our product portfolio based on both existing and anticipated trends in the culinary industry. Our buyers have numerous contacts with suppliers throughout North America, Europe, Asia and South America and are always looking for new and interesting products that will aid our customers as they seek to keep up with the latest developments in the culinary industry. Our ability to successfully distribute a significant portion of the total production of smaller, regional and artisanal specialty food producers allows us the opportunity to be these producers’ primary route-to-market in our markets without, in most cases, requiring us to make contractual commitments regarding guaranteed volume. We are also able to utilize our size and successful track record of distributing products sourced from outside the United States and Canada to resist efforts from many of our foreign suppliers to push importing costs off onto us.

 

We seek to differentiate ourselves from our competitors by offering a more extensive depth and breadth of specialty products. We carry a wide range of high-quality specialty food products, including artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate and pastry products across each of our markets, but we also offer a number of items in each of our respective markets that are tailored to meet the unique preferences of the individual chefs in that market. We regularly rotate our inventory to identify and bring to market new products that will continue to support our value proposition.

 

Within our product offerings, we carry numerous gourmet brands, and at the same time, we seek to maximize product contribution through the sale of our proprietary brands, which we offer in a number of staple products, including bulk olive oil, Italian grating cheeses and butter. We believe that our ability to offer simultaneously high-quality specialty foods and ingredients, center-of-the-plate products and more traditional broadline staple food products provides our customers with foodservice distribution solutions that are efficient and cost effective.

 

Our Sophisticated and Experienced Sales Professionals

 

We employ a sophisticated and experienced sales force of approximately 400 sales and customer service professionals focused on meeting our customers’ goals and objectives, while concurrently educating them regarding our latest products and broader culinary trends. To ensure a high level of customer service, we seek to maintain a ratio of approximately one sales professional for every 67 of our customers, excluding our direct-to-consumer customers. Our sales force is composed of the following three distinct groups which are all focused on providing outstanding service to our customers:

 

·Outside Sales Associates: Responsible for identifying sales opportunities, educating customers and acting as our public representatives.

 

·Inside Sales Associates: Responsible for processing customer orders and arranging for delivery and payment.

 

·Product Specialists: Responsible for maintaining specialized product knowledge and educating our outside sales associates and customers regarding new products and general developments in several specific categories, including protein, seafood, pastry and cheese.

 

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A significant number of our sales professionals have formal culinary training, degrees in the culinary arts and/or prior experience working in the culinary industry. We strive to harness this culinary knowledge and passion for food and to concurrently promote an entrepreneurial working environment. Utilizing advanced pricing optimization software available to them on a real-time basis, our sales professionals are afforded flexibility to determine the pricing of individual items for our customers within a range of pricing options. The majority of our outside sales professionals are compensated on a commission basis, and their performance is measured primarily upon their gross profit dollars obtained. We have historically experienced low turnover among our seasoned sales professionals.

 

Because we are highly focused on collaborating with our customers and educating them regarding our latest products and broader culinary trends, we view the ongoing education and training of our sales force as crucial to our continued success. To ensure that our sales professionals remain on the forefront of new culinary products and trends, we regularly hold “vendor shows” at our distribution centers, where our sales force is able to interact with vendors and learn more about the vendors’ latest product offerings and the performance of these products relative to competitive offerings.

 

Our Suppliers

 

We are committed to providing our customers with an unrivaled portfolio of specialty food products, as well as a comprehensive broadline product offering and center-of-the-plate products. To fulfill this commitment, we maintain strong sourcing relationships with numerous producers of high-quality artisan and regional specialty food products, as well as a wide range of broadline product suppliers and protein vendors. Our importing arm also provides us with access to exclusive items such as regional olive oils, truffles and charcuterie sourced from Italy, Spain, France and other Mediterranean countries.

 

We constantly seek out and evaluate new products in order to satisfy our customers’ desire to be at the forefront of the latest culinary and menu trends, and, as evidence of our commitment to aid our customers in creating unique and innovative menu items, we regularly utilize our sourcing relationships and industry insights to procure other products that we do not regularly carry but that our customers specifically request.

 

We currently distribute products from more than 1,700 different suppliers. We carry multiple products and utilize multiple suppliers in all of our product categories, thereby eliminating our dependence upon any single supplier. Additionally, we seek to limit commodity risk by utilizing sophisticated forecasting and inventory management systems to minimize the inventory carrying time of commodity-oriented products and by leveraging the specialized product knowledge of our product specialists to manage purchasing and inventory levels when appropriate.

 

Our Operations and Distribution Centers

 

Operating out of 25 distribution centers of varying size and providing service six days a week in many areas, we utilize our fleet of delivery trucks to fill customer orders, usually within 12-24 hours of order placement. Our average distribution service level, or the percentage of in-stock items ordered by customers that were delivered by the requested date, was in excess of 97% as of fiscal year ended December 25, 2015, which our management believes is among the highest in the foodservice distribution industry. To achieve these high service levels, we have invested significantly in sophisticated warehousing, inventory control and distribution systems, as described in more detail below.

 

We have begun to implement pick-to-voice technology in each of our distribution facilities, which will enable our warehouse employees to fill orders with greater speed and accuracy.

 

Products are delivered to our distribution centers primarily by contract carriers, the suppliers themselves and our fleet of trucks. We lease our trucks from national leasing companies and regional firms that offer competitive services. Customer orders are assembled in our distribution centers and then sorted, placed on pallets and loaded onto trucks and trailers in delivery sequence. The majority of our trucks and delivery trailers have multiple, temperature-controlled compartments that ensure all product is delivered to the customer at its optimal temperature.

 

We employ advanced routing and logistics planning software, which maximizes the number of daily deliveries that each of our trucks can make, while also enabling us to typically make deliveries within each customer’s preferred 2-3 hour time window. For our direct-to-consumer business, we ship through nationally recognized couriers. We also use GPS and vehicle monitoring technology to regularly evaluate the condition of our delivery trucks and monitor the performance of our drivers, by tracking their progress relative to their delivery schedule and providing information regarding hard braking, idling and fast starts. Our use of this technology allows us to conduct proactive fleet maintenance, provide timely customer service and improve our risk management.

 

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Our Technology Systems

 

We maintain an advanced information technology platform that enables us to manage our operations across our various markets, as we seek to drive our growth and profitability and ensure that the needs of our customers are met in an accurate and efficient manner. We have made significant investments in distribution, sales, information and warehouse management systems over the last seven years, and are in the process of implementing a fully-integrated ERP system. We are also in the process of implementing a fully integrated warehouse management system at some of our recently acquired distribution facilities. Our systems improvements include the implementation or enhancement of a web-based purchasing and advanced planning system that provides advanced forecasting and planning tools, vehicle monitoring and route optimization software and pick-to-voice and directed put-away systems. Over the last five years, we have also implemented an internally developed, web-based reporting tool which provides real-time sales, pricing and profitability analysis for our management and sales professionals. These improvements have been made in an effort to improve our efficiency, as we continue to grow our business. We believe that our current systems are scalable and can be leveraged to support our future growth.

 

Intellectual Property

 

Except for the Spoleto, Bel Aria, Grand Reserve, Provvista, Argonaut, Praml, Black Falls, Michael’s, Chocoa, Crescendo, Matisse, Qzina, Coccinelle, Allen Brothers, The Great Steakhouse Steaks, Del Monte and The Chefs’ Warehouse trademarks, we do not own or have the right to use any patent, trademark, trade name, license, franchise or concession, the loss of which would have a material adverse effect on our business, financial condition or results of operations.

 

Competition

 

The foodservice distribution industry is highly competitive. We compete with numerous smaller distributors on a local level, as well as with a limited number of national broadline foodservice distributors. Certain of these distributors have greater financial and other resources than we do. Bidding for contracts or arrangements with customers, particularly larger hotels and caterers, is highly competitive and distributors may market their services to a particular customer over a long period of time before they are invited to bid. We believe that most purchasing decisions in the foodservice distribution industry are based upon the quality and price of the product distributed and the distributor’s ability to completely and accurately fill orders and deliver them in a timely manner.

 

Employees

 

As of December 25, 2015, we had 1,693 full-time employees, 125 of whom currently operate under a collective bargaining agreement. This collective bargaining agreement expires in August 2017. We had 149, or 8.8%, of our employees (including the 125 who operate under a collective bargaining agreement) are represented by unions. We offer attractive compensation and benefit packages, and we believe our relationship with our employees is satisfactory.

 

Regulation

 

As a distributor of specialty food products and meat and seafood in the United States and Canada, we are subject to regulation by numerous international, federal, state, provincial and local regulatory agencies. For example, at the U.S. federal level, we are subject to the Federal Food, Drug and Cosmetic Act, the Bioterrorism Act and regulations promulgated by the U.S. Food and Drug Administration (“FDA”). The FDA regulates manufacturing and holding requirements for foods, specifies the standards of identity for certain foods and prescribes the format and content of certain information required to appear on food product labels, among other responsibilities. For certain product lines, we are also subject to the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Country of Origin Labeling Act and regulations promulgated thereunder by the U.S. Department of Agriculture (“USDA”). The USDA imposes standards for product quality and sanitation, including the inspection and labeling of meat and poultry products and the grading and commercial acceptance of produce shipments from vendors. In January 2011, President Obama signed into law the FDA Food Safety Modernization Act, which greatly expands the FDA’s authority over food safety, including giving the FDA power to order the recall of unsafe foods, increase inspections at food processing facilities, issue regulations regarding the sanitary transportation of food, enhance tracking and tracing requirements and order the detention of food that it has “reason to believe” is adulterated or misbranded, among other provisions. The products we distribute in Canada are also subject to regulation and inspection by Health Canada and the Canadian Food Inspection Agency. Our suppliers are also subject to similar regulatory requirements and oversight. The failure to comply with applicable regulatory requirements could result in civil or criminal fines or penalties, product recalls, closure of facilities or operations, the loss or revocation of existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business.

 

We are also subject to state and local regulation through such measures as the licensing of our facilities, enforcement by state and local health agencies of state and local standards for our products and facilities and regulation of our trade practices in connection with the sale of products. Our facilities are generally inspected at least annually by federal and/or state authorities. These facilities are also subject to inspections and regulations issued pursuant to the Occupational Safety and Health Act by the U.S. Department of Labor, which require us to comply with certain manufacturing, health and safety standards to protect our employees from accidents and to establish hazard communication programs to transmit information about the hazards of certain chemicals present in certain products that we distribute. Our Canadian warehouse, distribution facilities, repackaging activities and other operations also are subject to regulation and inspection by the Canadian Food Inspection Agency and provincial health authorities.

 

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Our trucking operations are regulated by the Surface Transportation Board, the Federal Highway Administration, Transport Canada and Canadian provincial transportation authorities. In addition, interstate motor carrier operations are subject to safety requirements prescribed by the U.S. Department of Transportation and other relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state regulations. We believe that we are in compliance with applicable regulatory requirements relating to our motor carrier operations. Our failure to comply with the applicable motor carrier regulations could result in substantial fines or revocation of our operating permits.

 

Our operations are subject to a broad range of federal, state, provincial and local environmental health and safety laws and regulations, including those governing discharges to air, soil and water, the handling and disposal of hazardous substances and the investigation and remediation of contamination resulting from releases of petroleum products and other hazardous substances.

 

We believe that we are in material compliance with all international, federal, state, provincial and local regulations applicable to our operations, and management is unaware of any related issues that may have a material adverse effect upon our business, financial condition or results of operations.

 

Litigation and Insurance

 

We may be subject to lawsuits, claims and assessments in the normal course of business. Our management does not believe that there are any suits, claims or unasserted claims or assessments pending which would have a material adverse effect on our operations or financial condition.

 

We maintain comprehensive insurance packages with respect to our facilities, equipment, product liability, directors and officers, workers’ compensation and employee matters in amounts which management believes to be prudent and customary within the foodservice distribution industry.

 

Seasonality

 

Excluding our direct-to-consumer business, we generally do not experience any material seasonality. However, our sales and operating results may vary from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, personnel changes, demand for our products, supply shortages, weather patterns and general economic conditions.

 

Our direct-to-consumer business is subject to seasonal fluctuations, with direct-to-consumer center-of-the-plate protein sales typically higher during the holiday season in our fourth quarter; accordingly, a disproportionate amount of operating cash flows from this portion of our business is generated in the fourth quarter. Despite a significant portion of these sales occurring in the fourth quarter, there are operating expenses, principally advertising and promotional expenses, throughout the year.

 

Inflation

 

Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our customers. The impact of inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our operations.

 

Available Information

 

Our principal executive office is located at 100 East Ridge Road, Ridgefield, Connecticut 06877, and our telephone number is (203) 894-1345. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports will be made available free of charge through the Investor Relations section of our website (http://www.chefswarehouse.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Material contained on our website is not incorporated by reference into this report.

 

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We have also adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer and controller. Our Code of Ethics is publicly available on the Investor Relations section of our website (http://www.chefswarehouse.com) and is available free of charge by writing to The Chefs’ Warehouse, Inc., 100 East Ridge Road, Ridgefield, Connecticut 06877, Attn: Investor Relations. If we make any substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, we intend to make any legally required disclosures regarding such amendments or waivers on the Investor Relations section of our website (http://www.chefswarehouse.com).

 

Please note that our website address is provided as an inactive textual reference only.

 

The public may also read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC located at http://www.sec.gov.

 

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Executive Officers

 

NAME & POSITION AGE BUSINESS EXPERIENCE
     
Christopher Pappas
President, Chief Executive Officer and Chairman of the Board of Directors
56 Christopher Pappas is our founder and has served as our chief executive officer since 1985 and has been a director on our board and our board chairman since our IPO, and he also served as a director and the chairman of the board of our predecessor company, Chefs’ Warehouse Holdings, LLC. He has been our president since April 11, 2009 and before that was our president from our formation to January 1, 2007. Prior to founding our company, Mr. C. Pappas played basketball professionally in Europe for several years following his graduation from Adelphi University in 1981 with a Bachelor of Arts degree in Business Administration. Mr. C. Pappas currently oversees all of our business activities, with a focus on product procurement, sales, marketing, strategy development, business development and operations.
     
John Pappas
Vice Chairman and Director
52 John Pappas is a founder of our company and currently serves as our vice chairman, a position he has held since March 1, 2011. From our founding in 1985 to March 1, 2011, he served as our chief operating officer. Mr. J. Pappas has been a director on our board since our IPO, and he also served as a director on the board of our predecessor company, Chefs’ Warehouse Holdings, LLC. He has over 30 years of experience in logistics, facility management and global procurement and oversees our network of distribution centers nationwide. Mr. J. Pappas is also active in the development of our corporate strategy.
     
John Austin
Chief Financial Officer & Assistant Corporate Secretary
54 John Austin is our chief financial officer and assistant corporate secretary, positions he has held since July 1, 2012. Prior to joining our company he was a founder and chief financial officer of The Hilb Group, LLC, a regional mid-market insurance brokerage firm formed in 2009 which focused primarily on property and casualty insurance and employee benefits services. Prior to joining The Hilb Group in 2009, Mr. Austin was employed by Performance Food Group Company (“PFG”), a Richmond, Virginia-based publicly-traded foodservice distributor, from 1995 to 2009. Mr. Austin served his last six years at PFG as that company’s chief financial officer. Prior to joining PFG, Mr. Austin spent four years as the assistant controller for General Medical Corporation, a Richmond, Virginia-based distributor of medical supplies. He also spent the first six years of his career in public accounting, primarily with the Richmond, Virginia office of Deloitte & Touche.
     
Alexandros Aldous
General Counsel & Corporate Secretary
35 Alexandros Aldous is our general counsel, a position he has held since joining us in March 2011, and our corporate secretary, a position he has held since July 27, 2011. Prior to joining our company, he served as a legal consultant in London to Barclays Capital, the investment banking division of Barclays Bank PLC, from November 2009 to December 2010. Mr. Aldous also served as an attorney with Watson, Farley & Williams from August 2008 to September 2009, where he specialized in mergers and acquisitions and capital markets, and as an attorney with Shearman & Sterling LLP from October 2005 to August 2008, where he specialized in mergers and acquisitions. Mr. Aldous is a member of the Dean’s Council of American University’s School of International Service. Mr. Aldous received a Bachelor of Arts degree in Classics and Government from Colby College, a Juris Doctor and M.A. from American University and an LL.M. from the London School of Economics and Political Science. Mr. Aldous is licensed to practice law in the State of New York, Washington, D.C. and England and Wales and is authorized as house counsel in the State of Connecticut.
     
Frank O’Dowd
Chief Information Officer
58 Frank O’Dowd is our chief information officer, a position he has held since February 15, 2007. Mr. O’Dowd has extensive experience managing information technology in rapidly growing organizations. Prior to joining our company, he was the chief information officer at GAF Materials Corporation, a North American roofing manufacturer, from June 1997 to April 2006, where he guided the company’s IT function as the organization grew from a regional supplier to a large multinational corporation. Mr. O’Dowd’s prior professional experience also includes experiences at Reed Elsevier, Newsweek Magazine and Wyeth Pharmaceuticals. Mr. O’Dowd holds a Bachelor of Arts degree from The University of Dayton and a Master of Arts degree from Stony Brook University.
     
Patricia Lecouras
Chief Human Resources Officer
60 Patricia Lecouras is our chief human resources officer, a position she has held since March 5, 2007. Ms. Lecouras joined our company from GE Capital Commercial Finance where she was vice president, human resources from 2001 to 2007. Prior to her time with GE Capital Commercial Finance, Ms. Lecouras was with Nine West Shoes (f/k/a Fischer Camuto Corporation) and Xerox. Ms. Lecouras’s professional experience is multidisciplinary and includes prior experience working in finance and tax-related functions. She also has earned a six sigma master black belt certification. Ms. Lecouras holds a Bachelor of Arts degree in Psychology and Social Work from Skidmore College.
     

 

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Item 1A.RISK FACTORS

 

Our business, financial condition and results of operations are subject to various risks and uncertainties, including those described below and elsewhere in this Annual Report on Form 10-K. This section discusses factors that, individually or in the aggregate, we think could cause our actual results to differ materially from our expected and historical results. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.

 

Our success depends to a significant extent upon general economic conditions, including disposable income levels and changes in consumer discretionary spending.

 

Because our target customers include menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores, our business is exposed to reductions in disposable income levels and discretionary consumer spending. In uncertain economic environments, like those that have been present in the United States and Canada over the last several years, consumers’ discretionary spending may be negatively impacted. Moreover, in times of high unemployment rates, reduced home values, high levels of home foreclosures, high gas prices, investment losses, personal bankruptcies, reduced access to credit and/or reduced consumer confidence, consumers similarly may be less willing to spend discretionary dollars. Economic conditions may remain volatile and may continue to repress consumer confidence and discretionary spending for the near term. If the uncertain economic conditions of the last five years continue for a prolonged period of time or worsen, consumers may choose to spend discretionary dollars less frequently which could result in a decline in consumers’ food-away-from-home purchases, particularly in more expensive restaurants, and, consequently, adversely impact the businesses of our customers by, among other things, reducing the frequency with which our customers’ customers choose to dine out or the amount they spend on meals while dining out. If our customers’ sales decrease, our profitability could decline as we spread fixed costs across a lower volume of sales. Moreover, if a prolonged downturn or uncertain outlook in the economy persists for an extended period of time or becomes more pervasive, consumers might ultimately make long-lasting changes to their discretionary spending behavior, including dining out less frequently on a permanent basis. Accordingly, adverse changes to consumer preferences or consumer discretionary spending, each of which could be affected by many different factors which are out of our control, could harm our business, financial condition or results of operations. Our continued success will depend in part upon our ability to anticipate, identify and respond to changing economic and other conditions and the impact that those conditions may have on discretionary consumer spending.

 

A significant portion of our future growth is dependent upon our ability to expand our operations in our existing markets and to penetrate new markets either through organic growth or through acquisitions.

 

We intend to expand our presence in our existing markets by adding to our existing customer base through the expansion of our product portfolio and the increase in the volume and/or number of purchase orders from our existing customers. We cannot assure investors in our common stock, however, that we will be able to continue to successfully expand or acquire critical market presence in our existing markets, as we may not successfully market our specialty food and center-of-the-plate products and brands or may encounter larger and/or more well-established competitors with substantially greater financial resources. Moreover, competitive circumstances and consumer characteristics in new segments of existing markets may differ substantially from those in the segments in which we have substantial experience. If we are unable to expand in existing markets, our ability to increase our revenues and profitability may be affected in a material and adverse manner. At times, we have grown our business by expanding into new geographic markets. Efforts to expand organically may take time to produce revenues that exceed our expenses in these new markets, which can be high as we build out our infrastructure and hire associates to run our operations.

 

We also regularly evaluate opportunities to acquire other companies. To the extent our future growth includes acquisitions, we cannot assure investors in our common stock that we will successfully identify suitable acquisition candidates, obtain financing for such acquisitions, if necessary, consummate such potential acquisitions, effectively and efficiently integrate any acquired entities or successfully expand into new markets as a result of our acquisitions. Moreover, to the extent that we acquire companies that are principally involved in the distribution of products that we have not historically distributed, like fresh produce, there may be additional risks that we face.

 

We may not achieve benefits expected from our acquisitions, including our recent acquisition of Del Monte, which could adversely impact our business and operating results.

 

We believe that there are risks related to acquiring companies, including overpaying for acquisitions, losing key employees of acquired companies, failing to identify potential liabilities associated with the acquisition of the business prior to our acquisition and failing to achieve potential synergies. Additionally, our business could be adversely affected if we are unable to integrate the companies we acquired.

 

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On April 6, 2015, we completed our acquisition of Del Monte. We can provide no assurance that (1) the anticipated benefits of the Del Monte transaction, including any cost savings and operational synergies, will be fully realized in the time frame anticipated or at all, (2) the costs or difficulties related to the integration of the Del Monte business and operations into ours will not be greater than expected, (3) unanticipated costs, charges and expenses, including those related to the retention of the Del Monte labor force, will not result from the transaction, (4) there will not be disputes regarding whether we are obligated to pay the additional contingent consideration in connection with the transaction, (5) we will be able to retain key personnel, including John DeBenedetti, the former Chief Executive Officer and president of Del Monte, and (6) the transaction will not cause disruption to our business and operations and our relationships with customers, employees and other third parties. If one or more of these or other risks are realized, it could have a material adverse impact on our business, financial condition and results of operations.

 

A significant portion of our past growth has been achieved through acquisitions of or mergers with other distributors of specialty food products and center-of-the-plate protein items. Our future acquisitions may have a material adverse effect on our results of operations, particularly in periods immediately following the consummation of those transactions while the operations of the acquired business are being integrated with our operations. Achieving the benefits of acquisitions depends on timely, efficient and successful execution of a number of post-acquisition events, including successful integration of the acquired entity. Integration requires, among other things:

 

·maintaining the existing customer and supplier base and personnel;
·optimizing delivery routes;
·coordinating administrative, distribution and finance functions; and
·integrating management information systems and personnel.

 

The integration process may temporarily redirect resources previously focused on reducing product cost, resulting in lower gross profits in relation to sales. In addition, the process of combining companies could cause the interruption of, or a loss of momentum in, the activities of the respective businesses, which could have an adverse effect on their combined operations. In an effort to streamline the acquisition and integration process and achieve expected cost savings and operational synergies more quickly, we implemented an integration team during fiscal 2014, which is dedicated to onboarding new acquisitions as quickly and efficiently as possible. We believe that having a team dedicated to integration will help make sure the people, processes and products we add through acquisitions are consistent with our historical business and will allow our management team to focus its attention on our day-to-day operations. If we are unable to fully implement the integration team in a timely manner or at all or it does not improve our integration process, the integration of acquisitions could continue to divert the attention of management, and any difficulties or problems encountered in the integration process could have a material adverse effect on our business, financial condition or results of operations.

 

In connection with our acquisition of businesses in the future, if any, we may decide to consolidate the operations of any acquired business with our existing operations or make other changes with respect to the acquired business, which could result in special charges or other expenses. Our results of operations also may be adversely affected by expenses we incur in making acquisitions, by amortization of acquisition-related intangible assets with definite lives and by additional depreciation attributable to acquired assets. Any of the businesses we acquire may also have liabilities or adverse operating issues, including some that we fail to discover before the acquisition, and our indemnity for such liabilities typically has been limited and may, with respect to future acquisitions, also be limited. Additionally, our ability to make any future acquisitions may depend upon obtaining additional financing or the consents of our lenders. We may not be able to obtain this additional financing or these consents on acceptable terms or at all. Moreover, we may need to finance our acquisition activity with the issuance of equity or debt securities, which may have rights and preferences superior to those of our common stock and, in the case of common equity securities, may be issued at such prices and in such amounts as may cause significant dilution to our then-existing common stockholders. To the extent we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could have a material adverse effect on our ability to complete acquisitions.

 

In addition, although we enter into acquisition agreements with each company or business we acquire that contain customary representations, warranties, covenants and indemnities, there is no guarantee that we will recover all of our losses that may result from a breach of such agreements. For example, most acquisition agreements contain baskets or deductibles and caps and limitations on damages and on periods in which we may bring a claim. In addition, there can be no guarantee that we will be successful on the merits of any claim that we bring arising out of a breach of an acquisition agreement or that if we are successful on the merits in bringing a claim that the sellers of the businesses we acquire will be able to pay us for our losses. Moreover, the costs that we incur to investigate a potential matter may not be fully recoverable.Moreover, as a result of an acquisition, we may enter into a new business or market or offer products that differ from our core business. Any such new business or market or the sale and distribution of new products may present new challenges for us, and we may not be able to overcome such challenges. Additionally, we may seek to distribute a different set of products than the business that we acquire, which may cause a loss of customers of those businesses if we can no longer carry the products they desire or charge more for those products than was charged before we acquired the business.

 

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Our failure to realize the benefits expected from our acquisitions could result in a reduction in the price of our common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely impact our business, financial condition or results of operations.

 

We may have difficulty managing and facilitating our future growth.

 

At times since our inception, we have rapidly expanded our operations through organic growth, acquisitions or otherwise. This growth has placed and will continue to place significant demands upon our administrative, operational and financial resources. This growth, however, may not continue. To the extent that our customer base and our distribution networks continue to grow, this future growth may be limited by our inability to acquire new distribution facilities or expand our existing distribution facilities, make acquisitions, successfully integrate acquired entities, implement information systems initiatives or adequately manage our personnel.

 

Moreover, our future growth may be limited in part by the size and location of our distribution centers. As we near maximum utilization of a given facility, our operations may be constrained and inefficiencies may be created, which could adversely affect our results of operations unless the facility is expanded, volume is shifted to another facility or additional processing capacity is added. Conversely, as we add additional facilities or expand existing operations or facilities, excess capacity may be created. Any excess capacity may also create inefficiencies and adversely affect our results of operations. We cannot assure investors in our common stock that we will be able to successfully expand our existing distribution facilities or open new distribution facilities in new or existing markets as needed to facilitate growth.

 

Even if we are able to expand our distribution network, our ability to compete effectively and to manage future growth, if any, will depend on our ability to continue to implement and improve operational, financial and management information systems on a timely basis and to expand, train, motivate and manage our employees. We cannot assure investors in our common stock that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. Accordingly, our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

 

Conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network.

 

Our profitability and operating margins are dependent upon, among other things, our ability to anticipate and react to any interruptions in our distribution network and changes to food costs and availability. We obtain a significant portion of our specialty food products and center-of-the-plate products from local, regional, national and international third-party suppliers. We generally do not enter into long-term contracts with our suppliers, whereby they would be committed to provide products to us for any appreciable duration of time. Although our purchasing volume can provide leverage when dealing with suppliers, particularly smaller suppliers for whom we may be their largest customer, suppliers may not provide or may be unable to provide the specialty food products or center-of-the-plate products we need in the quantities and at the times and prices we request. Failure to identify an alternate source of supply for these items or comparable products that meet our customers’ expectations may result in significant cost increases. Additionally, weather, governmental regulation, water shortages, availability and seasonality may affect our food costs or cause a disruption in the quantity of our supply. For example, weather patterns in recent years have resulted in lower than normal levels of rainfall and snowfall in key agricultural states such as California, impacting the price of water and the corresponding prices of food products grown in states facing drought conditions. Additionally, the route-to-market for some of the products we sell, such as baking chocolate, depends upon the stability of political climates and a stable labor force in developing nations, such as the Ivory Coast. In such countries, political and social unrest may cause the prices for these products to rise to levels beyond those that our customers are willing to pay, if the product is available at all. If we are unable to obtain these products, our customers may seek a different supplier for these or other products which could negatively impact our business, financial condition or results of operations.

 

We do not currently use financial instruments to hedge our risk exposure to market fluctuations in the price of food products. Similarly, our suppliers may also be affected by higher costs to source or produce and transport food products, as well as by other related expenses that they pass through to their customers, which could result in higher costs for the specialty food products or center-of-the-plate products they supply to us. Our inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could therefore negatively impact our business, financial condition or results of operations.

 

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We may also be subject to material supply chain interruptions based upon conditions outside of our control. These interruptions could include work slowdowns, work interruptions, strikes or other adverse employment actions taken by employees of ours or our suppliers, short-term weather conditions or more prolonged climate change, crop conditions, product recalls, water shortages, transportation interruptions within our distribution channels, unavailability of fuel or increases in fuel costs, competitive demands and natural disasters or other catastrophic events, such as food-borne illnesses or bioterrorism. The efficiency and effectiveness of our distribution network is dependent upon our suppliers’ ability to consistently deliver the specialty food products and meat, poultry and seafood we need in the quantities and at the times and prices we request. Accordingly, if we are unable to obtain the specialty food products or meat, poultry or seafood that comprise a significant percentage of our product portfolio in a timely manner and in the quantities and at the prices we request as a result of any of the foregoing factors or otherwise, we may be unable to fulfill our obligations to customers who may, as a result of any such failure, resort to other distributors for their food product needs or change the types of products they buy from us to products that are less profitable for us.

 

Our increased distribution of center-of-the-plate products, like meat, poultry and seafood, following our acquisitions of Michael’s, Allen Brothers and Del Monte, involves risks that we have not historically faced.

 

With our acquisitions of Michael’s, Allen Brothers and Del Monte, a larger percentage of our revenues is expected to come from center-of-the-plate products than has historically been the case. With our increased distribution of center-of-the-plate products like meat, poultry and seafood, we are more susceptible to increases in the prices of those products, and we cannot assure investors in our common stock that all or part of any increased costs experienced by us from time to time can be passed along to consumers of our products, in a timely manner or at all. Conversely, rapid downward pricing for these products, including as a result of restrictions on the exporting of U.S. beef products or lower demand internationally for U.S. beef products, may result in our lowering our prices to our customers even though our inventory on hand is at a higher cost. The supply and market price of our center-of the plate products are typically more volatile than most of our core specialty products and are dependent upon a variety of factors over which we have no control, including the relative cost of feed and energy, weather, livestock diseases, government regulation and the availability of beef, chicken and seafood.

 

The prices of our meat and poultry products are largely dependent on the production of feed ingredients, which is affected primarily by the global level of supply inventories and demand for feed ingredients, the agricultural policies of the U.S. and foreign governments and weather patterns throughout the world. In particular, weather patterns often change agricultural conditions in an unpredictable manner. A significant change in weather patterns could affect supplies of feed ingredients, as well as the industry’s ability to obtain feed ingredients or deliver products. More recently, feed prices have been impacted by increased demand both domestically for ethanol and globally for protein production.

 

Additionally, our center-of-the-plate business is subject to risks relating to animal health and diseases. An outbreak of diseases affecting livestock (such as foot-and-mouth disease or bovine spongiform encephalopathy, commonly referred to as mad cow disease) could result in restrictions on sales of products, restrictions on purchases of livestock from suppliers or widespread destruction of livestock. Outbreaks of diseases, or the perception by the public that an outbreak has occurred, or other concerns regarding diseases, can lead to inadequate supply, cancellation of orders by customers and adverse publicity, any of which can have a significant negative impact on consumer demand and, as a result, on our business, financial condition or results of operations.

 

In addition, meat, seafood and poultry products that we distribute could be subject to recall because they are, or are alleged to be, contaminated, spoiled or inappropriately labeled. Our meat and poultry products may be subject to contamination by disease-producing organisms, or pathogens, such as Listeria monocytogenes, Salmonella and generic E.coli. These pathogens are generally found in the environment, and, as a result, there is a risk that they, as a result of food processing, could be present in the meat and poultry products that we distribute. These pathogens can also be introduced as a result of improper handling in our facilities or at the consumer level. These risks may be controlled, although not eliminated, by adherence to good manufacturing practices and finished product testing. We have little, if any, control over proper handling before we receive the product or once the product has been shipped to our customers. Illness and death may result if the pathogens are not eliminated before these products are sold to customers.

 

We are also susceptible to increases in the prices of our seafood products. The prices of our seafood products are largely dependent on the continuous supply of fresh seafood, which in turn could be affected by a large number of factors, including, but not limited to, environmental factors, the availability of seafood stock, weather conditions, water contamination, the policies and regulations of the governments of the relevant territories where such fishing is carried out, the ability of the fishing companies and fishermen that supply us to continue their operations and pressure from environmental or animal rights groups. The major raw material for our seafood products is fresh seafood, and any shortage in supply or upsurge in demand of fresh seafood may lead to an increase in prices, which may adversely affect our profitability, including as a result of increased production costs and lower profit margins.

 

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Our operations are subject to extensive regulation and oversight by the United States Department of Agriculture (USDA), the United States Food and Drug Administration (FDA), and other federal, state, local and foreign authorities regarding the processing, packaging, storage, safety, distribution, advertising and labeling of its products. Recently, food safety practices and procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA. Failure to comply with existing or new laws and regulations could result in administrative penalties and injunctive relief, civil remedies, fines, interruption of operations, recalls of products or seizures of properties, potential criminal sanctions and personal injury or other damage claims. These remedies, changes in the applicable laws and regulations or discovery of currently unknown conditions could increase costs, limit business operations and reduce profitability.

 

Our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures.

 

We operate within a segment of the foodservice distribution industry, which is an industry characterized by a high volume of sales with relatively low profit margins. Although our profit margins are typically higher than more traditional broadline foodservice distributors, they are still relatively low compared to other industries’ profit margins. Volatile food costs may have a direct impact upon our profitability. Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the extent we are unable to pass on all or a portion of such product cost increases to our customers. In addition, product cost inflation may negatively impact consumer discretionary spending decisions within our customers’ establishments, which could adversely impact our sales. Conversely, our profit levels may be negatively impacted during periods of product cost deflation even though our gross profit as a percentage of sales may remain relatively constant. However, some of our products, particularly certain of our protein items, are priced on a cost plus a dollar markup, which helps mitigate the negative impact of deflation. If our product mix changes, we may face increased risks of compression of our margins, as we may be unable to achieve the same level of profit margins as we are able to capture on our traditional specialty products. For instance, we experienced increased margin compression in our protein category beginning in the third quarter of 2013 which continued throughout 2014. If this compression had continued, our operating profit margin and results of operations could have been materially and adversely impacted. To compensate for lower gross margins, we, in turn, would have to reduce the expenses that we incur to service our customers or our net income or operating margin may be negatively impacted. Our inability to effectively price our specialty food products or center-of-the-plate products, to quickly respond to inflationary and deflationary cost pressures and to reduce our expenses could have a material adverse impact on our business, financial condition or results of operations.

 

Group purchasing organizations may become more active in our industry and increase their efforts to add our customers as members of these organizations.

 

Some of our customers, including a majority of our hotel customers, purchase their products from us through group purchasing organizations. These organizations have increased their efforts to aggregate the purchasing power of smaller, independent restaurants in an effort to lower the prices paid by these customers on their foodservice orders, and we have experienced some pricing pressure from these purchasers. If these group purchasing organizations are able to add a significant number of our customers as members, we may be forced to lower the prices we charge these customers in order to retain the business, which would negatively affect our business, financial condition or results of operations. Additionally, if we were unable or unwilling to lower the prices we charge for our products to a level that was satisfactory to the group purchasing organization, we may lose the business of those of our customers that are members of these organizations, which could have a material adverse impact on our business, financial condition or results of operations.

 

Because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas.

 

Our financial condition and results of operations are highly dependent upon the local economies of the culinary markets in which we distribute our products. In recent years, certain of these markets have been more negatively impacted by the overall economic crisis, including experiencing higher unemployment rates and weaker housing market conditions, than other areas of the United States and Canada. Moreover, sales in our New York market, which we define as our operations on the East Coast of the United States spanning from Boston to Atlantic City, accounted for approximately 31% of our net sales in our 2015 fiscal year. We are therefore particularly exposed to downturns in this regional economy. Following our acquisition of Del Monte, we now have significant operations in the San Francisco Bay area and Los Angeles, California. Deterioration in the economic conditions of our key markets generally, or in the local economy of the New York metropolitan area or San Francisco Bay or Los Angeles, California areas, specifically, could affect our business, financial condition or results of operations in a materially adverse manner.

 

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In addition, given our geographic concentrations, other regional occurrences such as adverse weather conditions, terrorist attacks and other catastrophic events could have a material adverse effect on our business, financial condition or results of operations. Adverse weather conditions can significantly impact the business of our customers and our ability to profitably and efficiently conduct our operations and, in severe cases, could result in our trucks being unable to make deliveries or cause the temporary closure or the destruction of one or more of our distribution centers. Our operations and/or distribution centers which are located in (i) New York City, Ohio, Washington D.C., Chicago and Canada are particularly susceptible to significant amounts of snowfall and ice, (ii) Miami are particularly susceptible to hurricanes and (iii) Los Angeles and San Francisco are particularly susceptible to earthquakes and mudslides. In addition, our restaurant customers, many of which are independently owned with operations limited to one or two markets, may be less able to withstand the impact on their business from adverse weather conditions than national chain restaurants because they are unable to spread the risks of such events across numerous locations. In some cases these customers may not be able to re-open their restaurants, and consequently make payment to us for products previously provided, if the weather event or other catastrophic event is severe, particularly if they lacked sufficient insurance or their insurance claims are not processed quickly.

 

Due to their prominence as, among other characteristics, densely-populated major metropolitan cities and as international hubs for intermodal transportation, a majority of our markets are known as targets for terrorist activity and other catastrophic events. If our or our customers’ operations are significantly disrupted or if any one or more of our distribution centers is temporarily closed or destroyed for any of the foregoing reasons, our business, financial condition or results of operations may be materially adversely affected. In anticipation of any such adverse weather conditions, terrorist attacks, man-made disasters or other unforeseen regional occurrences, we have implemented a disaster recovery plan. Should any of these events occur, and if we are unable to execute our disaster recovery plan, we may experience challenges in acquiring and distributing our products, failures or delays in the recovery of critical data, delayed reporting and compliance with governmental entities, inability to perform necessary corporate functions and other breakdowns in normal operating procedures that could have a material adverse effect on our business and create exposure to administrative and other legal claims against us.

 

Damage to our reputation or lack of acceptance of our specialty food products, center-of-the-plate products and/or the brands we carry in existing and new markets could materially and adversely impact our business, financial condition or results of operations.

 

We believe that we have built a strong reputation for the breadth and depth of our product portfolio and the brands we carry and that we must protect and grow their value to be successful in the future. Any incident that erodes consumer confidence in or affinity for our specialty food or center-of-the-plate products or brands, whether or not justified, could significantly reduce their respective values and damage our business. If our customers perceive or experience a reduction in the quality or selection of our products and brands or our customer service, or in any way believe that we failed to deliver a consistently positive experience, our business, financial condition or results of operations may be affected in a materially adverse manner.

 

A specialty foods distribution business such as ours can be adversely affected by negative publicity or news reports, whether or not accurate, regarding food quality issues, public health concerns, illness, safety, injury or government or industry findings concerning our products or others across the food distribution industry. Although we have taken steps to mitigate food quality, public health and other foodservice-related risks, these types of health concerns or negative publicity cannot be completely eliminated or mitigated and may harm our results of operations and damage the reputation of, or result in a lack of acceptance of, our products or the brands we carry.

 

In addition, our ability to successfully penetrate new markets may be adversely affected by a lack of awareness or acceptance of our product portfolio or our brands in these new markets. To the extent we are unable to foster name recognition and affinity for our products and brands in new markets, we may not be able to penetrate these markets as anticipated, and, consequently, our growth may be significantly delayed or impaired.

 

Our customers are generally not obligated to continue purchasing products from us.

 

Most of our customers buy from us pursuant to individual purchase orders, as we generally do not enter into long-term agreements with our customers for the purchase of our products. Because our customers are generally not obligated to continue purchasing products from us, we cannot assure investors in our common stock that the volume and/or number of our customers’ purchase orders will remain constant or increase or that we will be able to maintain or add to our existing customer base. Significant decreases in the volume and/or number of our customers’ purchase orders or our inability to retain or grow our current customer base may have a material adverse effect on our business, financial condition or results of operations.

 

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We have experienced losses due to our inability to collect accounts receivable in the past and could experience increases in such losses in the future if our customers are unable to pay their debts to us in a timely manner or at all.

 

Certain of our customers have experienced bankruptcy, insolvency and/or an inability to pay their debts to us as they come due. If our customers suffer significant financial difficulties or bankruptcies, they may be unable to pay their debts to us in a timely manner or at all. It is possible that our customers may contest their obligations to pay us under bankruptcy laws or otherwise. Even if our customers do not contest their obligations to pay us, if our customers are unable to pay their debts to us in a timely manner, it could adversely impact our ability to collect accounts receivable and may require that we take larger provisions for bad debt expense. Moreover, we may have to negotiate significant discounts and/or extended financing terms with these customers in such a situation in an attempt to secure payment for outstanding debts. Accordingly, if we are unable to collect upon our accounts receivable as they come due in an efficient and timely manner, our business, financial condition or results of operations may be materially and adversely affected. During periods of economic weakness, like those we have recently experienced, small to medium-sized businesses, like many of our independent restaurant and fine dining establishment customers, may be impacted more severely and more quickly than larger businesses. Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could adversely impact our business, financial condition or results of operations.

 

Product liability claims could have a material adverse effect on our business, financial condition or results of operations.

 

Like any other distributor of food products, we face an inherent risk of exposure to product liability claims if the products we sell cause injury or illness. We may be subject to liability, which could be substantial, because of actual or alleged contamination in products sold by us, including products sold by companies before we acquired them. We have, and the companies we have acquired have had, liability insurance with respect to product liability claims. This insurance may not continue to be available at a reasonable cost or at all, and it may not be adequate to cover product liability claims against us or against any of the companies we have acquired. We generally seek contractual indemnification from manufacturers or suppliers of the product, but any such indemnification is limited, as a practical matter, to the creditworthiness of the indemnifying party. If we or any of our acquired companies do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations.

 

Fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations.

 

Fuel cost volatility may have a negative impact on our business, financial condition or results of operations. The cost of diesel fuel can increase the price we pay for products as well as the costs we incur to distribute products to our customers. These factors, in turn, may negatively impact our net sales, margins, operating expenses and operating results. Although we have been able to pass along a portion of increased fuel costs to our customers in the past, there is no guarantee we can do so again. If fuel costs continue to remain at elevated levels, like those we are currently experiencing, or increase in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, which could have a material adverse effect on our business, financial condition or results of operations.

 

New information or attitudes regarding diet and health or adverse opinions about the health effects of the products we distribute could result in changes in consumer eating habits, which could have a material adverse effect on our business, financial condition or results of operations.

 

Consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming the products we distribute. If consumer eating habits change significantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with the implementation of those changes. Additionally, changes in consumer eating habits may result in the enactment of laws and regulations that impact the ingredients and nutritional content of our products or require us to disclose the nutritional content of products. Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of our products, may be costly and time consuming. We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or resulting new laws or regulations or to adapt our menu offerings to trends in eating habits.

 

We have significant competition from a variety of sources, and we may not be able to compete successfully.

 

The foodservice distribution industry is highly fragmented and competitive, and our future success will be largely dependent upon our ability to profitably meet our customers’ needs for certain gourmet foods and ingredients, varying drop sizes, high service levels and timely delivery. We compete with numerous smaller distributors on a local level, as well as with a limited number of larger, traditional broadline foodservice distributors. We cannot assure investors in our common stock that our current or potential competitors will not provide specialty food products and ingredients, protein items or services that are comparable or superior to those provided by us at prices that are lower than the prices we charge or adapt more quickly than we do to evolving culinary trends or changing market requirements. It is also possible that alliances among competitors may develop and rapidly acquire significant market share. Accordingly, we cannot assure investors in our common stock that we will be able to compete effectively against current and future competitors, and increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations.

 

 

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Our substantial indebtedness may limit our ability to invest in the ongoing needs of our business.

 

We have a substantial amount of indebtedness. As of December 25, 2015, we had approximately $274.8 million of total indebtedness. In particular, we had approximately $4.7 million and $93.4 million of outstanding indebtedness under the Term Loan Facility and Revolving Credit Facility, respectively, and we had $125.0 million of senior secured notes (the Notes). In addition, at December 25, 2015, we owed $11.0 million under our NMTC Loan to build out our Bronx, New York distribution facility, and we also had $3.9 million outstanding under capital leases and other financing agreements for computer equipment, vehicles and software. Moreover, as part of the consideration we paid in connection with our acquisition of Del Monte, we issued to entities affiliated with Del Monte $36.75 million in convertible subordinated notes with a six-year maturity bearing interest at 2.5% per annum with a conversion price of $29.70 per share.

 

Our indebtedness could have important consequences to you. For example our indebtedness:

 

·requires us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity and other general corporate purposes;

 

·increases our vulnerability to adverse general economic or industry conditions;

 

·limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate;

 

·makes us more vulnerable to increases in interest rates, as borrowings under our senior secured term loan facility and senior secured revolving credit facility are at variable rates;

 

·limits our ability to obtain additional financing in the future for working capital or other purposes, including to finance acquisitions;

 

·in the case of the convertible subordinated notes, could result in the issuance of additional shares of our common stock that would result in the dilution of our then-existing stockholders; and

 

·places us at a competitive disadvantage compared to our competitors that have less indebtedness.

 

If our earnings are insufficient to fund our operations, including our acquisition growth strategy, we will need to raise additional capital or issue additional debt, including longer-term, fixed-rate debt, to pay our indebtedness as it comes due or as our availability under our Revolving Credit Facility is exhausted. If we are unable to obtain funds necessary to make required payments or if we fail to comply with the various requirements of our Credit Facilities, the Note Purchase and Guarantee Agreement or (subject to certain limitations on the holders ability to accelerate the obligations) our convertible subordinated notes issued in connection with the Del Monte acquisition, we would be in default, which would permit the holders of our indebtedness to accelerate the maturity of the indebtedness, or in the case of the convertible subordinated notes, convert the notes to common stock resulting in the holders of those notes and their affiliates becoming one of our largest stockholders, and could cause defaults under any indebtedness we may incur in the future. Any default under our indebtedness requiring the repayment of outstanding borrowings would have a material adverse effect on our business, financial condition and results of operations. If we are unable to refinance or repay our indebtedness as it becomes due, we may become insolvent and be unable to continue operations.

 

Although the agreements governing the Credit Facilities and the Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness. The lenders under the Credit Facilities and the holders of the Notes consented to our issuance of the convertible subordinated notes.

 

The agreements governing the Credit Facilities and the Notes require us to maintain fixed charge coverage ratios and leverage ratios, which become more restrictive over time. Our ability to comply with these ratios in the future may be affected by events beyond our control, and our inability to comply with the required financial ratios could result in a default under the Credit Facilities or the Notes. In the event of events of default, the lenders under the Credit Facilities or the holders of the Notes could elect to terminate lending commitments and declare all borrowings outstanding, together with accrued and unpaid interest and other fees, to be immediately due and payable. See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

 

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Our ability to raise capital in the future may be limited.

 

Our business and operations may consume resources, including availability under our senior secured revolving credit facility, faster than we currently anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt, including longer-term, fixed-rate debt, or a combination of both. Additional financing may not be available on favorable terms or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements or grow our business through acquisitions, or otherwise. If we issue new debt securities, the debt holders may have rights senior to those of our common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend upon market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

 

We may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all.

 

There are inherent risks in our ability to borrow debt capital. Our lenders, including the lenders participating in the Credit Facilities and the holders of the Notes, may have suffered losses related to their lending and other financial relationships, especially because of the general weakening and continued uncertainty of the national economy over the past six years, increased financial instability of many borrowers and the declining value of their assets. As a result, lenders may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our senior secured revolving credit facility, refinance our existing indebtedness or obtain other financing on favorable terms or at all. Our access to funds under the Credit Facilities is dependent upon the ability of our lenders to meet their funding commitments. Our financial condition and results of operations would be adversely affected in a material manner if we were unable to draw funds under the Revolving Credit Facility because of a lender default or if we had to obtain other cost-effective financing. Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business can be arranged. Such measures could include deferring capital expenditures (including our entry into new markets, including through acquisitions) and reducing or eliminating other discretionary uses of cash.

 

Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.

 

We rely upon our computer systems and network infrastructure across our operations. Our business involves the storage and transmission of many types of sensitive or confidential information, including customers’ and suppliers’ personal information, private information about employees, and financial and strategic information about us and our operations. Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operations, or any unauthorized access to sensitive or confidential information, including as a result of hacking, could have a material adverse effect on our business, financial condition or results of operations. Although we employ both internal resources and external consultants to conduct auditing and testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operational procedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.

 

Our investments in information technology may not produce the benefits that we anticipate.

 

In an attempt to reduce our operating expenses, increase our operational efficiencies, boost our operating margins and more closely track the movement of our inventory in our protein business, we have aggressively invested in the development and implementation of new information technology. We may not be able to implement these technological changes in the time frame we have planned, and any delays in implementation could negatively impact our business, financial condition or results of operations. In addition, the costs to make these changes may exceed our estimates and will likely exceed any benefits that we realize during the early stages of implementation. Even if we are able to implement the changes as planned, and within our cost estimates, we may not be able achieve the expected efficiencies, cost savings and operational enhancements from these investments which could have an adverse effect on our business, financial condition or results of operations.

 

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We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.

 

Our ability to implement our business plan successfully depends in part upon our ability to further build brand recognition, including for our proprietary products, using our trademarks, service marks and other proprietary intellectual property, including our names and logos. We have registered or applied to register a number of our trademarks. We cannot assure investors in our common stock that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our goods and services, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes upon our intellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business, financial condition or results of operations and might prevent our brands from achieving or maintaining market acceptance.

 

We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claim that we have infringed or are infringing upon their intellectual property rights, our operating profits could be affected in a materially adverse manner. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resources or require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any of which could have a negative impact on our business, financial condition or results of operations and could harm our future prospects.

 

Our business operations and future development could be significantly disrupted if we lose key members of our management team.

 

The success of our business significantly depends upon the continued contributions of our founders and key employees, both individually and as a group. Our future performance will substantially depend upon our ability to motivate and retain Christopher Pappas, our chairman, president and chief executive officer, John Pappas, our vice chairman, John Austin, our chief financial officer and assistant corporate secretary, and John DeBenedetti, our executive vice president of protein, as well as certain other senior key employees. The loss of the services of any of our founders or key employees, including key employees of the businesses we have acquired, could have a material adverse effect on our business, financial condition or results of operations. We have no reason to believe that we will lose the services of any of these individuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in the foodservice distribution industry and special role in our operations.

 

Our insurance policies may not provide adequate levels of coverage against all claims, and fluctuating insurance requirements and costs could negatively impact our profitability. In addition, if we fail to establish proper reserves and adequately estimate future expenses, the costs associated with our self-insured group medical, workers’ compensation liability and auto liability plans may adversely affect our business, financial condition or results of operations.

 

We believe that our insurance coverage is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. These losses, should they occur, could have a material and adverse effect on our business, financial condition or results of operations. In addition, the cost of workers’ compensation insurance, general liability insurance and directors’ and officers’ liability insurance fluctuates based upon our historical trends, market conditions and availability. Because our operations principally are centered in large, metropolitan areas, our insurance costs are higher than if our operations and facilities were based in more rural markets. Additionally, health insurance costs in general have risen significantly over the past few years. These increases, as well as federal legislation requiring employers to provide specified levels of health insurance to all employees, could have a negative impact upon our business, financial condition or results of operations, and there can be no assurance that we will be able to successfully offset the effect of such increases with plan modifications and cost control measures, additional operating efficiencies or the pass-through of such increased costs to our customers.

 

Effective October 1, 2011, we began maintaining a self-insured group medical program. We record a liability for medical claims during the period in which they occur, as well as an estimate of incurred but not reported claims. Management determines the adequacy of these accruals based on a monthly evaluation of our historical claims experience and medical cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. If we suffer a substantial loss that is not covered by our self- insurance reserves, the loss and attendant expenses could harm our business and operating results. We have purchased stop loss coverage from third parties which limits our exposure above the amounts we have self-insured.

 

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Effective August 1, 2012, we became self-insured for workers’ compensation and automobile liability to deductibles or self-insured retentions of $350,000 for workers compensation and $250,000 for automobile liability per occurrence. The amounts in excess of our deductibles are fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

 

Increases in our labor costs, including as a result of labor shortages, the unionization of some of our associates, the price or unavailability of insurance and changes in government regulation could slow our growth or harm our business.

 

We are subject to a wide range of labor costs. Because our labor costs (particularly those in our center-of-the-plate businesses) are, as a percentage of revenues, higher than other industries, we may be significantly harmed by labor cost increases.

 

Our operations are highly dependent upon our experienced and sophisticated sales professionals and, in our protein unit, on the experienced butchers we employ. Qualified individuals have historically been in short supply and an inability to attract and retain them may limit our ability to expand our operations in existing markets, as well as our ability to penetrate new markets. We can make no assurances that we will be able to attract and retain qualified individuals in the future. Additionally, the cost of attracting and retaining qualified individuals may be higher than we currently anticipate, and as a result, our profitability could decline. We are subject to the risk of employment-related litigation (which we believe is increased as a result of our expansion in California resulting from the Del Monte acquisition) at both the state and federal levels, including claims styled as class action lawsuits, which are more costly to defend. Also, some employment-related claims in the area of wage and hour disputes are not insurable risks.

 

Despite our efforts to control costs while still providing competitive healthcare benefits to our staff members, significant increases in healthcare costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective. Moreover, we are continuing to assess the impact of federal healthcare legislation on our healthcare benefit costs, and significant increases in such costs could adversely impact our operating results. There is no assurance that we will be able to pass through the costs of such legislation in a manner that will not adversely impact our operating results.

 

In addition, many of our delivery and warehouse personnel are hourly workers subject to various minimum wage requirements. Mandated increases in minimum wage levels have recently been and continue to be proposed and implemented at both federal and state government levels. Minimum wage increases may increase our labor costs.

 

We are also subject to the regulations of the U.S. Citizenship and Immigration Services and U.S. Customs and Immigration Enforcement. Our failure to comply with federal and state labor laws and regulations, or our employees’ failure to meet federal citizenship or residency requirements, could result in a disruption in our work force, sanctions or fines against us as well as adverse publicity and additional cost.

 

As of December 25, 2015, we had 1,693 full-time and part-time employees, 149 of whom (approximately 8.8%) are represented by unions. Of the 149 employees represented by unions, 125 are operating under a collective bargaining agreement. We have in the past been the focus of union negotiating efforts, and it is likely that we will be the focus of similar efforts in the future.

 

As we increase our employee base and broaden our distribution operations to new geographic markets, including as a result of acquisitions, our increased visibility could result in increased or expanded union-organizing efforts or we may acquire businesses with unionized workforces. Two labor unions have been certified to represent bargaining units at our New York and Maryland facilities, and we have entered into a collective bargaining agreement with our union employees in New York. Although we have not experienced a work stoppage to date, if we are unable to successfully negotiate union contracts, or renewals of existing contracts, if additional employees were to unionize or if we acquire additional businesses with unionized employees, we could be subject to work stoppages and increases in labor costs, either of which could have a material adverse effect on our business, financial condition or results of operations.

 

24
 

We are subject to significant governmental regulation, and failure to comply could subject us to enforcement actions, recalls or other penalties, which could have a material adverse effect on our business, financial condition or results of operations.

 

Our business is highly regulated at the federal, state and local levels, and our specialty food products, meat, poultry and seafood products and distribution operations require various licenses, permits and approvals. For example:

·the products we distribute in the United States are subject to regulation and inspection by the FDA and the USDA, and the products we distribute in Canada are subject to regulation by Health Canada and the Canadian Food Inspection Agency;

 

·our warehouse, distribution facilities, repackaging activities and other operations also are subject to regulation and inspection, as applicable, by the FDA, the USDA, Health Canada, the Canadian Food Inspection Agency and state and provincial health authorities; and

 

·our U.S. and Canadian trucking operations are subject to regulation by, as applicable, the U.S. Department of Transportation, the U.S. Federal Highway Administration, Transport Canada, the Surface Transportation Board and provincial transportation authorities.

 

Our suppliers are also subject to similar regulatory requirements and oversight. The failure to comply with applicable regulatory requirements could result in civil or criminal fines or penalties, product recalls, closure of facilities or operations, the loss or revocation of any existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business, any of which could have a material adverse effect on our business, financial condition or results of operations.

 

In addition, as a distributor and repackager of specialty food products and meat, poultry and seafood products, we are subject to increasing governmental scrutiny of and public awareness regarding food safety and the manufacture, sale, packaging, storage and marketing of natural, organic and other food products. Compliance with these laws may impose a significant burden upon our operations. If we were to distribute foods that are or are perceived to be contaminated, or otherwise not in compliance with applicable laws, any resulting product recalls could have a material adverse effect on our business, financial condition or results of operations. In January 2011, President Obama signed into law the FDA Food Safety Modernization Act, which greatly expands the FDA’s authority over food safety, including giving the FDA power to order the recall of unsafe foods, increase inspections at food processing facilities, issue regulations regarding the sanitary transportation of food, enhance tracking and tracing requirements and order the detention of food that it has reason to believe is adulterated or misbranded, among other provisions. The FDA has taken a number of steps to implement the law, including, among others, the issuance of final regulations on preventive controls, produce safety, and foreign supplier verification programs to strengthen the oversight of imported foods. These actions have resulted in increased compliance costs that are likely to continue. We cannot assure investors in our common stock that these actions will not adversely impact us or others in our industry further, including suppliers of the products we sell, many of whom are small-scale producers who may be unable or unwilling to bear the expected increases in costs of compliance and as a result cease operations or seek to pass along these costs to us.

 

Additionally, concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas, or GHG, emissions. Increased regulation regarding GHG emissions, especially diesel engine emissions, could impose substantial costs upon us. These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our vehicles prematurely.

 

Until the timing, scope and extent of such regulation becomes known, we cannot predict its effect on our business, financial condition or results of operations. It is reasonably possible, however, that such regulation could impose material costs on us which we may be unable to pass on to our customers.

 

Federal, state, provincial and local tax rules in the United States and Canada may adversely impact our business, financial condition or results of operations.

 

We are subject to federal, state and local taxes in the United States, as well as federal, provincial and local taxes in Canada. Although we believe that our tax estimates are reasonable, if the Internal Revenue Service (“IRS”) or any other taxing authority disagrees with the positions we have taken on our tax returns, we could face additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our business, financial condition or results of operations. In addition, complying with new tax rules, laws or regulations could impact our business, financial condition or results of operations, and increases to federal, provincial or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effective tax rate could have a material impact on our business, financial condition or results of operations.

 

25
 

 

The price of our common stock may be volatile and our stockholders could lose all or part of their investment.

 

Volatility in the market price of our common stock may prevent our stockholders from being able to sell their shares at or above the price the stockholders paid for their shares. The market price of our common stock could fluctuate significantly for various reasons, which include the following:

 

our quarterly or annual earnings or those of other companies in our industry;

changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to our business;

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

changes in accounting standards, policies, guidance, interpretations or principles;

additions or departures of our senior management personnel;

sales of common stock by our directors and executive officers;

adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

actions by stockholders;

the level and quality of research analyst coverage for our common stock, changes in financial estimates or investment recommendations by securities analysts following our business or failure to meet such estimates;

the financial disclosure we may provide to the public, any changes in such disclosure or our failure to meet projections included in our public disclosure;

various market factors or perceived market factors, including rumors, whether or not correct, involving us, our customers, our distributors or suppliers or our competitors;

introductions of new products or new pricing policies by us or by our competitors;

acquisitions or strategic alliances by us or our competitors;

short sales, hedging and other derivative transactions in our common stock;

the operating and stock price performance of other companies that investors may deem comparable to us; and

other events or factors, including changes in general conditions in the United States and global economies or financial markets (including those resulting from acts of God, war, incidents of terrorism or responses to such events).

 

Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

 

As of February 26, 2016, our executive officers, directors and their affiliates beneficially owned, in the aggregate, approximately 22.4% of our outstanding shares of common stock. In particular, Christopher Pappas, our president and chief executive officer, and John Pappas, our vice chairman, beneficially owned approximately 20.4% of our outstanding shares of common stock as of March 1, 2016. Additionally, upon the closing of our acquisition of Del Monte on April 6, 2015, the shareholders of Del Monte received approximately 1.1 million shares of our common stock, or 4.2% of our outstanding common stock as of March 1, 2016, as well as $36.75 million in convertible subordinated notes, which notes may be converted into shares of our common stock by such holders at any time at a per share price of $29.70. As a result of their significant individual ownership levels, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

 

If securities analysts or industry analysts downgrade our stock, publish negative research or reports or do not publish reports about our business, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our stock or our competitors’ stock, our stock price may likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

We do not intend to pay dividends for the foreseeable future and our stock may not appreciate in value.

 

We currently intend to retain our future earnings, if any, to finance the operation and growth of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or that the price at which our stockholders have purchased their shares will be able to be maintained.

 

26
 

 

Our issuance of preferred stock or debt securities could adversely affect holders of our common stock and discourage a takeover.

 

Our board of directors is authorized to issue up to 5,000,000 shares of preferred stock without any action on the part of our stockholders. Our board of directors also has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that we issue preferred stock in the future that has preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market price of our common stock could be adversely affected. In addition, the ability of our board of directors to issue shares of preferred stock without any action on the part of our stockholders may impede a takeover of us and prevent a transaction favorable to our stockholders.

 

Additionally, in the future, we may need to raise additional funds or pay all, or a portion, of the acquisition price for a business we acquire through the issuance of new debt, including longer-term, fixed-rate debt. If we issue new debt securities, the debt holders may have rights senior to those of our common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.

 

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

 

Provisions in our certificate of incorporation and bylaws as well as provisions of the Delaware General Corporation Law could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:

 

authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

eliminating the ability of stockholders to call a special meeting of stockholders; and

establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

 

27
 

 

Item 1B.UNRESOLVED STAFF COMMENTS

 

None.

 

Item 2.PROPERTIES

 

The following table sets forth the location, purpose and approximate size of our distribution and corporate facilities as of February 26, 2016:

               
Name/Location   Owned/Leased   Purpose   Approximate Size
(Sq. Feet)
 
Ridgefield, Connecticut   Leased   Corporate Headquarters   20,000  
American Canyon, California   Leased   Processing Facility/Distribution Center   24,000  
Brisbane, California   Leased   Processing Facility/Distribution Center   51,000  
Bronx, New York   Leased   Distribution Center   234,200  
Columbus, Ohio   Leased   Processing Facility/Distribution Center   60,000  
Cincinnati, Ohio   Owned   Distribution Center   66,500  
Chicago, Illinois   Owned   Processing Facility   18,100  
Chicago, Illinois   Leased   Processing Facility/Distribution Center   108,500  
Hanover, Maryland   Leased   Distribution Center   55,200  
Marina, California   Leased   Processing Facility/Distribution Center   20,000  
Miami, Florida   Leased   Distribution Center   27,000  
Oakland, California   Leased   Processing Facility/Distribution Center   10,000  
Pompano Beach, Florida   Leased   Distribution Center   24,200  
Los Angeles, California   Leased   Distribution Center   80,000  
Downey, California   Leased   Distribution Center   40,300  
Hayward, California   Leased   Distribution Center   40,000  
Burlingame, California   Leased   Distribution Center   9,600  
San Francisco, California (1)   Leased   Processing Facility/Distribution Center   117,500  
San Francisco, California (2)   Leased   Processing Facility/Distribution Center   25,000  
Las Vegas, Nevada   Leased   Distribution Center   80,000  
Portland, Oregon   Leased   Distribution Center   46,500  
Tempe, Arizona   Leased   Distribution Center   14,500  
Seattle, Washington   Leased   Distribution Center   10,500  
West Sacremento, California (1)   Leased   Processing Facility/Distribution Center   45,000  
West Sacremento, California (2)   Leased   Maintenance Building   12,000  
Richmond, BC, Canada   Leased   Distribution Center   15,600  
Toronto, ON, Canada   Leased   Distribution Center   25,500  
Edmonton, AB, Canada   Leased   Distribution Center   11.500  
Total Square Feet           1,292,200  

 

We consider our properties to be in good condition generally and believe our facilities are adequate for our operations and provide sufficient capacity to meet our anticipated requirements.

 

Item 3.LEGAL PROCEEDINGS

 

From time to time, we are subject to various legal proceedings that arise from the normal course of business activities. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our results of operations, prospects, cash flows, financial position and brand. We are not currently aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.

 

28
 

 

Item 4.MINE SAFETY DISCLOSURES

 

Not applicable.

 

29
 

 

PART II

 

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The Chefs’ Warehouse, Inc. Common Stock

 

Our common stock is publicly traded under the symbol “CHEF” on the NASDAQ Global Select Market. The following table sets forth the high and low sale prices for our common stock for the fiscal periods indicated as reported by the Nasdaq Stock Market during the indicated quarters.

 

    Common Stock Price  
    High   Low  
Fiscal Year Ended December 25, 2015              
First Quarter   $ 24.09   $ 19.57  
Second Quarter   $ 22.84   $ 18.07  
Third Quarter   $ 21.61   $ 13.39  
Fourth Quarter   $ 20.61   $ 12.55  
               
Fiscal Year Ended December 26, 2014              
First Quarter   $ 29.99   $ 19.78  
Second Quarter   $ 21.66   $ 17.24  
Third Quarter   $ 20.04   $ 16.09  
Fourth Quarter   $ 22.44   $ 14.80  

 

On March 3, 2016, the closing price of our common stock on the NASDAQ Global Select Market was $18.61 per share. As of February 10, 2016, there were 57 holders of record of our common stock. This does not include the number of persons whose stock is in nominee or “street” name accounts through brokers.

 

We have never paid a cash dividend on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Furthermore, we are prohibited from paying cash dividends under the terms of our senior secured credit facilities and the agreement governing our senior secured notes without the consent of the lenders or noteholders, respectively, thereunder.

 

Performance Graph

 

The following graph compares the cumulative total stockholder return on our common stock during the period from July 28, 2011 (the first day our stock began trading on the NASDAQ Stock Market) through December 25, 2015 with the cumulative total return on the NASDAQ Composite and the S&P Smallcap Food Distributor Index. The comparison assumes that $100 was invested on July 28, 2011 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.

 

The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate such information by reference into such filing.

 

30
 

 

COMPARISON OF 3 YEAR 5 MONTH CUMULATIVE TOTAL RETURN
AMONG THE CHEFS’ WAREHOUSE, INC.
NASDAQ COMPOSITE INDEX AND THE S&P SMALLCAP FOOD DISTRIBUTOR INDEX

 

(LINE GRAPH)

 

ASSUMES $100 INVESTED ON JULY 28, 2011 

                                       
    July 28,
2011
  December 30,
2011
  December 28,
2012
  December 27,
2013
  December 26,
2014
  December 25,
2015
 
                                       
The Chefs’ Warehouse, Inc.   $ 100.00   $ 102.06   $ 88.00   $ 166.51   $ 125.89   $ 95.31  
NASDAQ Composite Index   $ 100.00   $ 102.13   $ 103.71   $ 166.33   $ 206.01   $ 242.38  
S&P Smallcap Food Distributor Index   $ 100.00   $ 96.43   $ 110.30   $ 199.90   $ 200.97   $ 132.23  

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

                           
    Total Number
of Shares
Repurchased(1)
  Average
Price
Paid Per Share
  Total
Number of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
  Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
or Programs
 
September 26, 2015 to October 23, 2015     810   $ 13.86          
October 24, 2015 to November 20, 2015                  
November 21, 2015 to December 25, 2015     1,157     18.06          
Total     1,967   $ 16.33          

 

 

(1)During the thirteen weeks ended December 25, 2015, we withheld 1,967 shares of our common stock to satisfy tax withholding requirements upon the vesting of restricted shares of our common stock awarded to certain of our officers and key employees. 

 

31
 

 

Equity Compensation Plan Information

 

See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

 

Item 6.SELECTED FINANCIAL DATA

 

The selected consolidated financial data presented below as of the end of each of the fiscal years in the five-year period ended December 25, 2015 have been derived from our or our predecessor company’s audited consolidated financial statements. The data set forth below is qualified by reference to, and should be read in conjunction with our consolidated financial statements and their notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. Our consolidated statement of operations for the year ended December 30, 2011 contained a 53rd week while all other years presented contained 52 weeks.

 

Acquisitions Affecting Comparability of Operating Results (amounts are presented in thousands)

 

The Company has made several acquisitions throughout the five-year period ended December 25, 2015. For acquisitions affecting the comparability of most recent three fiscal years, refer to the “Recent Acquisitions” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. Acquisitions affecting comparability of the previous periods are described below.

 

On August 10, 2012, the Company acquired 100% of the equity securities of Michael’s, a specialty protein distributor based in Columbus, Ohio. Michael’s distributes an extensive portfolio of custom cut beef, seafood and other center-of-the-plate products to many of the leading restaurants, country clubs, hotels and casinos in Ohio, Indiana, Illinois, Tennessee, Michigan, Kentucky, West Virginia and western Pennsylvania. The total purchase price for the business was approximately $53,509 and was funded with borrowings under the revolving credit facility portion of the Credit Agreement that we entered into in April 2012.

 

On April 27, 2012, we acquired 100% of the outstanding common stock of Praml International, Ltd. (“Praml”), a Nevada corporation. The purchase price paid to acquire Praml was approximately $19,500. We financed the purchase price paid for the outstanding common stock of Praml with borrowings under the revolving credit facility portion of the Credit Agreement we entered into in April 2012. Praml was a leading specialty foods importer and wholesale distributor located in Las Vegas, Nevada, which serviced the Las Vegas and Reno markets.

 

On November 7, 2011, we purchased substantially all the assets of Provvista, including Provvista’s customer list, inventory and certain intellectual property. Provvista is a leading specialty foods importer and wholesale distributor located in Portland, Oregon, which services the Portland, Oregon and Seattle, Washington metropolitan areas. The purchase price paid to Provvista was approximately $8,800. We financed the purchase price with borrowings under our credit facilities that we entered into in connection with our initial public offering (“IPO”).

 

On June 24, 2011, we purchased certain of the assets of Harry Wils including certain of its inventory and certain intangible assets, including its customer list and certain intellectual property. Harry Wils was a specialty foodservice distribution company headquartered in the New York City metropolitan area. The purchase price paid to Harry Wils was approximately $8,900. We financed the purchase price for these assets with borrowings under our senior secured credit facilities in place prior to the consummation of our IPO.

 

32
 

 

Consolidated Statement of Operations Data:
(Amounts presented in thousands, except for per share amounts)

                                 
    FOR THE FISCAL YEARS ENDED  
Statement of Operations Data:   December 25,
2015
  December 26,
2014
  December 27,
2013
  December 28,
2012
  December 30,
2011
 
Net sales   $ 1,058,996   $ 836,625   $ 673,545   $ 480,292   $ 400,632  
Cost of sales     789,462     630,573     501,181     355,288     294,698  
                                 
Gross profit     269,534     206,052     172,364     125,004     105,934  
Operating expenses     229,134     173,042     135,783     96,237     78,138  
                                 
Operating income     40,400     33,010     36,581     28,767     27,796  
Interest expense, net     12,984     8,167     7,775     3,674     14,570  
Gain on interest rate swap                     (81 )
(Gain) loss on sale of assets     (295 )   (5 )   8     18     6  
                                 
Income before income taxes     27,711     24,848     28,798     25,075     13,301  
Provision for income taxes     11,502     10,633     11,808     10,564     5,603  
                                 
Net income   $ 16,209   $ 14,215   $ 16,990   $ 14,511   $ 7,698  
                                 
Basic net income per share   $ 0.63   $ 0.58   $ 0.78   $ 0.70   $ 0.44  
Diluted net income per share   $ 0.63   $ 0.57   $ 0.77   $ 0.69   $ 0.43  
Weighted average common shares outstanding:                                
Basic     25,532     24,638     21,767     20,612     17,591  
Diluted     26,509     24,845     21,995     20,926     18,032  
                                 
Balance Sheet Data (at end of period)                                
Cash and cash equivalents   $ 2,454   $ 3,328   $ 20,014   $ 118   $ 2,033  
Working capital   $ 130,627   $ 111,947   $ 117,504   $ 57,802   $ 29,769  
Total assets   $ 586,218   $ 376,193   $ 354,758   $ 210,134   $ 107,878  
Long-term debt, net of current portion   $ 268,508   $ 135,800   $ 140,847   $ 119,352   $ 39,590  
Total liabilities   $ 398,254   $ 229,399   $ 222,693   $ 170,852   $ 84,308  
Total stockholders’ equity   $ 187,964   $ 146,794   $ 132,065   $ 39,282   $ 23,570  

 

33
 

 

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with information included in Item 8 of this report. Unless otherwise indicated, the terms “Company”, “Chefs’ Warehouse”, “we”, “us”, and “our” refer to The Chefs’ Warehouse, Inc. and its subsidiaries. All dollar amounts are in thousands except per share amounts.

 

Overview and Recent Developments

 

Overview

 

We are a premier distributor of specialty foods in eight of the leading culinary markets in the United States. We offer more than 34,000 SKUs, ranging from high-quality specialty foods and ingredients to basic ingredients and staples and center-of-the-plate proteins. We serve more than 26,000 customer locations, primarily located in our 15 geographic markets across the United States and Canada, and the majority of our customers are independent restaurants and fine dining establishments. As a result of our acquisition of Allen Brothers, we also sell certain of our center-of-the-plate products directly to consumers.

 

We believe several key differentiating factors of our business model have enabled us to execute our strategy consistently and profitably across our expanding customer base. These factors consist of a portfolio of distinctive and hard-to-find specialty food products, an extensive selection of center-of-the-plate proteins, a highly trained and motivated sales force, strong sourcing capabilities, a fully integrated warehouse management system, a highly sophisticated distribution and logistics platform and a focused, seasoned management team.

 

In recent years, our sales to existing and new customers have increased through the continued growth in demand for specialty food products and center-of-the-plate products in general; increased market share driven by our large percentage of sophisticated and experienced sales professionals, our high-quality customer service and our extensive breadth and depth of product offerings, including, as a result of our acquisitions of Michael’s in August 2012, Allen Brothers in December 2013 and Del Monte in April 2015, meat, seafood and other center-of-the-plate products, and, as a result of our acquisition of Qzina in May 2013, gourmet chocolate, pastries and dessert; the acquisition of other specialty food and center-of-the-plate distributors; the expansion of our existing distribution centers; our entry into new distribution centers, including the construction of a new distribution center in Chicago; and the import and sale of our proprietary brands. Through these efforts, we believe that we have been able to expand our customer base, enhance and diversify our product selections, broaden our geographic penetration and increase our market share. We believe that as a result of these efforts, we have increased sales from $400,632 in fiscal 2011 to $1,058,996 in fiscal 2015.

 

Recent Acquisitions

 

On April 6, 2015, we acquired substantially all the equity interests of Del Monte Capitol Meat Co. and substantially all the assets of certain of its affiliated companies (collectively, “Del Monte”) for an initial purchase price of approximately $185,332, including the initial net working capital adjustment. Founded in 1926, Del Monte supplies high quality, USDA inspected beef, pork, lamb, veal, poultry and seafood products to Northern California. The funding of the acquisition consisted of the following:

 

·$123,893 in cash, which was funded with cash-on-hand, borrowings under the revolving credit facility portion of our senior secured credit facilities and the issuance of $25,000 of additional senior secured notes that bear interest at 5.80% per annum due on October 17, 2020;

·approximately 1.1 million shares of our common stock (valued at $22.17 per share); and

·$36,750 in convertible subordinated notes issued to certain entities affiliated with Del Monte with a six-year maturity bearing interest at 2.50% with a conversion price of $29.70 per share.

 

In addition, we have agreed to pay additional contingent consideration of up to $24,500 upon the successful achievement of Adjusted EBITDA targets for the Del Monte entities and improvements in certain operating metrics for our existing protein business and the business of any protein companies subsequently acquired by the Company over the six years following the closing. The final amount of the purchase price for Del Monte is subject to certain customary post-closing adjustments and finalization of our purchase accounting adjustments.

 

On October 24, 2014, we acquired substantially all the assets of Euro Gourmet Inc. (“Euro Gourmet”), a wholesale specialty distributor based in Beltsville, Maryland. Founded in 1999, Euro Gourmet was a supplier of imported and domestic products. Euro Gourmet supplied more than 3,000 products to some of the finest restaurants, bakeries, patisseries, chocolatiers, hotels and cruise lines along the mid-Atlantic United States. The total purchase price for Euro Gourmet was approximately $2,063 at closing and was funded with cash from operations.

 

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On December 11, 2013, we acquired substantially all the assets of Allen Brothers, Inc. (and its subsidiaries) based in Chicago, Illinois. Founded in 1893, Allen Brothers is a leading processor and distributor of premium quality meats to nearly 400 of the nation’s finest restaurants, hotels, casinos and country clubs. In addition, Allen Brothers supplies many of those same high quality products to over 100,000 consumers through a direct mail and e-commerce platform. The total purchase price for the business is estimated to be approximately $30,670, which includes approximately $23,939 paid at closing with cash proceeds from our September 2013 common stock offering. The remaining $6,731 represents pension liabilities we assumed of $2,878 and earnout consideration of $6,000 to be paid upon the achievement of certain performance milestones over the next four years following the closing, offset by $2,147 received as an adjustment to the purchase price.

 

On May 1, 2013, we acquired 100% of the equity interests of Qzina Specialty Foods North America Inc. (“Qzina”), a British Columbia, Canada corporation based in Pompano Beach, Florida. Founded in 1982, Qzina is a leading supplier of gourmet chocolate, dessert and pastry products dedicated to the pastry professional. Qzina currently supplies more than 3,000 products to some of the finest restaurants, bakeries, patisseries, chocolatiers, hotels and cruise lines throughout the U.S. and Canada. The total purchase price paid for Qzina was $31,396, net of $578 cash and was funded with borrowings under the revolving credit facility portion of our Amended and Restated Credit Agreement. In the third quarter of 2014, the Company received a settlement of $491 from the prior owners of Qzina directly related to disputes regarding the working capital adjustment.

 

On December 31, 2012, we acquired substantially all of the assets of Queensgate Foodservice (“Queensgate”), a foodservice distributor based in Cincinnati, Ohio. Queensgate strengthens our foothold in the Ohio Valley and provides a platform on which to leverage the Michael’s acquisition completed in August 2012. The purchase price paid for Queensgate at the closing was $21,934 and was funded with borrowings under the revolving credit facility portion of the Credit Agreement that we entered into in April 2012.

 

Our Growth Strategies and Outlook

 

We continue to invest in our people, facilities and technology in an effort to achieve the following objectives and maintain our premier position within the specialty foodservice distribution market:

 

·sales and service territory expansion;

·operational excellence and high customer service levels;

·expanded purchasing programs and improved buying power;

·product innovation and new product category introduction;

·operational efficiencies through system enhancements; and

·operating expense reduction through the centralization of general and administrative functions.

 

Our growth has allowed us to improve upon our organization’s infrastructure, open new distribution facilities and pursue selective acquisitions. Over the last several years, we have increased our distribution capacity to approximately 1 million square feet in 25 distribution facilities at December 25, 2015. From the second half of fiscal 2013 through the end of fiscal 2015, we have invested significantly in acquisitions, infrastructure and management.

 

Key Factors Affecting Our Performance

 

Due to our focus on menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores, our results of operations are materially impacted by the success of the food-away-from-home industry in the United States and Canada, which is materially impacted by general economic conditions, weather, discretionary spending levels and consumer confidence. When economic conditions deteriorate, our customers businesses are negatively impacted as fewer people eat away-from-home and those who do spend less money. As economic conditions begin to improve, our customers’ businesses historically have likewise improved, which contributes to improvements in our business. Likewise, the direct to consumer business of our Allen Brothers subsidiary is significantly dependent on consumers’ discretionary spending habits, and weakness or uncertainty in the economy could lead to consumers buying less from Allen Brothers.

 

Volatile food costs may have a direct impact upon our profitability. Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the extent we are unable to pass on all or a portion of such product cost increases to our customers. In addition, product cost inflation may negatively impact consumer discretionary spending decisions within our customers’ establishments, which could adversely impact our sales. Conversely, our profit levels may be negatively impacted during periods of product cost deflation even though our gross profit as a percentage of sales may remain relatively constant. However, some of our products, particularly certain of our protein items, are priced on a cost plus a dollar markup, which helps mitigate the negative impact of deflation.

 

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Given our wide selection of product categories, as well as the continuous introduction of new products, we can experience shifts in product sales mix that have an impact on net sales and gross profit margins. This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, the shift in product mix resulting from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

 

The foodservice distribution industry is fragmented but consolidating, and we have supplemented our internal growth through selective strategic acquisitions. We believe that the consolidation trends in the foodservice distribution industry will continue to present acquisition opportunities for us, which may allow us to grow our business at a faster pace than we would otherwise be able to grow the business organically.

 

Performance Indicators

 

In addition to evaluating our income from operations, our management team analyzes our performance based on net sales growth, gross profit and gross profit margin.

 

·Net sales growth. Our net sales growth is driven principally by changes in volume and, to a lesser degree, changes in price related to the impact of inflation in commodity prices and product mix. In particular, product cost inflation and deflation impacts our results of operations and, depending on the amount of inflation or deflation, such impact may be material. For example, inflation may increase the dollar value of our sales, and deflation may cause the dollar value of our sales to fall despite our unit sales remaining constant or growing.

·Gross profit and gross profit margin. Our gross profit and gross profit as a percentage of net sales, or gross profit margin, are driven principally by changes in volume and fluctuations in food and commodity prices and our ability to pass on any price increases to our customers in an inflationary environment and maintain or increase gross profit margin when our costs decline. Our gross profit margin is also a function of the product mix of our net sales in any period. Given our wide selection of product categories, as well as the continuous introduction of new products, we can experience shifts in product sales mix that have an impact on net sales and gross profit margins. This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, impact of product mix from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

 

Key Financial Definitions

 

·Net sales. Net sales consist primarily of sales of specialty products, center-of-the-plate proteins and other food products to independently-owned restaurants and other high-end foodservice customers, which we report net of certain group discounts and customer sales incentives. Net sales also include sales by our Allen Brothers subsidiary that are direct to consumers.

·Cost of sales. Cost of sales include the net purchase price paid for products sold, plus the cost of transportation necessary to bring the product to our distribution facilities. Our cost of sales may not be comparable to other similar companies within our industry that include all costs related to their distribution network in their costs of sales rather than as operating expenses.

·Operating expenses. Our operating expenses include warehousing, processing and distribution expenses (which include salaries and wages, employee benefits, facility and distribution fleet rental costs and other expenses related to warehousing, processing and delivery) and selling, general and administrative expenses (which include selling, insurance, administrative, wage and benefit expenses and share-based compensation expense).

·Interest expense. Interest expense consists primarily of interest on our outstanding indebtedness and, as applicable, the write off of deferred financing fees.

 

Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The SEC has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results and require our most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies include the following: (i) determining our allowance for doubtful accounts, (ii) inventory valuation, with regard to determining our reserve for excess and obsolete inventory, (iii) valuing goodwill and intangible assets, (iv) vendor rebates and other promotional incentives, (v) self-insurance reserves, and (vi) accounting for income taxes and (vii) contingent earn-out liabilities. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies.

 

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Allowance for Doubtful Accounts

 

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are either conducted using cash-on-delivery terms or the account is closely monitored so that agreed-upon payments are received prior to orders being released. A failure to pay results in held or cancelled orders. We also estimate receivables that will ultimately be uncollectible based upon historical write-off experience. Our estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance. Our accounts receivable balance was $124,139 and $96,896, net of the allowance for doubtful accounts of $5,803 and $4,675, as of December 25, 2015 and December 26, 2014, respectively.

 

Inventory Valuation

 

We maintain reserves for slow-moving and obsolete inventories. These reserves are primarily based upon inventory age plus specifically identified inventory items and overall economic conditions. A sudden and unexpected change in consumer preferences or change in overall economic conditions could result in a significant change in the reserve balance and could require a corresponding charge to earnings. We actively manage our inventory levels as we seek to minimize the risk of loss and have consistently achieved a relatively high level of inventory turnover.

 

Valuation of Goodwill and Intangible Assets

 

We are required to test goodwill for impairment at least annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have elected to perform our annual tests for indications of goodwill impairment during the fourth quarter of each fiscal year. We test for goodwill impairment at the reporting unit level, as we aggregate our component units into two reporting units, Protein and Specialty, based on a discounted cash flow approach. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing our estimated fair value to our carrying value, including goodwill. If our estimated fair value exceeds our carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment. If required, the second step involves calculating an implied fair value of our goodwill. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if we were being acquired in a business combination. If the implied fair value of our goodwill exceeds the carrying value of our goodwill, there is no impairment. If the carrying value of our goodwill exceeds the implied fair value of our goodwill, an impairment charge is recorded for the excess.

 

When analyzing whether to aggregate the business components into single reporting units, the Company considers whether each component has similar economic characteristics. The Company has evaluated the economic characteristics of its different geographic markets, including its recently acquired businesses, along with the similarity of the operations and margins, nature of the products, type of customer and methods of distribution of products and the regulatory environment in which the Company operates and concluded that the business components can be combined into two reporting units, Protein and Specialty.

 

As of December 25, 2015, our annual assessment indicated that we are not at risk of failing step one of the goodwill impairment test and no impairment of goodwill existed, as the fair value of each reporting unit exceeded their carrying value. Total goodwill as of December 25, 2015 and December 26, 2014 was $155,816 and $78,508, respectively.

 

Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the assets useful lives based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model. There have been no events or changes in circumstances during 2015 or 2014 indicating that the carrying value of our finite-lived intangible assets are not recoverable. Total finite-lived intangible assets as of December 25, 2015 and December 26, 2014 were $132,211 and $50,485, respectively.

 

The assessment of the recoverability of goodwill and intangible assets will be impacted if estimated future cash flows are not achieved.

 

Vendor Rebates and Other Promotional Incentives

 

We participate in various rebate and promotional incentives with our suppliers, including volume and growth rebates, annual incentives and promotional programs. In accounting for vendor rebates, we follow the guidance in ASC 605-50 (Emerging Issues Task Force, or EITF, No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor and EITF No. 03-10, Application of Issue No. 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers).

 

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We generally record consideration received under these incentives as a reduction of cost of goods sold; however, in certain circumstances, we record marketing-related consideration as a reduction of marketing costs incurred. We may receive consideration in the form of cash and/or invoice deductions.

 

We record consideration that we receive for volume and growth rebates and annual incentives as a reduction of cost of goods sold. We systematically and rationally allocate the consideration for those incentives to each of the underlying transactions that results in progress by us toward earning the incentives. If the incentives are not probable and reasonably estimable, we record the incentives as the underlying objectives or milestones are achieved. We record annual incentives when we earn them, generally over the agreement period. We record consideration received to promote and sell the suppliers’ products as a reduction of our costs, as the consideration is typically a reimbursement of costs incurred by us. If we received consideration from the suppliers in excess of our costs, we record any excess as a reduction of cost of goods sold.

 

Self-Insurance Reserves

 

Effective October 1, 2011, we began maintaining a self-insured group medical program. The program contains individual stop loss thresholds of $125 per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program throughout the year. The amount in excess of the self-insured levels is fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

 

Effective August 1, 2012, we became self-insured for workers’ compensation and automobile liability to deductibles or self-insured retentions of $350 for workers compensation and $250 for automobile liability per occurrence. The amounts in excess of our deductibles are fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

 

Income Taxes

 

The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

 

Contingent Earn-out Liabilities

 

We account for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually re-measure the liability at each balance sheet date by recording changes in the fair value through our Consolidated Statements of Operations. We determine the fair value of contingent consideration based on future operating projections under various potential scenarios, including the use of Monte Carlo simulations, and weight the probability of these outcomes. The ultimate settlement of contingent earn-out liabilities relating to business combinations may be for amounts which are materially different from the amounts initially recorded and may cause volatility in our results of operations.

 

Management has discussed the development and selection of these critical accounting policies with our board of directors, and the board of directors has reviewed the above disclosure. Our consolidated financial statements contain other items that require estimation, but are not as critical as those discussed above. These other items include our calculations for bonus accruals, depreciation and amortization. Changes in estimates and assumptions used in these and other items could have an effect on our consolidated financial statements.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance to clarify the principles for recognizing revenue. This guidance includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On August 12, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. Early adoption of ASU 2014-09 is permitted but not before the original effective date (annual periods beginning after December 15, 2016). We expect to adopt this guidance when effective and adoption is not expected to have a material impact on our financial statements.

 

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In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance provides that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015 and is required to be applied on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. We expect to adopt this guidance when effective and adoption is not expected to have a material impact on our financial statements.

 

In July 2015, the FASB issued guidance to simplify the subsequent measurement of inventory. This guidance provides that inventory should be measured at lower of cost or net realizable value. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017 and is required to be applied on a prospective basis. Early adoption is permitted at the beginning of an interim or annual reporting period. We expect to adopt this guidance when effective and are still evaluating the impact this standard will have on our financial statements.

 

In September 2015, the FASB issued guidance to simplify the accounting for measurement period adjustments for business combinations. This guidance eliminates the need to retrospectively adjust prior periods for adjustments in provisional amounts booked on the opening balance sheet. This guidance is effective for fiscal years beginning after December 15, 2015 and should be applied on a prospective basis. Early adoption is permitted for financial statements that have not been issued. We expect to adopt this guidance when effective and are evaluating the impact this standard will have on our financial statements.

 

In November 2015, the FASB issued guidance to simplify the presentation of deferred income tax assets and liabilities. Current GAAP requires an entity to separate deferred income tax assets and liabilities into current and non-current classifications. This guidance requires that all deferred tax liabilities be classified as non-current. This guidance is effective for fiscal years beginning after December 15, 2016 and may be applied on a prospective or retrospective basis. Early adoption is permitted as of the beginning of an interim or annual reporting period. We expect to adopt this guidance when effective and adoption is not expected to have a material effect on our financial statements.

 

In February 2016, the FASB issued guidance to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Current GAAP does not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We expect to adopt this guidance when effective and are evaluating the impact this standard will have on our financial statements.  

 

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Results of Operations

 

The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of sales:

             
    FISCAL YEAR ENDED

 
    December 25,
2015
    December 26,
2014
    December 27,
2013
 
Net sales     100.0 %     100.0 %     100.0 %
Cost of sales     74.6 %     75.4 %     74.4 %
Gross profit     25.4 %     24.6 %     25.6 %
Operating expenses     21.6 %     20.7 %     20.2 %
Operating income     3.8 %     3.9 %     5.4 %
Other expense (income):                        
Other expense     1.2 %     0.9 %     1.1 %
Income before income taxes     2.6 %     3.0 %     4.3 %
Provision for income taxes     1.1 %     1.3 %     1.8 %
Net income     1.5 %     1.7 %     2.5 %

  

Fiscal Year Ended December 25, 2015 compared to Fiscal Year Ended December 26, 2014

  

Net Sales 

 

Net sales for the fifty-two weeks ended December 25, 2015 increased approximately 26.6% to $1,058,996 from $836,625 for the fifty-two weeks ended December 26, 2014. The increase in net sales was primarily the result of the acquisition of Del Monte, as well as organic sales growth. Acquisitions contributed approximately $174,679, or 20.9%, to net sales growth for the year. Organic growth contributed the remaining approximately $47,692, or 5.7%, of total net sales growth. Internally calculated inflation was approximately 3.0% for the year ended December 25, 2015, driven largely by certain protein and chocolate categories offset in part by deflation in the cheese, dairy and seafood categories. Internally calculated inflation for fiscal 2014 was approximately 5.9%.

 

Gross Profit

 

Gross profit increased approximately 30.8% to $269,534 for the fifty-two weeks ended December 25, 2015 from $206,052 for the fifty-two weeks ended December 26, 2014 primarily due to increased sales volumes. Gross profit margin increased approximately 82 basis points to 25.4% in fiscal 2015 from 24.6% in the year earlier period. This increase in gross profit margin was due primarily to increased profit margins in our core specialty business and improved operating performance in our Allen Brothers subsidiary, which experienced significant cost pressure in 2014.

 

Operating Expenses

 

Total operating expenses increased by approximately 32.4% to $229,134 for the fifty-two weeks ended December 25, 2015 from $173,042 for the fifty-two weeks ended December 26, 2014 primarily due to increased sales volumes. As a percentage of net sales, operating expenses increased 96 basis points to 21.6% for fiscal 2015 from 20.7% for fiscal 2014. The increase in our operating expense ratio is primarily attributable to $4,210 of amortization expense and $653 of non-cash accretion of contingent consideration related to the acquisition of Del Monte. Additionally, fiscal 2014 included a $1,500 gain related to a settlement with the former owners of Michael’s and the reversal of earn-out liabilities of $1,904 for our Queensgate and Allen Brothers acquisitions as the performance metrics applicable to these earnouts were not achieved.

 

Operating Income

 

Operating income increased approximately 22.4% to $40,400 for the fifty-two weeks ended December 25, 2015 compared to $33,010 for the fifty-two weeks ended December 26, 2014. As a percentage of net sales, operating income was 3.8% in fiscal 2015 compared to 3.9% in fiscal 2014. The increase in operating income was primarily due to the increase in sales volume and gross profit margin, partially offset by the higher operating expenses as discussed above.

 

Other Expense

  

Total other expense increased $4,527 to $12,689 for the year ended December 25, 2015, from $8,162 for the year ended December 26, 2014. This increase can be attributed to increased interest expense due to higher levels of debt related to the financing of our acquisitions, offset in part by a $349 gain on the sale of one of our owned properties.

 

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Provision for Income Taxes

 

Our effective income tax rate was 41.5% and 42.8% for the years ended December 25, 2015 and December 26, 2014, respectively. The decrease in effective tax rate from fiscal 2014 to fiscal 2015 is due primarily to the negative impact from a New York state tax audit for the years 2010 through 2012, which was reflected in fiscal 2014. Adjusted for the impact of the audit, our effective tax rate for fiscal 2014 was approximately 40.7%.

 

Net Income

 

Reflecting the factors described in more detail above, net income increased $1,994 to $16,209 for the fiscal year ended December 25, 2015, compared to $14,215 for the fiscal year ended December 26, 2014.

 

Fiscal Year Ended December 26, 2014 compared to Fiscal Year Ended December 27, 2013

 

Net Sales

 

Net sales for the fifty-two weeks ended December 26, 2014 increased approximately 24.2% to $836,625 from $673,545 for the fifty-two weeks ended December 27, 2013. The increase in net sales was the result of organic sales growth (9.5%) and the acquisitions of Allen Brothers (11.4%) and the acquisitions of Qzina and Euro Gourmet (3.3%). These acquisitions accounted for approximately $98,969 of our net sales growth in fiscal 2014. Severe weather in the Northeast and Midwest during the month of December 2013 negatively impacted net sales during 2013 by approximately $4,000. The severe weather continued to affect the Midwest and Northeast into the first quarter of fiscal 2014 and negatively impacted our business in those markets. The severe weather impact was estimated by comparing the sales on weekends that included severe weather events in our core markets to normalized weekend sales for that time period. Internally calculated inflation for fiscal 2014 was approximately 5.9%.

 

Gross Profit

 

Gross profit increased approximately 19.5% to $206,052 for the fifty-two weeks ended December 26, 2014 from $172,364 for the fifty-two weeks ended December 27, 2013 primarily due to increased sales volumes. Gross profit margin decreased approximately 96 basis points to 24.6% in fiscal 2014 from 25.6% in the year earlier period. The decrease was due in large part to the shift in product mix toward more proteins, as well as the performance of Allen Brothers. Gross profit margin in fiscal 2014 was also negatively impacted by inflation, most significantly in the dairy category, a portion of which we were unable to pass through to customers.

 

Operating Expenses

 

Total operating expenses increased by approximately 27.4% to $173,042 for the 52 weeks ended December 26, 2014 from $135,783 for the fifty-two weeks ended December 27, 2013 primarily due to increased sales volumes. As a percentage of net sales, operating expenses increased fifty-two basis points to 20.7% for fiscal 2014 from 20.2% for fiscal 2013. The increase in our operating expense ratio is primarily attributable to higher net shipping costs and catalog promotion costs related to our Allen Brothers subsidiary and increased investments in information technology initiatives offset in part by the recovery of approximately $1,500 related to a settlement with the former owners of Michael’s associated with certain inventory issues we experienced at Michael’s and the reversal of earnout liabilities of $1,904 for our Queensgate and Allen Brothers acquisitions as the performance metrics applicable to these earnouts were not achieved for fiscal 2014.

 

Operating Income

 

Operating income decreased approximately 9.8% to $33,010 for the fifty-two weeks ended December 26, 2014 compared to $36,581 for the fifty-two weeks ended December 27, 2013. As a percentage of net sales, operating income was 3.9% in fiscal 2014 compared to 5.4% in fiscal 2013. The decrease in operating income was primarily due to the increase in operating expenses offset in part by the increased sales volume as discussed above.

 

Other Expense

 

Total other expense increased $379 to $8,162 for the year ended December 26, 2014, from $7,783 for the year ended December 27, 2013. This increase in total other expense is primarily attributable to the $392 increase in interest expense, which was higher in fiscal 2014 due to the increased debt levels to fund our acquisitions, as well as the higher interest rate on our $100,000 of senior secured notes.

 

Provision for Income Taxes

 

Our effective income tax rate was 42.8% and 41.0% for the years ended December 26, 2014 and December 27, 2013, respectively. The increase in effective tax rate from fiscal 2013 to fiscal 2014 is due primarily to the negative impact from a New York state tax audit for the years 2010 through 2012, which was reflected in fiscal 2014. Adjusted for the impact of the audit, our effective tax rate for fiscal 2014 was approximately 40.7%.

 

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Net Income

 

Reflecting the factors described in more detail above, net income decreased $2,775 to $14,215 for the fiscal year ended December 26, 2014, compared to $16,990 for the fiscal year ended December 27, 2013.

 

Liquidity and Capital Resources

 

We finance our day-to-day operations and growth primarily with cash flows from operations, borrowings under our senior secured credit facilities, operating leases, trade payables and bank indebtedness.

 

Senior Secured Credit Facilities

 

On April 25, 2012, the Company and certain of its subsidiaries entered into a senior secured credit facility (the “Credit Agreement”) with the a group of lenders with JPMorgan Chase Bank, N.A. (“Chase”), as administrative agent. Subsequent to that date, the Credit Agreement has been amended and restated (the “Amended and Restated Credit Agreement”) to meet the changing requirements of the Company.

 

The Amended and Restated Credit Agreement provides for a senior secured term loan facility (the “Term Loan Facility”) in the aggregate amount of up to $36,000 (the loans thereunder, the “Term Loans”) and a senior secured revolving loan facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”) of up to an aggregate amount of $140,000 (the loans thereunder, the “Revolving Credit Loans”). Unutilized commitments under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement are subject to a per annum fee of from 0.35% to 0.45% based on the Leverage Ratio (as defined therein). A fronting fee of 0.25% per annum is payable on the face amount of each letter of credit issued under the Credit Facilities.

  

The final maturity of the Term Loans is April 25, 2017. Subject to adjustment for prepayments, we are required to make quarterly principal payments of $1,500 on the Term Loans on June 30, September 30, December 31 and March 31, with the remaining balance due upon maturity.

  

Borrowings under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement have been used, and are expected to be used, for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company. The commitments under the Revolving Credit Facility expire on April 25, 2017 and any Revolving Credit Loans then outstanding will be payable in full at that time. As of December 25, 2015, we had $40,673 of availability under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement.

  

Currently borrowings under the Amended and Restated Credit Agreement bear interest according to a pricing grid based upon our Total Leverage Ratio. As of December 25, 2015 our interest rate was 3.8%.

  

The Amended and Restated Credit Agreement has covenants for Total Leverage Ratio, Senior Leverage Ratio and Fixed Charge Ratio. As of December 25, 2015, the Company was in compliance with all debt covenants under the Amended and Restated Credit Agreement, as amended.

  

New Markets Tax Credit Loan

 

On April 26, 2012, Dairyland HP LLC (“DHP”), an indirectly wholly-owned subsidiary of ours, entered into a financing arrangement under the New Markets Tax Credit (“NMTC”) program under the Internal Revenue Code of 1986, as amended, pursuant to which a subsidiary of Chase, provided to DHP an $11,000 construction loan (the “NMTC Loan”) to help fund DHPs expansion and build-out of our Bronx, New York facility and the rail shed located at that facility, which construction is required under the facility lease agreement. Borrowings under the NMTC Loan are secured by a first priority secured lien on DHPs leasehold interest in our Bronx, New York facility, including all improvements made on the premises, as well as, among other things, a lien on all fixtures incorporated into the project improvements.

 

Under the NMTC Loan, DHP is obligated to pay (i) monthly interest payments on the principal balance then outstanding and (ii) the entire unpaid principal balance then due and owing on April 26, 2017. So long as DHP is not in default, interest accrues on borrowings at 1.00% per annum. We may prepay the NMTC Loan, in whole or in part, in $100 increments.

 

As of December 25, 2015, DHP was in compliance with all debt covenants under the NMTC Loan.

 

Senior Secured Notes

 

On April 17, 2013, the Company and certain of its subsidiaries issued $100,000 principal amount of 5.90% Guaranteed Senior Secured Notes due 2023 (the “Notes”). The Notes are guaranteed by the certain subsidiaries of the Company. The Notes, which rank pari passu with the Company’s obligations under the Credit Facilities, were issued to The Prudential Insurance Company of America and certain of its affiliates (collectively, “Prudential”) pursuant to a note purchase and guarantee agreement dated as of April 17, 2013 (the “Note Purchase and Guarantee Agreement”) between the Company and Prudential. The net proceeds from the issuance of the Notes were used to repay then-outstanding borrowings under the Revolving Credit Facility.

 

 42

 

 

The Notes must be repaid in two equal installments, the first $50,000 of which is due April 17, 2018 and the second $50,000 of which is due at maturity on April 17, 2023. Moreover, the Company may prepay the Notes in amounts not less than $1,000 at 100% of the principal amount of the Notes repaid plus the applicable Make-Whole Amount (as defined in the Note Purchase and Guarantee Agreement).

 

On April 6, 2015, the Company issued $25,000 principal amount of 5.80% Series B Guaranteed Senior Secured Notes due October 17, 2020 to help fund the acquisition of Del Monte. The notes, which rank pari passu with the Company’s obligations under the Credit Facilities, were issued to Prudential pursuant to a Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015. In connection with the issuance of these notes, we entered into an amendment to our Amended and Restated Credit Agreement to permit the issuance of the notes.

 

On July 1, 2015, the Company entered into an amendment to the Note Purchase and Guarantee Agreement to permit an increase in the applicable rate of the Notes by 0.25% during the period of the Financial Covenants Adjustment.

 

The Note Purchase and Guarantee Agreement contains financial covenants related to leverage and fixed charges that are substantially the same as the corresponding provisions in the Amended and Restated Credit Agreement, as amended. As of December 25, 2015, the Company was in compliance with all debt covenants under the Notes and the Note Purchase and Guarantee Agreement, as amended.

 

Convertible Subordinated Notes

 

On April 6, 2015, the Company issued $36,750 principal amount of convertible subordinated notes with a six-year maturity bearing interest at 2.5% and a conversion price of $29.70 per share (the “Convertible Subordinated Notes”) to certain of the Del Monte entities as partial consideration in the Del Monte acquisition. The holders of the Convertible Subordinated Notes may, in certain instances beginning one year after issuance, redeem the Convertible Subordinated Notes for cash or shares of the Company’s common stock. Moreover, the Company may pay the outstanding principal amount due and owing under the Convertible Subordinated Notes at maturity in either cash or shares of the Company’s common stock. The Convertible Subordinated Notes, which are subordinate to the Company’s and its subsidiaries’ senior debt, are convertible into shares of the Company’s common stock by the holders at any time at a conversion price of $29.70.

 

Liquidity

 

Our capital expenditures, excluding cash paid for acquisitions, were approximately $21,656 for fiscal 2015. We believe our capital expenditures, excluding cash paid for acquisitions, for fiscal 2016 will be approximately $14,000. The significant decrease in projected capital expenditures in fiscal 2016 as compared to fiscal 2015 is the result of the completion of the renovation and expansion of our new Bronx, NY and Las Vegas, NV distribution facilities. Recurring capital expenditures will be financed with cash generated from operations and borrowings under our Revolving Credit Facility. Our planned capital projects will provide both new and expanded facilities and improvements to our technology that we believe will produce increased efficiency and the capacity to continue to support the growth of our customer base. Future investments and acquisitions will be financed through either internally generated cash flow, borrowings under our senior secured credit facilities in place at the time of the potential investment or acquisition or through the issuance of equity or debt securities, including, but not limited to, longer-term, fixed-rate debt securities and shares of our common stock.

 

In July 2015, we closed on a sale-leaseback transaction of our new Las Vegas, NV distribution facility. The property was sold for $14,645, which approximated its cost. The related on-going lease will be accounted for as an operating lease.

 

Cash Flows

 

Net cash provided by operations was $37,727 for fiscal 2015, an increase of $27,930 from the $9,797 provided by operations for fiscal 2014. The primary reasons for the increase in net cash provided by operations were increased cash generated through net income and a decrease in cash used in working capital and other operating assets and liabilities. During fiscal 2015 net income increased by $1,994 and, embedded within the net income increase, non-cash charges increased by $13,223, representing an overall increase of cash provided through net income of $15,217. The primary cause for this increase is the organic growth of the Company as well as the cash generating impacts of the Del Monte acquisition, and to a lesser extent the Euro Gourmet acquisition. Offsetting these positive impacts were increased corporate costs, including higher interest and income tax payments. The decrease in cash used for working capital was due to decreases in cash used for accounts receivable of $10,277 and inventory of $4,700, an increase in cash provided from accounts payable of $4,607, offset by a decrease in cash provided by prepaids and other assets of $4,759. These improvements in working capital were due to a concerted effort by management to better control this area during these periods of high growth.

 

 43

 

 

Net cash provided by operations was $9,797 for fiscal 2014, a decrease of $841 from the $10,638 provided by operations for fiscal 2013. The primary reasons for the decrease in net cash provided by operations were decreased net income of $2,775 and a decrease in cash used in working capital and other operating assets and liabilities of $2,014. The decrease in net income was primarily due to higher operating expenses and lower gross profit margin rates that more than offset the positive impacts of cash provided by sales growth. The decrease in cash used in working capital was due to increases in accounts payable and accrued liabilities of $11,956 and decreases in prepaid expenses and other assets of $15,281 and was partially offset by cash used for accounts receivable of $15,449 and inventory increase of $11,204.

 

Net cash used in investing activities was $129,300 for fiscal 2015, an increase of $105,627 from the net cash used in investing activities of $23,673 for fiscal 2014. The increase in net cash used was primarily due to increased cash paid for acquisitions, net of cash received of $124,315, the result of the Del Monte acquisition, which was partially offset by reduced capital expenditures of $2,550, the result of completing construction of our Bronx, NY and Las Vegas, NV distribution facilities, and an increase in proceeds from asset disposals of $16,138, the result of the sale-leaseback of our Las Vegas, NV distribution facility and the sale of one other facility.

 

Net cash used in investing activities was $23,673 for fiscal 2014, a decrease of $66,026 from the net cash used in investing activities of $89,699 for fiscal 2013. The decrease in net cash used was primarily due to decreased cash paid for acquisitions, net of cash received of $78,479, which was partially offset by increased capital expenditures of $12,502.

 

Net cash provided from financing activities was $91,046 in fiscal 2015, an increase of $93,744 from the $2,698 used in financing activities in fiscal 2014. This increase primarily resulted from the receipt of proceeds from our senior notes of $25,000 and the drawdown of $93,382 from of revolving credit facility to pay for the Del Monte acquisition. These proceeds were partially offset by increases in debt payments of $16,839 and use of restricted cash in fiscal 2014 of $5,578.

 

Net cash used in financing activities was $2,698 in fiscal 2014, a decrease of $101,425 from the $98,727 provided by financing activities in fiscal 2013. This decrease primarily resulted from the receipt of proceeds from our offering of common stock and the private placement of our senior secured notes offset by payment of our Revolving Credit Facility in fiscal 2013.

 

 44

 

 

Commitments and Significant Contractual Obligations

 

The following table summarizes our contractual obligations and commercial commitments at December 25, 2015.

                
   PAYMENTS DUE BY PERIOD (1)
   TOTAL  LESS THAN
ONE YEAR
  1-3
YEARS
  4-5
YEARS
  THEREAFTER
   (In thousands)
                
Inventory purchase commitments   $24,791   $24,791   $   $   $ 
Indebtedness   $310,847   $14,130   $166,884   $35,806   $94,027 
Capital lease obligations and software financing   $3,941   $1,589   $2,352   $   $ 
Pension exit liabilities  $4,202   $289   $578   $578   $2,757 
Long-term operating leases   $124,891   $16,888   $30,608   $22,457   $54,938 
                          
Total   $468,672   $57,687   $200,422   $58,841   $151,722 

 

(1) Interest on our various outstanding debt instruments is included in the above table, except for the revolving credit facility and term loan portion of our senior secured credit facilities, which has a variable interest rate. At December 25, 2015, we had borrowings of $4.7 million under our Term Loan Facility and $93.4 million under the Revolving Credit Facility. During the fiscal year ended December 25, 2015, the interest rate on our Term Loan Facility was between 3.4% and 3.7% and the interest rate on our Revolving Credit Facility was between 3.4% to 5.8%. During the year ended December 25, 2015, we incurred interest expense of $4,007, under both of these facilities. See Note 10 “Debt Obligations” to our consolidated financial statements for further information.

 

A portion of the indebtedness obligations shown in the above table reflects the expiration of our Credit Facilities, not necessarily the underlying individual borrowings. In addition, cash to be paid for income taxes is excluded from the table above.

 

One of the Company’s subsidiaries, Dairyland USA Corporation, subleases office space in one of its former distribution centers from TCW Leasing Co., LLC (“TCW”), an entity controlled by the Company’s founders. TCW leases the distribution center from the New York City Industrial Development Agency. In connection with this sublease arrangement and TCW’s obligations to its mortgage lender, Dairyland USA Corporation and two of the Company’s other subsidiaries initially were required to act as guarantors of TCW’s mortgage obligation on the distribution center. The mortgage payoff date is December 2029 and the potential obligation under this guarantee totaled $5,580 at December 25, 2015. By agreement dated July 1, 2005, the lender conditionally released all three of the Company’s subsidiaries from their guaranty obligations, provided the sublease between Dairyland USA Corporation and TCW remains in full force and effect. The Company believes that it and its subsidiaries were in full compliance with that requirement during fiscal 2015. In addition, during the first half of 2016, the Company plans to exit the office space sublease and TCW plans to refinance its mortgage with another lender, with the result that the Company and its subsidiaries will be unconditionally and fully released from any guaranty of TCW’s mortgage loan.

 

We had outstanding letters of credit of approximately $5,945 and $4,845 at December 25, 2015 and December 26, 2014, respectively.

 

Substantially all of our assets are pledged as collateral to secure our borrowings under our Credit Facilities.

 

Seasonality

 

Excluding our direct-to-consumer business, we generally do not experience any material seasonality. However, our sales and operating results may vary from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, personnel changes, demand for our products, supply shortages, weather patterns and general economic conditions.

 

Our direct-to-consumer business is subject to seasonal fluctuations, with direct-to-consumer center-of-the-plate protein sales typically higher during the holiday season in our fourth quarter; accordingly, a disproportionate amount of operating cash flows from this portion of our business is generated by our direct-to-consumer business in the fourth quarter of our fiscal year. Despite a significant portion of these sales occurring in the fourth quarter, there are operating expenses, principally advertising and promotional expenses, throughout the year.

 

 45

 

 

Inflation

 

Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our customers. The impact of inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our operations.

 

Off-Balance Sheet Arrangements

 

As of December 25, 2015, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

 

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Interest Rate Risk

 

On April 25, 2012, the Borrowers and the Guarantors entered into the Credit Agreement with the lenders from time to time party thereto, Chase, as Administrative Agent, and the other parties thereto. On April 17, 2013, the Borrowers and Guarantors entered into the Amended and Restated Credit Agreement. Each of the Credit Agreement and the Amended and Restated Credit Agreement, as amended, is described in more detail above under the caption “Liquidity and Capital Resources” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our primary market risks are related to fluctuations in interest rates related to borrowings under our current credit facilities.

 

As of December 25, 2015, we had an aggregate $98.1 million of indebtedness outstanding under the Revolving Credit Facility and Term Loan Facility and $3.8 million under a software financing agreement that bore interest at variable rates. A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately $596 per annum, holding other variables constant.

 

 46

 

 

Item 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  

Index to the Consolidated Financial Statements   Page
     
Report of Independent Registered Public Accounting Firm   48
     
Consolidated Balance Sheets at December 25, 2015 and December 26, 2014   49
     
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 25, 2015, December 26, 2014 and December 27, 2013   50
     
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 25, 2015, December 26, 2014 and December 27, 2013   51
     
Consolidated Statements of Cash Flows for the Years Ended December 25, 2015, December 26, 2014, and December 27, 2013   52
     
Notes to Consolidated Financial Statements   53

 

 47

 

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholders
The Chefs’ Warehouse, Inc.
Ridgefield, CT

 

We have audited the accompanying consolidated balance sheets of The Chefs’ Warehouse, Inc. as of December 25, 2015 and December 26, 2014 and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three fiscal years in the period ended December 25, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide 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 The Chefs’ Warehouse, Inc. at December 25, 2015 and December 26, 2014, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 25, 2015, in conformity with accounting principles generally accepted in the United States of America.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Chefs’ Warehouse, Inc.’s internal control over financial reporting as of December 25, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 4, 2016 expressed an unqualified opinion thereon.

 

/s/ BDO USA, LLP

 

Stamford, CT
March 4, 2016

 

 48

 

  

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED BALANCE SHEETS 

(In thousands, except share data)

               
    December 25,
2015
  December 26,
2014
 
ASSETS              
Current assets:              
Cash and cash equivalents   $ 2,454   $ 3,328  
Accounts receivable, net of allowance of $5,803 in 2015 and $4,675 in 2014     124,139     96,896  
Inventories, net     92,758     75,528  
Deferred taxes, net     5,256     3,500  
Prepaid expenses and other current assets     9,164     9,755  
Total current assets     233,771     189,007  
               
Equipment and leasehold improvements, net     54,283     47,938  
Software costs, net     4,511     5,358  
Goodwill     155,816     78,508  
Intangible assets, net     132,211     50,485  
Other assets     5,626     4,897  
Total assets   $ 586,218   $ 376,193  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable   $ 64,888   $ 43,157  
Accrued liabilities     24,258     19,522  
Accrued compensation     7,732     6,645  
Current portion of long-term debt     6,266     7,736  
Total current liabilities     103,144     77,060  
               
Long-term debt, net of current portion     268,508     135,800  
Deferred taxes, net     9,316     8,067  
Other liabilities and deferred credits     17,286     8,472  
Total liabilities     398,254     229,399  
               
Commitments and contingencies              
               
Stockholders’ equity:              
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at December 25, 2015 and December 26, 2014          
Common Stock - $0.01 par value, 100,000,000 shares authorized, 26,290,675 and 25,031,267 shares issued and outstanding at December 25, 2015 and December 26, 2014, respectively     263     250  
Additional paid in capital     125,170     97,966  
Accumulated other comprehensive loss     (2,949 )   (693 )
Retained earnings     65,480     49,271  
Total stockholders’ equity     187,964     146,794  
Total liabilities and stockholders’ equity   $ 586,218   $ 376,193  

 

See accompanying notes to the consolidated financial statements.

 

49
 

 

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except share and per share amounts)

                     
    December 25,
2015
  Fiscal Years Ended
December 26,
2014
  December 27,
2013
 
                     
Net sales   $ 1,058,996   $ 836,625   $ 673,545  
Cost of sales     789,462     630,573     501,181  
Gross profit     269,534     206,052     172,364  
Operating expenses     229,134     173,042     135,783  
Operating income     40,400     33,010     36,581  
Interest expense     12,984     8,167     7,775  
(Gain) loss on sale of assets     (295 )   (5 )   8  
Income before income taxes     27,711     24,848     28,798  
Provision for income taxes     11,502     10,633     11,808  
Net income   $ 16,209   $ 14,215   $ 16,990  
Other comprehensive income:                    
Foreign currency translation adjustments     (2,256 )   (479 )   (214 )
Comprehensive income   $ 13,953   $ 13,736   $ 16,776  
                     
Net income per share:                    
Basic   $ 0.63   $ 0.58   $ 0.78  
Diluted   $ 0.63   $ 0.57   $ 0.77  
                     
Weighted average common shares outstanding:                    
Basic     25,532,172     24,638,135     21,766,743  
Diluted     26,508,994     24,844,565     21,995,042  

 

See accompanying notes to the consolidated financial statements.

 

50
 

 

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 25, 2015, December 26, 2014 and December 27, 2013
(Amounts in thousands, except share amounts)

                                       
    Common Stock                          
    Shares   Amount   Additional
Paid in
Capital
  Accumulated
Other
Comprehensive
Loss
 

 

Retained
Earnings

  Total  
Balance December 28, 2012     20,988,073   $ 210   $ 21,005   $   $ 18,066   $ 39,281  
Net income                     16,990     16,990  
Proceeds from secondary offering     3,800,000     38     74,999             75,037  
Stock compensation     258,348     2     1,208             1,210  
Excess tax benefits on stock compensation             30             30  
Cumulative translation adjustment                 (214 )       (214 )
Shares surrendered to pay withholding taxes     (14,205 )       (269 )           (269 )
Balance December 27, 2013     25,032,216   $ 250   $ 96,973   $ (214 ) $ 35,056   $ 132,065  
Net income                     14,215     14,215  
Stock compensation     21,008         1,374             1,374  
Excess tax benefits on stock compensation             110             110  
Cumulative translation adjustment                 (479 )       (479 )
Shares surrendered to pay withholding taxes     (21,957 )       (491 )           (491 )
Balance December 26, 2014     25,031,267   $ 250   $ 97,966   $ (693 ) $ 49,271   $ 146,794  
Net income                     16,209     16,209  
Stock compensation     196,950     2     3,537             3,539  
Shares issued for Del Monte acquisition     1,113,636     11     24,678             24,689  
Excess tax benefits on stock compensation             81             81  
Cumulative translation adjustment                 (2,256 )       (2,256 )
Shares surrendered to pay withholding taxes     (51,178 )       (1,092 )           (1,092 )
Balance December 25, 2015     26,290,675   $ 263   $ 125,170   $ (2,949 ) $ 65,480   $ 187,964  

 

See accompanying notes to the consolidated financial statements.

 

51
 

 

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 25, 2015, December 26, 2014, and December 27, 2013
(Amounts in thousands)

                     
    December 25,
2015
  December 26,
2014
  December 27,
2013
 
Cash flows from operating activities:                    
Net income   $ 16,209   $ 14,215   $ 16,990  
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation     5,960     3,113     2,521  
Amortization of intangible assets     9,453     5,130     4,796  
Provision for allowance for doubtful accounts     2,909     1,195     924  
Deferred rent     850     (105 )   331  
Deferred taxes     (809 )   173     970  
Amortization of deferred financing fees     1,228     876     647  
Stock compensation     3,539     1,374     1,210  
Change in fair value of earn-outs     558     (1,581 )   (1,157 )
(Gain) loss on asset disposal     (295 )   (5 )   8  
Changes in assets and liabilities, net of acquisitions:                    
Accounts receivable     (11,055 )   (21,332 )   (5,883 )
Inventories     (6,109 )   (10,809 )   395  
Prepaid expenses and other current assets     1,314     6,074     (9,207 )
Accounts payable and accrued liabilities     15,351     10,744     (1,212 )
Other liabilities     (471 )   1,830     (199 )
Other assets     (905 )   (1,095 )   (496 )
Net cash provided by operating activities     37,727     9,797     10,638  
                     
Cash flows from investing activities:                    
Capital expenditures     (21,656 )   (24,206 )   (11,704 )
Cash paid for acquisitions, net of cash received     (123,831 )   484     (77,995 )
Proceeds from asset disposals     16,187     49      
Net cash used in investing activities     (129,300 )   (23,673 )   (89,699 )
                     
Cash flows from financing activities:                    
Change in restricted cash         5,578     5,430  
Proceeds of secondary offering             75,037  
Proceeds from senior secured notes     25,000         100,000  
Payment of debt and capital lease obligations     (23,893 )   (7,054 )   (5,271 )
Borrowing under revolving credit line     209,982     19,100     70,800  
Payments under revolving credit line     (116,600 )   (19,100 )   (145,800 )
Payment of deferred financing fees     (1,012 )   (841 )   (1,230 )
Cash paid for contingent earn-out obligation     (1,420 )        
Surrender of shares to pay withholding taxes     (1,092 )   (491 )   (269 )
Excess tax benefits on stock compensation     81     110     30  
Net cash provided by/(used in) financing activities     91,046     (2,698 )   98,727  
                     
Effect of foreign currency on cash and cash equivalents     (347 )   (112 )   230  
Net change in cash and cash equivalents     (874 )   (16,686 )   19,896  
Cash and cash equivalents at beginning of year     3,328     20,014     118  
Cash and cash equivalents at end of year   $ 2,454   $ 3,328   $ 20,014  
                     

See accompanying notes to the consolidated financial statements.

 

52
 

 

THE CHEFS’ WAREHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)

 

Note 1 - Operations and Basis of Presentation

 

Description of Business and Basis of Presentation

 

The financial statements include the consolidated accounts of The Chefs’ Warehouse, Inc. (the “Company”), and its wholly-owned subsidiaries. The Company’s quarterly periods end on the thirteenth Friday of each quarter. Every six to seven years the Company will add a fourteenth week to its fourth quarter to more closely align its year end to the calendar year. The Company operates in one reportable segment, food product distribution, which is concentrated on the East and West Coasts of the United States. The Company’s customer base consists primarily of menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores.

 

Consolidation

 

The consolidated financial statements include all the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires it to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities. Estimates are used in determining, among other items, the allowance for doubtful accounts, reserves for inventories, self-insurance reserves for group medical insurance, workers’ compensation insurance, and automobile liability insurance, future cash flows associated with impairment testing for intangible assets (including goodwill) and long-lived assets, useful lives for intangible assets, stock-based compensation, contingent earn-out obligations and tax reserves. Actual results could differ from estimates.

 

Note 2 – Summary of Significant Accounting Policies

 

Revenue Recognition

 

Revenue from the sale of a product is recognized at the point at which the product is delivered to the customer. The Company grants certain customers sales incentives, such as rebates or discounts and treats these as a reduction of sales at the time the sale is recognized. Sales tax billed to customers is not included in revenue but rather recorded as a liability owed to the respective taxing authorities at the time the sale is recognized.

 

Cost of Sales

 

The Company records cost of sales based upon the net purchase price paid for a product, including applicable freight charges incurred to deliver the product to the Company’s warehouse.

 

Operating Expenses

 

Operating expenses include the costs of facilities, product shipping and handling costs, warehousing costs, protein processing costs, selling and general administrative activities. Shipping and handling costs included in operating expenses were $54,172, $47,321 and $36,490 for fiscal 2015, 2014 and 2013, respectively. Protein processing costs included in operating expenses were $14,626, $6,829 and $2,730 for fiscal 2015, 2014 and 2013, respectively.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of less than three months to be cash equivalents. The Company periodically maintains balances at financial institutions which may exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.

 

Accounts Receivable

 

Accounts receivable consist of trade receivables from customers and are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based upon a number of specific criteria, such as whether a customer has filed for or been placed into bankruptcy, has had accounts referred to outside parties for collections or has had accounts significantly past due. The allowance also covers short paid invoices the Company deems to be uncollectable as well as a portion of trade accounts receivable balances projected to become uncollectable based upon historic patterns.

 

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Inventories

 

Inventories consist primarily of finished goods, food and related food products held for resale and are valued at the lower of cost or market. Our different entities record inventory using a mixture of first-in, first-out and average cost, which we believe approximates first-in, first-out. The Company maintains reserves for slow-moving and obsolete inventories.

 

Purchase Incentives

 

The Company receives consideration and product purchase credits from certain vendors that the Company accounts for as a reduction of cost of sales. There are several types of cash consideration received from vendors. The purchase incentive is primarily in the form of a specified amount per pound or per case. For the years ended December 25, 2015, December 26, 2014, and December 27, 2013, the recorded purchase incentives totaled approximately $11,109, $8,175, and $6,653, respectively.

 

Concentrations of Credit Risks

 

Financial instruments that subject the Company to concentrations of credit risk consist of cash, temporary cash investments and trade receivables. The Company’s policy is to deposit its cash and temporary cash investments with major financial institutions. The Company distributes its food and related products to a customer base that consists primarily of leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores. To reduce credit risk, the Company performs ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral. However, the Company, in certain instances, has obtained personal guarantees from certain customers. There is no significant balance with any individual customer.

 

Equipment and Leasehold Improvements

 

The Company records equipment and leasehold improvements at cost. Equipment that has been financed through capital leases is recorded at the present value of the minimum lease payments, which approximates cost. Equipment and leasehold improvements, including capital lease assets, are depreciated on a straight-line basis based upon estimated useful life.

 

Software Costs

 

The Company capitalizes certain computer software licenses and software implementation costs that are included in software costs in its consolidated balance sheets. These costs were incurred in connection with developing or obtaining computer software for internal use if it has a useful life in excess of one year, in accordance with Accounting Standards Codification (ASC) 350-40 “Internal-Use Software.” Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task that it previously did not perform. Internal use software is amortized on a straight-line basis over a three to seven year period. Capitalized costs include direct acquisitions as well as software and software development acquired under capitalized leases and internal labor where appropriate. Capitalized software purchases and related development costs, net of accumulated amortization, were $4,511 at December 25, 2015 and $5,358 at December 26, 2014.

 

Impairment of Long-Lived Assets

 

Long-lived assets, other than goodwill, are reviewed for impairment in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assetswhich only requires testing whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If any indicators are present, a recoverability test is performed by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If the net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), an additional step is performed that determines the fair value of the asset and the Company records an impairment, if any. The Company has not recorded any impairment of long-lived assets in fiscal 2015, 2014 or 2013.

 

Debt Issuance Costs

 

Certain costs associated with the issuance of debt instruments are capitalized and included in non-current assets in the consolidated balance sheets. The Company had unamortized debt issuance costs of $2,537 and $2,751 as of December 25, 2015 and December 26, 2014, respectively. These costs are amortized over the terms of the related debt instruments by effective interest rate method. Amortization of debt issuance costs was $1,228 for the fiscal year ended December 25, 2015, $876 for the fiscal year ended December 26, 2014, and $647 for the fiscal year ended December 27, 2013.

 

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Intangible Assets

 

The intangible assets recorded by the Company consist of customer relationships, covenants not to compete and trademarks which are amortized over their useful lives on a schedule that approximates the pattern in which economic benefits of the intangible assets are consumed. Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If any indicators are present, a recoverability test is performed by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. Undiscounted cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model. There have been no events or changes in circumstances during fiscal 2015, 2014 or 2013 indicating that the carrying value of our finite-lived intangible assets are not recoverable.

 

Goodwill

 

Goodwill is the excess of the acquisition cost of businesses over the fair value of identifiable net assets acquired in accordance with ASC 350, “Intangibles-Goodwill and Other.” Impairment testing for goodwill is performed at least annually and more frequently if indicators of impairment exist. In fiscal 2014 and prior, the Company had only one reporting unit and used a market capitalization approach to evaluate goodwill for potential impairment. Beginning in fiscal 2015, impairment testing for goodwill uses a two-step approach, which is performed at the reporting unit level, as the Company has identified two reporting units – Protein and Specialty. Step one compares the fair value of the reporting unit with its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value (i.e., fair value of the entity less the fair value of the entity’s assets and liabilities, including identifiable intangible assets). If the carrying value of goodwill exceeds its implied fair value, the excess is required to be recorded as impairment. There have been no events or changes in circumstances during fiscal 2015, 2014 or 2013 indicating that goodwill may be impaired.

 

Employee Benefit Programs

 

The Company sponsors a defined contribution plan covering substantially all full-time employees (the “401(k) Plan”). The Company recognized expense related to the 401(k) Plan totaling $858, $717 and $449, respectively, for fiscal 2015, 2014 and 2013.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse. The Company follows certain provisions of ASC 740, “Income Taxes” (previously reported as Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”) which established a single model to address accounting for uncertain tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the tax authorities. The Company records uncertain tax positions when it is estimable and probable that such liabilities have been incurred. The Company, when required, will accrue interest and penalties related to income tax matters in income tax expense.

 

Commitments and Contingencies

 

The Company is subject to various claims and contingencies related to lawsuits, taxes and environmental matters, as well as commitments under contractual and other commercial obligations. The Company recognizes liabilities for contingencies and commitments when a loss is probable and can be reasonably estimated.

 

Contingent Earn-out Liabilities

 

The Compay accounts for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually re-measures the liability at each balance sheet date by recording changes in the fair value through the Consolidated Statements of Operations. The Company determines the fair value of contingent consideration based on future operating projections under various potential scenarios and weigh the probability of these outcomes. The ultimate settlement of contingent earn-out liabilities relating to business combinations may be for amounts which are materially different from the amounts initially recorded and may cause volatility in the Company’s results of operations.

 

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Stock-Based Compensation

 

The Company measures stock-based compensation at the grant date based on the fair value of the award. Restricted stock awards are valued based on the fair value of the stock on the grant date and the related compensation expense is recognized over the service period. Similarly, for awards subject to graded vesting, the Company ensures that the compensation expense recognized is at least equal to the vested portion of the award.

 

Self-Insurance Reserves

 

Effective October 1, 2011, the Company began maintaining a self-insured group medical program. The program contains stop loss thresholds of $125 per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program during the year. The amount in excess of the self-insured levels is fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

 

Effective August 1, 2012, the Company became self-insured for workers’ compensation and automobile liability to deductibles or self-insured retentions of $350 for workers compensation and $250 for automobile liability per occurrence. The amounts in excess of the Company’s deductibles are fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

 

Assets and Liabilities Measured at Fair Value

 

The Company accounts for contingent earn-out obligations at fair value. The value of these liabilities are estimated using Level 3 inputs.

 

Note 3 – Net Income per Share

 

The following table sets forth the computation of basic and diluted earnings per share:

                
   Fiscal Year Ended 
   December 25, 2015   December 26, 2014   December 27, 2013 
Net income per share:               
Basic  $0.63   $0.58   $0.78 
Diluted  $0.63   $0.57   $0.77 
Weighted average common shares:               
Basic   25,532,172    24,638,135    21,766,743 
Diluted   26,508,994    24,844,565    21,995,042 

 

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Reconciliation of net income per common share:

 

   Fiscal Year Ended 
   December 25, 2015   December 26, 2014   December 27, 2013 
Numerator:               
Net income  $16,209   $14,215   $16,990 
Add effect of dilutive securities               
Interest on convertible notes, net of tax   403         
Adjusted net income  $16,612   $14,215   $16,990 
Denominator:               
Weighted average basic common shares outstanding   25,532,172    24,638,135    21,766,743 
Dilutive effect of unvested common shares   79,385    206,430    228,299 
Dilutive effect of convertible notes   897,437         
Weighted average diluted common shares outstanding   26,508,994    24,844,565    21,995,042 

 

We had unvested common shares of 34,526, 8,903 and 20,944 that were anti-dilutive at December 25, 2015, December 26, 2014, and December 27, 2013, respectively.

 

Note 4 – Fair Value Measurements

 

The Company accounts for certain assets and liabilities at fair value. The Company categorizes each of its fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:

 

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets.

 

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities include the following:

 

a)quoted prices for similar assets in active markets;

b)quoted prices for identical or similar assets in inactive markets;

c)inputs other than quoted prices that are observable for the asset; and

d)inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

If the asset has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset.

 

Level 3 - Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.

 

Assets and Liabilities Measured at Fair Value

 

As of December 25, 2015 the Company’s only assets or liabilities measured at fair value were the contingent earn-out liabilities for the Allen Brothers and Del Monte acquisitions. These liabilities were estimated using Level 3 inputs and had fair values of $4,344 and $13,792 at December 25, 2015, respectively. These liabilities are reflected as accrued liabilities and other liabilities and deferred credits on the balance sheet. The fair value of contingent consideration was determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments. A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement.

 

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The following table presents the changes in Level 3 contingent consideration liability:

                          
   Euro
Gourmet
   Allen
Brothers
   Queensgate   Del Monte   Total 
Balance December 27, 2013   $   $6,322   $960   $   $7,282 
Opening liability    238                238 
Payments                     
Changes in fair value    5    (626)   (960)       (1,581)
Balance December 26, 2014    243    5,696            5,939 
Opening liability                13,139    13,139 
Payments        (1,500)           (1,500)
Changes in fair value    (243)   148        653    558 
Balance December 25, 2015   $   $4,344   $   $13,792    18,136 

 

Fair Value of Financial Instruments

 

The carrying amounts reported in the Company’s consolidated balance sheets for accounts receivable and accounts payable approximate fair value, due to the immediate to short-term maturity of these financial instruments. The fair values of the current and former revolving credit facilities and term loans approximated their book values as of December 25, 2015 and December 26, 2014, as these instruments had variable interest rates that reflected current market rates available to the Company. The carrying amount of the Company’s senior secured notes at December 25, 2015 approximates fair value, as the interest rate obtained by the Company approximates the prevailing interest rates available to the Company for similar instruments. The fair value of these debt instruments were estimated using Level 3 inputs.

 

The following tables presents the carrying value and fair value of the Company’s convertible subordinated notes (more fully described in Note 9). In estimating the fair value of these convertible secured notes, the Company utilized Level 3 inputs including, prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion option. The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk free interest rate in calculating the fair value estimate.

 

   December 25, 2015   December 26, 2014 
                 
   Carrying Value   Fair Value   Carrying Value   Fair Value 
                 
Convertible Secured Notes  $36,750   $34,300   $   $ 

 

Note 5 – Acquisitions

 

The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations”. Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated fair values, as of the acquisition date. Results of operations are included in the Company’s financial statements from the date of acquisition. For the acquisitions noted below, the Company used the income approach to determine the fair value of the customer relationships, the relief from royalty method to determine the fair value of trademarks and the comparison of economic income using the with/without approach to determine the fair value of non-compete agreements. The Company used Level 3 inputs to determine the fair value of all these intangible assets.

 

Del Monte

 

On April 6, 2015, the Company acquired substantially all the equity interests of Del Monte Capitol Meat Co. and substantially all the assets of certain of its affiliated companies (collectively “Del Monte”). Del Monte supplies high quality USDA inspected beef, pork, lamb, veal, poultry and seafood products to Northern California. The aggregate purchase price paid by the Company at closing was approximately $185,332, including the impact of an initial net working capital adjustment which is subject to a post-closing working capital adjustment true up. Approximately $123,893 was paid in cash through cash-on-hand, the proceeds from the issuance of additional senior secured notes and additional borrowings under the revolving portion of the Amended and Restated Credit Agreement (as defined below). The remaining approximately $61,439 consisted of (i) approximately 1.1 million shares of the Company’s common stock totaling approximately $24,689 and (ii) $36,750 in aggregate principal amounts of convertible subordinated notes with a six-year maturity bearing interest at 2.5% with a conversion price of $29.70 per share issued to certain of the Del Monte entities. The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total approximately $24,500 to certain of the Del Monte entities; the payment of the earn-out liability is subject to certain conditions, including the successful achievement of Adjusted EBITDA targets for the Del Monte entities and improvements in certain operating metrics for the Company’s existing protein business and the business of any protein companies subsequently acquired by the Company over the six years following the closing of the Del Monte acquisition. At April 6, 2015, the Company estimated the fair value of this contingent earn-out liability to be $13,139. This contingent liability is adjusted to fair value on a quarterly basis and is estimated to be $13,792 at December 25, 2015. The Company expensed $1,546 of professional fees and $3,000 of transaction bonuses in operating expenses related to the Del Monte acquisition during the fiscal year ended December 25, 2015. The Company is in the process of finalizing a valuation of the tangible and intangible assets of Del Monte as of the acquisition date. These assets will be valued at fair value using Level 3 inputs. Customer lists are expected to be amortized over 15 years and trademarks are expected to be amortized over 20 years. Goodwill for the Del Monte acquisition will be amortized over 15 years for tax purposes. For year ended December 25, 2015, the Company reflected net sales and income before taxes and the amortization of intangible assets of $172,201 and $17,132, respectively, for Del Monte in its condensed consolidated statement of operations.

 

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Allen Brothers

 

On December 11, 2013, the Company acquired substantially all the assets of Allen Brothers, Inc. (and its subsidiaries) based in Chicago, Illinois. Founded in 1893, Allen Brothers is a leading processor and distributor of premium quality meats to the nation’s finest restaurants, hotels, casinos and country clubs. In addition, Allen Brothers supplies many of those same high quality products to consumers through a direct mail and e-commerce platform. The total purchase price for the business is approximately $30,670, which included approximately $23,939 paid at closing with cash proceeds from the Company’s September 2013 common stock offering. The remaining $6,731 represents pension liabilities the Company assumed of $2,878 and earnout consideration of $6,000 to be paid upon the achievement of certain performance milestones over the next four years following the closing, offset by $2,147 received as an adjustment to the purchase price. The Company expensed $300 of professional fees in operating expenses related to the acquisition during the year ended December 27, 2013. During fiscal 2014, the Company completed a valuation of the tangible and intangible assets of Allen Brothers as of the acquisition date. These assets were valued at fair value using Level 3 inputs. Customer lists are being amortized over 20 years and trademarks are being amortized over 40 years. Goodwill for the Allen Brothers acquisition is being amortized over 15 years for tax purposes.

 

Qzina

 

On May 1, 2013, the Company acquired 100% of the equity interests of Qzina Specialty Foods North America Inc. (“Qzina”), a British Columbia, Canada corporation based in Pompano Beach, Florida. Founded in 1982, Qzina is a leading supplier of gourmet chocolate, dessert and pastry products dedicated to the pastry professional. At the time of its acquisition, Qzina supplied some of the finest restaurants, bakeries, patisseries, chocolatiers, hotels and cruise lines throughout the U.S. and Canada. The total purchase price for Qzina was approximately $31,796, net of $578 of cash and was funded with borrowings under the revolving credit facility portion of the Company’s senior secured credit facilities. In the third quarter of 2014, the Company received a settlement of $491 from the prior owners of Qzina directly related to disputes regarding the working capital adjustment. The Company reduced goodwill by $400 and used $91 to offset legal fees that were incurred in connection with the dispute. The Company expensed $149 of legal fees in operating expenses related to the acquisition in the year ended December 27, 2013. The Company has completed a formal valuation of the tangible and intangible assets of Qzina, as of the acquisition date. These assets were valued at fair value using Level 3 inputs. Other intangible assets consist of trademarks, which are being amortized over 20 years, customer relationships, which are being amortized over 20 years and covenants not to compete, which are being amortized over 2-5 years. Goodwill for the Qzina acquisition is not deductible for tax purposes.

 

Queensgate

 

On December 31, 2012, the Company purchased substantially all the assets of Queensgate Foodservice (“Queensgate”), a foodservice distributor based in Cincinnati, Ohio. The purchase price for Queensgate was approximately $21,934, which the Company financed with borrowings under the revolving credit facility portion of the Company’s then-existing senior secured credit facilities. Additionally, the purchase price could have been increased by up to $2,400 based upon the achievement of certain EBITDA milestones over a two-year period following the closing. This contingent consideration was not earned, as Queensgate did not meet the EBITDA threshold requiring payment for fiscal 2014 and 2013 results, and was recorded as a reduction of operating expenses. The Company expensed $69 of legal fees in operating expenses related to the acquisition in the year ended December 27, 2013. The Company has completed a formal valuation of the tangible and intangible assets of Queensgate. These assets were valued at fair value using Level 3 inputs. Other intangible assets consist of customer relationships, which will be amortized over 7 years, and covenants not to compete, which will be amortized over 5 years. Goodwill for the Queensgate acquisition will be amortized for tax purposes over 15 years.

 

The table below details the assets and liabilities acquired as part of the acquisitions of Del Monte, which was effective as of April 6, 2015, Allen Brothers, which was effective as of December 9, 2013, Qzina, which was effective as of May 1, 2013, and Queensgate, which was effective as of December 31, 2012, and the allocation of the purchase price paid in connection with these acquisitions.

 

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   Del Monte   Allen Brothers   Qzina   Queensgate 
Current assets   $31,872   $15,797   $22,498   $4,140 
Customer relationships    62,246    2,522    6,070    1,520 
Trademarks    29,261    4,782    4,411     
Goodwill    77,505    10,924    5,445    15,243 
Non-compete agreement            2,480    2,920 
Fixed assets    5,652    4,370    906    1,909 
Other assets    137    33         
Deferred tax liability    (361)       (4,302)   (863)
Capital leases            (137)    
Earn-out liability    (13,139)   (6,322)       (2,118)
Convertible subordinated notes    (36,750)            
Issuance of common shares   (24,689)            
Pension exit liability        (2,878)        
Unfavorable leases            (6)    
Current liabilities    (7,841)   (7,436)   (5,391)   (817)
                     
Cash purchase price   $123,893   $21,792   $31,974   $21,934 

 

The table below presents pro forma consolidated income statement information as if Del Monte had been included in the Company’s consolidated results for the entire periods reflected. The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisition. The pro forma information has been prepared using the purchase method of accounting, giving effect to the Del Monte acquisition as if the acquisition had been completed on December 28, 2013. The pro forma information is not necessarily indicative of the Company’s results of operations had the Del Monte acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Del Monte acquisition, any incremental costs for Del Monte transitioning to become a subsidiary of a public company or any additional sales opportunities following the acquisition. The pro forma information reflects amortization and depreciation of the Del Monte acquisition at their respective fair values based on available information and to give effect to the financing for the acquisition and related transactions.

           
   Fiscal Year Ended(unaudited) 
   December 25, 2015   December 26, 2014 
Net sales  $1,117,001   $1,055,186 
Income before income taxes   35,428    37,194 

 

Note 6 – Inventory

 

Inventory consists of finished product. Our different entities record inventory using a mixture of first-in, first-out and average cost, which we believe approximates first-in, first-out. Inventory is reflected net of reserves for shrinkage and obsolescence totaling $1,956 and $1,130 at December 25, 2015 and December 26, 2014, respectively.

 

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Note 7 – Equipment and Leasehold Improvements

 

Equipment and leasehold improvements consisted of the following:

                
        As of 
   Useful Lives  December 25, 2015   December 26, 2014 
Land    Indefinite   $1,571   $1,464 
Buildings    20 years    2,740    3,672 
Machinery and equipment    5-10 years    10,739    7,220 
Computers, data processing and other equipment    3-7 years    7,598    6,424 
Leasehold improvements    7-22 years    41,653    9,057 
Furniture and fixtures    7 years    1,488    904 
Vehicles    5-7 years    2,077    987 
Other    7 years    95    95 
Construction-in-process         8,884    36,200 
         76,845    66,023 
Less: accumulated depreciation and amortization         (22,562)   (18,085)
Equipment and leasehold improvements, net        $54,283   $47,938 

 

Construction-in-process at December 25, 2015 related primarily to the build out of the Company’s new distribution facility in San Francisco, CA and the implementation of its Enterprise Resource Planning (“ERP”) system. The build out of the San Francisco distribution center will be complete in the first quarter of fiscal 2016. The rollout of our ERP system will continue throughout fiscal 2016 and 2017. The Company expects the cost to complete the San Francisco distribution facility and the ERP system rollout to be under $1,000. Construction-in process at December 26, 2014 related primarily to the build out of the Company’s new distribution facilities in Bronx, NY and Las Vegas, NV, and the implementation of its ERP system.

 

At December 25, 2015, December 26, 2014 and December 27, 2013, the Company had $506, $509 and $820, respectively, of equipment and vehicles financed by capital leases. The Company recorded depreciation of $96, $96 and $211 on these assets for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013, respectively.

 

Depreciation expense was $4,536, $2,166 and $2,024 for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013, respectively.

 

Capitalized software is recorded net of accumulated amortization of $3,751 and $2,423 as of December 25, 2015 and December 26, 2014, respectively. Amortization expense on software was $1,328, $851 and $286 for the fiscal years ended December 25, 2015, December 26, 2014, and December 27, 2013, respectively.

 

During the years ended December 25, 2015, December 26, 2014, and December 27, 2013, the Company incurred interest expense of $12,984, $8,167 and $7,775, respectively. The Company capitalized interest expense of $739, $822 and $90, respectively, during the same periods. Capitalized interest is related to the build outs of the new distribution facilities in Bronx, NY and Las Vegas, NV.

 

On June 30, 2015, the Company closed on a sale-leaseback transaction of its new Las Vegas, NV distribution facility. The property was sold for $14,645, which approximated its cost. The related ongoing lease will be accounted for as an operating lease by the Company.

 

Note 8 – Goodwill and Other Intangible Assets

 

The changes in the carrying amount of goodwill are presented as follows:

 

Carrying amount as of December 27, 2013   $78,026 
Goodwill increases    564 
Foreign currency translation    (82)
Carrying amount as of December 26, 2014    78,508 
Goodwill increases    77,448 
Foreign currency translation    (140)
Carrying amount as of December 25, 2015   $155,816 

 

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Other intangible assets consist of customer relationships being amortized over a period ranging from four to twenty years, trademarks being amortized over a period of one to forty years, and non-compete agreements being amortized over a period of two to six years. Other intangible assets consisted of the following at December 25, 2015 and December 26, 2014:

                 
   Weighted-Average
Remaining
Amortization Period
   Gross
Carrying
Amount
   Accumulated
Amortization
   Net Amount 
December 25, 2015                    
Customer relationships    158 months   $94,097   $(12,755)  $81,342 
Non-compete agreements    26 months    7,166    (4,213)   2,953 
Trademarks    243 months    52,549    (4,633)   47,916 
Total    186 months   $153,812   $(21,601)  $132,211 
                     
December 26, 2014                    
Customer relationships    131 months   $32,261   $(6,939)  $25,322 
Non-compete agreements    38 months    7,166    (2,825)   4,341 
Trademarks    270 months    23,586    (2,764)   20,822 
Total    181 months   $63,013   $(12,528)  $50,485 
                     

 

Amortization expense for other intangibles was $9,453, $5,130 and $4,796 for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013, respectively.

 

As of December 25, 2015, estimated amortization expense for other intangible assets for each of the next five fiscal years and thereafter is as follows:

 

2016  $10,791 
2017   10,756 
2018   9,617 
2019   9,340 
2020   9,067 
Thereafter    82,640 
Total   $132,211 

 

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Note 9 – Debt Obligations

 

Debt obligations as of December 25, 2015 and December 26, 2014 consisted of the following:

           
   December 25,
2015
   December 26,
2014
 
Senior secured notes   $125,000   $100,000 
Revolving credit facility   93,382     
Convertible notes   36,750     
Term loan    4,681    27,000 
New Markets Tax Credit Loan    11,000    11,000 
Capital leases and financed software    3,961    5,536 
Total debt obligations    274,774    143,536 
Less: current installments    (6,266)   (7,736)
Total debt obligations excluding current installments   $268,508   $135,800 

 

Maturities of the Company’s debt for each of the next five years and thereafter at December 25, 2015 is as follows:

 

2016  $6,295 
2017   105,969 
2018   50,760 
2019    
2020   25,000 
Thereafter    86,750 
Total   $274,774 

 

Amended and Restated Credit Agreement

 

On April 25, 2012, the Company and certain of its subsidiaries entered into a senior secured credit facility (the “Credit Agreement”) with the a group of lenders with JPMorgan Chase Bank, N.A. (“Chase”), as administrative agent. Subsequent to that date, the Credit Agreement has been amended and restated (the “Amended and Restated Credit Agreement”) to meet the changing requirements of the Company.

 

During fiscal 2015, the Company entered into amendments to the Amended and Restated Credit Agreement, that, among other things, (i) establish limits on the amount of leverage and senior secured leverage that the Company may incur, which limits decrease through September 30, 2016, (ii) provide for an increased interest rate when the Company’s Total Leverage Ratio, defined therein, is equal to, or greater than, 4.25 to 1.00, (iii) permit the acquisition of Del Monte, (iv) create an expansion option whereby the Company may increase the borrowings available in increments of at least $10,000, provided that the aggregate increases do not exceed $60,000, (v) upon the Company’s election by irrevocable written notice on each date on which the aggregate consideration paid during any two consecutive fiscal quarters for permitted acquisitions consummated on or after July 1, 2015, but not later than June 30, 2016, exceeds $25,000, increase the maximum permitted Total Leverage Ratio and Senior Secured Leverage ratio (as defined therein) for a period of four consecutive fiscal quarters beginning with the fiscal quarter during which the relevant acquisition occurs by, in the case of the first two fiscal quarters, an additional 0.50:1.00, and, in the case of the last two fiscal quarters, an additional 0.25:1.00; provided, however, that in no case shall the Total Leverage Ratio exceed 5.00:1.00 or the Senior Secured Leverage Ratio exceed 4.50:1.00 (collectively, the “Financial Covenants Adjustment”), (v) increases the capacity for Letter of Credit exposure from $5,000 to $10,000, and (vi) allows the Company to exclude current year capital expenditures related to its Las Vegas sale-leaseback transaction when calculating the aggregate amount of Capital Expenditures incurred during fiscal 2015.

 

The Amended and Restated Credit Agreement provides for a senior secured term loan facility (the “Term Loan Facility”) in the aggregate amount of up to $36,000 (the loans thereunder, the “Term Loans”) and a senior secured revolving loan facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”) of up to an aggregate amount of $140,000 (the loans thereunder, the “Revolving Credit Loans”). Unutilized commitments under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement are subject to a per annum fee of from 0.35% to 0.45% based on the Leverage Ratio, as defined therein. A fronting fee of 0.25% per annum is payable on the face amount of each letter of credit issued under the Credit Facilities.

 

The final maturity of the Term Loans is April 25, 2017. Subject to adjustment for prepayments, the Company is required to make quarterly principal payments of $1,500 on the Term Loans on June 30, September 30, December 31 and March 31, with the remaining balance due upon maturity.

 

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Borrowings under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement have been used, and are expected to be used, for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company. The commitments under the Revolving Credit Facility expire on April 25, 2017 and any Revolving Credit Loans then outstanding will be payable in full at that time. As of December 25, 2015, the Company had $40,673 of availability under the Revolving Credit Facility portion of the Amended and Restated Credit Agreement.

 

Currently borrowings under the Amended and Restated Credit Agreement bear interest according to a pricing grid based upon our Total Leverage Ratio.

 

The Amended and Restated Credit Agreement has covenants for Total Leverage Ratio, Senior Leverage Ratio and Fixed Charge Ratio, as defined therein. As of December 25, 2015, the Company was in compliance with all debt covenants under the Amended and Restated Credit Agreement.

 

New Markets Tax Credit Loan

 

On April 26, 2012, Dairyland HP LLC (“DHP”), an indirectly wholly-owned subsidiary of the Company, entered into a financing arrangement under the New Markets Tax Credit (“NMTC”) program under the Internal Revenue Code of 1986, as amended, pursuant to which a subsidiary of Chase, provided to DHP an $11,000 construction loan (the “NMTC Loan”) to help fund DHPs expansion and build-out of the Bronx, New York facility and the rail shed located at that facility, which construction is required under the facility lease agreement. Borrowings under the NMTC Loan are secured by a first priority secured lien on DHPs leasehold interest in the Bronx, New York facility, including all improvements made on the premises, as well as, among other things, a lien on all fixtures incorporated into the project improvements.

 

Under the NMTC Loan, DHP is obligated to pay (i) monthly interest payments on the principal balance then outstanding and (ii) the entire unpaid principal balance then due and owing on April 26, 2017. So long as DHP is not in default, interest accrues on borrowings at 1.00% per annum. The Company may prepay the NMTC Loan, in whole or in part, in $100 increments.

 

As of December 25, 2015, DHP was in compliance with all debt covenants under the NMTC Loan.

 

Senior Secured Notes

 

On April 17, 2013, the Company and certain of its subsidiaries issued $100,000 principal amount of 5.90% Guaranteed Senior Secured Notes due 2023 (the “Notes”). The Notes are guaranteed by the certain subsidiaries of the Company. The Notes, which rank pari passu with the Company’s obligations under the Credit Facilities, were issued to The Prudential Insurance Company of America and certain of its affiliates (collectively, “Prudential”) pursuant to a note purchase and guarantee agreement dated as of April 17, 2013 (the “Note Purchase and Guarantee Agreement”) between the Company and Prudential. The net proceeds from the issuance of the Notes were used to repay then-outstanding borrowings under the Revolving Credit Facility.

 

The Notes must be repaid in two equal installments, the first $50,000 of which is due April 17, 2018 and the second $50,000 of which is due at maturity on April 17, 2023. Moreover, the Company may prepay the Notes in amounts not less than $1,000 at 100% of the principal amount of the Notes repaid plus the applicable Make-Whole Amount (as defined in the Note Purchase and Guarantee Agreement).

 

On April 6, 2015, the Company issued $25,000 principal amount of 5.80% Series B Guaranteed Senior Secured Notes due October 17, 2020 to help fund the acquisition of Del Monte. The notes, which rank pari passu with the Company’s obligations under the Credit Facilities, were issued to Prudential pursuant to a Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015. In connection with the issuance of these notes, the Company entered into an amendment to the Amended and Restated Credit Agreement to permit the issuance of the notes.

 

On July 1, 2015, the Company entered into an amendment to the Note Purchase and Guarantee Agreement to permit an increase in the applicable rate of the Notes by 0.25% during the period of the Financial Covenants Adjustment.

 

The Note Purchase and Guarantee Agreement contains financial covenants related to leverage and fixed charges that are substantially the same as the corresponding provisions in the Amended and Restated Credit Agreement, as amended. As of December 25, 2015, the Company was in compliance with all debt covenants under the Notes and the Note Purchase and Guarantee Agreement, as amended.

 

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Convertible Subordinated Notes

 

On April 6, 2015, the Company issued $36,750 principal amount of convertible subordinated notes with a six-year maturity bearing interest at 2.5% and a conversion price of $29.70 per share (the “Convertible Subordinated Notes”) to certain of the Del Monte entities as partial consideration in the Del Monte acquisition. The holders of the Convertible Subordinated Notes may, in certain instances beginning one year after issuance, redeem the Convertible Subordinated Notes for cash or shares of the Company’s common stock. Moreover, the Company may pay the outstanding principal amount due and owing under the Convertible Subordinated Notes at maturity in either cash or shares of the Company’s common stock. The Convertible Subordinated Notes, which are subordinate to the Company’s and its subsidiaries’ senior debt, are convertible into shares of the Company’s common stock by the holders at any time at a conversion price of $29.70.

 

Obligations under the Amended and Restated Credit Agreement and the Note Purchase and Guarantee Agreement are obligations of, or guaranteed by, the Company and all of its subsidiaries other than Dairyland HP, LLC.

 

As of December 25, 2015, the Borrowers and Guarantors were in compliance with all debt covenants under the Amended and Restated Credit Agreement, as amended, the Notes and the Note Purchase and Guarantee Agreement, as amended, DHP was in compliance with all debt covenants under the NMTC Loan and the Company had reserved $5,945 of the Revolving Credit Facility for the issuance of letters of credit. As of December 25, 2015, funds totaling $40,673 were available for borrowing under the Revolving Credit Facility.

 

Note 10 – Stockholders’ Equity

 

On September 25, 2013, the Company completed a public offering of 3,800,000 shares of its common stock at $21.00 per share, and certain existing stockholders sold an additional 1,375,000 shares, including 675,000 shares sold to the underwriters to cover over-allotments. The Company recognized proceeds of approximately $75,037 after deducting underwriting fees and commissions and estimated offering expenses. The Company utilized approximately $12,500 of the net proceeds from the offering to repay outstanding borrowings under the Revolving Credit Facility, and subsequently used $23,939 to finance its acquisition of Allen Brothers, $2,063 to finance its acquisition of Euro Gourmet and the remainder for general corporate purposes.

 

On April 6, 2015, the Company issued 1,113,636 shares of common stock as a portion of the consideration for the Del Monte acquisition. These shares were valued at $22.17 per share.

 

Equity Incentive Plan

 

The Company has adopted the 2011 Omnibus Equity Incentive Plan (the “Equity Plan”). The purpose of the Equity Plan is to promote the interests of the Company and its stockholders by (i) attracting and retaining key officers, employees and directors; (ii) motivating such individuals by means of performance related incentives to achieve long-range performance goals; (iii) enabling such individuals to participate in the long-term growth and financial success of the Company; (iv) encouraging ownership of stock in the Company by such individuals; and (v) linking their compensation to the long-term interests of the Company and its stockholders.

 

The Equity Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors and allows for the issuance of stock options, stock appreciation rights (“SARs”), restricted share awards (“RSAs”), restricted share units, performance awards, or other stock-based awards. Stock option exercise prices are fixed by the Committee but shall not be less than the fair market value of a common share on the date of the grant of the option, except in the case of substitute awards. Similarly, the grant price of an SAR may not be less than the fair market value of a common share on the date of the grant. The Committee will determine the expiration date of each stock option and SAR, but in no case shall the stock option or SAR be exercisable after the expiration of ten years from the date of the grant. The Company plans to issue new shares upon exercise of any stock options. The Equity Plan provided 1,750,000 shares available for grant, of which no more than 1,000,000 could be for Incentive Stock Options. As of December 25, 2015, there were 881,561shares available for grant.

 

The following table reflects RSAs activity for the year ended December 25, 2015:

                     
   Shares   Weighted
Average
Grant
Date Fair
Value
   Weighted
Average
Remaining Contractual
Term (in
months)
   Aggregate
Intrinsic
Value
 
Outstanding December 26, 2014   374,567   $17.52    10.9   $8,252 
Granted   220,885    21.17           
Vested   (152,913)   20.04           
Forfeited   (23,935)   17.46           
Outstanding December 25, 2015   418,604   $18.54    10.1   $7,271 

 

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At December 25, 2015, the Company had 418,604 of unvested RSAs outstanding. At December 25, 2015, the total unrecognized compensation cost for these unvested RSAs was $6,343, and the weighted-average remaining useful life was approximately ten months. Of this total, $2,709 related to RSAs with time-based vesting provisions and $3,634 related to RSAs with performance-based vesting provisions. At December 25, 2015, the weighted-average remaining useful lives were approximately fifteen months for time-based vesting RSAs and five months for the performance-based vesting RSAs. No compensation expense related to the Company’s RSAs has been capitalized.

 

The Company has not issued any type of equity award other than RSAs under the Equity Plan.

 

Note 11 – Leases

 

The Company leases various warehouse and office facilities and certain vehicles and equipment under long-term operating lease agreements that expire at various dates, with related parties and with others. See Note 14 for additional discussion of related party transactions. The Company records operating lease costs, including any determinable rent increases, on a straight-line basis over the lease term. As of December 25, 2015, the Company is obligated under non-cancelable operating lease agreements to make future minimum lease payments as follows:

 

    Related
Party Real
Estate
  Third Party
Real Estate
  Third Party
Vehicles
  Third Party
Other
  Total  
2016   $ 935   $ 7,467   $ 7,386   $ 1,100   $ 16,888  
2017     953     7,583     7,002     764     16,302  
2018     972     6,433     6,491     410     14,306  
2019     992     5,700     4,897     128     11,717  
2020     1,012     5,963     3,743     22     10,740  
Thereafter     4,233     48,410     2,295         54,938  
Total minimum lease payments   $ 9,097   $ 81,556   $ 31,814   $ 2,424   $ 124,891  
                                 

Total rent expense for operating leases for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013 was $20,199, $16,381 and $13,529, respectively. As of December 25, 2015, one of the Company’s subsidiaries, Dairyland USA Corporation, subleases office space in one of its former distribution centers from TCW Leasing Co., LLC (“TCW”), an entity controlled by the Company’s founders. TCW leases the distribution center from the New York City Industrial Development Agency. In connection with this sublease arrangement and TCW’s obligations to its mortgage lender, Dairyland USA Corporation and two of the Company’s other subsidiaries initially were required to act as guarantors of TCW’s mortgage obligation on the distribution center. The mortgage payoff date is December 2029 and the potential obligation under this guarantee totaled $5,580 at December 25, 2015. By agreement dated July 1, 2005, the lender conditionally released all three of the Company’s subsidiaries from their guaranty obligations, provided the sublease between Dairyland USA Corporation and TCW remains in full force and effect. The Company believes that it and its subsidiaries were in full compliance with that requirement during fiscal 2015. During the first half of 2016, the Company plans to exit the office space sublease and TCW plans to refinance its mortgage with another lender, with the result that the Company and its subsidiaries will be unconditionally and fully released from any guaranty of TCW’s mortgage loan.

 

Note 12 – Income Taxes

 

The provision for income taxes consists of the following for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013:

 

    December 25,   December 26,   December 27,  
    2015   2014   2013  
Current income tax expense:                    
Federal   $ 9,538   $ 7,411   $ 8,402  
Foreign         114     86  
State     2,773     2,935     2,350  
Total current income tax expense     12,311     10,460     10,838  
Deferred income tax expense (benefit):                    
Federal     (725 )   92     830  
Foreign     19     30      
State     (103 )   51     140  
Total deferred income tax expense (benefit)     (809 )   173     970  
Total income tax expense   $ 11,502   $ 10,633   $ 11,808  

 

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The income tax expense differed from the total statutory income tax expense as computed by applying the statutory federal income tax rate to income before taxes. The reasons for the differences for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013 are set forth and quantified in the following table: 

                     
    December 25,   December 26,   December 27,  
    2015   2014   2013  
Statutory U.S. Federal tax   $ 9,700   $ 8,697   $ 10,079  
Differences due to:                    
Other permanent differences     369     266     293  
State and local taxes, net of federal benefit     1,728     1,499     1,705  
Foreign tax rate differential     (63 )   74     86  
Change in prior year tax estimate     (109 )   227     (185 )
Other, net     (123 )   (130 )   (170 )
    $ 11,502   $ 10,633   $ 11,808  

 

Deferred tax assets and liabilities at December 25, 2015 and December 26, 2014 consist of the following: 

               
    December 25,   December 26,  
    2015   2014  
Current deferred tax assets:              
Receivables and inventory   $ 4,685   $ 3,948  
Paid time off accrual     69     45  
Self-insurance reserves     2,213     1,332  
Cumulative foreign exchange difference     603     703  
Current deferred tax assets     7,570     6,028  
Current deferred tax liabilities:              
Contingent earn-out liabilities     (863 )   (1,145 )
Deduction of prepaid expenses     (1,451 )   (1,383 )
Current deferred tax assets, net   $ 5,256   $ 3,500  
               
Non-current deferred tax assets and liabilities:              
Foreign tax credit payable   $ 199   $ 202  
Federal net loss carryforwards     113     113  
State net loss carryforwards     196     158  
Rent accrual     1,013     696  
Stock compensation     638     382  
Deferred acquisition costs     357     189  
Other     86     1  
Net non-current deferred tax assets     2,602     1,741  
               
Non-current deferred tax liabilities:              
Property & equipment     (1,138 )   (598 )
Intangible assets     (10,780 )   (9,212 )
Other         2  
Non-current deferred tax liabilities     (11,918 )   (9,808 )
Non-current deferred tax liabilities, net   $ (9,316 ) $ (8,067 )

 

The deferred tax provision results from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company files income tax returns in the U.S. Federal and various state and local jurisdictions as well as the Canadian Federal and provincial districts. For Federal income tax purposes, the 2012 through 2015 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations and the fact that we have not yet filed our tax return for 2015. For state tax purposes, the 2011 through 2015 tax years remain open for examination by the tax authorities under a four-year statute of limitations. The Company records interest and penalties, if any, in income tax expense.

 

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At December 25, 2015, the Company had a federal net loss carryforward of $323 which resulted from the Company’s acquisition of Qzina in 2013. Because of the change of ownership provisions of the Tax Reform Act of 1986, the $323 federal net loss carryforward will be limited under the SRLY rules of IRC 382 to be used only against future taxable income attributable to Qzina. This federal net loss carryforward expires in fiscal 2033. The Company also acquired state net loss carryforwards totaling $301 upon completion of the Qzina acquisition in 2013. The state net loss carryforwards expire between 2031 and 2033.

 

The foreign net loss carryforward represents the foreign deductions impact from the deferred tax assets and liabilities related to the Qzina acquisition. These net loss carryforwards are fully reserved for as the foreign tax credit is disallowed as a result of IRC Section 901(m), which does not allow use of foreign tax credits on the portion of the deductions to a step-up in basis of the assets.

 

For financial reporting purposes, net loss from operations before income taxes for our foreign subsidiaries was $209 and $1,108 for the fiscal year ended December 25, 2015 and December 26, 2014, respectively. We had no foreign operations prior to fiscal 2013. It is our intention to indefinitely reinvest any earnings, therefore no U.S. taxes have been provided for these amounts. If we changed our reinvestment policy and decided to remit earnings, a deferred tax liability is not required as the the foreign subsidiary has elected to be subject to income tax on its earnings in the U.S. when incurred, not when repatriated under the check-the-box regime to be disregarded as separate from its owner.

 

Note 13 – Supplemental Disclosures of Cash Flow Information

 

    December 25,   December 26,   December 27,
    2015   2014   2013
                   
Cash paid for income taxes   $ 11,047   $ 10,652   $ 11,457
Cash paid for interest   $ 11,462   $ 8,161   $ 6,013
Noncash investing activity:                  
Capital Lease   $   $   $ 137
Software financing   $   $ 2,869   $ 3,328
Common stock issued for acquisitions   $ 24,689   $   $
Convertible notes issued for acquisitions   $ 36,750   $   $
Contingent earn-out liabilities for acquisitions   $ 13,139   $ 238   $ 10,941

 

Note 14 – Employee Benefit Plans

 

Employee Tax-Deferred Savings Plan

 

The Company offers a 401(k) Plan to all full-time employees that provides for tax-deferred salary deductions for eligible employees. Employees may choose to make voluntary contributions of their annual compensation to the 401(k) Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service. Beginning in 2011, the Company provided discretionary matching contributions equal to 50 percent of the employee’s contribution amount, up to a maximum of six percent of the employee’s annual salary, capped at $2.5 per associate per year. Matching contributions begin vesting after two years and are fully vested after six years. Employee contributions are fully vested when made. Under the 401(k) Plan there is no option available to the employee to receive or purchase the Company’s common stock. Matching contributions under the 401(k) Plan were $858 for fiscal 2015, $717 for fiscal 2014 and $449 for fiscal 2013.

 

Note 15 – Related Parties

 

The Company leases two warehouse facilities from related parties. These facilities are owned by entities owned 100% by Christopher Pappas, the Company’s chairman, president and chief executive officer, John Pappas, the Company’s vice chairman and one of its directors, and Dean Facatselis, a former non-employee director of the Company and the brother-in-law of Messrs. Pappas, and are deemed to be affiliates of these individuals. Expense related to the above facilities was $1,406, $1,564 and $1,537 for the fiscal years ended December 25, 2015, December 26, 2014 and December 27, 2013, respectively.

 

One of the Company’s non-employee directors, Stephen Hanson, was the President and a 50% owner of a New York City-based multi-concept restaurant operator holding company until December 2013. Certain subsidiaries of this holding company are customers of the Company and its subsidiaries that purchased an aggregate of approximately $3,616 from the Company us during fiscal 2013.

 

Each of Christopher Pappas, John Pappas and Dean Facatselis owns 8.33% of a New York City-based restaurant customer of the Company and its subsidiaries that purchased an aggregate of approximately $117, $144 and $195 of products from the Company during fiscal 2015, fiscal 2014 and fiscal 2013, respectively. Messrs. Pappas and Facatselis have no other interest in the restaurant other than these equal interests and are not involved in the day-to-day operation or management of this restaurant.

 

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John Pappas’s brother-in-law, Constantine Papataros, is one of the Company’s employees. The Company paid him approximately $169, $185 and $170 in total compensation during fiscal 2015, fiscal 2014 and fiscal 2013, respectively. Christopher Pappas’s brother, John Pappas, is one of the Company’s employees and a member of the Company’s Board of Directors. The Company paid John Pappas approximately $882, $447 and $452 in total compensation for fiscal 2015, fiscal 2014 and fiscal 2013, respectively. John Pappas did not receive any compensation in fiscal 2015, fiscal 2014 or fiscal 2013 for his service on the Company’s Board of Directors.

 

An entity owned 50% by John Couri, a director of the Company, and of which Messrs. C. Pappas and S. Hanson (also directors of the Company) previously held ownership interests owns an interest in an aircraft that the Company uses for business purposes in the course of its operations. Mr. Couri paid for his ownership interest in the aircraft himself and bears his share of all operating, personnel and maintenance costs associated with the operation of this aircraft. The Company made payment of $182 and $280, respectively for the years ended December 25, 2015 and December 26, 2014 for use of such aircraft. All payments except $16 in the year ended December 26, 2014 were paid directly to an entity that manages the aircraft in which Mr. Couri has a de minimis indirect ownership interest.

 

The Company paid $827, $168 and $78 to Architexture Studios, Inc. for interior decorating and design including the purchase of furniture and leasehold improvements primarily for our Las Vegas, San Francisco and Chicago facilities during fiscal years 2015, 2014 and 2013 respectively. This entity is owned by Julie Hardridge, the sister-in-law of Christopher Pappas.

 

With the acquisition of Del Monte, the Company acquired two warehouse facilities that the Company leases from certain prior owners of Del Monte. Three of the owners are current employees, one of whom, John DeBenedetti, serves on the Company’s board of directors. The first property is located in American Canyon, CA and is owned by TJ Management Co. LLC, an entity owned 50% by John DeBenedetti and 50% by Theresa Lincoln, John DeBenedetti’s sister. The Company paid rent on this facility totaling $156 for the year ended December 25, 2015. The second property is located in West Sacramento, CA and is owned by David DeBenedetti and Victoria DeBenedetti, the parents of John DeBenedetti. The Company paid rent on this facility totaling $167 for the year ended December 25, 2015. John DeBenedetti, Theresa Lincoln and Victoria DeBenedetti are employees of a subsidiary of the Company.

 

John DeBenedetti and Theresa Lincoln, indirectly through TJ Investments, LLC, own a 16.67% ownership interest in Old World Provisions, which supplies products to the Company following the Del Monte acquisition. During the year ended December 25, 2015 the Company purchased approximately $900 of products from Old World Provisions. Neither Mr. J. DeBenedetti nor Ms. Lincoln is involved in the day-to-day management of Old World Provisions.

 

The Company paid Theresa Lincoln, John DeBenedetti’s sister, approximately $198 in total compensation for fiscal 2015.

 

Note 16 – Commitments and Contingencies

 

Guarantees

 

As of December 25, 2015, one of the Company’s subsidiaries, Dairyland USA Corporation, subleases office space in one of its former distribution centers from TCW Leasing Co., LLC (“TCW”), an entity controlled by the Company’s founders. TCW leases the distribution center from the New York City Industrial Development Agency. In connection with this sublease arrangement and TCW’s obligations to its mortgage lender, Dairyland USA Corporation and two of the Company’s other subsidiaries initially were required to act as guarantors of TCW’s mortgage obligation on the distribution center. The mortgage payoff date is December 2029 and the potential obligation under this guarantee totaled $5,580 at December 25, 2015. By agreement dated July 1, 2005, the lender conditionally released all three of the Company’s subsidiaries from their guaranty obligations, provided the sublease between Dairyland USA Corporation and TCW remains in full force and effect. The Company believes that it and its subsidiaries were in full compliance with that requirement during fiscal 2015. In addition, during the first half of 2016, the Company plans to exit the office space sublease and TCW plans to refinance its mortgage with another lender, with the result that the Company and its subsidiaries will be unconditionally and fully released from any guaranty of TCW’s mortgage loan.

 

Legal Contingencies

 

The Company is involved in various legal proceedings. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where the Company believes an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. The Company does not believe that there is a reasonable possibility of material loss or loss in excess of the amount that the Company has accrued.

 

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Tax Audits

 

The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These audits may result in the assessment of additional taxes that are subsequently resolved with authorities or potentially through the courts.

 

Risk Management Programs

 

The Company maintains a self-insured group medical program. The program contains individual stop loss thresholds of $125 per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program throughout the year. The amount in excess of the self-insured levels is fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. The Company’s self-insurance reserves for its medical program totaled $657 and $574 at December 25, 2015 and December 26, 2014, respectively.

 

The Company maintains an insurance program for its automobile liability and workers compensation insurance subject to deductibles or self-insured retentions of $350 for workers compensation and $250 for automobile liability per occurrence. The amounts in excess of our deductibles are fully insured by third party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and cost trends. Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. The Company’s self-insurance reserves for its automobile liability program totaled $1,067 and $928 at December 25, 2015 and December 26, 2014, respectively. Self-insurance reserves for workers compensation totaled $5,185 and $2,911 at December 25, 2015 and December 26, 2014, respectively.

 

Workforce (unaudited)

 

As of December 25, 2015, approximately 8.8% of the Company’s employees are represented by unions. A portion of these employees are operating under a collective bargaining agreement which expires in August of 2017.

 

Note 17 – Valuation Reserves

 

A summary of the activity in the accounts receivable allowance for doubtful accounts appears below:

 

    December 25,
2015
  December 26,
2014
  December 27,
2013
 
Balance at beginning of period   $ 4,675   $ 3,642   $ 3,440  
Charged to costs and expenses     2,909     1,195     924  
Customer accounts written off, net of recoveries     (1,781 )   (162 )   (722 )
Balance at end of period   $ 5,803   $ 4,675   $ 3,642  
                     

A summary of activity in the inventory valuation reserve appears below:

 

    December 25,
2015
  December 26,
2014
  December 27,
2013
 
Balance at beginning of period   $ 1,130   $ 683   $ 650  
Charged to costs and expenses     3,288     3,422     3,051  
Inventory written off     (2,462 )   (2,975 )   (3,018 )
Balance at end of period   $ 1,956   $ 1,130   $ 683  

 

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Note 18 – Quarterly Results (unaudited)

 

The quarterly results of the Company for the years ended December 25, 2015 and December 26, 2014 are as follows:

 

    March 27,
2015
  June 26,
2015(1)
  Sept. 25,
2015
  Dec. 25,
2015
 
Net sales   $ 198,876   $ 282,882   $ 277,516   $ 299,722  
                           
Gross profit     50,339     71,808     70,460     76,927  
                           
Operating profit     3,140     9,333     12,853     15,074  
                           
Income before income taxes     1,653     5,759     8,943     11,356  
                           
Net income     967     3,363     5,224     6,655  
                           
Basic net income per share     0.04     0.13     0.20     0.26  
                           
Diluted net income per share     0.04     0.13     0.20     0.25  

 

    March 28,
2014
  June 27,
2014
  Sept. 26,
2014 (2)
  Dec. 26,
2014 (3)(4)
 
Net sales   $ 187,183   $ 213,144   $ 208,070   $ 228,228  
                           
Gross profit     46,068     52,402     50,693     56,889  
                           
Operating profit     3,751     8,557     9,033     11,669  
                           
Income before income taxes     1,692     6,458     7,132     9,566  
                           
Net income     989     3,820     4,207     5,199  
                           
Basic net income per share     0.04     0.16     0.17     0.21  
                           
Diluted net income per share     0.04     0.15     0.17     0.21  
                           

(1) Beginning in the second quarter of 2015 the Company began to reflect the results of the Del Monte acquisition. 

(2) The Company recorded a recovery of approximately $1,500 related to the settlement with the prior owners of Michael’s of a dispute associated with the inventory issues it previously experienced at Michael’s. This recovery was reflected as a reduction of operating expenses. 

(3) Beginning in the fourth quarter of 2014 the Company began to reflect the results of the Euro Gourmet acquisition. 

(4) The Company recorded income of $1,904 related to the reversal of earn-out obligations for our Queensgate and Allen Brothers acquisitions.

 

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Not applicable.

 

Item 9A.CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures.

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K.

 

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Annual Report on Internal Control Over Financial Reporting.

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 25, 2015. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In conducting the evaluation of the effectiveness of internal control over financial reporting as of December 25, 2015, management has excluded the acquisition of Del Monte, which was acquired on April 6, 2015. At its acquisition date, Del Monte, had aggregate total assets of approximately $38,000 and annual revenues of approximately $215,000. Further information regarding the acquisition of Del Monte appears in Note 5, Acquisitions, in the accompanying audited consolidated financial statements and in the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s internal control over financial reporting was effective as of December 25, 2015.

 

The Company’s financial statements included in this Annual Report on Form 10-K have been audited by BDO USA, LLP, an independent registered public accounting firm, as indicated in the report appearing on page 47 of this Form 10-K. BDO USA, LLP has also provided an attestation report on the Company’s internal control over financial reporting.

 

Changes In Internal Control Over Financial Reporting.

 

There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

72 

 

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholders
The Chefs’ Warehouse, Inc.
Ridgefield, CT

 

We have audited The Chefs’ Warehouse, Inc. internal control over financial reporting as of December 25, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Chefs’ Warehouse, Inc. management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting” under Item 9A of this Form 10-K. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In our opinion, The Chefs’ Warehouse, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 25, 2015, based on the COSO criteria.

 

As indicated in the accompanying “Item 9A, Management’s Annual Report on Internal Control over Financial Reporting,” management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the acquisition of Del Monte, which was acquired on April 6, 2015 and is included in the consolidated balance sheets of The Chefs’ Warehouse, Inc. as of December 25, 2015, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the year then ended. At the acquisition date, Del Monte had aggregate total assets of approximately $38,000 and aggregate annual revenues of approximately $215,000. Management did not assess the effectiveness of internal control over financial reporting of Del Monte because of the timing of the acquisition. Our audit of internal control over financial reporting of The Chefs’ Warehouse, Inc. also did not include an evaluation of the internal control over financial reporting of Del Monte. 

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Chefs’ Warehouse, Inc. as of December 25, 2015 and December 26, 2014, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 25, 2015 and our report dated March 4, 2016 expressed an unqualified opinion thereon.

 

/s/ BDO USA, LLP

 

Stamford, CT
March 4, 2016

 

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Item 9B. OTHER INFORMATION

 

None.

 

PART III

 

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

  

The information set forth under the captions “Corporate Governance,” “Proposal 1 - Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders to be held on May 14, 2016, which we intend to file within 120 days after our fiscal year-end, is incorporated herein by reference. As provided in General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding executive officers of our Company is provided in Part I of this Annual Report on Form 10-K under the caption, “Executive Officers.”

 

Item 11. EXECUTIVE COMPENSATION

 

The information set forth under the caption “Executive Compensation” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders to be held on May 14, 2016, which we intend to file within 120 days after our fiscal year-end, is incorporated herein by reference.

 

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The information set forth under the captions “Stock Ownership of Certain Beneficial Owners and Management” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders to be held on May 14, 2016, which we intend to file within 120 days after our fiscal year-end, is incorporated herein by reference.

 

The following table provides certain information with respect to equity awards under our equity compensation plans as of December 25, 2015: 

              
Plan Category  Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
   Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the
second column)
 
Plans approved by stockholders            881,561 
Plans not approved by stockholders             
Total            881,561 

 

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

  

The information set forth under the captions “Corporate Governance – Director Independence” and “Corporate Governance – Certain Relationships and Related Transactions” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders to be held on May 14, 2016, which we intend to file within 120 days after our fiscal year-end, is incorporated herein by reference.

 

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

  

The information set forth under the captions “Proposal 2 – Ratification of Independent Registered Public Accounting Firm – Fees Paid to BDO USA, LLP” and “Proposal 2 – Ratification of Independent Registered Public Accounting Firm – Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders to be held on May 14, 2016, which we intend to file within 120 days after our fiscal year-end, is incorporated herein by reference.

 

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PART IV

 

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

  

The following documents are filed as part of this report:

 

1.Financial Statements – See Index to the Consolidated Financial Statements at Item 8 of this Annual Report on Form 10-K.

 

2.Financial Statement Schedules - Supplemental schedules are not provided because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.

 

3.Exhibits – The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K.

 

  Exhibit
No.
  Description
       
  2.1   Stock Purchase Agreement, dated as of April 27, 2012, among The Chefs’ Warehouse West Coast, LLC and Adelheid Putze and Rudolf Putze (in corporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on April 30, 2012) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.2   Securities Purchase Agreement, dated as of August 10, 2012, among Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Mid-Atlantic, LLC, Michael’s Finer Meats, LLC and the other parties party thereto (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 13, 2012) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.3   Asset Purchase Agreement, dated as of December 31, 2012, among The Chefs’ Warehouse Midwest, LLC, QG Holding, Inc., Queensgate Food Group, LLC, Mullaghan Properties, LLC, SP Beverage Co., LLC and the other parties party thereto (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on January 2, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.4   Stock Purchase Agreement, dated as of May 1, 2013, among The Chefs’ Warehouse Pastry Division Canada ULC, the Shareholders set forth therein, and Fulcrum Capital Partners Inc., as the Shareholders’ Representative (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on May 1, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.5   Asset Purchase Agreement, dated as of December 11, 2013, by and among Allen Brothers 1893, LLC, Allen Brothers, Inc., The Great Steakhouse Steaks LLC, The Chefs’ Warehouse, Inc., and the other parties thereto (incorporated by reference to the Company’s Form 8-K filed on December 17, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.6   Asset Purchase Agreement, dated as of January 11, 2015, by and among The Chefs’ Warehouse, Inc., a Delaware corporation, Del Monte Capitol Meat Company, LLC, a Delaware limited liability company, T.J. Foodservice Co., Inc., a California corporation, TJ Seafood, LLC, a California limited liability company, John DeBenedetti, Victoria DeBenedetti, Theresa Lincoln, and John DeBenedetti, as the Sellers’ Representative (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 15, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).

 

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  2.7   Earn-Out Agreement, dated April 6, 2015 by and among The Chefs' Warehouse, Inc., Del Monte Capitol Meat Company, LLC, T.J. Foodservice Co., Inc., TJ Seafood, LLC, and John DeBenedetti, as the Sellers' Representative (incorporated by reference to Exhibit 2.1 to the Company's 8-K filed on April 9, 2015)(Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.8   Earn-Out Agreement, dated April 6, 2015 by and among The Chef’s Warehouse, Inc., Del Monte Capitol Meat Company, LLC, T.J. Foodservice Co., TJ Seafood, LLC, and John DeBeneditti, as the Seller’s Representative (incorporated by reference to Exhibit 2.1 to the Company’s 8-K filed on April 9, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.9   Indemnification Agreement, dated April 6, 2015, by and among Del Monte Merger Sub, LLC, The Chefs' Warehouse, Inc., Del Monte Capitol Meat Company, LLC, DeBenedetti/Del Monte Trust, Victoria DeBenedetti, David DeBenedetti, Del Monte Capitol Meat Co., Inc., T.J. Foodservice Co., Inc., TJ Seafood, LLC, John DeBenedetti, Theresa Lincoln and John DeBenedetti, as the Selling Parties' Representative (incorporated by reference to Exhibit 2.2 to the Company's 8-K filed on April 9, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  3.1   Certificate of Incorporation of the Company, dated as of July 27, 2011 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on August 2, 2011).
       
  3.2   Bylaws of the Company, dated as of July 27, 2011 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2011).
       
  4.1   Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s S-1/A filed on July 1, 2011).
       
  10.1   Agreement of Lease, dated as of April 26, 2012, between the City of New York, as Landlord, and Dairyland HP LLC, as Tenant (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.2   Amendment to Agreement of Lease, dated as of April 26, 2012, between the City of New York, as Landlord, and Dairyland HP LLC, as Tenant, dated February 27, 2013 (incorporated by reference to Exhibit 10.38 to the Company’s Form 10-K filed on March 13, 2013).
       
  10.3   Mortgage Note, dated as of April 26, 2012, between Dairyland HP LLC, as Maker, and Commercial Lending II LLC, as Payee (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.4   Leasehold Mortgage and Security Agreement and Assignment of Leases and Rents, dated as of April 26, 2012, between Dairyland HP LLC, as Mortgagor, and Commercial Lending II LLC, as Mortgagee (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.5   Joint and Several Guaranty of Payment, dated as of April 26, 2012, among The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.6   Lease between The Chefs’ Warehouse Leasing Co., LLC and Dairyland USA Corporation, dated as of December 29, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s Form S-1/A filed on June 8, 2011).
       
  10.7   First Amendment of Lease dated as of January 1, 2015 between Dairyland USA Corporation and TCW Leasing Co., LLC, f/k/a The Chefs' Warehouse Leasing Co., LLC (incorporated by reference to Exhibit 10.12 to the Company's Form 10-Q filed on August 5, 2015).
       
  10.8   Lease Agreement, dated as of June 30, 2015, between CW LV Real Estate, LLC, The Chefs' Warehouse, Inc., Chefs' Warehouse Parent, LLC and The Chefs' Warehouse West Coast, LLC, jointly and severally as the Tenant, and CW Nevada Landlord, LLC, as the Landlord (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed on July 7, 2015).
       
  10.9*   Employment Agreement between Christopher Pappas and The Chefs’ Warehouse, Inc., together with its subsidiaries, dated as of August 2, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2011).
       
  10.10*   Amended and Restated Employment Agreement between John Pappas and The Chefs’ Warehouse, Inc., together with its subsidiaries, dated as of January 12, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 19, 2012).
       
  10.11*   Offer letter between The Chefs’ Warehouse, Inc. and John D. Austin, dated May 29, 2012 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 30, 2012).
       
  10.12*   Offer letter between Chefs’ Warehouse Holdings, LLC and Frank O’Dowd, dated as of January 28, 2007 (incorporated by reference to Exhibit 10.11 to the Company’s Form S-1/A filed on June 8, 2011).
       
  10.13*   Offer letter between Chefs’ Warehouse Holdings, LLC and Patricia Lecouras, dated as of January 31, 2007 (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-K filed on March 13, 2013).
       
  10.14*   Offer letter between Chefs’ Warehouse Holdings, LLC and Alexandros Aldous, dated as of February 18, 2011 (incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K filed on March 13, 2013).

 

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  10.15*   Severance Agreement, made as of August 1, 2014, by and between The Chefs’ Warehouse, Inc. and Alexandros Aldous (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 6, 2014).
       
  10.16   Employment Agreement Pursuant to Purchase Agreements, dated as of April 6, 2015, by and between Del Monte Capitol Meat Company, LLC, The Chefs' Warehouse, Inc. and John DeBenedetti (incorporated by reference to Exhibit 10.11 to the Company's Form 10-Q filed on August 5, 2015).
       
  10.17*   The Chefs’ Warehouse, Inc. 2011 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.13 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.18*   The Chefs’ Warehouse, Inc. 2013 Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 24, 2013).
       
  10.19*   The Chefs’ Warehouse, Inc. 2014 Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 12, 2014).
       
  10.20*   The Chefs’ Warehouse, Inc. Executive Change in Control Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 6, 2014).
       
  10.21†   Form of Non-Qualified Stock Option Agreement (Officers and Employees).
       
  10.22*   Form of Non-Qualified Stock Option Agreement (Directors) (incorporated by reference to Exhibit 10.15 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.23*   Form of Restricted Share Unit Award Agreement (Directors) (incorporated by reference to Exhibit 10.16 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.24*   Form of Restricted Share Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.17 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.25†   Form of Restricted Share Award Agreement (Directors).
       
  10.26*   Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.19 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.27*   Form of Performance Restricted Share Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on January 19, 2012).
       
  10.28   Form of Restricted Share Award Agreement for a Transaction Bonus Award Grant (incorporated by reference to Exhibit 10.6 to the Company's Form 8-K filed on April 9, 2015).
       
  10.29   Form of LTIP award agreement (incorporated by reference to Exhibit 10.8 to the Company's Form 10-Q filed on May 6, 2015).
       
  10.30+   Amendment and Restatement Agreement, dated as of April 17, 2013, among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the financial institutions party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on May 7, 2013).
       
  10.31   Amendment No. 1, dated as of July 23, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 28, 2014).
       
  10.32   Amendment No. 2, dated as of November 4, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on November 5, 2014).

 

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  10.33   Amendment No. 3, dated as of December 3, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 9, 2014).
       
  10.34   Amendment No. 4, dated as of January 9, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on January 15, 2015).
       
  10.35   Amendment No. 5, dated as of April 6, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.36   Amendment No. 6, dated as of July 1, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 7, 2015).
       
  10.37   Amendment No. 7, dated as of August 26, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 4, 2015).
       
 

10.38†

 

 

 

  Amendment No. 8, dated as of December 18, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent.
       
  10.39†   Amendment No. 9, dated as of February 26, 2016, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs' Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs' Warehouse West Coast, LLC, and The Chefs' Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent.
       
  10.40+   Amended and Restated Pledge and Security Agreement, dated April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, The Chefs’ Warehouse of Florida, LLC, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Michael’s Finer Meats, LLC, Michael’s Finer Meats Holdings, LLC, The Chefs’ Warehouse Midwest, LLC, and the other Subsidiaries of The Chefs’ Warehouse, Inc. that become party thereto after the date thereof, as Grantors, and JPMorgan Chase Bank, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed May 7, 2013).
       
  10.41+   Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed May 7, 2013).

 

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  10.42   Amendment No. 1, dated as of July 23, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on July 28, 2014).
       
  10.43   Amendment No. 2, dated as of November 4, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed November 5, 2014).
       
  10.44   Amendment No. 3, dated as of December 3, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 9, 2014).
       
  10.45   Amendment No. 4, dated as of January 9, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on January 15, 2015).
       
  10.46   Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.47   Amendment No. 6, dated as of July 1, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 7, 2015).
       
  10.48†   Amendment No. 7, dated as of December 18, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company.
       
  10.49†   Amendment No. 8, dated as of February 26, 2016, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs' Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs' Warehouse West Coast, LLC, and The Chefs' Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company.

   

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  10.50   Form of Note (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed May 7, 2013).
       
  10.51   Building Loan Agreement, dated as of April 26, 2012, between Commercial Lending II LLC, as Lender, and Dairyland HP LLC, as Borrower (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K/A filed on May 1, 2012).
       
  10.52+   Loan Agreement, dated as of April 26, 2012, among Dairyland HP LLC, as Borrower, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Guarantors, and Commercial Lending II LLC, as Lender (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.53   Form of Series B Note (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.54   Convertible Subordinated Non-Negotiable Promissory Note, dated April 6, 2015, issued by Del Monte Capitol Meat Company, LLC to TJ Seafood, LLC. (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.55   Convertible Subordinated Non-Negotiable Promissory Note, dated April 6, 2015, issued by Del Monte Capitol Meat Company, LLC to T.J. Foodservice Co., Inc. (incorporated by reference to Exhibit 10.5 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.56*   Form of Indemnification Agreement by and between The Chefs’ Warehouse, Inc. and its directors and executive officers (incorporated by reference to Exhibit 10.24 to the Company’s Form S-1/A filed on July 14, 2011).
       
  14.1   The Chefs’ Warehouse, Inc. Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Form 10-Q filed on August 6, 2013).
       
  21†   Subsidiaries of the Company.
       
  23.1†   Consent of Independent Registered Public Accounting Firm.
       
  31.1†   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
  31.2†   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
  32.1†   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
  32.2†   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
  101.INS†   XBRL Instance Document
  101.SCH†   XBRL Schema Document
  101.CAL†   XBRL Calculation Linkbase Document
  101.DEF†   XBRL Definition Linkbase Document
  101.LAB†   XBRL Label Linkbase Document
  101.PRE†   XBRL Presentation Linkbase Document

  

  * Management Contract or Compensatory Plan or Arrangement
  Filed herewith
  + Certain confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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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 on March 4, 2016.

 

  THE CHEFS’ WAREHOUSE, INC.
   
March 4, 2016 /s/ Christopher Pappas
  Christopher Pappas
  Chairman, President and Chief
  Executive 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.

 

Signature     Capacity     Date  
         
/s/ Christopher Pappas   Chairman, President and   March 4, 2016
Christopher Pappas   Chief Executive Officer
(Principal Executive Officer)
   
         
/s/ John D. Austin   Chief Financial Officer   March 4, 2016
John D. Austin   (Principal Accounting and
Financial Officer)
   
         
/s/ John Pappas   Director and Vice Chairman   March 4, 2016
John Pappas        
         
/s/ Alan Guarino   Director   March 4. 2016
Alan Guarino        
         
/s/ John A. Couri   Director   March 4. 2016
John A. Couri        
         
/s/ Dominick C. Cerbone   Director   March 4. 2016
Dominick C. Cerbone        
         
/s/ Joseph Cugine   Director   March 4. 2016
Joseph Cugine        
         
/s/ Stephen Hanson   Director   March 4. 2016
Stephen Hanson        
         
/s/ John DeBenedetti   Director   March 4. 2016
John DeBenedetti        
         
/s/ Katherine Oliver   Director   March 4. 2016
Katherine Oliver        

 

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INDEX OF EXHIBITS

 

  Exhibit
No.
  Description
       
  2.1   Stock Purchase Agreement, dated as of April 27, 2012, among The Chefs’ Warehouse West Coast, LLC and Adelheid Putze and Rudolf Putze (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on April 30, 2012) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.2   Securities Purchase Agreement, dated as of August 10, 2012, among Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Mid-Atlantic, LLC, Michael’s Finer Meats, LLC and the other parties party thereto (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 13, 2012) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.3   Asset Purchase Agreement, dated as of December 31, 2012, among The Chefs’ Warehouse Midwest, LLC, QG Holding, Inc., Queensgate Food Group, LLC, Mullaghan Properties, LLC, SP Beverage Co., LLC and the other parties party thereto (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on January 2, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.4   Stock Purchase Agreement, dated as of May 1, 2013, among The Chefs’ Warehouse Pastry Division Canada ULC, the Shareholders set forth therein, and Fulcrum Capital Partners Inc., as the Shareholders’ Representative (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on May 1, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.5   Asset Purchase Agreement, dated as of December 11, 2013, by and among Allen Brothers 1893, LLC, Allen Brothers, Inc., The Great Steakhouse Steaks LLC, The Chefs’ Warehouse, Inc., and the other parties thereto (incorporated by reference to the Company’s Form 8-K filed on December 17, 2013) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.6   Asset Purchase Agreement, dated as of January 11, 2015, by and among The Chefs’ Warehouse, Inc., a Delaware corporation, Del Monte Capitol Meat Company, LLC, a Delaware limited liability company, T.J. Foodservice Co., Inc., a California corporation, TJ Seafood, LLC, a California limited liability company, John DeBenedetti, Victoria DeBenedetti, Theresa Lincoln, and John DeBenedetti, as the Sellers’ Representative (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 15, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.7   Merger Agreement, dated as of January 11, 2015, by and among The Chefs’ Warehouse, Inc., a Delaware corporation, Del Monte Merger Sub, LLC, a Delaware limited liability company, Del Monte Capitol Meat Co., Inc., a California corporation, David DeBenedetti, Victoria DeBenedetti, DeBenedetti/Del Monte Trust, and John DeBenedetti, as the Sellers’ Representative (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 15, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.8   Earn-Out Agreement, dated April 6, 2015 by and among The Chefs' Warehouse, Inc., Del Monte Capitol Meat Company, LLC, T.J. Foodservice Co., Inc., TJ Seafood, LLC, and John DeBenedetti, as the Sellers' Representative (incorporated by reference to Exhibit 2.1 to the Company's 8-K filed on April 9, 2015)(Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  2.9   Indemnification Agreement, dated April 6, 2015, by and among Del Monte Merger Sub, LLC, The Chefs' Warehouse, Inc., Del Monte Capitol Meat Company, LLC, DeBenedetti/Del Monte Trust, Victoria DeBenedetti, David DeBenedetti, Del Monte Capitol Meat Co., Inc., T.J. Foodservice Co., Inc., TJ Seafood, LLC, John DeBenedetti, Theresa Lincoln and John DeBenedetti, as the Selling Parties' Representative (incorporated by reference to Exhibit 2.2 to the Company's 8-K filed on April 9, 2015) (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request).
       
  3.1   Certificate of Incorporation of the Company, dated as of July 27, 2011 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on August 2, 2011).
       
  3.2   Bylaws of the Company, dated as of July 27, 2011 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2011).

 

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  4.1   Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s S-1/A filed on July 1, 2011).
       
  10.1   Agreement of Lease, dated as of April 26, 2012, between the City of New York, as Landlord, and Dairyland HP LLC, as Tenant (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.2   Amendment to Agreement of Lease, dated as of April 26, 2012, between the City of New York, as Landlord, and Dairyland HP LLC, as Tenant, dated February 27, 2013 (incorporated by reference to Exhibit 10.38 to the Company’s Form 10-K filed on March 13, 2013).
       
  10.3   Mortgage Note, dated as of April 26, 2012, between Dairyland HP LLC, as Maker, and Commercial Lending II LLC, as Payee (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.4   Leasehold Mortgage and Security Agreement and Assignment of Leases and Rents, dated as of April 26, 2012, between Dairyland HP LLC, as Mortgagor, and Commercial Lending II LLC, as Mortgagee (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.5   Joint and Several Guaranty of Payment, dated as of April 26, 2012, among The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on April 30, 2012).
       
  10.6   Lease between The Chefs’ Warehouse Leasing Co., LLC and Dairyland USA Corporation, dated as of December 29, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s Form S-1/A filed on June 8, 2011).
       
  10.7   First Amendment of Lease dated as of January 1, 2015 between Dairyland USA Corporation and TCW Leasing Co., LLC, f/k/a The Chefs' Warehouse Leasing Co., LLC (incorporated by reference to Exhibit 10.12 to the Company's Form 10-Q filed on August 5, 2015).
       
  10.8   Lease Agreement, dated as of June 30, 2015, between CW LV Real Estate, LLC, The Chefs' Warehouse, Inc., Chefs' Warehouse Parent, LLC and The Chefs' Warehouse West Coast, LLC, jointly and severally as the Tenant, and CW Nevada Landlord, LLC, as the Landlord (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed on July 7, 2015).
       
  10.9*   Employment Agreement between Christopher Pappas and The Chefs’ Warehouse, Inc., together with its subsidiaries, dated as of August 2, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2011).
       
  10.10*   Amended and Restated Employment Agreement between John Pappas and The Chefs’ Warehouse, Inc., together with its subsidiaries, dated as of January 12, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 19, 2012).
       
  10.11*   Offer letter between The Chefs’ Warehouse, Inc. and John D. Austin, dated May 29, 2012 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 30, 2012).
       
  10.12*   Offer letter between Chefs’ Warehouse Holdings, LLC and Frank O’Dowd, dated as of January 28, 2007 (incorporated by reference to Exhibit 10.11 to the Company’s Form S-1/A filed on June 8, 2011).
       
  10.13*   Offer letter between Chefs’ Warehouse Holdings, LLC and Patricia Lecouras, dated as of January 31, 2007 (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-K filed on March 13, 2013).
       
  10.14*   Offer letter between Chefs’ Warehouse Holdings, LLC and Alexandros Aldous, dated as of February 18, 2011 (incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K filed on March 13, 2013).
       
  10.15*   Severance Agreement, made as of August 1, 2014, by and between The Chefs’ Warehouse, Inc. and Alexandros Aldous (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 6, 2014).
       
  10.16   Employment Agreement Pursuant to Purchase Agreements, dated as of April 6, 2015, by and between Del Monte Capitol Meat Company, LLC, The Chefs' Warehouse, Inc. and John DeBenedetti (incorporated by reference to Exhibit 10.11 to the Company's Form 10-Q filed on August 5, 2015).
       
  10.17*   The Chefs’ Warehouse, Inc. 2011 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.13 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.18*   The Chefs’ Warehouse, Inc. 2013 Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 24, 2013).

 

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  10.19*   The Chefs’ Warehouse, Inc. 2014 Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 12, 2014).
       
  10.20*   The Chefs’ Warehouse, Inc. Executive Change in Control Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 6, 2014).
       
  10.21†   Form of Non-Qualified Stock Option Agreement (Officers and Employees).
       
  10.22*   Form of Non-Qualified Stock Option Agreement (Directors) (incorporated by reference to Exhibit 10.15 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.23*   Form of Restricted Share Unit Award Agreement (Directors) (incorporated by reference to Exhibit 10.16 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.24*   Form of Restricted Share Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.17 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.25†   Form of Restricted Share Award Agreement (Directors).
       
  10.26*   Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.19 to the Company’s Form S-1/A filed on July 1, 2011).
       
  10.27*   Form of Performance Restricted Share Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on January 19, 2012).
       
  10.28   Form of Restricted Share Award Agreement for a Transaction Bonus Award Grant (incorporated by reference to Exhibit 10.6 to the Company's Form 8-K filed on April 9, 2015).
       
  10.29   Form of LTIP award agreement (incorporated by reference to Exhibit 10.8 to the Company's Form 10-Q filed on May 6, 2015).
       
  10.30+   Amendment and Restatement Agreement, dated as of April 17, 2013, among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the financial institutions party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on May 7, 2013).
       
  10.31   Amendment No. 1, dated as of July 23, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 28, 2014).
       
  10.32   Amendment No. 2, dated as of November 4, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on November 5, 2014).
       
  10.33   Amendment No. 3, dated as of December 3, 2014, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 9, 2014).
       
  10.34   Amendment No. 4, dated as of January 9, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on January 15, 2015).

 

84
 

 

  10.35   Amendment No. 5, dated as of April 6, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.36   Amendment No. 6, dated as of July 1, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 7, 2015).
       
  10.37   Amendment No. 7, dated as of August 26, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 4, 2015).
       
  10.38†   Amendment No. 8, dated as of December 18, 2015, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent.
       
 

10.39†

  Amendment No. 9, dated as of February 26, 2016, to the Amended and Restated Credit Agreement dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs' Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs' Warehouse West Coast, LLC, and The Chefs' Warehouse of Florida, LLC, as Borrowers, the other Loan Parties thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent.
       
  10.40+   Amended and Restated Pledge and Security Agreement, dated April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, The Chefs’ Warehouse of Florida, LLC, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Michael’s Finer Meats, LLC, Michael’s Finer Meats Holdings, LLC, The Chefs’ Warehouse Midwest, LLC, and the other Subsidiaries of The Chefs’ Warehouse, Inc. that become party thereto after the date thereof, as Grantors, and JPMorgan Chase Bank, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed May 7, 2013).
       
  10.41+   Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed May 7, 2013).
       
  10.42   Amendment No. 1, dated as of July 23, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on July 28, 2014).
       
  10.43   Amendment No. 2, dated as of November 4, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed November 5, 2014).

 

85
 

 

       
  10.44   Amendment No. 3, dated as of December 3, 2014, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 9, 2014).
       
  10.45   Amendment No. 4, dated as of January 9, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, and Michael’s Finer Meats, LLC, as the Initial Guarantors, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on January 15, 2015).
       
  10.46   Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.47   Amendment No. 6, dated as of July 1, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 7, 2015).
       
  10.48†   Amendment No. 7, dated as of December 18, 2015, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company.
       
  10.49†   Amendment No. 8, dated as of February 26, 2016, to the Note Purchase and Guarantee Agreement, dated as of April 17, 2013, by and among Dairyland USA Corporation, The Chefs' Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs' Warehouse West Coast, LLC, and The Chefs' Warehouse of Florida, LLC, as Issuers, the Guarantors party thereto, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Arizona Reinsurance Captive Company, and Prudential Retirement Insurance and Annuity Company.
       
  10.50   Form of Note (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed May 7, 2013).
       
  10.51   Building Loan Agreement, dated as of April 26, 2012, between Commercial Lending II LLC, as Lender, and Dairyland HP LLC, as Borrower (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K/A filed on May 1, 2012).
       
  10.52+   Loan Agreement, dated as of April 26, 2012, among Dairyland HP LLC, as Borrower, The Chefs’ Warehouse, Inc., Chefs’ Warehouse Parent, LLC, Dairyland USA Corporation, The Chefs’ Warehouse Mid-Atlantic, LLC, Bel Canto Foods, LLC, The Chefs’ Warehouse West Coast, LLC, and The Chefs’ Warehouse of Florida, LLC, as Guarantors, and Commercial Lending II LLC, as Lender (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on April 30, 2012).

 

86
 

 

  10.53   Form of Series B Note (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.54   Convertible Subordinated Non-Negotiable Promissory Note, dated April 6, 2015, issued by Del Monte Capitol Meat Company, LLC to TJ Seafood, LLC. (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.55   Convertible Subordinated Non-Negotiable Promissory Note, dated April 6, 2015, issued by Del Monte Capitol Meat Company, LLC to T.J. Foodservice Co., Inc. (incorporated by reference to Exhibit 10.5 to the Company's Form 8-K filed with the Securities and Exchange Commission on April 9, 2015).
       
  10.56*   Form of Indemnification Agreement by and between The Chefs’ Warehouse, Inc. and its directors and executive officers (incorporated by reference to Exhibit 10.24 to the Company’s Form S-1/A filed on July 14, 2011).
       
  14.1   The Chefs’ Warehouse, Inc. Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Form 10-Q filed on August 6, 2013).
       
  21†   Subsidiaries of the Company.
       
  23.1†   Consent of Independent Registered Public Accounting Firm.
       
  31.1†   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
  31.2†   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
  32.1†   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
  32.2†   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
  101.INS†   XBRL Instance Document
  101.SCH†   XBRL Schema Document
  101.CAL†   XBRL Calculation Linkbase Document
  101.DEF†   XBRL Definition Linkbase Document
  101.LAB†   XBRL Label Linkbase Document
  101.PRE†   XBRL Presentation Linkbase Document

  

  * Management Contract or Compensatory Plan or Arrangement
  Filed herewith
  + Certain confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

87

 

The Chefs’ Warehouse, Inc. 10-K

 

Exhibit 10.21

THE CHEFS’ WAREHOUSE, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(Officers and Employees)

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of this ____ day of _____________, 20__ (the “Grant Date”), by and between The Chefs’ Warehouse, Inc., a Delaware corporation (together with its Subsidiaries and Affiliates, the “Company”), and __________________ (the “Optionee”). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in The Chefs’ Warehouse, Inc. 2011 Omnibus Equity Incentive Plan (the “Plan”).

WHEREAS, the Company has adopted the Plan, which permits the issuance of stock options for the purchase of shares of the common stock, par value $0.01 per share, of the Company (the “Shares”); and

WHEREAS, the Company desires to afford the Optionee an opportunity to purchase Shares as hereinafter provided in accordance with the provisions of the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1.

Grant of Option.

(a)

The Company grants as of the date of this Agreement the right and option (the “Option”) to purchase __________ Shares, in whole or in part (the “Option Stock”), at an exercise price of _________________________ and No/100 Dollars ($_________) per Share, on the terms and conditions set forth in this Agreement and subject to all provisions of the Plan. The Optionee, holder or beneficiary of the Option shall not have any of the rights of a stockholder with respect to the Option Stock until such person has become a holder of such Shares by the due exercise of the Option and payment of the Option Payment (as defined in Section 3 below) in accordance with this Agreement.

(b)

The Option shall be a non-qualified stock option. In order comply with all applicable federal, state or local tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or other taxes are withheld or collected from the Optionee.

2.

Exercise of Option.

(a)

Except as otherwise provided herein, this Option shall become vested and exercisable only if both (i) the Optionee has remained continuously employed by the Company through the third anniversary of the Grant Date (the “Service-Vesting Condition”), and (ii) a Trading Price (as defined below) of $30 has been achieved or, in the event of a Change in Control, the consideration per Share paid or delivered in connection with the Change in Control is at least $30 (the “Market-Vesting Condition”).For purposes of this Agreement, “Trading Price” means the volume-weighted average closing price of a Share, as reported on the NASDAQ composite transaction reporting system, for a twenty (20) consecutive trading day period.For the avoidance of doubt, it is noted that, except as otherwise provided herein, the Option may not be exercised prior to the third anniversary of the Grant Date, whether or not the Market-Vesting Condition is satisfied prior to such anniversary date.

(b)

Notwithstanding the above, the Service-Vesting Condition shall be deemed satisfied with respect to 100% of the Option Stock in the event of the Optionee’s death, Disability or Retirement, provided the Optionee has remained continuously employed by the Company from the date of this Agreement to such event.In no event, however, may the Option be exercised unless the Market-Vesting Condition has been satisfied by the date of the Optionee’s death, Disability or Retirement or such later date as of which the Option terminates pursuant to Section 4 below.

(c)

Notwithstanding the foregoing, in the event of a Change in Control, (i) if the Market-Vesting Condition is satisfied as of the Change in Control and the Change in Control occurs prior to satisfaction of the Service-Vesting Condition, and provided further the Option is assumed in the Change in Control transaction under the terms set forth in Section 13.3 of the Plan, this Option shall vest upon satisfaction of the Service-Vesting Condition except that in the event the Optionee’s employment with the Company (or its successor) is terminated by (A) the Optionee for Good Reason, or (B) the Company for any reason other than for Cause (as defined in the Plan, unless otherwise defined in an applicable service agreement), this Option shall vest and become exercisable with respect to 100% of the Option Stock (but only to the extent such Option has not otherwise terminated or become exercisable); (ii) if the Market-Vesting Condition is satisfied as of the Change in Control and the Option is not assumed in the Change in Control transaction under the terms set forth in Section 13.3 of the Plan, the Service-Vesting condition shall be deemed satisfied and this Option shall vest and become exercisable with respect to 100% of the Option Stock immediately prior to the Change in Control (but only to the extent such Option has not otherwise terminated or become exercisable); (iii) if the Market-Vesting Condition is not satisfied as of the Change in Control, this Option shall terminate immediately prior the Change in Control and become void and of no effect.

 
 

3.

Manner of Exercise. The Option may be exercised in whole or in part at any time within the period permitted hereunder for the exercise of the Option, with respect to whole Shares only, by serving written notice of intent to exercise the Option delivered to the Company at its principal office (or to the Company’s designated agent), stating the number of Shares to be purchased, the person or persons in whose name the Shares are to be registered and each such person’s address and social security number. Such notice shall not be effective unless accompanied by payment in full of the Option Price for the number of Shares with respect to which the Option is then being exercised (the “Option Payment”) and, except as otherwise provided herein, cash equal to the required withholding taxes as set forth by Internal Revenue Service and applicable state and local tax guidelines for the employer’s minimum statutory withholding. The Option Payment shall be made in cash or cash equivalents or, at the discretion of the Committee, in whole Shares previously acquired by the Optionee and valued at the Shares’ Fair Market Value on the date of exercise (or next succeeding trading date if the date of exercise is not a trading date), or by a combination of such cash (or cash equivalents) and Shares. Subject to applicable securities laws and the consent of the Committee, the Optionee may also exercise the Option (a) by delivering a notice of exercise of the Option and by simultaneously selling the Shares of Option Stock thereby acquired pursuant to a brokerage or similar agreement approved in advance by proper officers of the Company, using the proceeds of such sale as payment of the Option Payment, together with any applicable withholding taxes, or (b) by directing the Company to withhold that number of whole Shares otherwise deliverable to the Optionee pursuant to the Option having an aggregate Fair Market Value at the time of exercise equal to the sum of the Option Payment and the amount necessary to satisfy any applicable withholding obligations.

4.

Termination of Option. The Option will expire ten (10) years from the date of grant of the Option (the “Term”) with respect to any then unexercised portion thereof, unless terminated earlier as set forth below:

(a)

Termination by Death. If the Optionee’s employment by the Company terminates by reason of death, this Option may thereafter be exercised by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, but only if the Market-Vesting Conditions has been satisfied, for a period of one (1) year from the date of death or until the expiration of the Term of the Option, whichever period is the shorter.

(b)

Termination by Reason of Disability. If the Optionee’s employment by the Company terminates by reason of Disability, this Option may thereafter be exercised by the Optionee or personal representative or guardian of the Optionee, as applicable, but only if the Market-Vesting Conditions has been satisfied, for a period of three (3) years from the date of such termination of employment or until the expiration of the Term of the Option, whichever period is the shorter.

(c)

Termination by Retirement. If the Optionee’s employment by the Company terminates by reason of Retirement, this Option may thereafter be exercised by the Optionee, but only if the Market-Vesting Condition has been satisfied, for a period of three (3) years from the date of such termination of employment or until the expiration of the Term of the Option, whichever period is the shorter.

(d)

Termination for Cause. If the Optionee’s employment by the Company is terminated for Cause, this Option shall terminate immediately and become void and of no effect.

(e)

Other Termination. If the Optionee’s employment by the Company terminates for any reason other than for Cause, death, Disability or Retirement, this Option may be exercised by the Optionee, to the extent the Service-Vesting Condition was satisfied at the time of such termination, but only if the Market-Vesting Condition has been satisfied, for a period of three (3) months from the date of such termination of employment or the expiration of the Term of the Option, whichever period is the shorter.

 
 

5.

No Right to Continued Employment. The grant of the Option shall not be construed as giving the Optionee the right to be retained in the employ of the Company, and the Company may at any time dismiss the Optionee from employment, free from any liability or any claim under the Plan.

6.

Adjustment to Option Stock. The Committee may make equitable and appropriate adjustments in the terms and conditions of, and the criteria included in, this Option in recognition of unusual or nonrecurring events (and shall make the adjustments for the events described in Section 4.2 of the Plan) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles in accordance with the Plan, whenever the Committee determines that such event(s) affect the Shares. Any such adjustments shall be effected in a manner that precludes the material enlargement of rights and benefits under this Award.

7.

Amendments to Option. Subject to the restrictions contained in the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, the Option, prospectively or retroactively; provided that any

such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of the Optionee or any holder or beneficiary of the Option shall not to that extent be effective without the consent of the Optionee, holder or beneficiary affected.

8.

Limited Transferability. Except as otherwise provided by the Committee, during the Optionee’s lifetime, this Option can be exercised only by the Optionee, and this Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Optionee other than by will or the laws of descent and distribution. Any attempt to otherwise transfer this Option shall be void. No transfer of this Option by the Optionee by will or by laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary or appropriate to establish the validity of the transfer.

9.

Reservation of Shares. At all times during the term of this Option, the Company shall use its best efforts to reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of this Agreement.

10.

Plan Governs. The Optionee hereby acknowledges receipt of a copy of (or electronic link to) the Plan and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are governed by the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.

 
 

11.

Severability. If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.

12.

Notices. All notices required to be given under this Award shall be deemed to be received if delivered or mailed as provided for herein to the parties at the following addresses, or to such other address as either party may provide in writing from time to time.

To the Company:   The Chefs’ Warehouse, Inc.
100 East Ridge Road
Ridgefield, Connecticut 06877
Attn: Corporate Secretary
     
To the Optionee:   The address then maintained with respect to the Optionee in the Company’s records.

 

13.

Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to conflicts of laws principles.

14.

Resolution of Disputes. Any dispute or disagreement which may arise under, or as a result of, or in any way related to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Optionee and the Company for all purposes.

15.

Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Optionee’s legal representative and assignees. All obligations imposed upon the Optionee and all rights granted to the Company under this Agreement shall be binding upon the Optionee’s heirs, executors, administrators, successors and assignees.

 

[The next page is the signature page]

 

 
 

IN WITNESS WHEREOF, the parties have caused this Non-Qualified Stock Option Agreement to be duly executed effective as of the day and year first above written.

 

  THE CHEFS’ WAREHOUSE, INC.
   
   
  By:    
   
   
  OPTIONEE:
   
   
  Signature

 

 

 

 

 

 

 

The Chefs’ Warehouse, Inc. 10-K

 

Exhibit 10.25

 

THE CHEFS’ WAREHOUSE, INC.

PERFORMANCE RESTRICTED SHARE AWARD AGREEMENT

(Officers and Employees)

THIS PERFORMANCE RESTRICTED SHARE AWARD AGREEMENT (this “Agreement”) is made and entered into as of the             day of             , 20            (the “Grant Date”), between The Chefs’ Warehouse, Inc., a Delaware corporation (together with its Subsidiaries, the “Company”), and             , (the “Grantee”). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in The Chefs’ Warehouse, Inc. 2011 Omnibus Equity Incentive Plan (the “Plan”).

WHEREAS, the Company has adopted the Plan, which permits the issuance of restricted shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) as a Performance Award under the Plan; and

WHEREAS, pursuant to the Plan, the Committee responsible for administering the Plan has granted a Performance Award of restricted shares to the Grantee as provided herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1.

Grant of Performance Shares.

(a)

The Company hereby grants to the Grantee an award (the “Award”) with respect to a maximum of             shares of Common Stock of the Company on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. The Common Stock of the Company subject to the Award is referred to as the “Shares” or “Performance Shares.

(b)

The Grantee’s rights with respect to the Award shall remain forfeitable at all times prior to the dates on which the Performance Shares shall vest in accordance with Sections 2 and 3 hereof.

(c)

The target Performance Shares under this Award is Performance Shares (the “Target Performance Shares”). For purposes of this Agreement, the term “Performance Period” shall mean the fiscal year of the Company ending.

2.

Terms and Rights as a Stockholder.

(a)

Except as otherwise provided herein, provided that the Grantee provides continuous service to the Company through the applicable vesting date, and further provided that the additional conditions and performance criteria set forth in Exhibit A hereto have been satisfied, the Performance Shares shall vest in accordance with the following schedule:

Percentage of Shares Vesting Date
[ ] % [DATE]
[ ] % [DATE]
[ ] % [DATE]
[ ] % [DATE]

 

The period over which the Performance Shares vests in accordance with the preceding schedule is referred to as the “Vesting Period.”

The number of Performance Shares originally subject to this Award that do not vest, if any, in accordance with this Section 2(a) shall be forfeited immediately by the Grantee upon the determination of the Committee that the necessary performance criteria have not been met.

 

 
 

 

(b)

The Grantee shall have all rights of a stockholder with respect to the Performance Shares, including the right to receive dividends and the right to vote such Performance Shares, subject to the following restrictions:

(i)

the Grantee shall not be entitled to the removal of the restricted legends or restricted account notices or to delivery of the stock certificate (if any) for any Shares until the Committee has determined that such Shares shall have vested pursuant to the terms of this Agreement and the fulfillment of any other restrictive conditions set forth herein;

(ii)

none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of until the Committee has determined that such Shares shall have vested pursuant to the terms of this Agreement and until the fulfillment of any other restrictive conditions set forth herein;

(iii)

except as otherwise provided herein or determined by the Committee at or after the grant of the Award hereunder, unless the Grantee remains in the continuous employment (or other service-providing capacity) of the Company for the entire Vesting Period applicable to a portion of the Performance Shares, the Performance Shares related to such Vesting Period shall be forfeited, and all rights of the Grantee to such Shares shall terminate, without further obligation on the part of the Company, as of the effective date of Grantee’s termination of employment; and

(iv)

any dividends otherwise payable on Performance Shares shall not be paid to the Grantee at the time such dividends are paid to the holders of Common Stock generally, but shall be paid to Grantee within fifteen days of the Committee’s determination of the number of Performance Shares that become vested pursuant to the terms of Section 2(a) of this Agreement; provided, that any dividends otherwise payable with respect to Performance Shares that are forfeited pursuant to Section 2(a) shall not be paid.

(c)

Notwithstanding the foregoing, the Performance Shares awarded hereunder shall automatically vest (provided, that such Shares have not previously been forfeited) upon the termination of the Grantee’s employment from the Company which results from the Grantee’s death or Disability.

(d)

In the event of a Change in Control, (i) if the Change in Control occurs during the Performance Period, the necessary performance criteria shall be deemed satisfied as to the Target Performance Shares and the Vesting Period shall automatically terminate as to the Target Performance Shares immediately prior to the Change in Control, and (ii) if the Change in Control occurs after the Performance Period, the Vesting Period shall automatically terminate immediately prior to the Change in Control as to the Performance Shares for which the necessary performance criteria has been satisfied; provided in each case, that if this Award is assumed in the Change in Control transaction under the terms set forth in Section 13.3 of the Plan, the Vesting Period shall run according to the schedule set forth in Section 2(a) hereof except that in the event of the termination of the Grantee’s employment following a Change in Control, if the Grantee’s employment with the Company (or its successor) is terminated by (A) the Grantee for Good Reason, or (B) the Company for any reason other than for “Cause” (as “Cause” is defined in the Plan, unless otherwise defined in an applicable service agreement), the Vesting Period shall terminate with respect to 100% of the Shares.

Any shares of Common stock, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Shares shall be subject to the same restrictions, terms and conditions as such Shares.

3.

Termination of Restrictions. Following the termination of the Vesting Period, and provided that all other restrictive conditions set forth herein have been met, all restrictions set forth in this Agreement or in the Plan relating to such portion or all, as applicable, of the Performance Shares that the Committee determines shall vest shall lapse as to such portion of the Performance Shares, and a stock certificate for the appropriate number of shares of Common Stock, free of the restrictions and restrictive stock legend, shall, upon request, be delivered to the Grantee or Grantee’s beneficiary or estate, as the case may be, pursuant to the terms of this Agreement (or, in the case of book-entry shares, such restrictions and restricted stock legend shall be removed from the confirmation and account statements delivered to the Grantee in book-entry form).

 

2 
 

 

4.

Delivery of Shares.

(a)

As of the date hereof, certificates representing the Shares may be registered in the name of the Grantee and held by the Company or transferred to a custodian appointed by the Company for the account of the Grantee subject to the terms and conditions of the Plan and shall remain in the custody of the Company or such custodian until their delivery to the Grantee or Grantee’s beneficiary or estate as set forth in Sections 4(b) and (c) hereof or their forfeiture or reversion to the Company as set forth in Section 2(b) hereof. The Committee may, in its discretion, provide that the Grantee’s ownership of Shares prior to the lapse of any transfer restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in accordance with and subject to the applicable provisions of the Plan.

(b)

If certificates shall have been issued as permitted in Section 4(a) above, certificates representing Shares that shall vest pursuant to this Agreement shall be delivered to the Grantee upon request following the date on which the vesting has been determined.

(c)

If certificates shall have been issued as permitted in Section 4(a) above, certificates representing Shares that vest upon the Grantee’s death shall be delivered to the executors or administrators of the Grantee’s estate as soon as practicable following the receipt of proof of the Grantee’s death satisfactory to the Company.

(d)

Any certificate representing Shares shall bear (and confirmation and account statements sent to the Grantee with respect to book-entry Shares may bear) a legend in substantially the following form or substance:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITES ACT OF 1933 AND UNDER APPLICABLE BLUE SKY LAW OR UNLESS SUCH SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION THEREUNDER.

THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE CHEFS’ WAREHOUSE, INC. 2011 OMNIBUS EQUITY INCENTIVE PLAN (THE “PLAN”) AND THE PERFORMANCE RESTRICTED SHARE AWARD AGREEMENT (THE “AGREEMENT”) BETWEEN THE OWNER OF THE RESTRICTED SHARES REPRESENTED HEREBY AND THE CHEFS’ WAREHOUSE, INC. (THE “COMPANY”). THE RELEASE OF SUCH SHARES FROM SUCH TERMS AND CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE PLAN AND THE AGREEMENT AND ALL OTHER APPLICABLE POLICIES AND PROCEDURES OF THE COMPANY, COPIES OF WHICH ARE ON FILE AT THE COMPANY.

5.

Effect of Lapse of Restrictions. To the extent that any Performance Shares vest hereunder, the Grantee may receive, hold, sell or otherwise dispose of such Performance Shares free and clear of the restrictions imposed under the Plan and this Agreement upon compliance with applicable legal requirements.

6.

No Right to Continued Employment. This Agreement shall not be construed as giving the Grantee the right to be retained in the employ of the Company, and subject to any other written contractual arrangement between the Company and the Grantee, the Company may at any time dismiss the Grantee from employment, free from any liability or any claim under the Plan.

3 
 

7.

Adjustments. The Committee may make equitable and proportionate adjustments in the terms and conditions of, and the criteria (including any performance criteria set forth on Exhibit A) included in, this Award in recognition of unusual or nonrecurring events (and shall make adjustments for the events described in Section 4.2 of the Plan) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles in accordance with the Plan whenever the Committee determines that such events affect the Shares. Any such adjustments shall be effected in a manner that precludes the material enlargement of rights and benefits under this Award.

8.

Amendment to Award. Subject to the restrictions contained in the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate the Award, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of the Grantee or any holder or beneficiary of the Award shall not to that extent be effective without the consent of the Grantee, holder or beneficiary affected.

9.

Withholding of Taxes. If the Grantee makes an election under Section 83(b) of the Code with respect to the Award, the Award made pursuant to this Agreement shall be conditioned upon the prompt payment to the Company of any applicable withholding obligations or withholding taxes by the Grantee (“Withholding Taxes”). Failure by the Grantee to pay such Withholding Taxes will render this Agreement and the Award granted hereunder null and void ab initio and the Shares granted hereunder will be immediately cancelled. If the Grantee does not make an election under Section 83(b) of the Code with respect to the Award, upon the vesting of any Shares hereunder (or property distributed with respect thereto), the Company may satisfy the required Withholding Taxes as set forth by Internal Revenue Service guidelines for the employer’s minimum statutory withholding with respect to the Grantee and issue vested shares to the Grantee without restriction. The Company may satisfy the required Withholding Taxes by withholding from the Shares included in the Award that number of whole shares necessary to satisfy such taxes as of the date the restrictions lapse with respect to such Shares based on the Fair Market Value of the Shares, or by requiring the Grantee to remit to the Company the proper Withholding Taxes in cash.

10.

Plan Governs. The Grantee hereby acknowledges receipt of a copy of (or electronic link to) the Plan and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are governed by the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.

4 
 

11.

Severability. If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.

12.

Notices. All notices required to be given under this Award shall be deemed to be received if delivered or mailed as provided for herein, to the parties at the following addresses, or to such other address as either party may provide in writing from time to time.

     
To the Company:  

The Chefs’ Warehouse, Inc.

100 East Ridge Road

Ridgefield, Connecticut 06877

Attn: Corporate Secretary

   
To the Grantee:   The address then maintained with respect to the
Grantee in the Company’s records.

 

13.

Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to conflicts of laws principles.

14.

Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantee’s legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantee’s heirs, executors, administrators and successors.

15.

Resolution of Disputes. Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee and the Company for all purposes.

 

 

(remainder of page left blank intentionally)

 

5 
 

IN WITNESS WHEREOF, the parties have caused this Restricted Share Award Agreement to be duly executed effective as of the day and year first above written.

 

  THE CHEFS’ WAREHOUSE, INC.
   
  By:    
   
   
  GRANTEE:
   
     

  

 

6 
 

EXHIBIT A

Performance Criteria

Except as otherwise provided in this Agreement, provided that the Company’s audited fully diluted earnings per share (the “EPS”) for the Performance Period meets or exceeds the applicable threshold amounts, and subject to all the other terms and conditions of this Agreement, the restrictions with respect to the Shares shall lapse and such Shares shall vest over a range of between 50% - 150% of the Target Performance Shares in accordance with the following schedule:

EPS Thresholds Percent of Target Shares
   
$___ or less 0%
$___ to $___ 50%
$___ to $___ 75%
$___ to $___ 100%
$___ to $___ 125%
$ ___ or more 150%

 

7 

 

THE CHEFS’ WAREHOUSE, INC. 10-K

 

Exhibit 10.38

 

  

EXECUTION COPY

AMENDMENT NO. 8

Dated as of December 18, 2015

to

AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDMENT NO. 8 (this “Amendment”) is made as of December 18, 2015 by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and as Collateral Agent (in such capacity, the “Collateral Agent”), under that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013, by and among the Borrowers, the other Loan Parties party thereto, the Lenders, the Administrative Agent and the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrowers have requested that the requisite Lenders, the Administrative Agent and the Issuing Bank agree to amend Section 6.13(c) of the Credit Agreement and provide a limited waiver, as more fully described herein; and

WHEREAS, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank hereby agree to enter into this Amendment.

1.                  Amendments to the Credit Agreement. Upon the satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree that the Credit Agreement shall be amended as follows, with effect from (and including) June 30, 2015:

(a)                Section 6.13(c)(i) of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:

Notwithstanding the foregoing, for purposes of determining compliance with this Section 6.13(c)(i), up to $6,518,000 of Capital Expenditures incurred or made on or prior to September 25, 2015 by the Loan Parties and their Subsidiaries in connection with the Specified Las Vegas Transaction shall be deemed to be excluded when calculating the aggregate amount of Capital Expenditures incurred or made by the Loan Parties and their Subsidiaries during the 2015 Fiscal Year. 

(b)               Section 6.13(c)(ii) of the Credit Agreement is hereby amended to add the phrase “occurring after the 2016 Fiscal Year” immediately following the phrase “in respect of any Fiscal Year” in the first sentence thereof.

1 
 

 

2.                  Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that:

(a)                the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders, the Administrative Agent and the Issuing Bank;

(b)               the Administrative Agent shall have received counterparts of the Consent and Reaffirmation attached as Exhibit A hereto duly executed by the Loan Guarantors;

(c)                the Administrative Agent shall have received an executed and effective amendment to the Prudential Note Agreement, which amendment shall be substantially in the form set forth on Exhibit B hereto;

(d)               the Borrower Representative shall have made a Borrowing Request to the Administrative Agent for a Revolving Borrowing in an amount equal to $14,645,000 for purposes of repaying the Term Loans in an equivalent amount substantially concurrently with the effectiveness of this Amendment;

(e)                the Administrative Agent shall have received from the Borrowers, on behalf of each Lender signatory hereto that delivers its executed signature page to this Amendment by no later than the date and time specified by the Administrative Agent, an amendment fee in an amount equal to 0.10% of the sum of (i) such Lender’s Revolving Commitment immediately prior to the effectiveness of this Amendment plus (ii) the aggregate principal amount of such Lender’s Term Loans outstanding immediately prior to the effectiveness of this Amendment; and

(f)                the Administrative Agent shall have received payment and/or reimbursement of the Administrative Agent’s and its affiliates’ fees and expenses (including, to the extent invoiced in an invoice dated on or prior to the date hereof, reasonable documented out-of-pocket fees and expenses of counsel for the Administrative Agent) in connection with this Amendment and the other Loan Documents.

3.                  Waiver. For the avoidance of doubt, the Administrative Agent and the Lenders party hereto hereby waive (i) any non-compliance with Section 6.13(c) of the Credit Agreement (as in effect prior to the effectiveness of this Amendment) due to the Loan Parties and their Subsidiaries making Capital Expenditures during the 2015 Fiscal Year in excess of $17,000,000, (ii) any non-compliance with Section 2.11(c) and/or 2.11(e) of the Credit Agreement relating to the prepayment of Obligations in an aggregate amount equal to the Ratable Share of 100% of the Net Proceeds received in connection with the Specified Las Vegas Transaction, (iii) any incorrect representation or warranty made by the Loan Parties pursuant to Section 3.07 and/or 4.02 of the Credit Agreement (solely to the extent incorrect as a result of the events described in clauses (i), (ii) and/or (iv) of this paragraph) and (iv) any non-compliance with Section 5.02(a) of the Credit Agreement as a result of any failure of the Loan Parties to provide timely notice of the foregoing. This specific waiver shall not be construed to constitute (1) a waiver of any other event, circumstance or condition or of any other right or remedy available to the Administrative Agent or any Lender pursuant to the Credit Agreement or any other Loan Document or (2) a course of dealing or a consent to any departure by the Borrowers or any other Loan Party from any other term or requirement of the Credit Agreement or any other Loan Document. 

4.                  Repayment of Term Loans. The Borrowers shall repay the Term Loans (to be applied to installments of the Term Loans in the inverse order of maturity) in an aggregate amount of not less than $14,645,000, which the Loan Parties hereby represent and warrant reflects the Ratable Share of 100% of the Net Proceeds received in connection with the Specified Las Vegas Transaction, substantially concurrently with the effectiveness of this Amendment.

 2 
 

5.                  Authorization of Agents. Each Lender party hereto hereby consents to and authorizes each of the Agents to execute and deliver an amendment to the Intercreditor Agreement, substantially in the form set forth on Exhibit C hereto.

6.                  Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows:

(a)                This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b)               As of the date hereof, after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Loan Parties set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects (provided that any such representations or warranties qualified by materiality or Material Adverse Effect are true and correct in all respects), it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date.

7.                  Reference to and Effect on the Credit Agreement.

(a)                Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b)               Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)                Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.

(d)               This Amendment is a “Loan Document” under (and as defined in) the Credit Agreement.

8.                  Release of Claims

(a)                Each of the Loan Parties, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Administrative Agent, the Collateral Agent and each of the Lenders, their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (the Administrative Agent, the Collateral Agent, the Lenders and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of setoff, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any of the Loan Parties or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in each case in connection with the Credit Agreement or any of the other Loan Documents or transactions thereunder or related thereto.

 3 
 

(b)               Each of the Loan Parties understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

9.                  Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.

10.              Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

11.              Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.

[Signature Pages Follow]

 

 

 4 
 

 

 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

  DAIRYLAND USA CORPORATION
   
  By:  /s/ John D. Austin
 

Name:

John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  BEL CANTO FOODS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

 

JPMORGAN CHASE BANK, N.A.,

individually as a Lender, as the Swingline Lender, as the Issuing Bank, as Administrative Agent and as Collateral Agent

     
  By: /s/ Diane Bredehoft
  Name: Diane Bredehoft
  Title: Authorized Officer
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 

  
 

 

 

GE CAPITAL BANK, formerly known as
GE CAPITAL FINANCIAL INC.,

as a Lender

     
  By: /s/ Heather-Leigh Glade
  Name: Heather-Leigh Glade
  Title: Duly Authorized Signatory
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 

  
 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as a Lender

     
  By: /s/ Thomas Pizzo
  Name: Thomas Pizzo
  Title: Senior Vice President
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 

  
 

 

 

BMO HARRIS FINANCING, INC.,

as a Lender

     
  By: /s/ Paul Harris
  Name: Paul Harris
  Title: MD
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

 

BRANCH BANKING AND TRUST COMPANY,

as a Lender

     
  By: /s/ Kenneth M. Blackwell
  Name: Kenneth M. Blackwell
  Title: Senior Vice President
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

EXHIBIT A

 

Consent and Reaffirmation

 

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 8 to Amended and Restated Credit Agreement with respect to that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the other Loan Parties party thereto, the Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), which Amendment No. 8 to Amended and Restated Credit Agreement is dated as of December 18, 2015 and is by and among the Borrowers, the financial institutions listed on the signature pages thereof and the Administrative Agent (the “Amendment”). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement.

 

Without in any way establishing a course of dealing by the Administrative Agent, the Collateral Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Loan Guaranty and any other Loan Document executed by it and acknowledges and agrees that the Loan Guaranty and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

 

Dated December 18, 2015

[Signature Pages Follow]

 

 

  
 

 

IN WITNESS WHEREOF, this Consent and Reaffirmation has been duly executed as of the day and year above written.

 

DAIRYLAND USA CORPORATION

     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  BEL CANTO FOODS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

 

THE CHEFS’ WAREHOUSE, INC.

     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  CHEFS’ WAREHOUSE PARENT, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MIDWEST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE PASTRY DIVISION, INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

  QZ ACQUISITION (USA), INC.

     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS NORTH AMERICA (USA), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Florida corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Washington corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS (AMBASSADOR), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  CW LV REAL ESTATE LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

  
 

 

  ALLEN BROTHERS 1893, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE GREAT STEAKHOUSE STEAKS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al 

  
 

 

EXHIBIT B

Form of Amendment to Prudential Note Agreement

 

[Attached]

 

 

 

  
 

 

EXHIBIT C

Form of Amendment to Intercreditor Agreement

 

[Attached]

 

 

 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 10.39

EXECUTION COPY

AMENDMENT NO. 9

Dated as of February 26, 2016

to

AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDMENT NO. 9 (this “Amendment”) is made as of February 26, 2016 by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and as Collateral Agent (in such capacity, the “Collateral Agent”), under that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013, by and among the Borrowers, the other Loan Parties party thereto, the Lenders, the Administrative Agent and the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrowers have requested that the requisite Lenders, the Administrative Agent and the Issuing Bank agree to certain amendments to the Credit Agreement, as more fully described herein; and

WHEREAS, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank hereby agree to enter into this Amendment.

1.

Amendments to the Credit Agreement. Upon the satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree that the Credit Agreement shall be amended as follows:

(a)

The definition of “Fixed Charges” set forth in Section 1.01 of the Credit Agreement is hereby amended by deleting the phrase “prepayments (other than Excess Cash Flow prepayments) and” set forth therein.

(b)

The definition of “Prepayment Event” set forth in Section 1.01 of the Credit Agreement is hereby amended by adding the following phrase after the end of clause (a) thereof: “(other than dispositions described in Section 6.05(i))”.

(c)

Section 6.02 of the Credit Agreement is hereby amended to add the following new clause (r) thereto (and to make any related punctuation and grammatical changes as a result thereof):

 
 

(r)

Liens representing any interest of a sublessee arising by virtue of being granted a sublease permitted by Section 6.05(i).

(d)

Section 6.05 of the Credit Agreement is hereby amended to add the following new clause (i) thereto (and to make any related punctuation and grammatical changes as a result thereof):

(i)

subleases entered into in the ordinary course of business, to the extent that they do not materially interfere with the business of Holdings and its Subsidiaries taken as a whole.

2.

Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that:

(a)

the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders, the Administrative Agent and the Issuing Bank;

(b)

the Administrative Agent shall have received counterparts of the Consent and Reaffirmation attached as Exhibit A hereto duly executed by the Loan Guarantors;

(c)

the Administrative Agent shall have received an executed and effective amendment to the Prudential Note Agreement, which amendment shall be substantially in the form set forth on Exhibit B hereto; and

(d)

the Administrative Agent shall have received payment and/or reimbursement of the Administrative Agent’s and its affiliates’ expenses (including, to the extent invoiced in an invoice dated on or prior to the date hereof, reasonable documented out-of-pocket fees and expenses of counsel for the Administrative Agent) in connection with this Amendment and the other Loan Documents.

3.

Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows:

(a)

This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b)

As of the date hereof, after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Loan Parties set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects (provided that any such representations or warranties qualified by materiality or Material Adverse Effect are true and correct in all respects), it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date.

4.

Reference to and Effect on the Credit Agreement.

(a)

Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

 

 
 

(b)

Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)

Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.

(d)

This Amendment is a “Loan Document” under (and as defined in) the Credit Agreement.

5.

Release of Claims.

(a)

Each of the Loan Parties, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Administrative Agent, the Collateral Agent and each of the Lenders, their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (the Administrative Agent, the Collateral Agent, the Lenders and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of setoff, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any of the Loan Parties or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in each case in connection with the Credit Agreement or any of the other Loan Documents or transactions thereunder or related thereto.

(b)

Each of the Loan Parties understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

6.

Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.

7.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

8.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.

[Signature Pages Follow]

 

 
 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

 

  DAIRYLAND USA CORPORATION
     
     
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  BEL CANTO FOODS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

Signature Page to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  JPMORGAN CHASE BANK, N.A.,
  individually as a Lender, as the Swingline Lender, as the Issuing Bank, as Administrative Agent and as Collateral Agent
     
     
  By: /s/ Joseph A. Lisack
    Name: Joseph A. Lisack
    Title: Authorized Officer

 

 

 

Signature Page to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  WELLS FARGO BANK, NATIONAL ASSOCIATION,
  as a Lender
     
     
  By: /s/ Thomas Pizzo
    Name:  Thomas Pizzo
    Title:  Senior Vice President

 

 

 

Signature Page to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  BMO HARRIS FINANCING, INC.,
  as a Lender
     
     
  By: /s/ Joan Spiotto Murphy
    Name:  Joan Spiotto Murphy
    Title: Director

 

 

 

Signature Page to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  BRANCH BANKING AND TRUST COMPANY,
  as a Lender
     
     
  By: /s/ Kenneth M. Blackwell
    Name:  Kenneth M. Blackwell
    Title:   Senior Vice President

 

 

 

Signature Page to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

EXHIBIT A

Consent and Reaffirmation

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 9 to Amended and Restated Credit Agreement with respect to that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the other Loan Parties party thereto, the Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), which Amendment No. 9 to Amended and Restated Credit Agreement is dated as of February 26, 2016 and is by and among the Borrowers, the financial institutions listed on the signature pages thereof and the Administrative Agent (the “Amendment”). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement.

Without in any way establishing a course of dealing by the Administrative Agent, the Collateral Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Loan Guaranty and any other Loan Document executed by it and acknowledges and agrees that the Loan Guaranty and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

Dated February 26, 2016

[Signature Pages Follow]

 

 
 

IN WITNESS WHEREOF, this Consent and Reaffirmation has been duly executed as of the day and year above written.

 

  DAIRYLAND USA CORPORATION
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  BEL CANTO FOODS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

Signature Page to Consent and Reaffirmation to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  THE CHEFS’ WAREHOUSE, INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  CHEFS’ WAREHOUSE PARENT, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  MICHAEL’S FINER MEATS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  MICHAEL’S FINER MEATS HOLDINGS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE MIDWEST, LLC
   
   
  By: /s/  John D. Austin
    Name:  John D. Austin
    Title: CFO
   
   
  THE CHEFS’ WAREHOUSE PASTRY DIVISION, INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

Signature Page to Consent and Reaffirmation to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  QZ ACQUISITION (USA), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS NORTH AMERICA (USA), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS, INC., a Florida corporation
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS, INC., a Washington corporation
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS (AMBASSADOR), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  CW LV REAL ESTATE LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

Signature Page to Consent and Reaffirmation to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

 
 

 

  ALLEN BROTHERS 1893, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE GREAT STEAKHOUSE STEAKS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  DEL MONTE CAPITOL MEAT COMPANY HOLDINGS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  DEL MONTE CAPITOL MEAT COMPANY, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

Signature Page to Consent and Reaffirmation to Amendment No. 9 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 
 

 

EXHIBIT B

Form of Amendment to Prudential Note Agreement

[Attached]

 

 

 

 

THE CHEFS’ WAREHOUSE, INC. 10-K

 

Exhibit 10.48

 

EXECUTION COPY

 

WAIVER AND AMENDMENT NO. 7 TO NOTE PURCHASE AND GUARANTEE AGREEMENT

 

THIS WAIVER AND AMENDMENT NO. 7 TO NOTE PURCHASE AND GUARANTEE AGREEMENT (this “Amendment”) is made as of December 18, 2015 by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida”, and together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Issuers”), each of the Guarantors whose names appear on the signature pages hereto (together with the Issuers, collectively, the “Obligors”), and each of the holders of the Notes whose names appear on the signature pages hereto (each a “Noteholder” and collectively, the “Noteholders”).

WHEREAS, the Obligors and the Noteholders are party to that certain Note Purchase and Guarantee Agreement dated as of April 17, 2013, as amended by that certain Amendment No. 1 to Note Purchase and Guarantee Agreement dated as of July 23, 2014, that certain Amendment No. 2 to Note Purchase and Guarantee Agreement dated as of November 4, 2014, that certain Amendment No. 3 to Note Purchase and Guarantee Agreement dated as of December 3, 2014, that certain Amendment No. 4 to Note Purchase and Guarantee Agreement dated as of January 9, 2015, that certain Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015 and that certain Amendment No. 6 to Note Purchase and Guarantee Agreement dated as of July 1, 2015 (as so amended and supplemented, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”), pursuant to which the Issuers issued and sold (i) $100,000,000 in aggregate principal amount of their Guaranteed Senior Secured Notes due April 17, 2023 (as amended, restated or otherwise modified from time to time pursuant to Section 18 of the Note Purchase Agreement and including any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement, the “Series A Notes”), and (ii) $25,000,000 in aggregate principal amount of their 5.80% Series B Guaranteed Senior Secured Notes due October 17, 2020 (as amended, restated or otherwise modified from time to time pursuant to Section 18 of the Note Purchase Agreement and including any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement, the “Series B Notes”; and together with the Series A Notes, collectively, the “Notes”);

WHEREAS, the Obligors have requested that the Required Holders agree to certain amendments and waivers to the Note Purchase Agreement;

WHEREAS, the Obligors and the Noteholders have so agreed on the terms and conditions set forth herein;

WHEREAS, the Noteholders constitute the Required Holders;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Obligors and the Noteholders hereby agree to enter into this Amendment.

1.

Definitions. All capitalized terms used herein and not otherwise defined shall have the meanings provided for in the Note Purchase Agreement.

2.

Amendments to the Note Purchase Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 4 below, and effective as of the date such conditions are satisfied, the parties hereto agree that the Note Purchase Agreement is hereby amended as follows, with the effect from June 30, 2015:

 

 1 
 

(a)

Section 10.13(c)(i) of the Note Purchase Agreement is hereby amended by adding the following sentence at the end thereof: 

“Notwithstanding the foregoing, for purposes of determining compliance with this Section 10.13(c)(i), up to $6,518,000 of Capital Expenditures incurred or made on or prior to September 25, 2015 by the Obligors and their Subsidiaries in connection with the Specified Las Vegas Transaction shall be deemed to be excluded when calculating the aggregate amount of Capital Expenditures incurred or made by the Obligors and their Subsidiaries during the 2015 Fiscal Year.” 

(b)

Section 10.13(c)(ii) of the Note Purchase Agreement is hereby amended to add the phrase “occurring after the 2016 Fiscal Year” immediately following the phrase “in respect of any Fiscal Year” in the first sentence thereof.

3.

Waivers. For the avoidance of doubt, the Noteholders hereby waive (i) any non-compliance with Section 10.13(c) of the Note Purchase Agreement (as in effect prior to the effectiveness of this Amendment) due to the Obligors and their Subsidiaries making Capital Expenditures during the 2015 Fiscal Year in excess of $17,000,000, (ii) any non-compliance with Section 8.3 of the Note Purchase Agreement relating to the requirement to offer to prepay a portion of the Notes held by such holder equal to such holder’s Ratable Portion of the Relevant Designated Net Proceeds received in connection with the Specified Las Vegas Transaction, (iii) any incorrect representation or warranty made by the Obligors pursuant to Section 7.2(b) of the Note Purchase Agreement (solely to the extent incorrect as a result of the events described in clauses (i), (ii) and/or (iv) of this paragraph) and (iv) any non-compliance with Section 7.1(g) of the Note Purchase Agreement as a result of any failure of the Obligors to provide timely notice of the foregoing. This specific waiver shall not be construed to constitute (1) a waiver of any other event, circumstance or condition or of any other right or remedy available to any Noteholder pursuant to the Note Purchase Agreement or any other Financing Document or (2) a course of dealing or a consent to any departure by the Issuers or any other Obligor from any other term or requirement of the Note Purchase Agreement or any other Financing Document.

4.

Conditions of Effectiveness. The effectiveness of this Amendment is subject to the following conditions precedent, each to be in form and substance satisfactory to the Noteholders: 

(a)

each Noteholder shall have received counterparts of this Amendment duly executed by the Obligors and the Noteholders;

(b)

each Noteholder shall have received a fully executed copy of an amendment to the Bank Credit Agreement, which amendment shall be substantially in the form set forth on Exhibit A hereto and in full force and effect (the “Bank Amendment”);

(c)

The Chefs’ Warehouse, Inc. shall have paid to each Noteholder, in consideration of the agreements of such Noteholder contained herein, by wire transfer of immediately available funds, a fee, whether or not such holder has signed this Amendment, in an amount equal to 0.10% (10 basis points) of the aggregate outstanding principal amount of Notes held by such Noteholder; such fee shall be deemed earned when paid and shall be nonrefundable; and

 

 2 
 

 

(d)           the Noteholders shall have received payment and/or reimbursement of their fees and expenses (including, without limitation, all fees and expenses of counsel for the Noteholders to the extent invoiced in reasonable detail on or prior to the date hereof) in connection with this Amendment and the other Financing Documents.

   

5.

Representations and Warranties of the Obligors. Each Obligor hereby represents and warrants as follows:

(a)

This Amendment and the Note Purchase Agreement as modified hereby constitute legal, valid and binding obligations of such Obligor and are enforceable against such Obligor in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. 

(b)

As of the date hereof and after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Obligors set forth in the Note Purchase Agreement, as amended hereby, are true and correct in all material respects (except that any representation or warranty that is qualified as to materiality shall be true and correct in all respects), it being understood and agreed that any representation or warranty which by its terms expressly relates to a specified date shall be required to be true and correct only as of such specified date.

6.

Confirmation and Ratification of Guaranteed Obligations. By executing this Amendment, each of the Guarantors hereby (a) consents to this Amendment, (b) acknowledges that, notwithstanding the execution and delivery of the Amendment, the obligations of each of the Guarantors under the Guaranty continue in full force and effect and are not impaired or affected, and the Guaranty continues in full force and effect and shall apply to the Guaranteed Obligations as amended by this Amendment, and (c) affirms and ratifies the Guaranty, any other Financing Document executed by it and the Guaranteed Obligations in all respects.

7.

Reference to and Effect on the Note Purchase Agreement.

(a)

Upon the effectiveness hereof, each reference to the Note Purchase Agreement in the Note Purchase Agreement or any other Financing Document shall mean and be a reference to the Note Purchase Agreement as amended hereby.

(b)

Each Financing Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)

Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Noteholders, nor constitute a waiver of any provision of the Note Purchase Agreement, any other Financing Document or any other documents, instruments or agreements executed and/or delivered in connection therewith. 

(d)

This Amendment constitutes a “Financing Document” under (and as defined in) the Note Purchase Agreement.

 

 3 
 

8.

Release of Claims.

(a)

Each of the Obligors, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Noteholders, their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (the Noteholders and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of setoff, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any of the Obligors or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Agreement, in each case in connection with the Note Purchase Agreement or any of the other Financing Documents or transactions thereunder or related thereto.

(b)

Each of the Obligors understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

9.

Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties hereto shall be governed by, the law of the State of New York excluding choice of law principles that would permit the application of the laws of a different jurisdiction.

10.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

11.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.

 

[Signature Pages Follow]

 

 

 

 4 
 

 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

  ISSUERS:
   
  DAIRYLAND USA CORPORATION
   
  By:  /s/ John D. Austin
 

Name:

John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  BEL CANTO FOODS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

 5 
 

  GUARANTORS:
   
  THE CHEFS’ WAREHOUSE, INC.
   
  By:  /s/ John D. Austin
 

Name:

John D. Austin
  Title: CFO
     
     
  CHEFS’ WAREHOUSE PARENT, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MIDWEST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE PASTRY DIVISION, INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

 6 
 

 

  QZ ACQUISITION (USA), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS NORTH AMERICA (USA), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Florida corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Washington corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS (AMBASSADOR), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  CW LV REAL ESTATE LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

 

 7 
 

 

  ALLEN BROTHERS 1893, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE GREAT STEAKHOUSE STEAKS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

 

 

 8 
 

 

  NOTEHOLDERS:
   
  THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
     
  By: /s/ Tannis Fussell
  Name: Tannis Fussell
  Title: Vice President
     
     
  PRUCO LIFE INSURANCE COMPANY
     
  By: /s/ Tannis Fussell
  Name: Tannis Fussell
  Title: Assistant Vice President
     
     
  PRUDENTIAL ARIZONA REINSURANCE CAPTIVE COMPANY
  By:

Prudential Investment Management, Inc.,

as investment manager

     
  By: /s/ Tannis Fussell
  Name: Tannis Fussell
  Title: Vice President
     
     
  PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY
  By:

Prudential Investment Management, Inc.,

as investment manager

     
  By: /s/ Tannis Fussell
  Name: Tannis Fussell
  Title: Vice President
     

 [Signature Page to Amendment No. 7 to Note Purchase and Guarantee Agreement - Chefs’ Warehouse

 

 

 

 9 
 

 

Exhibit A

Bank Amendment

EXECUTION COPY

 

AMENDMENT NO. 8

Dated as of December 18, 2015

to

AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDMENT NO. 8 (this “Amendment”) is made as of December 18, 2015 by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and as Collateral Agent (in such capacity, the “Collateral Agent”), under that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013, by and among the Borrowers, the other Loan Parties party thereto, the Lenders, the Administrative Agent and the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrowers have requested that the requisite Lenders, the Administrative Agent and the Issuing Bank agree to amend Section 6.13(c) of the Credit Agreement and provide a limited waiver, as more fully described herein; and

WHEREAS, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto, the Administrative Agent and the Issuing Bank hereby agree to enter into this Amendment.

1.

Amendments to the Credit Agreement. Upon the satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree that the Credit Agreement shall be amended as follows, with effect from (and including) June 30, 2015:

(a)

Section 6.13(c)(i) of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:

Notwithstanding the foregoing, for purposes of determining compliance with this Section 6.13(c)(i), up to $6,518,000 of Capital Expenditures incurred or made on or prior to September 25, 2015 by the Loan Parties and their Subsidiaries in connection with the Specified Las Vegas Transaction shall be deemed to be excluded when calculating the aggregate amount of Capital Expenditures incurred or made by the Loan Parties and their Subsidiaries during the 2015 Fiscal Year.

 

 10 
 

 

(b)

Section 6.13(c)(ii) of the Credit Agreement is hereby amended to add the phrase “occurring after the 2016 Fiscal Year” immediately following the phrase “in respect of any Fiscal Year” in the first sentence thereof.

2.

Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that:

(a)

the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders, the Administrative Agent and the Issuing Bank;

(b)

the Administrative Agent shall have received counterparts of the Consent and Reaffirmation attached as Exhibit A hereto duly executed by the Loan Guarantors;

(c)

the Administrative Agent shall have received an executed and effective amendment to the Prudential Note Agreement, which amendment shall be substantially in the form set forth on Exhibit B hereto;

(d)

the Borrower Representative shall have made a Borrowing Request to the Administrative Agent for a Revolving Borrowing in an amount equal to $14,645,000 for purposes of repaying the Term Loans in an equivalent amount substantially concurrently with the effectiveness of this Amendment;

(e)

the Administrative Agent shall have received from the Borrowers, on behalf of each Lender signatory hereto that delivers its executed signature page to this Amendment by no later than the date and time specified by the Administrative Agent, an amendment fee in an amount equal to 0.10% of the sum of (i) such Lender’s Revolving Commitment immediately prior to the effectiveness of this Amendment plus (ii) the aggregate principal amount of such Lender’s Term Loans outstanding immediately prior to the effectiveness of this Amendment; and

(f)

the Administrative Agent shall have received payment and/or reimbursement of the Administrative Agent’s and its affiliates’ fees and expenses (including, to the extent invoiced in an invoice dated on or prior to the date hereof, reasonable documented out-of-pocket fees and expenses of counsel for the Administrative Agent) in connection with this Amendment and the other Loan Documents.

3.

Waiver. For the avoidance of doubt, the Administrative Agent and the Lenders party hereto hereby waive (i) any non-compliance with Section 6.13(c) of the Credit Agreement (as in effect prior to the effectiveness of this Amendment) due to the Loan Parties and their Subsidiaries making Capital Expenditures during the 2015 Fiscal Year in excess of $17,000,000, (ii) any non-compliance with Section 2.11(c) and/or 2.11(e) of the Credit Agreement relating to the prepayment of Obligations in an aggregate amount equal to the Ratable Share of 100% of the Net Proceeds received in connection with the Specified Las Vegas Transaction, (iii) any incorrect representation or warranty made by the Loan Parties pursuant to Section 3.07 and/or 4.02 of the Credit Agreement (solely to the extent incorrect as a result of the events described in clauses (i), (ii) and/or (iv) of this paragraph) and (iv) any non-compliance with Section 5.02(a) of the Credit Agreement as a result of any failure of the Loan Parties to provide timely notice of the foregoing. This specific waiver shall not be construed to constitute (1) a waiver of any other event, circumstance or condition or of any other right or remedy available to the Administrative Agent or any Lender pursuant to the Credit Agreement or any other Loan Document or (2) a course of dealing or a consent to any departure by the Borrowers or any other Loan Party from any other term or requirement of the Credit Agreement or any other Loan Document.

 

 11 
 

 

4.

Repayment of Term Loans. The Borrowers shall repay the Term Loans (to be applied to installments of the Term Loans in the inverse order of maturity) in an aggregate amount of not less than $14,645,000, which the Loan Parties hereby represent and warrant reflects the Ratable Share of 100% of the Net Proceeds received in connection with the Specified Las Vegas Transaction, substantially concurrently with the effectiveness of this Amendment.

5.

Authorization of Agents. Each Lender party hereto hereby consents to and authorizes each of the Agents to execute and deliver an amendment to the Intercreditor Agreement, substantially in the form set forth on Exhibit C hereto.

6.

Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows:

(a)

This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b)

As of the date hereof, after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Loan Parties set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects (provided that any such representations or warranties qualified by materiality or Material Adverse Effect are true and correct in all respects), it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date.

7.

Reference to and Effect on the Credit Agreement.

(a)

Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b)

Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)

Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.

(d)

This Amendment is a “Loan Document” under (and as defined in) the Credit Agreement.

 12 
 

 

8.

Release of Claims

(a)

Each of the Loan Parties, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Administrative Agent, the Collateral Agent and each of the Lenders, their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (the Administrative Agent, the Collateral Agent, the Lenders and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of setoff, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any of the Loan Parties or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in each case in connection with the Credit Agreement or any of the other Loan Documents or transactions thereunder or related thereto.

(b)

Each of the Loan Parties understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

9.

Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.

10.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

11.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.

[Signature Pages Follow]

 

 13 
 

 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

  DAIRYLAND USA CORPORATION
   
  By:  /s/ John D. Austin
 

Name:

John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  BEL CANTO FOODS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

JPMORGAN CHASE BANK, N.A.,

individually as a Lender, as the Swingline Lender, as the Issuing Bank, as Administrative Agent and as Collateral Agent

     
  By: /s/ Diane Bredehoft
  Name: Diane Bredehoft
  Title: Authorized Officer
     

 

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

GE CAPITAL BANK, formerly known as
GE CAPITAL FINANCIAL INC.,

as a Lender

     
  By: /s/ Heather-Leigh Glade
  Name: Heather-Leigh Glade
  Title: Duly Authorized Signatory
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as a Lender

     
  By: /s/ Thomas Pizzo
  Name: Thomas Pizzo
  Title: Senior Vice President
     

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

BMO HARRIS FINANCING, INC.,

as a Lender

     
  By: /s/ Paul Harris
  Name: Paul Harris
  Title: MD
     

 

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

BRANCH BANKING AND TRUST COMPANY,

as a Lender

     
  By: /s/ Kenneth M. Blackwell
  Name: Kenneth M. Blackwell
  Title: Senior Vice President
     

 

 

 

 

Signature Page to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

EXHIBIT A

 

Consent and Reaffirmation

 

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 8 to Amended and Restated Credit Agreement with respect to that certain Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida” and, together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Borrowers”), the other Loan Parties party thereto, the Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), which Amendment No. 8 to Amended and Restated Credit Agreement is dated as of December 18, 2015 and is by and among the Borrowers, the financial institutions listed on the signature pages thereof and the Administrative Agent (the “Amendment”). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement.

Without in any way establishing a course of dealing by the Administrative Agent, the Collateral Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Loan Guaranty and any other Loan Document executed by it and acknowledges and agrees that the Loan Guaranty and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

 

Dated December 18, 2015

[Signature Pages Follow]

 

  
 

 

IN WITNESS WHEREOF, this Consent and Reaffirmation has been duly executed as of the day and year above written.

  DAIRYLAND USA CORPORATION
   
  By:  /s/ John D Austin
 

Name:

John D Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  BEL CANTO FOODS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
     
  By: /s/ John D Austin
  Name: John D Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
     
  By: /s/ John D Austin
  Name: John D Austin
  Title: CFO
     

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

 

THE CHEFS’ WAREHOUSE, INC.

     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  CHEFS’ WAREHOUSE PARENT, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  MICHAEL’S FINER MEATS HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE MIDWEST, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE CHEFS’ WAREHOUSE PASTRY DIVISION, INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al

 

  
 

 

  QZ ACQUISITION (USA), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS NORTH AMERICA (USA), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Florida corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS, INC., a Washington corporation
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  QZINA SPECIALTY FOODS (AMBASSADOR), INC.
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  CW LV REAL ESTATE LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al 

  
 

 

  ALLEN BROTHERS 1893, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  THE GREAT STEAKHOUSE STEAKS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY HOLDINGS, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     
     
  DEL MONTE CAPITOL MEAT COMPANY, LLC
     
  By: /s/ John D. Austin
  Name: John D. Austin
  Title: CFO
     

 

Signature Page Consent and Reaffirmation to Amendment No. 8 to

Amended and Restated Credit Agreement dated as of April 25, 2012, as amended and restated as of April 17, 2013

The Chefs’ Warehouse, Inc. et al 

 

  
 

 

EXHIBIT B

Form of Amendment to Prudential Note Agreement

 

[Attached]

 

  
 

 

EXHIBIT C

Form of Amendment to Intercreditor Agreement

 

[Attached]

 

 

 

 

 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 10.49 

EXECUTION COPY

 

AMENDMENT NO. 8 TO NOTE PURCHASE AND GUARANTEE AGREEMENT

THIS AMENDMENT NO. 8 TO NOTE PURCHASE AND GUARANTEE AGREEMENT (this “Amendment”) is made as of February 26, 2016 by and among Dairyland USA Corporation, a New York corporation (“Dairyland”), The Chefs’ Warehouse Mid-Atlantic, LLC, a Delaware limited liability company (“CW Mid-Atlantic”), Bel Canto Foods, LLC, a New York limited liability company (“Bel Canto”), The Chefs’ Warehouse West Coast, LLC, a Delaware limited liability company (“CW West Coast”), and The Chefs’ Warehouse of Florida, LLC, a Delaware limited liability company (“CW Florida”, and together with Dairyland, CW Mid-Atlantic, Bel Canto and CW West Coast, the “Issuers”), each of the Guarantors whose names appear on the signature pages hereto (together with the Issuers, collectively, the “Obligors”), and each of the holders of the Notes whose names appear on the signature pages hereto (each a “Noteholder” and collectively, the “Noteholders”).

WHEREAS, the Obligors and the Noteholders are party to that certain Note Purchase and Guarantee Agreement dated as of April 17, 2013, as amended by that certain Amendment No. 1 to Note Purchase and Guarantee Agreement dated as of July 23, 2014, that certain Amendment No. 2 to Note Purchase and Guarantee Agreement dated as of November 4, 2014, that certain Amendment No. 3 to Note Purchase and Guarantee Agreement dated as of December 3, 2014, that certain Amendment No. 4 to Note Purchase and Guarantee Agreement dated as of January 9, 2015, that certain Supplemental Note Purchase and Guarantee Agreement and Amendment Agreement dated as of April 6, 2015, that certain Amendment No. 6 to Note Purchase and Guarantee Agreement dated as of July 1, 2015 and that certain Waiver and Amendment No. 7 to Note Purchase and Guarantee Agreement dated as of December 18, 2015 (as so amended and supplemented, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”), pursuant to which the Issuers issued and sold (i) $100,000,000 in aggregate principal amount of their Guaranteed Senior Secured Notes due April 17, 2023 (as amended, restated or otherwise modified from time to time pursuant to Section 18 of the Note Purchase Agreement and including any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement, the “Series A Notes”), and (ii) $25,000,000 in aggregate principal amount of their 5.80% Series B Guaranteed Senior Secured Notes due October 17, 2020 (as amended, restated or otherwise modified from time to time pursuant to Section 18 of the Note Purchase Agreement and including any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement, the “Series B Notes”; and together with the Series A Notes, collectively, the “Notes”);

WHEREAS, the Obligors have requested that the Required Holders agree to certain amendments to the Note Purchase Agreement;

WHEREAS, the Obligors and the Noteholders have so agreed on the terms and conditions set forth herein;

WHEREAS, the Noteholders constitute the Required Holders;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Obligors and the Noteholders hereby agree to enter into this Amendment.

1.

Definitions. All capitalized terms used herein and not otherwise defined shall have the meanings provided for in the Note Purchase Agreement.

 
 

2.

Amendments to the Note Purchase Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 below, and effective as of the date such conditions are satisfied, the parties hereto agree that the Note Purchase Agreement is hereby amended as follows:

(a)

Section 10.2 of the Note Purchase Agreement is hereby amended by (i) deleting the “and” at the end of clause (p) thereof, (ii) adding an “and” at the end of clause (q) thereof immediately following the “;”, and (iii) adding the following new clause (r) thereto immediately following clause (q):

“(r)

Liens representing any interest of a sublessee arising by virtue of being granted a sublease permitted by Section 10.5(i).”

(b)

Section 10.5 of the Note Purchase Agreement is hereby amended by (i) deleting the “and” at the end of clause (g) thereof, (ii) adding an “and” at the end of clause (h) thereof immediately following the “;”, and (iii) adding the following new clause (i) thereto immediately following clause (h):

“(i)

subleases entered into in the ordinary course of business, to the extent that they do not materially interfere with the business of the Company and its Subsidiaries taken as a whole.”

(c)

The definition of “Fixed Charges” set forth in Schedule B to the Note Purchase Agreement is hereby amended by deleting the phrase “prepayments (other than Excess Cash Flow prepayments) and” set forth therein.

(d)

The definition of “Prepayment Event” set forth in Schedule B to the Note Purchase Agreement is hereby amended by adding the following parenthetical to the end of clause (a) thereof immediately following the reference to “Obligor” and immediately prior to the “;”: “(other than dispositions described in Section 10.5(i)”.

3.

Conditions of Effectiveness. The effectiveness of this Amendment is subject to the following conditions precedent, each to be in form and substance satisfactory to the Noteholders:

(a)

each Noteholder shall have received counterparts of this Amendment duly executed by the Obligors and the Noteholders;

(b)

each Noteholder shall have received a fully executed copy of an amendment to the Bank Credit Agreement, which amendment shall be substantially in the form set forth on Exhibit A hereto and in full force and effect (the “Bank Amendment”); and

(c)

the Noteholders shall have received payment and/or reimbursement of their fees and expenses (including, without limitation, all fees and expenses of counsel for the Noteholders to the extent invoiced in reasonable detail on or prior to the date hereof) in connection with this Amendment and the other Financing Documents.

4.

Representations and Warranties of the Obligors. Each Obligor hereby represents and warrants as follows:

(a)

This Amendment and the Note Purchase Agreement as modified hereby constitute legal, valid and binding obligations of such Obligor and are enforceable against such Obligor in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

 
 

(b)

As of the date hereof, immediately before and after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Obligors set forth in the Note Purchase Agreement, as amended hereby, are true and correct in all material respects (except that any representation or warranty that is qualified as to materiality shall be true and correct in all respects), it being understood and agreed that any representation or warranty which by its terms expressly relates to a specified date shall be required to be true and correct only as of such specified date.

(c)

The Lenders and administrative agent under the Bank Amendment have not received and will not receive any fee or consideration in connection with the Bank Amendment and the matters covered thereby.

5.

Confirmation and Ratification of Guaranteed Obligations. By executing this Amendment, each of the Guarantors hereby (a) consents to this Amendment, (b) acknowledges that, notwithstanding the execution and delivery of the Amendment, the obligations of each of the Guarantors under the Guaranty continue in full force and effect and are not impaired or affected, and the Guaranty continues in full force and effect and shall apply to the Guaranteed Obligations as amended by this Amendment, and (c) affirms and ratifies the Guaranty, any other Financing Document executed by it and the Guaranteed Obligations in all respects.

6.

Reference to and Effect on the Note Purchase Agreement.

(a)

Upon the effectiveness hereof, each reference to the Note Purchase Agreement in the Note Purchase Agreement or any other Financing Document shall mean and be a reference to the Note Purchase Agreement as amended hereby.

(b)

Each Financing Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)

Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Noteholders, nor constitute a waiver of any provision of the Note Purchase Agreement, any other Financing Document or any other documents, instruments or agreements executed and/or delivered in connection therewith.

(d)

This Amendment constitutes a “Financing Document” under (and as defined in) the Note Purchase Agreement.

7.

Release of Claims.

(a)

Each of the Obligors, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Noteholders, their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (the Noteholders and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of setoff, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any of the Obligors or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Agreement, in each case in connection with the Note Purchase Agreement or any of the other Financing Documents or transactions thereunder or related thereto.

 

 
 

(b)

Each of the Obligors understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

8.

Governing Law. This Amendment shall be construed and enforced in accordance with, and the rights of the parties hereto shall be governed by, the law of the State of New York excluding choice of law principles that would permit the application of the laws of a different jurisdiction.

9.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

10.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.

[Signature Pages Follow]

 

 
 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

  DAIRYLAND USA CORPORATION
     
     
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE MID-ATLANTIC, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  BEL CANTO FOODS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE WEST COAST, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE OF FLORIDA, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

[Chefs’ Warehouse - Signature Page to Amendment No. 8 to Note Purchase and Guarantee Agreement]

 

 
 

 

  GUARANTORS:
   
  THE CHEFS’ WAREHOUSE, INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  CHEFS’ WAREHOUSE PARENT, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  MICHAEL’S FINER MEATS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  MICHAEL’S FINER MEATS HOLDINGS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE CHEFS’ WAREHOUSE MIDWEST, LLC
   
   
  By: /s/  John D. Austin
    Name:  John D. Austin
    Title: CFO
   
   
  THE CHEFS’ WAREHOUSE PASTRY DIVISION, INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

[Chefs’ Warehouse - Signature Page to Amendment No. 8 to Note Purchase and Guarantee Agreement]

 

 
 

 

  QZ ACQUISITION (USA), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS NORTH AMERICA (USA), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS, INC., a Florida corporation
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS, INC., a Washington corporation
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  QZINA SPECIALTY FOODS (AMBASSADOR), INC.
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  CW LV REAL ESTATE LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

[Chefs’ Warehouse - Signature Page to Amendment No. 8 to Note Purchase and Guarantee Agreement]

 

 
 

 

  ALLEN BROTHERS 1893, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  THE GREAT STEAKHOUSE STEAKS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  DEL MONTE CAPITOL MEAT COMPANY HOLDINGS, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO
   
   
  DEL MONTE CAPITOL MEAT COMPANY, LLC
   
   
  By: /s/ John D. Austin
    Name:  John D. Austin
    Title:  CFO

 

 

 

[Chefs’ Warehouse - Signature Page to Amendment No. 8 to Note Purchase and Guarantee Agreement]

 

 
 

 

 

NOTEHOLDERS:
   
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
 
 
By: /s/ Matthew Douglass
  Name:  Matthew Douglass
  Title:  Assistant Vice President
   
   
PRUCO LIFE INSURANCE COMPANY
   
   
By: /s/ Matthew Douglass
  Name:  Matthew Douglass
  Title:  Assistant Vice President
   
   
PRUDENTIAL ARIZONA REINSURANCE CAPTIVE COMPANY
By: PGIM, Inc., as investment manager
   
   
  By: /s/ Matthew Douglass
    Name:  Matthew Douglass
    Title:  Assistant Vice President
   
   
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY
By: PGIM, Inc., as investment manager
   
   
  By: /s/ Matthew Douglass
    Name:  Matthew Douglass
    Title:  Assistant Vice President

 

 

 

[Chefs’ Warehouse - Signature Page to Amendment No. 8 to Note Purchase and Guarantee Agreement]

 

 
 

 

Exhibit A

Bank Amendment

 

A-1 

 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 21

 

The Chefs’ Warehouse, Inc.

 

Subsidiaries of the Registrant

 

Entity Name   State of Organization
Dairyland USA Corporation   New York
Dairyland HP LLC (1)   Delaware
Bel Canto Foods, LLC (1)   New York
Chefs’ Warehouse Parent, LLC   Delaware
The Chefs’ Warehouse Mid-Atlantic, LLC (2)   Delaware
The Chefs’ Warehouse West Coast, LLC (2)   Delaware
The Chefs’ Warehouse of Florida, LLC (2)   Delaware
The Chefs’ Warehouse Midwest, LLC (2)   Delaware
Michael’s Finer Meats Holdings, LLC (2)   Delaware
Michael’s Finer Meats, LLC (3)   Delaware
The Chefs’ Warehouse Pastry Division, Inc. (2)   Delaware
The Chefs’ Warehouse Pastry Division Canada ULC (4)   British Columbia, Canada
QZ Acquisition (USA), Inc. (2)   Delaware
Qzina Specialty Foods North America (USA), Inc. (5)   Delaware
Qzina Specialty Foods, Inc. (6)   Florida
Qzina Specialty Foods, Inc. (6)   Washington
Qzina Specialty Foods (Ambassador), Inc. (6)   California
CW LV Real Estate LLC (7)   Delaware
Allen Brothers 1893, LLC (8)   Delaware
Del Monte Capitol Meat Company Holdings, LLC (2)   Delaware
Del Monte Capitol Meat Company, LLC (9)   Delaware
Del Monte Merger Sub, LLC (10)   Delaware
The Great Steakhouse Steaks, LLC (11)   Delaware
     
(1)Dairyland HP LLC and Bel Canto Foods, LLC are wholly-owned by Dairyland USA Corporation, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(2)The Chefs’ Warehouse Mid-Atlantic, LLC, The Chefs’ Warehouse West Coast, LLC,The Chefs’ Warehouse of Florida, LLC, The Chefs’ Warehouse Midwest, LLC, Michael’s Finer Meats Holdings, LLC, The Chefs’ Warehouse Pastry Division, Inc., QZ Acquisition (USA), Inc. and Del Monte Capitol Meat Company Holdings, LLC are wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(3)Michael’s Finer Meats, LLC is wholly-owned by Michael’s Finer Meats Holdings, LLC, which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(4)The Chefs’ Warehouse Pastry Division Canada ULC is wholly-owned by The Chefs’ Warehouse Pastry Division, Inc., which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(5)Qzina Specialty Foods North America (USA), Inc. is wholly-owned by QZ Acquisition (USA), Inc., which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(6)Qzina Specialty Foods, Inc. (a Florida corporation), Qzina Specialty Foods, Inc. (a Washington corporation) and Qzina Specialty Foods (Ambassador), Inc. are wholly-owned by Qzina Specialty Foods North America (USA), Inc., which is wholly-owned by QZ Acquisition (USA), Inc., which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(7)CW LV Real Estate LLC is wholly-owned by The Chefs’ Warehouse West Coast, LLC, which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(8)Allen Brothers 1893, LLC is wholly-owned by The Chefs’ Warehouse Midwest, LLC, which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(9)Del Monte Capitol Meat Company, LLC is wholly-owned by Del Monte Meat Company Holdings, LLC, which is wholly-owned by Chefs’ Warehouse Parent, LLC, which is wholly-owned by The Chefs’ Warehouse, Inc.

 

(10)Del Monte Merger Sub, LLC is wholly-owned by The Chefs’ Warehouse, Inc.

 

(11) The Great Steakhouse Steaks, LLC is wholly owned by Allen Brothers 1893, LLC.

 

 
 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

The Chefs’ Warehouse, Inc.
Ridgefield, CT

 

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-175974), the Registration Statement on Form S-3 (No. 333-187348) and the Registration Statement on Form S-4 (No. 333-187349) of The Chefs’ Warehouse, Inc. of our reports dated March 4, 2016, relating to the consolidated financial statements and the effectiveness of The Chefs’ Warehouse, Inc.’s internal control over financial reporting, which appear in the Annual Report on Form 10-K of The Chefs’ Warehouse, Inc. for the fiscal year ended December 25, 2015.

 

/s/ BDO USA, LLP

 

Stamford, CT
March 4, 2016

 

 
 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 31.1

 

CERTIFICATIONS

 

I, Christopher Pappas, certify that:

 

  1. I have reviewed this annual report on Form 10-K of The Chefs’ Warehouse, Inc.;
         
  2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
         
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
         
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and Rule 15d-15(f)) for the registrant and have:
         
      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
         
      (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
         
      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
         
      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
         
  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
         
      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
         
      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: March 4, 2016   /s/ Christopher Pappas
  By: Christopher Pappas
    Chairman, President and Chief Executive Officer
    (Principal Executive Officer)

 

 
 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 31.2

 

CERTIFICATIONS

 

I, John D. Austin, certify that:

 

  1. I have reviewed this annual report on Form 10-K of The Chefs’ Warehouse, Inc.;
         
  2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
         
  3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
         
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and Rule 15d-15(f)) for the registrant and have:
         
      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
         
      (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
         
      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
         
      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
         
  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
         
      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
         
      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: March 4, 2016   /s/ John D. Austin
  By: John D. Austin
    Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer)

 

 
 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of The Chefs’ Warehouse, Inc. (the “Company”) on Form 10-K for the year ended December 25, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Pappas, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
Date: March 4, 2016 By: /s/ Christopher Pappas
    Christopher Pappas
    Chairman, President and Chief Executive Officer
    (Principal Executive Officer)
     

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

 
 

THE CHEFS’ WAREHOUSE, INC. 10-K

Exhibit 32.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of The Chefs’ Warehouse, Inc. (the “Company”) on Form 10-K for the year ended December 25, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John D. Austin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: March 4, 2016 By: /s/ John D. Austin
    John D. Austin
    Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
     

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.