AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 2000

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PYA/MONARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)

MARYLAND 5141 36-2998724
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)

------------------------

PYA/Monarch, Inc.
80 International Drive
Greenville, South Carolina 29615
(864) 676-8600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------

R. Henry Kleeman, Esq.
Vice President and Deputy General Counsel
Sara Lee Corporation
Three First National Plaza
70 West Madison
Chicago, Illinois 60602
(312) 726-2600

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
------------------------------

COPIES TO:

CHARLES W. MULANEY, JR., ESQ. KEITH S. CROW, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM KIRKLAND & ELLIS
(ILLINOIS) 200 EAST RANDOLPH DRIVE
333 WEST WACKER DRIVE CHICAGO, IL 60601
CHICAGO, IL 60606 (312) 861-2000
(312) 407-0700 (312) 861-2000

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------

CALCULATION OF REGISTRATION FEE

PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE

Common Stock, par value $.01 per share...................... $160,000,000 $42,240

------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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Subject to Completion. Dated June 26, 2000.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

[LOGO]

Common Stock

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This is an initial public offering of shares of common stock of
PYA/Monarch, Inc. All of
the shares of common stock are being sold by PYA/Monarch.

Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . PYA/Monarch intends to list the
common stock on the New York Stock Exchange under the symbol "PYA."

SEE "RISK FACTORS" ON PAGE 6 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF THE COMMON STOCK.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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Per Share Total
---------- -----

Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to PYA/Monarch................... $ $

To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from PYA/Monarch at the initial public offering price less the
underwriting discount.

------------------

The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.

GOLDMAN, SACHS & CO.

BEAR, STEARNS & CO. INC.

SALOMON SMITH BARNEY

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Prospectus dated , 2000.

PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR HISTORICAL FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS
INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OUR BUSINESS

We are a leading broadline marketer and distributor of food and related
products to restaurants and other foodservice establishments in the Southeastern
and Mid-Atlantic regions of the United States. We are the nation's fourth
largest broadline distributor, and we believe that we are the largest broadline
distributor in our core Southeastern service area, one of the fastest growing
regions of the country. We have increased our net sales through internal growth
and acquisitions from $1.5 billion in fiscal 1994 to over $2.7 billion in fiscal
1999, a compound annual growth rate of 12.9%, well above the industry average
growth rate of 4.6%.

We distribute over 38,000 products including dry, refrigerated and frozen
foods, paper supplies and foodservice equipment. Our products include both
PYA/Monarch proprietary brands and nationally recognized brands. We serve a
diverse customer base comprised of both independent accounts, which are often
referred to as street accounts, and multi-unit accounts, which are often
referred to as chain accounts. Our street customers consist of independent
restaurants, hotels and other foodservice businesses, while the majority of our
multi-unit accounts consist of franchises or corporate-owned units of national
or regional family dining and other restaurant concepts.

We believe our size and scope of operations give us a competitive advantage.
Our large-scale operations provide significant name recognition and operating
efficiencies, and our extensive distribution network enables us to offer
customers a broad array of products and value-added services across a wide
service area. Our modern, large-scale distribution centers provide cost savings
in branch overhead, warehouse operations and transportation. In addition, we
have made substantial investments in advanced proprietary information systems,
which further reduce our costs and enhance our selling efforts and customer
service.

FOODSERVICE DISTRIBUTION INDUSTRY

The foodservice industry is highly fragmented and is consolidating. This
consolidation has primarily resulted from acquisitions of smaller, regional
distributors by larger broadline distributors. We anticipate further
consolidation in the industry as smaller distributors confront increasingly
difficult competitive challenges. Larger broadline distributors have access to
the significant capital and management resources needed to construct and equip
large distribution centers, maintain a modern fleet of delivery vehicles and
develop the sophisticated information systems required for cost-efficient
operations.

GROWTH STRATEGIES

Our ongoing strategies to grow our business are:

INCREASE STREET ACCOUNT SALES. We plan to improve profitability by
continuing to increase street account sales, which generate higher profit
margins. From fiscal 1994 to fiscal 1999, our sales to street accounts increased
at a compound annual growth rate of 17.2%. During this period, our street
account sales as a percentage of total sales increased from 40% to 49%. We
intend to continue to grow street account sales by hiring more commissioned
sales representatives, by implementing technology improvements that enable our
sales representatives to spend more time providing value-added services and by
expanding the value-added services that we offer.

INCREASE SALES PENETRATION OF EXISTING ACCOUNTS. We intend to become the
primary broadline distributor for more of our customers by leveraging our strong
position in quality, service and pricing. We have undertaken a number of
technology-based initiatives to increase sales to existing customers, including
our web-based interactive ordering system and our data warehouse of customer
purchasing history. We are also focusing on increasing sales to selected
multi-unit customers to more cost effectively use our existing capacity.

AGGRESSIVELY PROMOTE OUR PROPRIETARY BRANDS. We intend to increase sales of
our proprietary brand products by focusing on branch marketing, promotional
programs, sales incentives and sales force training. Sales of our proprietary
brand products, which we primarily market to our street accounts, enhance our
profitability because we avoid paying the price premiums and higher overhead
costs associated with national brands. Sales of our proprietary brand products
have increased from approximately 30% of street account sales in fiscal 1997 to
approximately 38% of street account sales in fiscal 1999.

PURSUE STRATEGIC ACQUISITIONS. To accelerate growth in both sales and
profits and to expand our core service areas, we plan to selectively acquire
foodservice distributors. We intend to pursue acquisitions of businesses in
contiguous service areas that have a committed management and sales force and
that have a high percentage of street accounts.

BUILD AND EXPAND LARGE, MODERN WAREHOUSES. We are investing in large-scale,
technologically advanced warehouses to provide a platform for growth and to
control distribution expenses. Modern, broadline facilities enhance our ability
to attract new customers by allowing us to offer a broad product selection and
superior service capabilities. We are introducing a sophisticated
voice-activated selection system that significantly improves accuracy. We plan
to continue to focus on facility improvement and expansion as a key component of
our growth strategy.

OUR RELATIONSHIP WITH SARA LEE

We are currently a wholly owned subsidiary of Sara Lee. After the completion
of this offering, Sara Lee will own approximately % of the outstanding shares
of our common stock, or approximately % if the underwriters fully exercise
their option to purchase additional shares. Sara Lee currently is planning to
effect an exchange or other distribution of all or a significant portion of its
shares of our common stock within 18 months of this offering, although the
timing of the exchange or other distribution has not been finally determined.
Sara Lee is not obligated to complete any exchange or other distribution, and we
cannot assure you as to whether, when or how it will occur. Before the
completion of this offering, we will enter into agreements with Sara Lee related
to the separation of our business operations from those of Sara Lee. These
agreements provide for, among other things, various interim and ongoing
relationships between us and Sara Lee.

These agreements are described more fully in the section entitled
"Arrangements Between Sara Lee and PYA/Monarch" included elsewhere in this
prospectus. The terms of these agreements are being negotiated in the context of
a parent-subsidiary relationship and may be more or less favorable to us than if
they had been negotiated with unaffiliated parties.

THE OFFERING

Common stock offered......................... shares

Common stock to be outstanding immediately
after this offering........................ shares

Common stock to be held by Sara Lee
immediately after this offering............ shares

Use of proceeds.............................. The estimated net proceeds from this offering
of approximately $ million will be
used to repay a portion of our indebtedness
to Sara Lee.

Proposed New York Stock Exchange Symbol...... PYA

This information is based on shares outstanding immediately
prior to this offering, all of which are owned by Sara Lee. Unless we
specifically state otherwise, the information in this prospectus does not take
into account the issuance of up to shares of common stock that the
underwriters have the option to purchase from us. If the underwriters fully
exercise their option to purchase additional shares, shares of common
stock will be outstanding after this offering and Sara Lee will hold of
those shares.

The number of shares of our common stock to be outstanding immediately after
the offering above does not take into account approximately shares of our
common stock reserved for issuance under our stock plans. At the time of the
offering, we intend to grant options to purchase approximately shares of
our common stock at the offering price to some of our directors, officers and
employees. In addition to the common stock reserved for issuance under our stock
plans, we intend to offer to selected executive employees options to purchase up
to an aggregate of shares of our common stock, subject to the surrender
and cancellation of previously granted options to purchase Sara Lee common
stock.

------------------------

We were originally incorporated in Delaware, and we reincorporated in
Maryland in June 1998. Our executive offices are located at 80 International
Drive, Greenville, South Carolina 29615. Our telephone number is
(864) 676-8600, and our facsimile number is (864) 676-8701. We also maintain an
Internet site at www.pyamonarch.com. The information contained on our website or
connected to our website is not part of this prospectus.

In this prospectus, "PYA/Monarch," "we," "us," and "our" each refers to
PYA/Monarch, Inc. and not to the underwriters or Sara Lee. "Sara Lee" refers to
Sara Lee Corporation and its subsidiaries, not including PYA/Monarch. Our fiscal
year ends on the Saturday closest to June 30 of any given year. Fiscal year 1999
is a 53-week year, while fiscal years 1995, 1996, 1997, 1998 and 2000 are
52-week years.

PYA/MONARCH-REGISTERED TRADEMARK-, MONARCH-REGISTERED TRADEMARK- and other
trademarks of PYA/Monarch appearing in this prospectus are the property of
PYA/Monarch.

SUMMARY FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables present our summary financial data. The data presented
in these tables are from "Selected Financial Data" and our historical financial
statements and notes to those statements, which are included elsewhere in this
prospectus. You should read those sections and the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a further explanation of the financial data summarized here. The
historical financial information may not be indicative of our future performance
and does not reflect what our financial position and results of operations would
have been had we operated as a separate, stand-alone entity during the periods
presented.

YEARS ENDED 39 WEEKS ENDED
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JULY 1, JUNE 29, JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
STATEMENTS OF INCOME DATA: 1995 1996 1997 1998 1999(1) 1999 2000
- -------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Net sales.............................. $1,983,287 $2,200,804 $2,372,694 $2,584,878 $2,742,110 $1,981,538 $2,113,021
Gross profit........................... 292,923 328,867 348,540 382,858 410,376 293,360 327,122
Selling, general and administrative
expenses............................. 232,828 254,507 269,107 293,819 316,658 231,413 259,484
Loss on sale to Sara Lee of trade
receivables, net of collection
fees (2)............................. -- -- 14,710 41,535 44,287 31,907 34,367
Impairment of long-lived assets (3).... -- -- -- 1,336 -- -- 1,100
Interest expense (income), net (4)..... 2,410 17 (4,663) (12,116) (14,684) (10,570) (13,293)
Income before income taxes............. 57,685 74,343 69,386 58,284 64,115 40,610 45,464
Net income............................. 33,923 43,617 41,044 34,262 37,912 24,001 26,637
Pro forma as adjusted net
income (5)...........................
Net income per share--basic and
diluted..............................
Pro forma as adjusted net income per
share--basic and diluted.............
Shares used in computing pro forma as
adjusted net income per share--basic
and diluted..........................

APRIL 1, 2000
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PRO FORMA
ACTUAL AS ADJUSTED(5)
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BALANCE SHEET DATA:
Working capital........................................... $ 62,271
Total assets.............................................. 615,043
Inventories, net.......................................... 110,876
Note receivable from Sara Lee (6)......................... 165,445
Payable to Sara Lee (7)................................... 103,637
Stockholder's equity...................................... 235,344

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(1) 1999 was a 53-week year.

(2) Represents losses on the sale to Sara Lee of 100% of our third-party trade
receivables. From February 1997 to June 2000, we sold our receivables to
Sara Lee at a discount. As of June 2000, we no longer sell our trade
receivables to Sara Lee and therefore, will no longer incur a loss on the
sale of such receivables.

(3) Represents write-down of three of our facilities to estimated net realizable
value.

(4) Represents primarily interest income from Sara Lee on the note receivable
from Sara Lee received in consideration for the sale of our trade
receivables to Sara Lee. As of June 2000, we no longer sell our trade
receivables to Sara Lee and therefore, will no longer recognize interest
income on the note receivable from Sara Lee.

(5) Pro forma as adjusted amounts give effect to the following actions as though
these actions had taken place as of July 4, 1999.

- our dividend of a promissory note in the principal amount of $
payable to Sara Lee and the resulting reduction in stockholder's
equity;

- the termination of our sale to Sara Lee of trade receivables through
the following transactions:

- our purchase from Sara Lee of all our outstanding trade receivables
at fair market value for $ ;

- our payment of the receivables purchase price through the retirement
on a dollar-for-dollar basis of the note receivable from Sara Lee;
and

- elimination of the loss on sale to Sara Lee of trade receivables and
interest income from Sara Lee;

- our sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share and after
deducting an assumed underwriting discount and estimated offering
expenses payable by us;

- use of the estimated offering proceeds to repay a portion of our
indebtedness and reflection of interest expense on the unpaid balance
of the indebtedness of $ at an assumed market interest rate of
%, resulting in interest expense of $ for the 39 weeks ended
April 1, 2000; and

- the difference in estimated costs for the services to be provided by
Sara Lee under the master transitional services agreement, at a cost of
$1 million per year, from the costs historically allocated to us for
these services, resulting in an incremental expense of $83 in the
39 weeks ended April 1, 2000.

Upon Sara Lee's exchange or other distribution of our common stock, we will
no longer be permitted to participate in Sara Lee's benefit plans, insurance
plans and working capital funding arrangements. We may face increased costs
for these and other items, following this offering. At this time, we cannot
estimate the amount or timing of these increased costs and, accordingly, we
have not included this amount in the pro forma as adjusted amounts.

(6) Represents the note receivable from Sara Lee described in note 4.

(7) Actual amount represents a payable to Sara Lee. Pro forma as adjusted amount
represents the $ payable to Sara Lee and the $ promissory note
to be issued to Sara Lee as payment of a dividend prior to the end of fiscal
2000. All of the payable and a portion of the promissory note will be repaid
with the net proceeds of this offering.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND OTHER
INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK.

RISKS RELATED TO OUR BUSINESS

THE FOODSERVICE DISTRIBUTION INDUSTRY HAS LOW PROFIT MARGINS AND IS SENSITIVE TO
NATIONAL AND REGIONAL ECONOMIC CONDITIONS AND OTHER FACTORS.

The foodservice distribution industry is characterized by relatively low
profit margins. The prices at which we sell our products change with the cost of
the underlying products. As a result, our profit levels may be reduced during
periods of decreased prices for our products, even though our gross profit
percentage on those products may remain relatively constant. A reduction in the
price of our products could have a material adverse effect on our business,
operating results and financial condition. The foodservice distribution industry
is sensitive to national and regional economic conditions. Economic downturns
may reduce consumer spending at the restaurants and other foodservice
institutions that we supply. This reduction in spending could have an adverse
impact on the demand for our products causing a material adverse effect on our
operating results.

Our operating results also are particularly sensitive to, and may be
adversely affected by, difficulty in collecting accounts receivable, maintaining
inventory control, and responding to competitive price pressures, severe weather
conditions and unexpected increases in fuel or other transportation-related
costs. Although these factors generally have not had a material adverse impact
on our past operations, we cannot assure you that one or more of these factors
will not adversely affect future operating results.

THE FOODSERVICE DISTRIBUTION INDUSTRY IS HIGHLY COMPETITIVE.

We operate in highly competitive markets, and our future success depends, in
large part, on our ability to provide superior service and high quality products
at competitive prices. Our competition includes broadline distributors that
provide a comprehensive range of food and related products, niche distributors
that supply limited product categories, and system distributors that typically
supply a narrower range of products to a limited number of multi-unit businesses
operating in a broad geographical area. We compete in each of our markets with
at least one large national distribution company, generally SYSCO Corp., U.S.
Foodservice or Alliant Foodservice, Inc., as well as with numerous regional and
local distributors. Some of our competitors have substantially greater financial
and other resources than we do. Our failure to compete successfully could have a
material adverse effect on our business, operating results and financial
condition.

OUR SUCCESS LARGELY DEPENDS ON OUR ABILITY TO RETAIN OUR SENIOR MANAGEMENT.

Our success is largely dependent on the skills, experience and efforts of
our senior management. The loss of the services of one or more members of our
senior management team could have a material adverse effect on our business and
financial results. Some members of our management team are not covered by
employment agreements.

WE MAY NOT BE ABLE TO IDENTIFY, ACQUIRE OR SUCCESSFULLY INTEGRATE SUITABLE
ACQUISITION TARGETS.

Acquisitions are an important part of our growth strategy. To successfully
pursue this strategy, we must first identify attractive acquisition targets. Due
to increased consolidation in the foodservice distribution industry, we may face
significant competition for suitable acquisition targets. Additionally,
acquisitions will enhance our earnings only if we can successfully integrate
those businesses into our marketing programs, centralized purchasing operations,
distribution network

and information systems. Our ability to integrate acquired businesses may be
adversely affected by factors that include:

- customer resistance to our product selection or distribution system;

- our failure to retain key management and sales personnel;

- difficulties in converting information systems to our proprietary systems;
and

- difficulties in allocating limited management resources.

In addition, we may not be able to realize the synergies that we anticipated in
selecting our acquisition candidates. The difficulties we face in acquiring and
integrating foodservice businesses could have a material adverse effect on our
business, operating results and financial condition.

PRODUCT LIABILITY CLAIMS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

We face an inherent risk of exposure to product liability claims if any of
the products we sell cause injury or illness. We have obtained liability
insurance for product liability claims. We cannot assure you, however, that this
insurance will continue to be available at a reasonable cost, or that any
insurance that we obtain will be adequate to cover product liability claims
against us. We generally obtain contractual indemnification from parties
supplying our products, but this form of indemnification is limited, as a
practical matter, to the creditworthiness and financial resources of the
indemnifying party. If we do not have adequate insurance or contractual
indemnification available, losses associated with product liability claims could
have a material adverse effect on our business, operating results and financial
condition.

HIGH EMPLOYEE TURNOVER RATES AND DIFFICULTIES HIRING A SUFFICIENT NUMBER OF
QUALIFIED WORKERS COULD ADVERSELY AFFECT OUR BUSINESS.

Our distribution system is labor intensive. We compete intensely with other
employers for workers, particularly during periods of low unemployment. We face
particular difficulties in staffing our facilities during the night hours when
the bulk of our distribution activity occurs. High turnover rates increase our
distribution costs and lower worker productivity. If we cannot hire and retain
qualified personnel, our business, operating results and financial condition may
be adversely affected. In addition, our growth strategy depends, in part, on our
ability to increase the size of our sales force. We cannot assure you that we
will be able to attract and retain sufficient qualified sales personnel, and the
failure to do so could adversely affect our revenue growth in the future.

THE LOSS OF A MAJOR CUSTOMER COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

Meeting the needs of our larger customers requires us to commit a
significant portion of our personnel and distribution resources to these
accounts. Generally, our customer contracts may be cancelled by either party at
its option. If we lose one of our major customers, we may not be able to reduce
the scale of our operations or reallocate our personnel and distribution
resources in a timely or efficient manner. Any delay or additional costs in
reallocating our resources or reducing the scale of our operations could have a
material adverse effect on our business, operating results and financial
condition.

RISKS RELATED TO OUR RELATIONSHIP WITH SARA LEE

WE WILL BE CONTROLLED BY SARA LEE AS LONG AS IT OWNS A MAJORITY OF OUR COMMON
STOCK, WHICH MAY LEAD TO CONFLICTS OF INTEREST.

After the completion of this offering, Sara Lee will own approximately %
of the outstanding shares of our common stock, or approximately % if the
underwriters fully exercise their option to purchase additional shares.
Investors in this offering will not be able to affect the outcome of any
stockholder vote at least for as long as Sara Lee owns a majority of our
outstanding common stock. As a result, Sara Lee will control all matters
affecting us, including:

- the composition of our board of directors and, through it, any
determination with respect to our business direction and policies,
including the appointment and removal of officers;

- the allocation of business opportunities that may be suitable for us and
Sara Lee;

- any determinations with respect to mergers or other business combinations;

- any acquisition or disposition of assets;

- our financing;

- changes to the agreements providing for our separation from Sara Lee;

- the payment of dividends on our common stock; and

- determinations with respect to our tax returns.

If Sara Lee were to sell a controlling interest in us to a third party, such
third party would be under no obligation to dispose of its controlling interest.

Conflicts of interest may arise between Sara Lee and us as a result of our
separation from Sara Lee and Sara Lee's continued controlling interest in us. In
particular, following this offering, Sara Lee will continue to be a supplier of
food products for us. Conflicts of interest may also arise from:

- the nature and quality of services rendered by Sara Lee to us;

- tax and employee benefit matters;

- indemnification obligations;

- insurance matters;

- sales or distributions by Sara Lee of all or any portion of its ownership
interest in us; and

- Sara Lee's ability to control our management and affairs.

We may not be able to resolve any potential conflicts, and, even if we do,
the resolution may be less favorable than if we were dealing with an
unaffiliated party.

SARA LEE MAY LATER DECIDE NOT TO COMPLETE AN EXCHANGE OR OTHER DISTRIBUTION OF
OUR COMMON STOCK, WHICH COULD HAVE AN ADVERSE EFFECT UPON THE MARKET FOR OUR
COMMON STOCK AND CONSTRAIN OUR ABILITY TO ISSUE ADDITIONAL EQUITY SECURITIES.

Sara Lee currently is planning to effect an exchange or other distribution
of its shares of our common stock within 18 months of this offering, although no
specific timetable has been finally determined. Sara Lee is not obligated to
complete any exchange or other distribution of our common stock, and it may not
occur. Until Sara Lee consummates an exchange or other distribution of our
common stock, the liquidity of our shares in the market may be constrained. Due
to the limited liquidity of our stock, relatively small trades of our stock may
have a disproportionate effect on our stock price. After the 180-day period
following this offering, which may be waived by

the underwriters, there are no contractual limitations on sales of our common
stock by Sara Lee. The sale or potential sale by Sara Lee of our stock could
adversely affect the market price of our stock.

Sara Lee must own 80% or more of our common stock to continue to consolidate
our business with its other businesses for tax purposes and to preserve the
tax-free status of any exchange or other distribution of its remaining shares of
our common stock. As a result, Sara Lee may prevent us from issuing additional
equity securities for purposes such as providing incentives for our management,
raising capital or making acquisitions unless and until an exchange or other
distribution occurs.

OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY.

Our financial statements have been derived from the financial statements of
Sara Lee. Accordingly, the historical financial information we have included in
this prospectus does not necessarily reflect what our financial position,
results of operations and cash flows would have been had we been treated as a
separate, stand-alone entity during the periods presented. Sara Lee did not
account for us, and we were not operated, as a separate, stand-alone entity for
the periods presented. The historical financial information is not necessarily
indicative of what our results of operations, financial position and cash flows
will be in the future and does not reflect many significant changes that will
occur in our capital structure, funding and operations as a result of our
separation from Sara Lee. For example, we may face increased costs for insurance
and equipment leasing and other financing as a stand-alone entity.

ALL OF THE NET PROCEEDS OF THIS OFFERING WILL BE USED TO REPAY A PORTION OF OUR
INDEBTEDNESS TO SARA LEE.

We intend to use all of the net proceeds from this offering to repay a
portion of our outstanding debt owed to Sara Lee. As a result, the net proceeds
from this offering will not be available for our business needs, such as funding
working capital or the expansion of our operations.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

OUR SECURITIES HAVE NO PRIOR MARKET, AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING.

Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after this offering. Among the factors that
could affect our stock price are:

- quarterly variations in our operating results;

- changes in sales or earnings estimates or the publication of research
reports by analysts;

- speculation in the press or the investment community;

- strategic actions by us or our competitors, such as acquisitions or
restructurings;

- actions by institutional stockholders or by Sara Lee prior to its exchange
or other distribution of our stock;

- general market conditions; and

- economic factors unrelated to our business.

In particular, we cannot assure you that you will be able to resell our shares
at or above the initial public offering price. The initial public offering price
will be determined by negotiations between representatives of the underwriters
and us.

PROVISIONS IN OUR CHARTER AND BYLAWS AND MARYLAND LAW MAY DELAY OR PREVENT AN
ACQUISITION OF US BY A THIRD PARTY.

Our charter and bylaws and Maryland law contain provisions that could make
it more difficult for a third party to acquire us without the consent of our
board of directors. These provisions have little significance while we are
controlled by Sara Lee, but could have considerable significance in the future.
Our charter authorizes us to issue additional authorized but unissued shares of
common stock or preferred stock and permits our board of directors, without
stockholder approval, to amend the charter to increase or decrease the aggregate
number of shares of stock or the number of shares of stock of any class or
series that we have the authority to issue. In addition, our board of directors
may classify or reclassify any unissued shares of common stock or preferred
stock and may set the preferences, rights and other terms of the classified or
reclassified shares. Although our board of directors has no intention to do so
at the present time, it could establish a series of preferred stock that could
have the effect of delaying, deferring or preventing a transaction or a change
in control that might involve a premium price for our common stock or otherwise
be in the best interest of our stockholders.

Our bylaws can only be amended by our board of directors. Our bylaws also
provide that nominations of persons for election to our board of directors and
the proposal of business to be considered at a stockholder meeting may be made
only in the notice of the meeting, by our board of directors or by a stockholder
who is entitled to vote at the meeting and has complied with the advance notice
procedures of our bylaws. So long as Sara Lee or its affiliates own a majority
of our outstanding common stock, Sara Lee is not required to comply with these
advance notice requirements. Also, under Maryland law, business combinations,
including issuances of equity securities, between us and any person who
beneficially owns 10% or more of our common stock or an affiliate of such person
are prohibited for a five year period unless exempted by the statute. After this
period, a combination of this type must be approved by two super-majority
stockholder votes, unless various conditions are met or the business combination
is exempted by our board of directors. Our board has exempted any business
combination with Sara Lee or any of its affiliates from these five year
prohibition and super-majority vote requirements.

These and other provisions of Maryland law or our charter and bylaws could
have the effect of delaying, deferring or preventing a transaction or a change
in control that might involve a premium price for our common stock or otherwise
be in the best interest of our stockholders.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends," "may," "will," "should," "estimates,"
"predicts," "potential," "continue" and similar expressions to identify these
forward-looking statements. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to a number of
factors, including those discussed in the sections in this prospectus entitled
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and other sections of this prospectus.

This prospectus also contains forward-looking statements attributed to third
parties relating to their estimates regarding the growth of our market. These
market data projections are based on a number of assumptions. If these
assumptions turn out to be incorrect, actual results may differ from the
projections based on these assumptions. As a result, our market may not grow at
the rate projected by these data projections, or at all. The failure of our
market to grow at the projected rate may have a material adverse effect on our
business, results of operations and financial condition and the market price of
our common stock.

OUR SEPARATION FROM SARA LEE

OVERVIEW

On May 30, 2000, Sara Lee announced a plan to narrow its focus on a smaller
number of global branded packaged goods segments by, among other things,
initiating plans to dispose of some of its businesses. The plan includes an
initial public offering of up to % of our common stock, to be followed by an
exchange or other distribution of our common stock by Sara Lee. Until the
completion of this offering, we will continue as a wholly owned subsidiary of
Sara Lee.

THE EXCHANGE OR OTHER DISTRIBUTION BY SARA LEE OF OUR COMMON STOCK

After completion of this offering, Sara Lee will own approximately %
of the outstanding shares of our common stock, or approximately % if the
underwriters fully exercise their option to purchase additional shares from us.
Sara Lee currently is planning to effect an exchange or other distribution of
its shares of our common stock within 18 months of this offering, although the
timing of the exchange or other distribution has not yet been finally
determined. Sara Lee is not obligated to complete any exchange or other
distribution, and we cannot assure you as to whether, when or how it will occur.
Sara Lee, in its sole and absolute discretion, will determine the date of any
exchange or other distribution and its timing, terms and conditions. Sara Lee's
decision whether to proceed with any exchange or other distribution is subject
to legal considerations, including the taxable or tax-free nature of the
exchange or other distribution, future market conditions and other circumstances
that may cause Sara Lee's board of directors to conclude that an exchange or
other distribution would not be in the best interests of Sara Lee's
stockholders. We have agreed to take all actions reasonably requested by Sara
Lee to facilitate the exchange or other distribution.

BENEFITS OF THE SEPARATION AND SUBSEQUENT EXCHANGE OR DISTRIBUTION

We believe that we will realize a number of benefits from our separation
from Sara Lee and the subsequent exchange or distribution of Sara Lee's
holdings, including the following:

GREATER STRATEGIC FOCUS. We expect to have a sharper focus on our
business and strategic opportunities because our board of directors and
management will be more focused on our business and we will no longer
compete for capital with other Sara Lee businesses.

INCREASED SALES AND SUPPLY OPPORTUNITIES. As an independent company, we
expect to have more freedom in sourcing our products than we could as a
subsidiary of a major food supplier such as Sara Lee. As an independent
company, we also will be able to more freely compete with other foodservice
distribution customers of Sara Lee.

BETTER INCENTIVES FOR EXECUTIVES AND EMPLOYEES. We expect that the
motivation of our executives and employees and the focus of our management
will be strengthened by incentive compensation programs tied to the market
performance of our common stock. The separation will enable us to offer our
employees compensation directly linked to the performance of our business,
which we believe will increase our ability to attract and retain qualified
personnel.

INCREASED SPEED AND RESPONSIVENESS. As a company smaller in size than
Sara Lee, we expect to be able to make decisions more quickly, deploy
resources more rapidly and efficiently and operate with more agility than we
could as a part of a larger organization. In addition, we expect this
separation will enhance our responsiveness to our customers and suppliers.

SEPARATION AND TRANSITIONAL ARRANGEMENTS

Prior to the completion of this offering, we will enter into agreements with
Sara Lee providing for the separation of our business from Sara Lee, including a
master separation agreement. These agreements will provide for, among other
things, various interim and ongoing relationships between us and Sara Lee.

USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $
million, based on an assumed initial public offering price of $ per
share and after deducting an assumed underwriting discount and the estimated
offering expenses payable by us. We intend to use the estimated proceeds of this
offering to repay a portion of our indebtedness to Sara Lee. This indebtedness
will be comprised of a payable to Sara Lee in the amount of $ and a
promissory note payable to Sara Lee in the principal amount of $ . We
intend to issue the $ promissory note to Sara Lee, in payment of a dividend
prior to the end of our current fiscal year, which ends July 1, 2000. The
promissory note will mature on June 30, 2002 and will be subject to mandatory
prepayment out of our excess cash flow after payment of all amounts outstanding
under our revolving credit facility with Sara Lee. The promissory note will bear
interest at a rate based on LIBOR plus 30 basis points for as long as Sara Lee
owns a majority of our outstanding stock and LIBOR plus 250 basis points
thereafter.

DIVIDEND POLICY

We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, we do not anticipate paying any cash
dividends in the foreseeable future. We intend to declare a dividend to be paid
by our issuance to Sara Lee of a $ promissory note prior to the end of our
current fiscal year.

Under Maryland law, our board of directors decides whether and when to
declare dividends. The declaration of future dividends, if any, will depend upon
various factors, including our net income, current and anticipated cash needs
and any other factors deemed relevant by our board. As long as Sara Lee owns a
majority of our outstanding common stock, it will control the composition of our
board of directors and thereby control decisions regarding our payment of
dividends.

We are prohibited from paying any dividends on our capital stock as long as
our indebtedness with Sara Lee is outstanding. Any future borrowings with
another party may contain similar restrictions.

CAPITALIZATION

The following table sets forth our capitalization as of April 1, 2000. Our
capitalization is presented:

- on an actual basis;

- on a pro forma basis to reflect the transactions related to our separation
from Sara Lee; and

- on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from our sale of shares of common stock in this
offering and the payment of a portion of our indebtedness to Sara Lee.

You should read the information set forth below together with "Selected
Financial Data," our historical financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus.

APRIL 1, 2000
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- ------------

Payable to Sara Lee (1)................................ $103,637 $ $
-------- ------ ------
Stockholder's equity
Preferred stock, par value $.01 per share,
25,000,000 shares authorized; none issued.......... --
Common stock, par value $.01 per share,
100,000,000 shares authorized; 1,000 shares issued
and outstanding on an actual basis; 1,000 shares
issued and outstanding on a pro forma basis; and
shares issued and outstanding on a pro forma
as adjusted basis.................................. --
Paid-in capital surplus................................ 37,129
Retained earnings...................................... 199,896
Accumulated other comprehensive loss................... (1,681)
-------- ------ ------
Total stockholder's equity......................... 235,344
======== ====== ======
Total capitalization............................. $338,981 $ $
======== ====== ======

- ------------------------

(1) We intend to use all of the estimated net proceeds of this offering to repay
all of our $ payable to Sara Lee and $ of our $
promissory note payable to Sara Lee. $ aggregate principal amount
will remain outstanding under the promissory note after our payment to Sara
Lee. The promissory note bears interest at a floating rate and was incurred
in payment of a dividend.

SELECTED FINANCIAL DATA

The following table presents our selected financial data. The information
set forth below should be read together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our historical
financial statements and notes to those statements included in this prospectus.
Our statements of operations data set forth below for the years ended June 28,
1997, June 27, 1998, and July 3, 1999 and the balance sheet data as of June 27,
1998 and July 3, 1999 are derived from our audited financial statements included
elsewhere in this prospectus which have been audited by Arthur Andersen LLP,
independent public accountants, whose report is also included in this
prospectus.

The statements of operations data for the years ended July 1, 1995 and
June 29, 1996 are derived from our unaudited financial data that is not included
in this prospectus. The statements of operations data for the 39 weeks ended
March 27, 1999 and April 1, 2000 and the balance sheet data as of April 1, 2000
are derived from unaudited financial statements included in this prospectus and,
in the opinion of management, include all normal and recurring adjustments that
are necessary for a fair presentation of our financial position and results of
operations for these periods. The historical financial information may not be
indicative of our future performance and may not reflect what our financial
position and results of operations would have been had we operated as a
separate, stand-alone entity during the periods presented.

YEARS ENDED 39 WEEKS ENDED
-------------------------------------------------------------- -----------------------
JULY 1, JUNE 29, JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
1995 1996 1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENTS OF INCOME DATA:
Net sales............................. $1,983,287 $2,200,804 $2,372,694 $2,584,878 $2,742,110 $1,981,538 $2,113,021
Gross profit.......................... 292,923 328,867 348,540 382,858 410,376 293,360 327,122
Selling, general and administrative
expenses............................ 232,828 254,507 269,107 293,819 316,658 231,413 259,484
Loss on sale to Sara Lee of trade
receivables (2)..................... -- -- 14,710 41,535 44,287 31,907 34,367
Impairment of long-lived assets (3)... -- -- -- 1,336 -- -- 1,100
Interest expense (income), net (4).... 2,410 17 (4,663) (12,116) (14,684) (10,570) (13,293)
Income before income taxes............ 57,685 74,343 69,386 58,284 64,115 40,610 45,464
Net income............................ 33,923 43,617 41,044 34,262 37,912 24,001 26,637
Pro forma as adjusted net
income (5)..........................
Net income per share--basic and
diluted.............................
Pro forma as adjusted net income per
share--basic and diluted............
Shares used in computing pro forma as
adjusted net income per share--basic
and diluted.........................

YEARS ENDED 39 WEEKS ENDED
--------------------------------------------------------------- -----------------------
JULY 1, JUNE 29, JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
1995 1996 1997 1998 1999(1) 1999 2000
---------- ---------- ---------- ---------- ----------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

BALANCE SHEET DATA:
Working capital..................... 33,759 35,316 42,987 $ 67,450 $ 82,026 52,191 $ 62,271
Total assets........................ 465,684 476,782 537,334 596,811 613,229 569,122 615,043
Inventories, net.................... 81,297 85,389 91,603 101,194 105,195 105,430 110,876
Note receivable from Sara
Lee (6)........................... 110,412 101,911 114,486 144,666 169,131 132,434 165,445
Payable to Sara Lee (7)............. 227,429 210,583 197,259 187,258 152,196 146,773 103,637
Stockholder's equity................ 32,102 65,499 111,724 155,338 192,347 179,339 235,344

- ------------------------------

(1) 1999 was a 53-week year.

(3) Represents write-down of three of our facilities to estimated net realizable
value.

(4) Represents primarily interest income from Sara Lee on the note receivable
received in consideration for the sale of our trade receivables to Sara Lee.
As of June 2000, we no longer sell our trade receivables to Sara Lee and
therefore, will no longer recognize interest income on the note receivable
from Sara Lee.

(5) Pro forma as adjusted amounts give effect to the following actions as though
these actions had taken place as of July 4, 1999.

- our dividend of a promissory note in the principal amount of $
payable to Sara Lee and the resulting reduction in stockholder's
equity;

- the termination of our sale to Sara Lee of trade receivables through
the following transactions:

- our purchase from Sara Lee of all our outstanding trade receivables
at fair market value for $ ;

- our payment of the receivables purchase price through the retirement
on a dollar-for-dollar basis of the note receivable from Sara Lee;
and

- elimination of the loss on sale to Sara Lee of trade receivables and
interest income from Sara Lee;

(6) Represents the note receivable from Sara Lee described in note 4.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ TOGETHER WITH OUR FINANCIAL STATEMENTS AND NOTES TO
THOSE STATEMENTS INCLUDED ELSEWHERE IN THE PROSPECTUS.

OVERVIEW

We distribute dry, refrigerated and frozen foods, paper supplies and
foodservice equipment to restaurants, hotels, hospitals and other foodservice
businesses in the Southeastern and Mid-Atlantic regions of the United States.
Our customer base is comprised of street accounts and multi-unit accounts. Our
street accounts consist of independent restaurants, hotels and other foodservice
businesses, while the majority of our multi-unit accounts consist of franchises
or corporate-owned units of national or regional family dining and other
restaurant concepts. We operate as one business with 15 distribution centers in
a contiguous geographic region, and most of our individual distribution centers
service both street accounts and multi-unit accounts. Although we make pricing
decisions on a customer by customer basis, we do not report or separately track
profitability by type of customer. No one customer constitutes more than 10% of
total sales.

We are the nation's fourth largest broadline foodservice distributor, and we
believe that we are the largest broadline distributor in the southeastern United
States. We have grown internally through increased sales to existing and new
customers and externally through acquisitions. We have increased our net sales
from $1.5 billion in fiscal 1994 to over $2.7 billion in fiscal 1999, a compound
annual growth rate of 12.9%.

A key element of our business strategy is to aggressively grow our sales to
street accounts, which offer higher profit margins. From fiscal 1994 to fiscal
1999, our sales to street accounts increased from $0.61 billion to
$1.34 billion, a compound annual growth rate of 17.2%.

Our cost of sales includes amounts paid to manufacturers and food processors
for our products. Increasing food prices result in higher product costs, which
are reflected in higher sales prices and higher gross profit. Our operating
expenses include labor-related and other selling expenses, warehousing,
transportation and other distribution costs, and administrative expenses. Our
distribution and administrative expenses are relatively fixed in the short-term.

Gross margins are generally higher for street accounts than for multi-unit
accounts. These higher margins are partially offset by the higher selling and
distribution costs attributable to street accounts. Gross margins are generally
higher for proprietary brand products than for national brand products of
comparable quality, although we incur additional advertising and marketing costs
in promoting our proprietary brand products that partially offset the higher
gross margin.

From February 1997 until June 3, 2000, we sold to Sara Lee 100% of our trade
receivables, as they were generated, at a discount, which reduced our earnings.
We sold these receivables to Sara Lee at a 1.75% discount in fiscal years 2000,
1999 and 1998, and at a 2.0% discount from February through June 1997. Prior to
that time, we sold our receivables to Sara Lee at face value. We also acted as
Sara Lee's collection agent and collected payments on behalf of Sara Lee for all
trade receivables sold. Sara Lee paid us a fixed collection fee equal to
$3.7 million per year. We recognized a loss on sale of trade receivables each
year equal to the discount, calculated as a percentage of net sales, net of the
collection fee. In exchange for our sale of trade receivables, Sara Lee issued
to us a note. The balance of the note receivable outstanding at any time accrued
interest at a rate of 10% per annum. The balance of the note receivable
increased by the amount of trade receivables we sold to Sara Lee, net of the
discount, plus collection fees and accrued

interest. The balance of the note receivable decreased by the amount of payments
we collected on the sold trade receivables.

FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------ --------------------
JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
1997 1998 1999 1999 2000
-------- -------- -------- --------- --------
(DOLLARS IN THOUSANDS)

Loss on sale to Sara Lee of trade
receivables, net of collection fees.... $14,710 $ 41,535 $ 44,287 $ 31,907 $ 34,367
Interest income from Sara Lee............ 4,701 12,121 14,717 10,563 13,311

As of June 3, 2000, we no longer sell our trade receivables to Sara Lee, and
therefore will no longer incur a loss on sale of trade receivables or recognize
interest income from Sara Lee. Sara Lee has agreed to repay the note receivable
in June 2000 with a combination of cash and the transfer of the outstanding
trade receivables, at fair market value.

Our operating results have historically been included in Sara Lee's income
tax returns, but the provision for income taxes in our financial statements has
been determined on a separate return basis.

Our fiscal year ends on the Saturday closest to June 30. Fiscal 1999 was a
53-week year, while fiscal 1997 and fiscal 1998 each consisted of 52 weeks.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, some of our
income and expense items as a percentage of net sales:

Net sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 85.3 85.2 85.0 85.2 84.5
----- ----- ----- ----- -----
Gross profit................................. 14.7 14.8 15.0 14.8 15.5
Selling, general and administrative expenses... 11.3 11.4 11.5 11.7 12.3
Loss on sale to Sara Lee of trade receivables,
net of collection fees....................... 0.7 1.6 1.6 1.6 1.6
Impairment of long-lived assets................ 0.0 0.0 0.0 0.0 0.1%
Interest income, net........................... (0.2) (0.5) (0.5) (0.5) (0.6)
----- ----- ----- ----- -----
Income before income taxes................... 2.9 2.3 2.4 2.0 2.1
Income taxes................................... 1.2 0.9 1.0 0.8 0.8
----- ----- ----- ----- -----
Net income................................... 1.7% 1.4% 1.4% 1.2% 1.3%
===== ===== ===== ===== =====

39 WEEKS ENDED APRIL 1, 2000 COMPARED WITH 39 WEEKS ENDED MARCH 27, 1999

NET SALES. Net sales increased 6.6% to $2.11 billion in the first 39 weeks
of fiscal 2000 from $1.98 billion during the same period in fiscal 1999. The
acquisition of D. Canale Food Services, Inc. in the first quarter of fiscal 2000
accounted for net sales growth of approximately $35.6 million, or 1.8%. However,
in the fourth quarter of fiscal 1999, we discontinued service to a large,
multi-unit account that was marginally profitable, which negatively affected our
net sales for the 39 weeks ended April 1, 2000 by approximately 1.3%. New
customers and increased penetration of existing accounts contributed to the
remaining increase in net sales.

Our street account sales as a percentage of total net sales, or street sales
mix, increased to 50.6% from 48.3% in the first 39 weeks of fiscal 2000 compared
to the same period in fiscal 1999. Street account sales, excluding acquisitions,
increased 8.5% in the first 39 weeks of fiscal 2000, primarily as a result of
growth of our street sales force and improved sales force productivity.
Multi-unit account sales, excluding acquisitions and the impact of the
termination of service to a large, multi-unit account that was marginally
profitable, increased 3.9%, primarily through increased sales to existing
multi-unit customers.

GROSS PROFIT. Gross profit increased 11.5% to $327.1 million, or 15.5% of
net sales, in the first 39 weeks of fiscal 2000 from $293.4 million, or 14.8% of
net sales, for the same period in fiscal 1999. The increase in gross profit
margin was primarily the result of improved purchasing effectiveness, the shift
in customer mix to a higher percentage of street accounts and increased sales of
proprietary brand products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 12.1% to $259.5 million in the first 39 weeks
of fiscal 2000 from $231.4 million for the same period in fiscal 1999. As a
percentage of net sales, selling, general and administrative expenses increased
to 12.3% in the first 39 weeks of fiscal 2000 from 11.7% for the same period in
fiscal 1999. The increase was partially attributable to increased distribution
and selling costs related to the increase in our street sales mix. In addition,
as a result of the low unemployment rate in our key markets, we experienced
increased labor costs, related primarily to recruiting and training additional
personnel in our warehouse and transportation areas.

LOSS ON SALE TO SARA LEE OF TRADE RECEIVABLES, NET OF COLLECTION FEES. Loss
on sale to Sara Lee of trade receivables, net of collection fees increased 7.7%
to $34.4 million in the first 39 weeks of fiscal 2000 from $31.9 million for the
same period in fiscal 1999. The loss increased at a rate faster than sales
because the amount of collection fees we earned remained constant at $2.8
million, while the amount of the discount on receivables sold increased in
proportion with sales.

IMPAIRMENT OF LONG-LIVED ASSETS. In the first 39 weeks of fiscal 2000, we
decided to close one of our facilities in Raleigh, North Carolina to more cost
effectively utilize existing warehouse capacity. As a result of the decision, we
recognized an impairment loss of $1.1 million in the first 39 weeks of fiscal
2000 to reduce the carrying amount of the facility to estimated net realizable
value.

INTEREST INCOME, NET. Interest income increased 25.8% to $13.3 million in
the first 39 weeks of fiscal 2000 from $10.6 million for the same period in
fiscal 1999. The increase in interest income resulted from the increase in the
average balance of the note receivable from Sara Lee incurred in connection with
the sale of our trade receivables. The increase in the average balance of the
note receivable was attributable to the increase in receivables sold and
accumulation of interest and collection fees earned since February 1997.

INCOME BEFORE INCOME TAXES. As a result of growth in net sales, the
increase in gross margin and increased interest income, our income before income
taxes increased 12.0% to $45.5 million in the first 39 weeks of fiscal 2000 from
$40.6 million for the same period in fiscal 1999.

INCOME TAXES. Our effective tax rate in the first 39 weeks of fiscal 2000
was 41.4% compared to 40.9% for the same period in fiscal 1999.

FISCAL 1999 COMPARED TO FISCAL 1998

NET SALES. Net sales increased 6.1% to $2.74 billion in fiscal 1999 from
$2.58 billion in fiscal 1998. The 53rd week in fiscal 1999 contributed net sales
growth of 2.1%. The acquisition of Kesterson Companies, Inc. in the third
quarter of fiscal 1998 accounted for net sales growth of approximately
$50.8 million, or 1.9%, in fiscal 1999. Offsetting this increase, however, was a
6.9% reduction in our net sales resulting from the discontinuation in the fourth
quarter of fiscal 1998 of

service to a large, multi-unit account that was marginally profitable. New
customers and increased penetration of existing accounts contributed to the
remaining increase in net sales.

Our street sales mix increased to 48.9% from 45.7% in fiscal 1999 compared
to the same period in fiscal 1998. Street account sales, excluding acquisitions
and the 53rd week, increased 9.5% in fiscal 1999, primarily as a result of
growth of our street sales force and improved sales force productivity.
Multi-unit account sales increased 8.0%, excluding acquisitions, the 53rd week
and the impact of the termination of service to a large, multi-unit account that
was marginally profitable. This growth in our multi-unit business was achieved
through the addition of several large new customers and increased sales to
existing customers.

GROSS PROFIT. Gross profit increased 7.2% to $410.4 million, or 15.0% of
net sales, in fiscal 1999 from $382.9 million, or 14.8% of net sales, in fiscal
1998. The increase in gross profit margin was primarily the result of the
significant shift in customer mix to a higher percentage of street accounts and
increased sales of proprietary brand products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 7.8% to $316.7 million in fiscal 1999 from
$293.8 million in fiscal 1998. As a percentage of net sales, selling, general
and administrative expenses increased to 11.5% in fiscal 1999 from 11.4% in
fiscal 1998. The increase was primarily attributable to increased distribution
and selling costs related to the increase in street sales mix.

LOSS ON SALE TO SARA LEE OF TRADE RECEIVABLES, NET OF COLLECTION FEES. Loss
on sale to Sara Lee of trade receivables, net of collection fees increased 6.6%
to $44.3 million in fiscal 1999 from $41.5 million in fiscal 1998. The loss
increased at a rate faster than sales because the amount of collection fees
earned by us remained constant at $3.7 million, while the amount of the discount
on receivables sold increased in proportion with sales.

INTEREST INCOME, NET. Interest income increased 21.2% to $14.7 million in
fiscal 1999 from $12.1 million in fiscal 1998. The increase in interest income
was driven by the increase in the average balance of the note receivable from
Sara Lee. The increase in the average balance of the note receivable was
attributable to growth in receivables sold and the accumulation of interest and
collection fees earned since February 1997.

INCOME BEFORE INCOME TAXES. As a result of growth in net sales, the
increase in gross margin and increased interest income, our income before income
taxes increased 10.0% to $64.1 million in fiscal 1999 from $58.3 million in
fiscal 1998.

INCOME TAXES. Our effective tax rate in fiscal 1999 was 40.9% compared to
41.2% in fiscal 1998.

FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES. Net sales increased 8.9% to $2.58 billion in fiscal 1998 from
$2.37 billion in fiscal 1997. The acquisition of Kesterson Companies, Inc. in
the third quarter of fiscal 1998 accounted for net sales growth of approximately
$27.9 million or 1.2% in fiscal 1998. New customers and increased penetration of
existing accounts contributed to the remaining increase in net sales.

Street account sales, excluding acquisitions, increased 6.5% in fiscal 1998,
primarily as a result of growth of our street sales force. Multi-unit account
sales increased 8.4%, excluding acquisitions, primarily through expansion of
sales to existing multi-unit customers. Because multi-unit account sales grew
faster than street account sales in fiscal 1998, our street sales mix decreased
from 45.9% in fiscal 1997 to 45.7% in fiscal 1998.

GROSS PROFIT. Gross profit increased 9.8% to $382.9 million, or 14.8% of
sales, in fiscal 1998 from $348.5 million, or 14.7% of sales, in fiscal 1997.
The increase in gross profit margin was primarily the result of improved
purchasing effectiveness and increased sales of proprietary brand products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 9.2% to $293.8 million in fiscal 1998 from
$269.1 million in fiscal 1997. As a percentage of net sales, selling, general
and administrative expenses increased to 11.4% in fiscal 1998 from 11.3% in
fiscal 1997. The increase was primarily attributable to increased warehouse and
transportation costs associated with the closure of a facility in Nashville,
Tennessee, the start-up of a new facility in Bloomington, Indiana, and the
termination of service in the fourth quarter of fiscal 1998 to a large,
marginally profitable account.

LOSS ON SALE TO SARA LEE OF TRADE RECEIVABLES, NET OF COLLECTION FEES. Loss
on sale to Sara Lee of trade receivables, net of collection fees increased
182.4% to $41.5 million in fiscal 1998 from $14.7 million in fiscal 1997. We
began selling our trade receivables to Sara Lee without recourse in February
1997. As a result, the loss on sale of trade receivables to Sara Lee in fiscal
1997 reflected less than five months impact of the receivables sale arrangement.

IMPAIRMENT OF LONG-LIVED ASSETS. In fiscal 1998, we decided to build a
larger, more efficient distribution center in Daytona, Florida to replace our
existing distribution center. In addition, we decided to close our distribution
center in Nashville, Tennessee and service its customers from our other
distribution centers. As a result of these decisions, we recognized an
impairment loss of $1.3 million to reduce the carrying amounts of the Daytona
and Nashville distribution centers to their estimated net realizable values.

INTEREST INCOME, NET. Interest income increased 159.8% to $12.1 million in
fiscal 1998 from $4.7 million in fiscal 1997. We began selling our trade
receivables to Sara Lee at a discount in February 1997. Sales of trade
receivables prior to February 1997 were made at face value. As a result,
interest income in fiscal 1997 reflected less than five months impact of the
receivables sales arrangement.

INCOME BEFORE INCOME TAXES. As a result of the increase in our loss on the
sale of trade receivables to Sara Lee, income before income taxes decreased
16.0% to $58.3 million in fiscal 1998 from $69.4 million in fiscal 1997.
Excluding the loss on the sale of receivables to Sara Lee and the related
interest income, our income before income taxes increased 10.4%, primarily as a
result of growth in net sales and the increase in gross margins.

INCOME TAX PROVISION. Our effective tax rate in fiscal 1998 was 41.2%
compared to 40.8% in fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

Historically, Sara Lee has managed cash on a centralized basis for us and
Sara Lee's other U.S.-based businesses. Cash receipts associated with our
business have been transferred directly to Sara Lee on a periodic basis, and
Sara Lee has provided funds to finance our operations and growth.

Cash provided by operating activities was $83.7 million for the 39 weeks
ended April 1, 2000, $15.5 million in fiscal 1999, $17.8 million in fiscal 1998
and $42.7 million in fiscal 1997.

We had capital expenditures of $19.2 million in the 39 weeks ended April 1,
2000, $18.6 million in fiscal 1999, $38.4 million in fiscal 1998 and
$37.0 million in fiscal 1997 primarily for warehouse improvements and expansions
and new warehouse equipment. We expect to spend approximately $100 million over
the next three years to upgrade and expand our facilities and equipment.

The net proceeds from the offering will be used to repay all of the
outstanding payable due to Sara Lee and a portion of our outstanding debt under
a promissory note to be issued to Sara Lee in June 2000 in payment of a
dividend.

Our future capital requirements will depend on a number of factors,
including the timing and rate of expansion of our business. Prior to the
completion of this offering, we will enter into a revolving credit agreement
with Sara Lee under which we may borrow up to $ million. We presently
anticipate that we will borrow approximately $ million under the revolving
credit

facility in the first quarter of fiscal 2001 to fund working capital
requirements. The revolving credit facility will be available to fund general
corporate purposes and will terminate when Sara Lee no longer holds a majority
of our outstanding common stock. We anticipate that at such time we will enter
into a revolving credit facility with a bank. The revolving credit facility
contains customary covenants, which restrict our ability to incur secured debt
or enter into sale leaseback transactions and which require us to maintain
specified interest coverage ratios.

We believe that our operating cash flow together with our revolving credit
facility and any refinancings of the facility will provide sufficient capital to
fund our operations for the next 18 months. After Sara Lee's exchange or other
distribution of our common stock, we intend to finance future acquisitions
through additional debt or equity financing. We cannot assure you that
additional financing will be available to us on favorable terms at that time.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In May 2000, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board (FASB) announced that it reached a conclusion on
Issue 00-14 "Accounting for Certain Sales Incentives." Issue 00-14 establishes
requirements for the recognition and display of sales incentives such as
discounts, coupons and rebates within the financial statements. The EITF
conclusions on this issue will become effective for reporting periods beginning
after May 18, 2000. Because of the timing of the release of these conclusions we
have yet to fully assess their effect on our results of operations and financial
position. Based upon the available information it is likely that the adoption of
these statements will result in the reclassification of various costs within the
captions of the income statement. At this time, we do not believe that the
adoption of these statements would modify our pre-tax earnings or net income.

In June 1998, June 1999 and June 2000, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities and SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133 and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities--an amendment of SFAS No. 133. These
statements outline the accounting treatment for all derivative activity. We do
not use derivative instruments and these accounting statements will not have an
effect on us.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

FOREIGN EXCHANGE

All of the food and related products that we purchase and distribute are
purchased from manufacturers or distributors in U.S. dollars. Therefore, no
foreign exchange risk occurs and no derivative instruments are used.

INTEREST RATE

Historically, Sara Lee has made all of our cash management and short-term
investment decisions, and we do not presently have material amounts of long-term
debt. We anticipate that we will incur additional long term debt in the future,
some or all of which may bear interest at floating rates. Changes in market
interest rates therefore could have a material effect on us.

COMMODITIES

Many of the products that we purchase and distribute to our customers are
commodities or contain commodity elements. The selling price of our products is
determined and managed based upon the cost of the product, in an effort to
maintain gross profit margins. As vendors change selling prices, we change our
selling prices accordingly to maintain appropriate gross profit margins.
However, we may be unable to immediately implement corresponding changes in our
selling prices to some of our customers. As a result, sudden, short-term changes
in commodity prices may have a significant short-term effect on our margins.

BUSINESS

OVERVIEW

We are a leading broadline marketer and distributor of food and related
products to restaurants and other foodservice establishments in the Southeastern
and Mid-Atlantic regions of the United States. We are the nation's fourth
largest broadline distributor, and we believe that we are the largest broadline
distributor in our core Southeastern service area, one of the fastest growing
regions of the country. We have increased our net sales from $1.5 billion in
fiscal 1994 to over $2.7 billion in fiscal 1999, a compound annual growth rate
of 12.9%.

We distribute over 38,000 products including dry, refrigerated and frozen
foods, paper supplies and foodservice equipment. Our products include both
PYA/Monarch proprietary brands and nationally recognized brands. We serve a
diverse customer base comprised of both independent, accounts, which are often
referred to as street accounts, and multi-unit accounts, which are often
referred to as chain accounts. Our street customers consist of independent
restaurants, hotels and other foodservice businesses, while the majority or our
multi-unit accounts consist of franchises or corporate-owned units of national
or regional family dining and other restaurant concepts.

A key component of our business strategy is to aggressively grow our sales
to street accounts, our higher margin customers. From fiscal 1994 to fiscal
1999, sales to street accounts increased at a compound annual growth rate of
17.2%. We seek to increase sales and profitability by increasing sales
penetration of our existing multi-unit and street accounts and promoting our
proprietary brands. We have supplemented our internal growth with selective
acquisitions that complement our business.

FOODSERVICE DISTRIBUTION INDUSTRY

The foodservice distribution industry generated sales of $154 billion in
1999, a 4.8% increase over 1998. According to industry sources, during the
period from 1994 to 1999, total foodservice distribution sales grew at a
compound annual growth rate of 4.6%. Growth in foodservice distribution has been
driven, in part, by demographic, economic and lifestyle trends resulting in
increased demand for meals prepared away from home. The particular trends that
have fueled the demand for foodservice meals include the increasing percentage
of women in the workforce, growth in dual-income and single-parent households,
increased affluence of the aging baby-boomer generation and consumers' demand
for convenience. An industry group projects that foodservice industry sales will
increase from an estimated $376 billion in 2000 to $577 billion by 2010. This
group also projects that the foodservice share of total food expenditures in the
United States will increase from its current level of approximately 45% to
approximately 53% by 2010.

Foodservice sales in our core service area are growing faster than the rest
of the United States. According to an industry publication, restaurant sales in
our core service area will grow 5.7% in 2000 versus 5.0% for the rest of the
United States. Management believes that restaurant sales growth in our markets
will continue to outpace the rest of the country due to projected population
growth. According to Bureau of Census projections, population in the south is
projected to increase by 10.4% from 2000 to 2010 versus 7.9% during the same
period for the rest of the United States.

Companies in the foodservice distribution industry purchase, warehouse,
market, and transport food products, paper products and other supplies and
food-related items to establishments that prepare and serve meals to be eaten
away from home. Foodservice distribution companies generally are classified as
"broadline", "niche" or "system" distributors. Broadline distributors, which
comprise 48% of industry sales, offer a comprehensive range of food and related
products and provide foodservice establishments with the cost savings associated
with large, full-service deliveries. Most broadline distributors service both
street and multi-unit customers. Niche distributors, which comprise 35% of
industry sales, generally are small enterprises that supply limited product
categories. Produce and fresh cut meat are examples of products commonly
supplied by niche distributors. System distributors, which comprise 17% of
industry sales, typically supply a narrow range of products to a limited number
of multi-unit businesses operating in a broad geographical area.

The foodservice distribution industry is highly fragmented and is
consolidating. There were approximately 2,700 distributors in 1999, a 23%
decrease in the number of distributors as compared to 1992. This consolidation
has primarily resulted from acquisitions of smaller, regional distributors by
larger, broadline distributors. Consolidation has permitted large foodservice
distributors to benefit from economies of scale in the areas of marketing,
procurement, operations, information systems and administration. The following
table illustrates the impact of these trends on the percentage of total net
sales in the industry generated by the largest broadline distributors during the
periods indicated.

PERCENTAGE OF
INDUSTRY NET SALES
YEAR ENDED
DECEMBER 31,
-------------------
1994 1999
-------- --------

Ten largest broadline distributors....................... 20% 27%
Fifty largest broadline distributors..................... 25% 31%

We anticipate further consolidation in the industry as small distributors
confront increasingly difficult competitive challenges. Larger broadline
distributors are more likely to have access to the significant capital needed to
construct and equip large distribution centers, maintain a modern fleet of
delivery vehicles and develop the sophisticated information systems required for
cost-efficient operations. These factors, combined with purchasing and overhead
efficiencies, make continuing consolidation more likely as smaller distributors
have greater difficulty competing on the basis of either cost or services.

GROWTH STRATEGIES

Our ongoing strategies to grow our business are:

INCREASE STREET ACCOUNT SALES. We plan to improve profitability by
continuing to increase sales to our large street account base. Street account
sales as a percentage of our total sales increased to 49% in fiscal 1999 from
40% in fiscal 1994. In addition to generating higher margin sales, street
customers, as independent operators, are more likely to use our full range of
products and value-added services. To better serve the needs of street
customers, we plan to increase the number of our commissioned sales
representatives. These representatives offer advice and assistance in a broad
array of foodservice product and business related areas, including menu planning
and pricing, nutritional information, plate presentation advice, and food safety
and market information. These services can foster strong relationships with our
customers and enhance customer loyalty. With the assistance of our integrated
information systems, we will target products and product groups that enhance our
margins and those of our street customers.

INCREASE SALES PENETRATION OF EXISTING ACCOUNTS. We intend to increase
sales penetration of existing accounts by becoming the primary broadline
distributor for more of our customers. We intend to accomplish this by
leveraging our strengths in quality, service and price. We are also taking
actions to enhance the productivity of our sales representatives, allowing them
to focus on account penetration and value-added selling. These actions include:

- enhancing our current array of order processing options by launching our
web-based interactive ordering system, which is capable of suggestive
selling based on prior purchases, product mix and logical add-ons;

- using our data warehouse of customer purchase history to customize sales
calls;

- identifying accounts with high penetration opportunities to properly focus
sales resources on those opportunities; and

- using technology and incentive compensation to improve customer service.

Existing multi-unit customers also represent significant opportunities for
increased sales. Many of our multi-unit customers, primarily casual dining
establishments, are experiencing more rapid growth than other types of
foodservice businesses. We are focusing on these growing businesses as a source
of increased sales and as a means to leverage our costs by more effectively
using existing capacity.

AGGRESSIVELY PROMOTE OUR PROPRIETARY BRANDS. By focusing on branch
marketing, promotional programs, sales incentives and sales force training, we
intend to increase sales of our proprietary brand products. Proprietary brand
products offer customers attractive product alternatives to comparable national
brands across a wide range of prices. They also enhance our profitability
because we avoid paying the price premiums and higher overhead costs associated
with national brands. Sales of our proprietary brand products increased from
approximately 30% of street sales in fiscal 1997 to 38% of street sales in
fiscal 1999.

PURSUE STRATEGIC ACQUISITIONS. Acquisitions allow us to accelerate growth
in both sales and profits and to expand our service areas. As an independent
company, we expect to have greater flexibility to pursue acquisitions than we
did as part of a large corporate group. Our primary criteria for acquisitions
are geographic location, customer mix, with an emphasis on more profitable
street account sales, the size of the business and the strength and commitment
of the management team. Our decentralized operating strategy and the flexibility
of our centralized, mainframe-based computer system facilitate the smooth and
rapid integration of acquired operations. Access to our information systems,
centralized purchasing operations, broad product line and value-added services
can reduce the operating expenses and enhance the sales and profit margins of an
acquired business.

BUILD AND EXPAND LARGE, MODERN WAREHOUSES. We are investing in large-scale,
technologically advanced warehouses to provide a platform for growth and to
control distribution expenses. Our modern, broadline facilities, which carry up
to 13,000 products, enhance our ability to attract new customers by allowing us
to offer the combination of our broad product selection and our superior service
capabilities. These facilities also are the most cost-effective means for us to
provide the broad array of products that our customers demand. We are
introducing a sophisticated voice-activated selection system, which improves
order accuracy resulting in enhanced customer satisfaction, reduced costs
associated with order errors and improved overall productivity. We currently
have large, new or remodeled broadline facilities near Columbia, South Carolina,
Charlotte and Raleigh, North Carolina, and Montgomery, Alabama. We opened a new
distribution center in Daytona, Florida, in May 2000. In addition, during fiscal
2001, we expect to acquire land for a new 225,000 square foot facility in
Atlanta, Georgia, and to expand our Raleigh, North Carolina facility.

We plan to continue to focus on facility improvement and expansion as a key
component of our growth strategy.

PRODUCTS

Our extensive selection of food and related products enables us to be a
single source of supply to a diverse base of customers with varying needs. Our
product line of over 38,000 items comprises a broad selection of canned and dry
food products, fresh meats, poultry and seafood, frozen foods, fresh produce,
dairy and other refrigerated products and related goods and supplies. Many of
our product offerings feature "center of the plate" or entree selections. We
distribute a wide variety of non-food products and equipment, including paper
products, plates, cups, and chemicals and cleaning supplies. We also offer
coffee and beverage equipment, supplies and service, light restaurant equipment
and supplies, and tableware such as china, silverware and glassware. To satisfy
our diverse customer base, we regularly update our product mix and use
centralized purchasing to ensure a consistently high level of quality for all
products throughout our distribution network.

PROPRIETARY BRANDS. We offer customers an expanding line of
quality-assured, value-priced products under the Monarch brand name. The Monarch
brand name has been recognized in the food industry for over 120 years. Monarch
brand products include frozen and canned goods, fruits, vegetables, meats and
other foodservice related products. Monarch brand labels include Advantage,
Heritage, Regency and Premium. We developed this multi-tier system to meet the
specific price and quality requirements of our different market segments. We
also continue to expand our exclusive line of signature products, which we
believe meet or exceed the quality and value of national brands. Several lines
of signature products are tailored to specific market segments. The Monarca line
of products, including pastas, cheeses, meats, tomato products, sauces and
imported oils, is designed for the Italian market segment. For the Spanish and
Mexican markets, we offer the Cocina de Calidad brand. These two ethnic labels
enable us to further penetrate and satisfy growing ethnic markets. We are also
targeting other foodservice specialties with growing appeal, including seafood,
marketed under the Captain Max label, and premium center-of-the-plate products,
marketed under the Perfecta label. Our Halton Farms Express label is a new line
of high quality, disposable carry out utensils and packaging items. Recognizing
the strong growth potential of these specialized markets, we have concentrated
product and service development efforts on these areas.

NATIONAL BRANDS. We offer our customers a broad selection of national brand
products, with each of our fifteen distribution centers carrying the product
lines that best meet its customers' needs. National brands are attractive to
multi-unit accounts and other customers seeking recognized product quality and
consistency throughout their operations. Distributing national brands has
strengthened relationships with many national suppliers that provide us with
important sales and marketing support. These sales complement sales of our
proprietary branded products.

INFORMATION SYSTEMS

We believe that our advanced, integrated information management systems give
us a significant competitive advantage. We manage the ordering, receiving,
warehousing and delivery of over 38,000 products through centralized computer
information systems. Operating in this manner allows for the consistent
implementation of best practices and generates higher returns on

investment. It also ensures the consistency of product, sales and financial data
on a company-wide basis. These systems include:

- an INTEGRATED ORDER MANAGEMENT SYSTEM that performs real-time allocation
of inventory and allows for orders to be input through a variety of
methods, including customer service call centers and electronic
transmissions from sales representatives and customers;

- a WAREHOUSE INVENTORY MANAGEMENT SYSTEM that allows for directed put-away
and let-down to ensure the proper rotation of product in the warehouse;

- TRUCK ROUTING SYSTEMS that allow us to optimize deliveries and take
advantage of back-haul opportunities;

- ADVANCED FINANCIAL SYSTEMS that allow us to record, report and analyze
financial results;

- a PURCHASING AND FORECASTING TOOL that assists in the management of
inventory by analyzing the benefits of economic order quantities and
taking advantage of buying promotions; and

- a DATA WAREHOUSE SYSTEM that allows us to systematically analyze the
profitability of customer accounts, sales territories and product groups.

We have standardized our hardware, software and networks among all of our
facilities to take advantage of centralized management and support. Mission
critical networks are designed to optimize the balance between reliability and
cost-efficiencies. We have cultivated partnerships with leading vendors and
integrators to ensure that we implement the most effective technology.

We have also undertaken other technology-based initiatives that we expect
will further enhance our efficiency, reduce distribution costs, improve customer
service and generate additional sales. These initiatives include:

INTERNET-BASED CUSTOMER ORDER ENTRY. Our customers can place their orders
using a variety of methods. Our sales representatives use a sophisticated
laptop-based system to generate customer orders. We also offer customers a
direct order entry application that allows them to create and electronically
transmit their orders. Our customers can also call in to one of our customer
service centers to place their orders. All of these methods feature
personalized order guides and pricing that are updated daily, access to our
entire catalog of items, and tools such as inventory and food cost
management to help our customers manage and grow their businesses
successfully. We have been supporting customer direct order entry since
1985. We are now offering an Internet-based customer direct ordering system.
This provides our customers on-line access through our web site to their
individual order guides and pricing, and to the full suite of service
products that we offer. Internet technology offers our customers a
personalized shopping experience, allowing us to suggest items and offer
promotions based on their current order. It reduces the amount of time
needed to deploy new features and allows us to offer direct order entry to
any customer that has an Internet browser. We have successfully piloted this
system with a few select customers and are in the early stages of full
implementation.

VOICE-ACTIVATED SELECTION. We believe we are the first foodservice
distributor to install voice selection technology in our distribution
facilities. Operating via radio frequency, the system provides computer
generated voice prompts to guide the operations staff in product selection
throughout the warehouse, as well as allowing voice responses of
confirmations, product status, quantities and product weights. We expect
this technology to increase the accuracy of our order picking, increase
overall productivity, and therefore, improve customer satisfaction. This
multi-lingual technology also flattens the learning curve for new employees
and allows us to train and retain a more diverse workforce. We have
successfully piloted this application in

our Charlotte distribution center and are implementing it at additional
locations in fiscal 2001 through 2003.

CUSTOMERS

We have a diverse customer base and serve a wide variety of foodservice
establishments. We currently ship to more than 39,000 customer locations. No
single customer accounted for more than 10% of our net sales in fiscal 1999. The
following table sets forth the components of our customer base by type of
institution for fiscal 1999.

PERCENTAGE
TYPE OF CUSTOMER OF GROSS SALES
- ---------------- ---------------

Restaurants................................................ 75.0%
Healthcare institutions.................................... 5.9%
Schools and colleges....................................... 4.6%
Hotels..................................................... 2.2%
Other...................................................... 12.3%
-----
100.0%

STREET CUSTOMERS. Our street customers are independent restaurants, hotels
and other foodservice businesses. Street customers are serviced directly by
commissioned sales representatives who personally call on customers, place
orders, coordinate product delivery and provide additional value-added services.
Street accounts represented approximately 49% of our net sales in fiscal 1999.
We are focusing our growth efforts on street sales because they generate higher
profit margins than our multi-unit accounts. These higher margins are partially
offset by higher sales and delivery costs attributable to the sales commissions
and smaller deliveries associated with street accounts.

MULTI-UNIT CUSTOMERS. The majority of our multi-unit customers consists of
franchises or corporate-owned units of national or regional family dining and
other restaurant concepts. This category also includes, to a lesser extent, bid
business such as schools and the military, hotels and other regional
institutional operators. Many of our current multi-unit customers, primarily
restaurants, are experiencing more rapid sales growth than other types of
foodservice businesses. By providing superior service, we have developed strong
working relationships with our multi-unit customers and created distribution
programs tailored to their precise delivery and product specifications.
Multi-unit customers are serviced by a combination of customer service
representatives and customer relationship managers who coordinate the
procurement and delivery of all products throughout the system from a central
location. Multi-unit accounts represented approximately 51% of our net sales in
fiscal 1999.

SALES AND MARKETING

Our principal marketing activities are conducted by a network of sales and
customer service professionals. As part of our strategy to increase street
account sales, we have established a plan for increasing our street sales force.
Our sales representatives typically transmit orders to the appropriate
distribution center electronically using a laptop computer. This process
facilitates order entry through the use of pre-coded price lists which
automatically price orders, apply pricing controls and allow the sales
representative to review the gross profit of each order at the time of sale.

Our sales and customer service representatives solicit and process orders,
service customers by telephone, review account balances and assist with new
product information. In addition, our sales representatives advise customers on
menu selection, methods of preparing and serving food

and other operating issues. We provide an extensive in-house training program
for entry level sales and customer service representatives which includes
seminars, on-the-job training and direct one-on-one supervision by experienced
sales personnel. Our sales management training program stresses the scope and
quality of service provided to our customers. Our commission program rewards
account profitability and promotes sales growth. We systematically measure the
profitability of each account and product segment, and we modify our incentive
programs accordingly. We maintain sales offices at each of our fifteen
distribution centers and at additional locations throughout our market areas. We
employ sales and marketing staff at both the corporate and branch levels to
solicit and manage relationships with our multi-unit customers.

We supplement our market presence with advertising campaigns in regional
trade publications, which typically focus on our value-added services and our
ability to service targeted industry segments. We support this effort with a
variety of promotional services and programs, including our quarterly magazine,
THE MONARCH EDGE, our web site and local food shows.

DISTRIBUTION

We distribute products from 15 distribution centers located in Alabama,
Florida, Georgia, Indiana, Mississippi, North Carolina, South Carolina,
Tennessee and Virginia. Our customers generally are located within 150 miles of
one of our distribution centers, although we have a service radius of
approximately 500 miles for our multi-unit customer base. Each distribution
center operates a warehouse complex housing dry, refrigerated and frozen storage
areas as well as office space for sales, marketing, administration and
distribution personnel.

More than 90% of our orders are placed for delivery the next day. Products
are automatically reserved for distribution at the time of order, thereby
ensuring complete fulfillment of orders upon delivery. Prior to loading,
customers' orders are assembled and sorted in the warehouse to ensure order
completeness. The products are staged according to the required delivery
sequence.

We deliver products door-to-door using a fleet of over 1,100 tractor-trailer
and straight trucks, each of which is equipped with separate
temperature-controlled compartments. We use a computerized routing system to
dispatch trucks, which optimizes delivery efficiency and minimizes drive time,
wait time and excess mileage. The majority of our fleet is equipped with
on-board computer systems to monitor vehicle speeds, fuel efficiency, idle time
and other vital statistics. We collect and analyze this information in an effort
to continually monitor and improve transportation efficiency and reduce costs.
In some of our geographic markets, we operate remote redistribution facilities
to achieve a higher level of customer service.

FACILITIES AND EQUIPMENT

Our corporate headquarters in Greenville, South Carolina, consists of 45,400
square feet of office space, occupied under a lease which expires on January 4,
2003.

We own all of our 15 full-service distribution centers. The following chart
provides information on the approximate size of each of our distribution
centers.

AREA IN
LOCATION SQUARE FEET
- -------- -----------

Montgomery, Alabama......................................... 374,000
Daytona Beach, Florida...................................... 163,000
Tampa, Florida*............................................. 108,000
Atlanta, Georgia............................................ 173,000
Bloomington, Indiana*....................................... 321,000
Jackson, Mississippi*....................................... 146,000
Charlotte, North Carolina................................... 421,000
Raleigh, North Carolina..................................... 185,000
Columbia, South Carolina.................................... 364,000
Greenville, South Carolina*................................. 200,000
Walterboro, South Carolina*................................. 92,000
Memphis, Tennessee.......................................... 122,000
Paris, Tennessee............................................ 91,000
Salem, Virginia............................................. 95,000
Virginia Beach, Virginia.................................... 206,000
---------
Total....................................................... 3,061,000

- ------------------------

* Serves multi-unit customers only

We consider our properties to be generally in good condition and believe
that our facilities are adequate for our current operations and provide
sufficient capacity to meet our current needs. We expect that we will require
additional facilities to support our long-term growth and that additional
facilities will be available on commercially reasonable terms, as the need
arises.

The equipment and machinery used in our operations consists principally of
electronic data processing equipment, product handling equipment and vehicles,
including tractor-trailers and straight trucks. We lease approximately 85% of
our tractor-trailers and straight trucks and own the remainder. We sublease
certain vehicles and equipment from Sara Lee under a month-to-month lease
agreement, which is cancellable by either party.

We outsource our data center operations under a five-year contract, which
expires on December 31, 2002. As our business needs warrant, we can either
increase or decrease the amount of computer capacity we purchase upon notice to
the vendor. We believe that this arrangement provides us with more reliable and
flexible service at a lower cost than we could achieve by operating our own data
center. While mainframe operations are outsourced, all mainframe applications
are custom-developed and maintained by us. Our financial and forecasting systems
use third-party software that we support.

We regularly evaluate the capacity of our various facilities and equipment,
and make capital investments to expand capacity where necessary. In fiscal 1999,
we spent $18.6 million on capital expenditures, primarily for an expansion to
our Montgomery, Alabama facility, the start of a new distribution center in
Daytona, Florida, and for warehouse improvements and equipment. The Daytona
facility was completed in fiscal year 2000. An expansion to our Raleigh, North
Carolina, location and the purchase of land for a new distribution center in
Atlanta, Georgia, are due to be completed in fiscal year 2001. We will continue
to undertake the expansion or replacement of our facilities as and when needed
to accommodate our growth.

SUPPLIERS

We employ over 60 buyers with expertise in specific product lines to
purchase products from approximately 2,700 suppliers located throughout the
United States and overseas. With the exception of some produce and other
customer and market specific products purchased locally at our branches, most of
our products are procured through a centralized purchasing department, located
at our Greenville, South Carolina headquarters. From Greenville, we manage
purchases and vendor relationships throughout the procurement cycle, from order
to payment. Substantially all of the products we distribute are available from
multiple suppliers, minimizing our dependence on any single source of supply.

Managing the majority of our procurement operations from our Greenville
facility results in lower costs through increased purchasing leverage with
suppliers and greater ordering efficiency. To maximize the benefits of our
centralized purchasing function, we attempt to concentrate purchases with
selected suppliers. This strategy enables us to buy high-quality products on
advantageous terms. We cooperate closely with these suppliers to promote new and
existing products. The suppliers assist in training our sales force and
customers on new products, trends in the industry and menu ideas, and
collaborate with us in advertising and promoting these products both through
printed advertisements and through annual branch-sponsored food shows.
Centralizing purchasing power at the corporate level often provides our buyers
with early access to new product concepts which, if attractive, can be quickly
introduced to customers.

COMPETITION

In recent years, the foodservice distribution industry has been
characterized by significant consolidation and the emergence of larger
competitors. We compete in each of our markets with at least one large national
distribution company, generally SYSCO Corp., U.S. Foodservice or Alliant
Foodservice, Inc., as well as with numerous regional and local distributors.

Our management believes that, although price is an important consideration,
distributors in the foodservice industry compete principally on the basis of
service and reliability, product quality and customer relations. We attribute
our ability to compete effectively against smaller regional and local
distributors to our wider product selection, the cost advantages resulting from
our size and centralized purchasing operations, and our ability to offer broad
and consistent market coverage. We compete effectively against other broadline
distributors primarily by providing our customers with accurate and timely
fulfillment of orders and an array of value-added services.

REGULATIONS

As a marketer and distributor of food products, we are subject to the
Federal Food, Drug and Cosmetic Act and other regulations issued by the U.S.
Food and Drug Administration. The FDA regulates manufacturing and holding
requirements for foods through its current good manufacturing practice
regulations, specifies the standards of identity for specified foods and
prescribes the format and content of information required to appear on food
product labels. The FDA also regulates hazard analysis critical control points
(HACCP) compliance for seafood processors. Some product lines are regulated by
the Federal Meat Inspection Act, the Poultry Products Inspection Act, the
Perishable Agricultural Commodities Act and other regulations issued by the U.S.
Department of Agriculture. The USDA imposes standards for product quality and
sanitation including the inspection, labeling and HACCP compliance of meat and
poultry products and the grading and commercial acceptance of produce shipments
from our suppliers. We are also subject to state and local regulation relating
to the licensing of our facilities, enforcement by state and local health
agencies of state and local standards for our products and regulation of our
trade practices in connection with the sale of our products. Our facilities
generally are inspected at least annually by

state and/or federal authorities. These facilities are also subject to
inspections and regulations issued pursuant to the Occupational Safety and
Health Act by the Department of Labor, which require us to comply with
manufacturing, health and safety standards to protect our employees from
accidents and to establish hazard communication programs to transmit information
on the hazards of various chemicals present in products that we distribute and
use.

We are also subject to regulation by numerous federal, state and local
regulatory agencies, including the U.S. Department of Labor, which sets
employment practice standards for workers, and the U.S. Department of
Transportation, which regulates qualification and licensing of drivers,
transportation of perishable and hazardous materials, and waste.

We believe that we are in compliance in all material respects with all
applicable government regulations.

ENVIRONMENTAL MATTERS

We are subject to federal, state and local environmental requirements,
including those relating to discharges of substances to the air, water and land,
the handling, storage and disposal of wastes and the clean-up of properties
affected by pollutants. In particular, a number of our distribution facilities
have underground and aboveground tanks for the storage of diesel fuel and other
petroleum products. These facilities are subject to requirements regarding the
storage of such products and the clean-up of any leaks or spills. We do not
currently anticipate any material adverse effect on our business or financial
condition as a result of our efforts to comply with environmental requirements.

We are currently investigating and cleaning-up leaks and spills from
petroleum underground storage tanks at our Greenville (Whitehorse Road) and
Walterboro, South Carolina distribution facilities. We do not expect to incur
material costs associated with the investigation and corrective action
activities at these facilities.

We have made, and will continue to make, capital expenditures to comply with
current and future environmental requirements. We do not anticipate material
capital expenditures for environmental controls in the current or succeeding
fiscal year. Because environmental requirements are becoming increasingly
stringent, our expenditures for environmental compliance may increase in the
future.

INTELLECTUAL PROPERTY

We have proprietary rights to a number of trademarks we use in our business,
including trademarks used in connection with the marketing of our private and
signature brand products. Many of these trademarks are registered with the U.S.
Patent and Trademark Office, each for an initial period of 20 years, which is
renewable for as long as we continue to use the trademarks.

EMPLOYEES

At the end of fiscal 1999, we had approximately 4,300 full-time employees,
of whom approximately 200 were employed in corporate management and
administration and approximately 2,900 of whom were hourly employees. We have
not experienced any labor disputes or work stoppages, and have no collective
bargaining contracts. We believe that our relationships with our employees are
good.

LITIGATION

From time to time, we are involved in litigation and proceedings arising in
the ordinary course of our business. There are no pending material legal
proceedings to which we are a party or to which our property is subject.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following sets forth information regarding each of our executive
officers and directors as of June 15, 2000:

NAME AGE POSITION
- ---- -------- --------------------------------------------------------

W. McFall Pearce............. 49 Chairman of the Board of Directors, President and Chief
Executive Officer

Kelly A. Elliott............. 36 Vice President and Chief Financial Officer

Robert M. Stout.............. 47 Director, President-Eastern Division and
President-Charlotte

Kenneth P. Craft............. 57 President-Western Division and President-Montgomery

Roger J. Toomey.............. 47 Senior Vice President-Marketing and Business Development

W. MCFALL (MAC) PEARCE has served as Chairman of our Board of Directors
since June 2000 and as President and Chief Executive Officer of PYA/Monarch
since June 1997. Twenty seven years ago, Mr. Pearce began his career at
PYA/Monarch as a buyer of frozen and refrigerated products. Since then, he has
held a variety of sales and management positions within PYA/Monarch, including
street sales representative, Regional Vice President, President-Charlotte, and
Executive Vice President. In 1997, Mr. Pearce became a Vice President of Sara
Lee. Mr. Pearce is active in various industry organizations, currently serving
as a member of the Editorial Board of Institutional Distribution Magazine and
the board of Foodservice Distributors International. Mr. Pearce is also on the
board of Markon, a produce cooperative of leading regional foodservice
distributors. Mr. Pearce is a member of the family that founded
Pearce-Young-Angel, a predecessor to PYA/Monarch. He holds a Bachelor of Science
degree in Marketing from the University of South Carolina.

KELLY A. ELLIOTT has served as Vice President and Chief Financial Officer of
PYA/Monarch since December 1997. Ms. Elliott began her career with PYA/Monarch
as a Senior Financial Analyst in January 1994. She was promoted to Manager of
Accounting in May 1994 and to Corporate Controller in January 1995. Prior to
joining PYA/Monarch, Ms. Elliott was with Arthur Andersen LLP in their Audit
Division from 1986 to 1990. She joined the Sara Lee organization with Bil Mar
Foods, Inc. from 1990 to 1993. From 1993 to 1994, she was Vice President of
Finance and Administration of Clear Springs Citrus, Inc., a fresh citrus juice
processor. Ms. Elliott graduated from Iowa State University and holds a Bachelor
of Business Administration degree in Accounting. She is a Certified Public
Accountant in South Carolina and Iowa, and a member of the American Institute of
Certified Public Accountants.

ROBERT M. STOUT has served as a director since June 2000, as
President-Eastern Division of PYA/Monarch since February 2000 and as President
of our Charlotte facility since October 1994. Mr. Stout began his career with
PYA/Monarch as a Charlotte, North Carolina, Sales Trainee in 1977 and has held
various sales and management positions with the Charlotte Branch. Mr. Stout
graduated from the University of North Carolina with a Bachelor of Arts degree
in Economics in 1974.

KENNETH P. CRAFT has served as President-Western Division of PYA/Monarch
since February 2000 and as President of our Montgomery facility since
July 1995. Mr. Craft began his career with PYA/ Monarch as a branch General
Manager in 1983 and has held the positions of Branch Vice President & General
Manager--Walterboro, South Carolina, and Branch President-Atlanta, Georgia.
Prior to joining PYA/Monarch, Mr. Craft held several management positions within
the food industry

with Food Services of America, Rykoff-Sexton, SYSCO, Glazier Foods, Kimbell
Grocery Company, and Carnation Company. Mr. Craft attended Arizona State
University where he studied Business Administration; he also attended Executive
Management training programs at Carnation Company and Emory University.

ROGER J. TOOMEY has served as Senior Vice President-Marketing and Business
Development of PYA/ Monarch since February 1998. Mr. Toomey was previously
employed with PYA/Monarch from 1986 to 1989 in the role of Group Marketing
Director in the Midwest Division. Prior to Mr. Toomey's return to PYA/ Monarch,
he spent eight years with Food Services of America, first as Vice President of
Purchasing and Marketing, then as Senior Vice President. From 1976 to 1986
Mr. Toomey was Director of Purchasing for Aslesen Company, a foodservice
distributor based in Minneapolis, Minnesota. Mr. Toomey holds a Bachelor of
Science degree in Accounting and Business Administration from the University of
Minnesota.

BOARD STRUCTURE AND COMPENSATION

In addition to the two directors who currently comprise our board of
directors, we intend to name five additional directors who will be appointed to
our board of directors prior to the completion of this offering. We expect that
two of these directors will be employees of Sara Lee and three will be outside
directors. We anticipate that the three outside directors will comprise our
audit committee and our compensation and employee benefits committee.

AUDIT COMMITTEE

Prior to the completion of this offering, we intend to establish an audit
committee. Our audit committee will review our auditing, accounting, financial
reporting and internal control functions and will make recommendations to the
board of directors for the selection of independent accountants. In addition,
the committee will review our accounting principles and financial reporting, our
compliance with foreign trade regulations as well as the independence of and the
non-audit services provided by our independent accountants. In discharging its
duties, the audit committee will:

- review and approve the scope of the annual audit and the independent
accountant's fees;

- meet independently with our internal accounting staff, our independent
accountants and our senior management; and

- review the general scope of our accounting, financial reporting, annual
audit and internal audit program, matters relating to internal control
systems and the results of the annual audit.

COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE

Prior to the completion of this offering, we intend to establish a
compensation and employee benefits committee. Our compensation and employee
benefits committee will determine, approve and report to the board of directors
on all elements of compensation for our elected officers, including targeted
total cash compensation and long-term equity based incentives.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For our fiscal year ended July 3, 1999, we were operated as a subsidiary of
Sara Lee and had no compensation committee. The compensation and employee
benefits committee of Sara Lee or properly authorized officers of Sara Lee made
all compensation decisions with respect to our executive officers. After this
offering, our compensation and employee benefits committee will make all
compensation decisions regarding our executive officers. None of our executive
officers will serve on the compensation committee or board of directors of any
other company of which any of

the members of our compensation and employee benefits committee or our board of
directors is an executive officer.

DIRECTOR COMPENSATION

Directors who are employees of PYA/Monarch or Sara Lee receive no fees for
their services as directors. Our non-employee directors will receive an annual
retainer of $30,000 and an annual grant of 5,000 options to purchase shares of
our common stock. The exercise price of these options will equal the fair market
value of our common stock on the date of grant. Non-employee directors can elect
to receive common stock, options to purchase common stock, or a combination of
common stock and options, in lieu of all or any portion of the $30,000 annual
retainer. In addition, non-employee directors may elect to defer part or all of
their annual cash retainer under our Directors Deferred Compensation Plan
described below. Deferred amounts are invested in an interest bearing account or
a stock equivalent account. Chairpersons of our board committees will receive an
additional $5,000 annually. At the time of the offering, we intend to grant an
option to purchase 5,000 shares of our common stock, at the offering price, to
each of our non-employee directors.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

All of our common stock is currently owned by Sara Lee, and thus none of our
officers, directors or director nominees own any of our common stock. To the
extent our directors and officers own shares of Sara Lee common stock at the
time Sara Lee effects any exchange or distribution of our common stock, our
directors and officers will participate in the exchange or distribution on the
same terms as other holders of Sara Lee common stock.

The following table sets forth the number of shares of Sara Lee common stock
beneficially owned on June 1, 2000 by each director, each of the executive
officers named in the Summary Compensation Table below and all of our directors
and executive officers as a group. Except as otherwise noted, the individual
director or executive officer or their family members has sole voting and
investment power with respect to such stock. The total number of shares of Sara
Lee common stock outstanding as of June 1, 2000 was 891,873,323.

SHARES OF SARA LEE
BENEFICIALLY OWNED
----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
- ------------------------ -------- -----------

W. McFall Pearce (1)........................................ 222,371 *
Kelly A. Elliott (2)........................................ 24,187 *
Robert M. Stout (3)......................................... 134,453 *
Kenneth P. Craft (4)........................................ 112,254 *
Roger J. Toomey (5)......................................... 14,000 *
All Directors and Officers as a Group (5 people)............ 507,265 *

- ------------------------

* Less than .01%.

(1) Includes 184,688 shares of common stock that may be purchased within
60 days of June 1, 2000 pursuant to the exercise of options.

(2) Includes 14,764 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

(3) Includes 99,593 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

(4) Includes 86,992 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

(5) Includes 13,000 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

EXECUTIVE COMPENSATION

The following table sets forth compensation information for our chief
executive officer and our four next most highly compensated executive officers
for the fiscal year ended July 3, 1999. All information set forth in this table
reflects compensation paid to these individuals for services performed for
PYA/Monarch during the fiscal year ended July 3, 1999.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- -----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS AWARDS (1) OPTIONS COMPENSATION (2)
- --------------------------- --------- --------- ---------- ---------- ----------------

W. McFall Pearce......................... $232,115 $164,494 $158,400 56,929 $26,441
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Kelly A. Elliott......................... 111,811 51,421 0 12,000 9,504
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER

Robert M. Stout.......................... 153,660 101,664 57,600 60,766 15,801
PRESIDENT--EASTERN DIVISION AND
PRESIDENT--CHARLOTTE

Kenneth P. Craft......................... 141,152 89,895 57,600 53,324 15,968
PRESIDENT--WESTERN DIVISION AND
PRESIDENT--MONTGOMERY

Roger J. Toomey.......................... 143,392 56,754 0 13,000 1,171
SENIOR VICE PRESIDENT--MARKETING AND
BUSINESS DEVELOPMENT

- ------------------------------

(1) Reflects the market value of restricted stock units on the date of grant.
Market value was calculated based on $24 per share of Sara Lee common stock
and the following number of restricted stock units: W. McFall Pearce, 6,600;
Robert Stout, 2,400; and Kenneth Craft, 2,400. Dividends on the restricted
stock units are escrowed during the three-year performance cycle. Dividends
and interest on the escrowed dividends are distributed at the end of the
performance cycle in the same proportion as the restrictions on the
restricted stock units lapse. The restrictions lapse three years from the
grant date if, and only to the extent that, performance goals or service
requirements are met. To the extent the performance goals or service
requirements are not attained, the restricted stock units, the escrowed
dividends and interest will be forfeited.

(2) Includes payment by Sara Lee of the following amounts for life insurance on
behalf of each of the executive officers above: $6,951 for W. McFall Pearce;
$2,947 for Kelly Elliott; $4,837 for Robert Stout; $6,116 for Kenneth Craft;
and $1,171 for Roger Toomey. Includes Sara Lee's contributions under its
employee stock ownership plan and supplemental retirement benefit plan of
the following amounts on behalf of the following executive officers
contained in the table above: $19,490 for W. McFall Pearce; $6,557 for Kelly
Elliott; $10,964 for Robert Stout; and $9,852 for Kenneth Craft.

GRANTS OF SARA LEE STOCK OPTIONS

The following table shows all grants of options to acquire shares of Sara
Lee common stock made to the executive officers named in the Summary
Compensation Table during the fiscal year ended July 3, 1999.

% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
NUMBER OF GRANTED TO RATES OF STOCK
SECURITIES SARA LEE EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN PRICE PER OPTION TERM(2)
THE OPTIONS FISCAL SARA LEE -----------------------------
NAME GRANTED YEAR SHARE EXPIRATION DATE 5% 10%
- ---- ------------ ------------- ----------- --------------- ------------- -------------

W. McFall Pearce............ 51,000 * $24.03 August 2008 $771,530 $1,955,670
5,929(3) * $27.72 July 2002 30,461 64,748

Kelly A. Elliott............ 12,000 * $24.03 August 2008 181,536 460,158

Robert M. Stout............. 25,000 * $24.03 August 2008 378,201 958,662
8,000 * $25.66 January 2009 129,234 327,581
5,266(3) * $22.88 August 2005 49,073 114,369
5,608(3) * $22.88 August 2006 61,237 146,663
6,606(3) * $22.88 August 2006 72,135 172,763
897(3) * $26.97 August 2004 7,457 16,698
1,857(3) * $26.97 January 2005 16,809 38,065
4,896(3) * $26.97 August 2005 49,484 113,844
866(3) * $26.97 August 2004 7,199 16,121
1,770(3) * $26.97 January 2005 16,022 36,282

Kenneth P. Craft............ 20,000 * $24.03 August 2008 302,561 766,930
4,874(3) * $29.73 August 2005 57,985 134,758
6,012(3) * $29.73 August 2006 83,966 200,519
16,662(3) * $29.73 August 2007 269,111 660,840
2,536(3) * $29.73 August 2005 30,170 70,116
3,240(3) * $29.73 August 2006 45,251 108,064

Roger J. Toomey............. 13,000 * $24.03 August 2008 196,664 498,504

- ------------------------------

* Less than .01%. The total options granted by Sara Lee in fiscal 1999 was
17,172,200.

(1) Exercise price equals 100% of the fair market value of the common stock on
the date of grant. Each option expires 10 years after the grant date, other
than restoration stock options described in more detail in footnote (3)
below. The options generally become exercisable in three equal annual
installments, on the first three anniversary dates of the date of grant. No
option may be exercised until the expiration of one year from the date of
grant. In the event of a change in control of Sara Lee, the compensation and
employee benefits committee of Sara Lee may provide for appropriate
adjustments, including acceleration of the vesting period.

(2) Potential realizable values are net of exercise price, but before deduction
of taxes associated with exercise. A zero percent gain in stock price from
the exercise price will result in zero dollars for the optionee. The dollar
amounts indicated in these columns are the result of calculations assuming
growth rates required by the rules of the Securities and Exchange
Commission. These growth rates are not intended to forecast future
appreciation, if any, of the price of Sara Lee common stock.

(3) These are restoration stock options, which are granted when an executive
exercises an existing option by surrendering Sara Lee common stock. The
grant of a restoration stock option upon the exercise of an existing option
is intended to promote increased employee share ownership by encouraging the
early exercise of existing options. The grant of a restoration stock option
does not result in an increase in the total combined number of shares and
options held by an employee.

EXERCISES OF SARA LEE STOCK OPTIONS

The following table shows aggregate exercises of options to purchase Sara
Lee common stock in the fiscal year ended July 3, 1999, by the executive
officers named above in the Summary Compensation Table.

AGGREGATED SARA LEE OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES

SARA LEE NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL-YEAR-END AT FISCAL YEAR-END(1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- --------- ------------ -------------- ------------ --------------

W. McFall Pearce..................... 16,400 $289,300 148,263 115,466 $696,890 $210,956
Robert M. Stout...................... 27,174 216,425 72,306 51,646 35,026 120,062
Kenneth P. Craft..................... 41,066 427,136 86,980 55,952 0 120,062

- ------------------------------

(1) Options are "in-the-money" at fiscal year-end if the market value of the
underlying securities on that date exceeds the exercise price of the
options. The amounts set forth represent the difference between the closing
price of Sara Lee common stock of $22.50 as reported by the New York Stock
Exchange on July 3, 1999, less the option exercise price payable for those
shares.

SEVERANCE POLICY

Sara Lee has a severance policy for certain officers of Sara Lee which
covers fiscal year 2000. Upon the consummation of this offering, PYA/Monarch
intends to adopt its own severance policy, and PYA/Monarch employees will no
longer be covered by Sara Lee's policy. Sara Lee's policy provides that if an
officer's employment is terminated without cause, the officer will receive from
12 to 24 months of salary as severance payments. The amount of actual severance
payments depends on the officer's position, length of service and age. Under
this policy, officers also receive a partial payment under the incentive plans
applicable to the fiscal year in which the termination occurs. The terminated
officer's participation in Sara Lee's insurance plans, except for disability
insurance, which ends on the date of termination of employment, will continue
for the same number of months for which he or she is receiving severance
payments. Severance payments terminate if the terminated officer becomes
employed by a competitor of Sara Lee.

RETIREMENT PLANS

The following table shows the approximate annual pension benefits payable
upon retirement under Sara Lee's qualified pension plan, as well as a
nonqualified supplemental benefit plan. Executive officers of PYA/Monarch are
eligible to participate in Sara Lee's retirement plans until the earlier of the
date that Sara Lee effects an exchange or other distribution of its PYA/Monarch
common stock or until PYA/Monarch adopts its own retirement plans. The
compensation covered by Sara Lee's pension plans is based on an employee's
annual salary and bonus. The amounts payable under the pension plans are
computed on the basis of a straight-life annuity and are not subject to
deduction for Social Security benefits or other amounts. Under the supplemental
benefit plan, accrued benefits having a present value exceeding $100,000 for
participants age 55 and older and $300,000 for participants who have not yet
attained the age of 55 are funded with periodic payments by Sara Lee to
individual trusts established by the participants.

ESTIMATED ANNUAL NORMAL RETIREMENT PENSION
BASED UPON THE INDICATED CREDITED SERVICE

FINAL
AVERAGE
COMPENSATION 10 YEARS 15 YEARS 25 YEARS 35 YEARS
- --------------------- --------- --------- --------- ---------

$150,000 $ 26,250 $ 39,375 $ 65,625 $ 91,875
200,000 35,000 52,500 87,500 122,500
250,000 43,750 65,625 109,375 153,125
300,000 52,500 78,750 131,250 183,750
350,000 61,250 91,875 153,125 214,375
400,000 70,000 105,000 175,000 245,000
450,000 78,750 118,125 196,875 275,625
500,000 87,500 131,250 218,750 306,250
600,000 105,000 157,500 262,500 367,500

As of June 1, 2000, the following executive officers of PYA/Monarch had
accrued the indicated years and months of credited service under the pension
plans: Mr. Pearce -- 23 years, 11 months; Ms. Elliott -- 6 years 4 months; Mr.
Stout -- 21 years, 9 months; Mr. Craft -- 16 years, 10 months; and Mr. Toomey --
5 years, 1 month.

EXECUTIVE EMPLOYMENT ARRANGEMENTS

Prior to completion of the offering, some of our executive officers will
enter into employment agreements with us. Under the terms of these agreements,
which will be substantially identical, the executive will receive an annual
salary and be eligible for a cash bonus of up to a specified portion of base
salary. In addition, these executives will receive an option to purchase a
specified number of shares of our common stock in connection with this offering
and an additional option to purchase a specified number of shares of our common
stock in August 2001. These options will vest 33 1/3% per year over a period of
three years and will be subject to the terms and conditions of our 2000 Stock
Incentive Plan. If the executive is either involuntarily terminated for any
reason other than cause, death or disability during the term of his or her
employment agreement, or is constructively terminated within two years after a
change in control, then the executive will continue to receive his or her salary
until the end of the agreement term (or, if later, the end of the period of
severance that would apply under our severance plan or a prior severance
agreement). The executive will also receive a pro-rated portion of his or her
bonus, and all unvested stock options and restricted stock will fully vest.

The table below identifies the executive officers that will enter into the
employment ageements described above and provides some details as to the terms
of their employment:

OPTION GRANT TO PURCHASE
PYA/MONARCH SHARES
---------------------------------
UPON
COMPLETION
NAME AND TITLE ANNUAL SALARY BONUS OF THIS OFFERING IN AUGUST 2001
- -------------- ------------- --------- ---------------- --------------

W. McFall Pearce
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER...............................
Kelly A. Elliott
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER...............
Robert M. Stout
PRESIDENT--EASTERN DIVISION AND
PRESIDENT--CHARLOTTE..................
Kenneth P. Craft
PRESIDENT--WESTERN DIVISION AND
PRESIDENT--MONTGOMERY.................
Roger J. Toomey
SENIOR VICE PRESIDENT--MARKETING AND
BUSINESS DEVELOPMENT..................

STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS

Our board of directors believes that the interests of our executive officers
and other senior management will be more closely aligned with the interests of
our stockholders if our executive officers and other senior management hold a
significant investment in our common stock. To ensure significant stock
ownership, our board of directors has adopted stock ownership guidelines that
require all of our employees, at the director-level and above, to own a
specified number of our securities. The ownership guidelines range from 50,000
shares for our Chief Executive Officer to 5,000 shares for each of our
director-level employees. Employees who are subject to the stock ownership
guidelines will have several years to achieve compliance. Shares covered by
deferred stock units and shares allocated under any 401(k) plan or other benefit
plans we may adopt will count towards compliance with the stock ownership
guidelines.

To facilitate our executives' achievement of our stock ownership guidelines,
we intend to offer to selected executive employees options to purchase up to an
aggregate of shares of our common stock subject to the surrender and
cancellation of previously granted options to purchase shares of Sara Lee common
stock. The number and exercise prices of these PYA/Monarch options will be
determined in a manner meant to reflect the difference between the fair market
values of Sara Lee common stock and PYA/Monarch common stock on the date of the
consummation of this offering. The PYA/Monarch options will maintain the same
vesting and exercise provisions as the Sara Lee options surrendered and
cancelled. However, the PYA/Monarch options will not be exercisable until the
earlier of one year after this offering or the date on which Sara Lee ceases to
own a majority of our capital stock; provided that in no event will these
options be exercisable within six months of this offering.

TREATMENT OF SARA LEE OPTIONS AND RESTRICTED STOCK UPON AN EXCHANGE OR OTHER
DISTRIBUTION

We intend to assume any remaining Sara Lee options held by our employees on
the date of an exchange or other distribution of our common stock by Sara Lee
and convert them into equivalent

PYA/Monarch options. As of June 1, 2000, our employees held options to purchase
shares of Sara Lee common stock, excluding options held by selected
executive employees who are entitled to surrender their Sara Lee options and
receive equivalent PYA/Monarch options when this offering is completed.

Under several Sara Lee long-term performance or restricted stock plans, some
of our key employees were granted restricted stock unit awards. As of June 1,
2000, our employees held unvested Sara Lee performance-based restricted stock
units and unvested Sara Lee service-based restricted stock units. At the time of
the offering, we intend to offer to selected executive employees the right to
surrender their Sara Lee service-based restricted stock units and receive
PYA/Monarch service-based restricted stock units that have the same vesting
requirements. Sara Lee performance-based restricted stock units will not be
eligible for conversion at the time of this offering. If Sara Lee effects an
exchange or distribution of its PYA/Monarch shares prior to expiration of the
vesting cycle applicable to the outstanding Sara Lee restricted stock units, all
of the unvested Sara Lee restricted stock units automatically will convert at
the time of the exchange or distribution into PYA/Monarch restricted stock
units.

2000 STOCK PLAN

Our board of directors adopted the PYA/Monarch 2000 Stock Incentive Plan in
, 2000, and we intend to obtain the approval of the 2000 Plan from our
sole shareholder, Sara Lee, prior to the completion of this offering. The 2000
Plan provides for the grant of incentive stock options, non-qualified stock
options, stock appreciation rights and other stock awards to our employees and
non-employee directors.

NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE 2000 PLAN. A total of
shares of our common stock have been reserved for issuance under the 2000
Plan. No options to acquire shares of common stock or other awards have been
issued as of June 1, 2000; however, in connection with this offering, we intend
to grant to our employees options to purchase approximately shares of our
common stock at the initial offering price. None of these options will be
exercisable for one year after this offering. The number of shares of common
stock available under the 2000 Plan, as well as the exercise price and the
number of any outstanding awards, will be proportionately adjusted in the event
of any stock dividend, stock split, combination or exchange of securities,
merger, consolidation, recapitalization, spin-off or other distribution, other
than normal cash dividends. Any awards under the 2000 Plan that are made as a
result of conversion by our employees of outstanding Sara Lee options or in
connection with the assumption of options in businesses we acquire will not
reduce the number of shares available for issuance under the 2000 Plan.

ADMINISTRATION OF THE 2000 PLAN. The compensation and employee benefits
committee of our board of directors will administer the 2000 Plan. Until Sara
Lee effects an exchange or other distribution of the PYA/Monarch common stock it
owns, we have agreed to adopt procedures satisfactory to Sara Lee to ensure that
the issuance of shares of our common stock under the 2000 Plan will not cause
Sara Lee's ownership of our common stock to fall below 80%, which is necessary
to preserve the tax-free status of such a transaction. Under these procedures,
we may be required to repurchase shares of our common stock on the open market
as options are exercised. In the case of any award under the 2000 plan that is
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, our compensation and
employee benefits committee will consist solely of two or more "outside
directors" within the meaning of Section 162(m) of the Code. Our committee has
the power to determine the terms of the awards granted, including the exercise
price, the number of shares subject to each option or stock purchase right, the
exercisability of the options and the form of consideration payable upon
exercise.

OPTIONS. The exercise price of all options granted under the 2000 Plan will
be at least equal to the fair market value of our common stock on the grant
date; provided, that options granted upon the involuntary conversion of our
employees' Sara Lee options or in connection with the acquisition of a business
may be granted with a purchase price that is intended to preserve the economic
value of the option being replaced but, in the case of an involuntary
conversion, not less than the exercise price of the Sara Lee option that was
converted. The committee may grant options that provide for the grant of a
restoration option. If a person exercises an option that contains a restoration
option provision and pays the exercise price by tendering shares of our common
stock to us, or satisfies any tax-withholding obligations by authorizing us to
withhold shares that would be granted under the option, the person exercising
the option may receive a restoration option for the number of shares tendered or
withheld. The committee determines all other terms of options.

No optionee may be granted an option to purchase more than shares over
the term of the 2000 Plan, except that in the calendar year that an optionee
begins service as the Chief Executive Officer, the optionee may be granted
options to purchase up to 500,000 shares. Neither of these limits will include
restoration options. The number of shares for which restoration options may be
granted to any optionee in any calendar year may not exceed 500,000 shares.

After termination of employment or service as a director, an optionee may
exercise a vested option for the period of time stated in the option agreement.
Generally, if termination is due to (1) death or disability, vesting accelerates
and the option will remain exercisable until the earlier of its expiration date
or 5 years, (2) retirement, vesting continues and the option will remain
exercisable until its expiration date, (3) involuntary termination under which
severance benefits are payable, a vested option will remain exercisable until
the earlier of its expiration date or the last day of the period for which
severance benefits are payable, or (4) cause, the option will terminate in its
entirety on the date of termination. In all other cases, a vested option will
terminate upon termination of employment; however, an option may never be
exercised later than the expiration of its term. Certain officers and employees
may be required to repay all financial gains realized from exercising all or a
portion of an option exercised within the six-month period preceding certain
conduct that is contrary or harmful to our interests, such as accepting
employment with one of our competitors.

STOCK APPRECIATION RIGHTS. All stock appreciation rights, or SARs, granted
under the 2000 Plan generally represent a right to receive payment, in cash,
stock, or a combination of cash and stock, equal to the excess of the fair
market value of a specified number of shares of common stock on the exercise
date over the fair market value of such shares on the grant date.

STOCK AWARDS. A stock award granted under the 2000 Plan represents an award
made in or valued in whole or in part by reference to shares of common stock and
may be payable in whole or in part in stock. The committee determines the
conditions and restrictions of all stock awards granted under the 2000 Plan. No
more than 20% of the shares reserved for issuance under the 2000 Plan may be
issued as a stock award.

PAYMENT DEFERRALS. The committee may require or permit an optionee to defer
the receipt of shares or cash or other property upon settlement of awards. The
committee may also allow the payment or crediting of earnings on deferred
amounts.

TRANSFERABILITY OF OPTIONS, SARS AND STOCK AWARDS. The 2000 Plan generally
does not allow for the transfer of options, SARs or stock awards other than by
will or the laws of descent and distribution pursuant to approved beneficiary
designation procedures. Only the employee may exercise his or her options during
his or her lifetime.

ADJUSTMENTS IN CONNECTION WITH A CHANGE IN CONTROL. In contemplation of or
in the event of a change in control, the committee may provide for appropriate
adjustments, including the

acceleration of vesting and the settlement or substitution of awards. If a
change in control occurs prior to the time Sara Lee effects an exchange or
distribution of our common stock, one-half of all unvested options will vest
automatically. Any exchange or distribution of our common stock by Sara Lee
should not constitute a change in control.

AMENDMENT OF THE 2000 PLAN. Our board of directors has the authority to
amend, suspend or terminate the 2000 Plan, provided it does not adversely affect
any award previously granted under our 2000 Plan without the affected award
holder's consent.

EXECUTIVE DEFERRED COMPENSATION PLAN

In June 2000, our board of directors adopted the Executive Deferred
Compensation Plan. The Deferred Compensation Plan has been approved by our sole
stockholder, Sara Lee. The Deferred Compensation Plan is not a tax-qualified
retirement plan. The Deferred Compensation Plan is a plan that permits all
officers and key employees at or above the director-level to elect to defer all
or a portion of their annual bonus or annual base salary and any other bonus or
incentive payment designated by the compensation and employee benefits
committee. A participant may also elect to transfer his or her deferrals under
the Sara Lee Executive Deferred Compensation Plan to the Deferred Compensation
Plan. All amounts deferred under the Deferred Compensation Plan are invested in
either an interest bearing account or a stock equivalent account, at the
election of the participant, and will be paid to the participant on the
distribution date elected by the participant. No participant may elect a date
for payment of deferred amounts that is sooner than one year after the date this
offering is completed.

PERFORMANCE-BASED ANNUAL INCENTIVE PLAN

Our board of directors adopted the Performance-Based Annual Incentive Plan
in , 2000, and we intend to obtain the approval of the Annual Incentive
Plan from our sole stockholder, Sara Lee, prior to the completion of this
offering. The Annual Incentive Plan is intended to provide some of our key
executives with annual incentive compensation that is tied to the achievement of
pre-established and objective performance goals. The compensation and employee
benefits committee of our board administers the Annual Incentive Plan. In the
case of awards intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code, the committee will consist solely of
two or more "outside directors" within the meaning of Section 162(m) of the
Code. Under the Annual Incentive Plan, each participant is eligible to receive a
predetermined annual award established by the compensation and employee benefits
committee, which award may not exceed $1.0 million, if the performance goal has
been satisifed.

2000 NON-EMPLOYEE DIRECTOR STOCK PLAN

Our board of directors adopted the 2000 Non-Employee Director Stock Plan on
, 2000, and we intend to obtain the approval of the Director Plan from
our sole stockholder, Sara Lee, prior to the completion of this offering.

ADMINISTRATION. The compensation and employee benefits committee of our
board of directors will administer the Director Plan. Until Sara Lee effects an
exchange or other distribution of the PYA/ Monarch common stock it owns, we have
agreed to adopt procedures satisfactory to Sara Lee to ensure that the issuance
of shares of our common stock under the Director Plan will not cause Sara Lee's
ownership of our common stock to fall below 80%, which is necessary to preserve
the tax-free status of Sara Lee's exchange or distribution. Under these
procedures, we may be required to repurchase shares of our common stock as
options are exercised.

NUMBER OF SHARES AVAILABLE UNDER THE DIRECTOR PLAN. As of , 2000, the
aggregate number of shares reserved for options and share awards under the
Director Plan was , and no options to acquire shares or other awards were
issued and outstanding as of that date. In any fiscal year, the aggregate number
of shares that will be available for awards under the Director Plan will be
one-tenth of one percent (.1%) of the outstanding shares of common stock as of
the last day of the immediately preceding fiscal year. The number of shares of
common stock available under the Director Plan, as well as the exercise price
and the number of shares of any outstanding awards, will be proportionately
adjusted in the event of any stock dividend, stock split, combination or
exchange of securities, merger, consolidation, recapitalization, spin-off or
other distribution, other than normal cash dividends.

ELECTION FOR DIRECTORS' FEES. Non-employee directors may elect to receive
all or any portion of their annual directors fees in the form of either options
or stock or a combination of options and stock.

OPTIONS. Each non-employee director will receive an annual option retainer
consisting of 5,000 options on the last regularly scheduled meeting of the board
held in October in each year beginning in October 2000. A restoration option may
be granted if a director pays the purchase price upon exercise of an option by
surrendering shares.

All options granted under our Director Plan have a term not longer than
10 years and an exercise price equal to the fair market value of our common
stock on the date of grant. Each option becomes exercisable six months after the
option grant date; provided that no option may be exercised until the earlier of
one year following this offering and the date that Sara Lee effects an exchange
or other distribution of the PYA/Monarch common stock it owns. After termination
of services as a non-employee director, an optionee may exercise the vested
portion of his or her option through the expiration of its term.

STOCK AND OPTIONS IN LIEU OF FEES. We will deliver to each non-employee
director who elects to receive stock in lieu of fees the number of shares equal
to the portion of the annual directors fees elected to be invested in shares
divided by the fair market value per share on the award date. Shares to be paid
in respect of, and prior to, the one-year period beginning on the first
November 1 after such election will not be transferred to the non-employee
director until immediately after the first annual meeting of stockholders held
after the date of such award. The amount of dividends that would otherwise be
paid on such shares will be held by PYA/Monarch until immediately after that
annual meeting. Any undelivered shares and dividend equivalents will be
forfeited if the non-employee director is not elected a director of PYA/Monarch
at that annual meeting. We will deliver to each non-employee director who elects
to receive options in lieu of fees the number of shares equal to (a) three times
the portion of the annual directors fees elected to be paid in the form of an
option, divided by (b) the fair market value per share on the option grant date.

TRANSFERABILITY OF OPTIONS. A non-employee director generally may not
transfer options granted to him or her under our Director Plan other than by
will or the laws of descent and distribution. Only an optionee may exercise his
or her options during his or her lifetime.

ADJUSTMENTS IN CONNECTION WITH A CHANGE IN CONTROL. In contemplation of or
in the event of a change in control, the administrator may provide for
appropriate adjustments, including acceleration of vesting and settlements of or
substitutions for awards either at the time an award is granted or at a
subsequent date. In the event of a change in control, all outstanding options
shall be immediately vested and exercisable and all shares and dividend
equivalents not yet transferred to the non-employee director will be immediately
transferred to the non-employee director. Any exchange or distribution of our
common stock by Sara Lee should not constitute a change in control.

AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN. Our board of directors has
the authority to amend or terminate the Director Plan at any time, provided it
does not adversely affect any award previously granted under our Director Plan
without the affected non-employee director's consent.

DIRECTORS' DEFERRED COMPENSATION PLAN

Our board of directors adopted the Directors' Deferred Compensation Plan in
, 2000, and we intend to obtain the approval of the Director's Deferred
Compensation Plan from our sole stockholder, Sara Lee, prior to the completion
of this offering. This plan is not a tax-qualified retirement plan. The
Directors' Deferred Compensation Plan is a plan that permits non-employee
directors to elect to defer all or a portion of their annual directors fees that
are otherwise payable in cash. Amounts deferred under the Directors' Deferred
Compensation Plan are invested in either an interest bearing account or a stock
equivalent account, at the election of the participant, and will be paid to the
participant on the distribution date elected by the participant. No participant
may elect a date for payment of deferred amounts that is sooner than one year
after the date this offering is completed.

ARRANGEMENTS BETWEEN SARA LEE AND PYA/MONARCH

THE FOLLOWING DESCRIPTION OF THE MASTER SEPARATION AGREEMENT AND KEY RELATED
AGREEMENTS IS ONLY A SUMMARY. FOR COMPLETE INFORMATION, YOU SHOULD READ THE FULL
TEXT OF THESE AGREEMENTS, WHICH HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS
A PART.

MASTER SEPARATION AGREEMENT

The master separation agreement will contain the key provisions relating to
our separation from Sara Lee, this offering and Sara Lee's plans to complete its
divestiture of PYA/Monarch within 18 months of this offering through an exchange
or other distribution of all or a significant portion of its shares of our
common stock.

THE SEPARATION. The ancillary agreements will detail the separation and
interim and ongoing relationships between Sara Lee and us following the
separation. These agreements will include:

- an employee matters agreement;

- a tax sharing agreement;

- a transitional services agreement;

- an indemnification and insurance matters agreement; and

- an equipment sublease agreement.

To the extent that the terms of any of these ancillary agreements conflict with
the separation agreement, the terms of these agreements will govern. These
agreements are described more fully below.

THE EXCHANGE OR OTHER DISTRIBUTION. We will agree to take all action
reasonably requested by Sara Lee to facilitate the exchange or other
distribution of its shares of our common stock.

COVENANTS BETWEEN SARA LEE AND PYA/MONARCH. We will agree with Sara Lee to:

- exchange information;

- engage in auditing practices;

- not take any action that would jeopardize Sara Lee's ownership of over 80%
of our outstanding capital stock;

- maintain the confidentiality of certain information;

- preserve available legal privileges;

- engage in certain environmental and safety practices consistent with laws
and in accordance with Sara Lee's environmental management system; and

- resolve disputes in a particular manner.

INFORMATION EXCHANGE. Both parties will agree to share information
relating to governmental, accounting, contractual and other similar
requirements of our ongoing businesses, unless the sharing could be
commercially detrimental, violate any law or agreement or waive any
attorney-client privilege. In furtherance of this covenant, both parties
will agree as follows:

- Each party will maintain adequate internal accounting systems and
controls to allow the other party to satisfy its own reporting
obligations and prepare its own financial statements.

- Each party will retain records beneficial to the other party for a
specified period of time. If the records are going to be destroyed, the
destroying party will give the other party an opportunity to retrieve
all relevant information from the records, unless the records are
destroyed in accordance with adopted record retention policies.

- Each party will use commercially reasonable efforts to provide the
other party with access to directors, officers, employees, other
personnel and agents who may be used as witnesses and books, records
and other documents which may reasonably be required in connection with
legal, administrative or other proceedings.

AUDITING PRACTICES. So long as Sara Lee is required to consolidate our
results of operations and financial position, we will agree to:

- not select a different independent accounting firm from that used by
Sara Lee without Sara Lee's consent;

- use commercially reasonable efforts to enable our auditors to date
their opinion on our audited annual financial statements on or before
the same date as Sara Lee's auditors date their opinion on Sara Lee's
financial statements;

- not change our fiscal year;

- exchange all relevant information needed to prepare financial
statements;

- grant each other's internal accounting staff access to each other's
records and to members of management; and

- notify each other of any change in accounting principles.

SARA LEE'S OWNERSHIP OF OVER 80% OF OUR COMMON STOCK. We will agree
with Sara Lee that, from the completion of this offering until the date of
any exchange or other distribution of all of our common stock by Sara Lee,
we will not take any action, such as issuing stock, that would cause Sara
Lee to no longer own over 80% of our outstanding stock. We may, however,
issue stock options and restricted stock awards, provided we give prior
written notice to Sara Lee and obtain Sara Lee's prior consent and provided
we repurchase sufficient amounts of our stock in open market transactions
before such options are exercisable or restricted stock is awarded so that
Sara Lee will continue to own over 80% of our outstanding stock.

DISPUTE RESOLUTION. If a dispute arises with Sara Lee, we will agree to
the following procedures:

- The senior executives of PYA/Monarch and Sara Lee will make a good
faith effort to resolve the dispute through negotiation first.

- If negotiations fail, the parties agree to attempt to resolve the
dispute through mediation.

- If mediation fails, the parties can resort to final and binding
arbitration. By agreeing to arbitration, the parties do not intend to
deprive any court of its jurisdiction to award a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of
arbitration proceedings and the enforcement of any award.

NO SOLICITATION. Each party will agree not to directly solicit or
recruit employees of the other party without the other party's consent for
two years after the completion of this offering.

However, this prohibition does not apply to general recruitment efforts
carried out through public or general solicitation or where the solicitation
is employee-initiated.

TRANSFER OF ASSETS. Immediately prior to the completion of this offering,
Sara Lee will transfer to us assets and liabilities related to our business, if
any, to the extent that the assets and liabilities were, prior to the completion
of this offering, assets or liabilities of Sara Lee. Sara Lee is not making any
promises to us regarding:

- the value of any asset that Sara Lee is transferring;

- whether there is a lien or encumbrance on any asset Sara Lee is
transferring;

- the absence of defenses with respect to any claims to be transferred; or

- the legal sufficiency of any conveyance of title to any asset Sara Lee is
transferring.

SARA LEE'S REGISTRATION RIGHTS. We will agree to use our best efforts to
effect up to three demand registrations under the applicable federal and state
securities laws of the shares of our common stock held by Sara Lee, if requested
by Sara Lee. Sara Lee may request no more than one demand registration in any
calendar year. We will also grant Sara Lee the right to include its shares of
our common stock in other registrations of our common equity securities
initiated by us or on behalf of our other stockholders. We agree to pay all
costs and expenses in connection with each registration of our common stock
requested by Sara Lee or in which Sara Lee participates. Each party will agree
to indemnify each other and any underwriters on standard terms, including for
liability under federal securities laws.

EXPENSES. We will bear the costs and expenses associated with this offering
and Sara Lee will bear the costs and expenses associated with any exchange or
other distribution of our common stock by Sara Lee. We will bear any costs and
expenses associated with any audit of our financial statements required by any
exchange or other distribution. We will each bear our own internal costs
incurred in consummating all of these transactions.

TERMINATION OF THE AGREEMENT. Sara Lee in its sole discretion can terminate
the separation agreement and all ancillary agreements and abandon this offering
at any time prior to the closing of this offering. Both parties must agree to
terminate the separation agreement and all ancillary agreements at any time
between the closing of this offering and any exchange or other distribution.

EMPLOYEE MATTERS AGREEMENT

The employee matters agreement will allocate to us assets, liabilities and
responsibilities relating to our current and former employees. The agreement
also will provide for our employees continued participation in some of the
benefit plans that Sara Lee currently sponsors. Under this agreement, we will
assume and agree to pay, perform and fulfill all obligations relating to our
employees arising out of their present or future employment with us and their
prior employment with Sara Lee relating to our business.

All of our employees will continue to participate in the Sara Lee sponsored
benefit plans, such as the pension and retirement plan, health benefit program
and group insurance plan, on terms comparable to those for Sara Lee employees
until the earlier of an exchange or other distribution by Sara Lee of our common
stock or until we establish our own benefit plans for our employees. We intend
to establish our own benefit programs no later than the time of any exchange or
other distribution by Sara Lee.

Once we establish our own benefits plans, we may modify or terminate each
plan in accordance with the terms of that plan and our policies. None of our
benefit plans will provide benefits that overlap benefits provided by the
corresponding Sara Lee benefit plan, if any. Each of

our benefit plans will provide that all service, compensation and other benefit
determinations that were recognized under the corresponding Sara Lee benefit
plan will be taken into account under that PYA/Monarch benefit plan.

Assets relating to the employee liabilities that we assume will be
transferred to us or our related plans and trusts from trusts and other funding
vehicles associated with Sara Lee's benefit plans.

TAX SHARING AGREEMENT

The tax sharing agreement will allocate responsibilities for tax matters
between PYA/Monarch and Sara Lee. Until the date Sara Lee effects an exchange or
other distribution of our common stock that it owns, Sara Lee is responsible for
preparing and filing all consolidated, combined and unitary tax returns that
include us and our subsidiaries, as well as our separate state income tax
returns. We have the right to review and comment on the tax returns that Sara
Lee files on our behalf, but Sara Lee has the exclusive right to determine the
manner in which such tax returns are prepared, including the elections, method
of accounting, positions, conventions and principles of taxation to be used.
Except with respect to separate state income tax returns, we are responsible for
preparing and filing any tax returns that include only us and our subsidiaries.

The tax sharing agreement requires us to pay Sara Lee the incremental tax
costs of our inclusion in consolidated, combined and unitary tax returns. In the
case of a consolidated federal income tax return, the amount we owe Sara Lee
will be computed as if we had filed our own separate, consolidated federal
income tax return for us and our subsidiaries. The tax sharing agreement
requires Sara Lee to compensate us for some, but not all, of the tax benefits
that Sara Lee may derive from our inclusion in its consolidated federal income
tax return.

Each member of an affiliated group that files a consolidated tax return for
United States federal income tax purposes is severally liable for the affiliated
group's federal income tax liability. Accordingly, we could be required to pay a
deficiency in the group's federal income tax liability for a period during which
we were a member of Sara Lee's group even if the tax sharing agreement allocates
that liability to Sara Lee or another member of the group. However, the tax
sharing agreement provides that Sara Lee will indemnify us if we are required to
pay a deficiency in the group's federal income tax liability that is allocated
to Sara Lee or another member of the group.

Sara Lee is solely responsible for controlling and contesting any audit or
other tax proceeding with respect to any consolidated, combined or unitary tax
return that includes us and our subsidiaries, as well as any separate state
income tax return relating to us and our subsidiaries.

The tax sharing agreement also requires us to indemnify Sara Lee for certain
taxes and similar obligations, including any taxes resulting from the failure of
any exchange or distribution by Sara Lee of our common stock (and certain
related transactions) to qualify as tax-free to Sara Lee as a result of actions
taken, or the failure to take required actions, by us or any of our
subsidiaries. Specifically, the tax sharing agreement requires us to cooperate
with Sara Lee, and to take any and all actions reasonably requested by Sara Lee,
in connection with Sara Lee's request, if any is made, for a private letter
ruling from the Internal Revenue Service or for a legal opinion regarding the
tax-free nature of an exchange or distribution of PYA/Monarch stock by Sara Lee
to Sara Lee's stockholders.

MASTER TRANSITIONAL SERVICES AGREEMENT

The master transitional services agreement governs the provision of
transitional services by Sara Lee to us, on an interim basis. The agreement will
terminate on the earlier of two years after the offering is completed or when
Sara Lee effects an exchange or other distribution of our common stock. Sara Lee
will provide support services including accounting, treasury,

environmental, tax, legal, risk management and assessment services, investor
relations, and other administrative functions.

Under the agreement we will pay Sara Lee a fee of $1,000,000 per year,
payable in monthly installments over the two year term of the agreement, plus an
additional fee for certain specified services, if any. The fee will be pro rated
for the actual term of the agreement if the agreement terminates in its entirety
before the end of its two year term. We may terminate the agreement with respect
to any service at any time upon notice to Sara Lee, however, the termination of
any service will have no effect upon the fee.

INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

GENERAL RELEASE OF PRE-SEPARATION CLAIMS. Effective immediately prior to
the completion of this offering, the indemnification and insurance matters
agreement will provide that we will release Sara Lee and its affiliates, agents,
successors and assigns, and Sara Lee will release us, and our affiliates,
agents, successors and assigns, from any liabilities arising from events
occurring on or before the separation date. This provision will not impair a
party from enforcing the separation agreement, any ancillary agreement or any
arrangement specified in any of these agreements.

INDEMNIFICATION. The indemnification and insurance matters agreement also
contains provisions governing indemnification. In general, we have agreed to
indemnify Sara Lee and its affiliates, agents, successors and assigns from all
liabilities arising from:

- our business, any of our liabilities or any of our contracts; and

- any breach by us of the separation agreement or any ancillary agreement.

Sara Lee has agreed to indemnify us and our affiliates, agents, successors
and assigns from all liabilities arising from:

- Sara Lee's business other than our business;

- certain disposition agreements relating to businesses that are no longer
part of PYA/ Monarch's business and liabilities of those businesses; and

- any breach by Sara Lee of the separation agreement or any ancillary
agreement.

These indemnification provisions do not apply to amounts collected from
insurance. The agreement also contains provisions governing notice and
indemnification procedures.

LIABILITY ARISING FROM THIS PROSPECTUS. We have agreed to indemnify Sara
Lee for any liability arising from any untrue statement of a material fact or
any omission of a material fact in this prospectus, other than any liability
relating to statements or omissions relating exclusively to Sara Lee.

ENVIRONMENTAL MATTERS. Sara Lee has agreed to indemnify us and our
affiliates, agents, successors and assigns from (1) all liabilities arising from
environmental conditions existing at facilities that are not owned by or
transferred to us, or which arise out of our operations occurring at certain
former facilities not owned by us and (2) certain third party site liabilities
arising from pre-separation activities.

We have agreed to indemnify Sara Lee and its affiliates, agents, successors
and assigns from (1) all liabilities arising from environmental conditions
caused by our operations at any facilities owned by or transferred to us,
(2) from environmental conditions at our facilities arising from an event that
occurs after the offering and (3) all third party site liabilities arising from
post-separation activities.

INSURANCE MATTERS. The agreement also contains provisions governing our
insurance coverage from the separation date until the date of any exchange or
other distribution of our common stock by Sara Lee. In general, we agree to
reimburse Sara Lee for premium expenses related to insurance coverage during
this period. Prior to any exchange or other distribution, Sara Lee will maintain
insurance policies on our behalf. Sara Lee will promptly distribute to us any
insurance proceeds that Sara Lee recovers under any Sara Lee insurance policy
relating to our business.

EQUIPMENT SUBLEASE AGREEMENT

We sublease certain vehicles from Sara Lee on a month-to-month basis, which
sublease is cancellable by either party. We have entered into an equipment
sublease agreement with Sara Lee that contains the terms upon which we will
continue to sublease tractor-trailers, straight trucks and other equipment from
Sara Lee until the date Sara Lee effects an exchange or distribution of its
PYA/Monarch common stock.

PROMISSORY NOTE

Prior to the completion of our fiscal year 2000, which ends on July 1, 2000,
we intend to declare and pay a dividend to Sara Lee. We intend to pay the
dividend by issuing a promissory note to Sara Lee with a principal amount equal
to the dividend declared. The promissory note to Sara Lee will bear interest at
a rate based on LIBOR plus 30 basis points for so long as Sara Lee owns more
than 80% of our outstanding stock and LIBOR plus 250 basis points thereafter.
The note will mature on June 30, 2002 and may be prepaid at any time without
penalty or premium. The note also requires mandatory prepayments in the event
cash proceeds are realized by us from the issuance of any equity securities or
by the generation of excess cash flow as defined in the note. The note includes
customary covenants, which restrict our ability to incur secured debt or enter
into sale leaseback transactions and which require us to maintain specified
interest coverage ratios. The note also contains customary events of default,
including failure to pay interest when due and the occurrence of certain events
of bankruptcy. The consent of Sara Lee is also required prior to us entering
into certain extraordinary transactions.

As required by the terms of the note, we will use all of the net proceeds of
the offering to repay a portion of the amount outstanding under the note.
Immediately following the offering, the aggregate principal amount owed by us to
Sara Lee pursuant to the note will be approximately $ million, based upon
an assumed initial public offering price of $ .

REVOLVING CREDIT FACILITY

Prior to the completion of this offering, we will enter into a revolving
credit facility with Sara Lee which will provide borrowing and investment
capabilities under which we may borrow up to $ million from Sara Lee and
invest excess funds with them. Indebtedness under the revolving credit facility
will bear interest based upon LIBOR plus 30 basis points. Investment will earn
interest based LIBOR minus 20 basis points. The revolving credit facility will
be available to fund general corporate purposes and terminates when Sara Lee no
longer holds a majority of our outstanding common stock. We intend to replace
the Sara Lee facility with a bank facility at such time as the Sara Lee facility
terminates. The credit facility may be prepaid without penalty or premium. The
facility will include essentially the same covenants and customary events of
default as the promissory note.

PRINCIPAL STOCKHOLDER

Prior to this offering all of the outstanding shares of our common stock
will be owned by Sara Lee, a publicly-held company that is listed on the New
York Stock Exchange. After this offering, Sara Lee will own about %, or about
% if the underwriters fully exercise their option to purchase additional
shares of our outstanding common stock. Except for Sara Lee, we are not aware of
any person or group that will beneficially own more than 5% of the outstanding
shares of our common stock following this offering. None of our executive
officers or directors currently owns any shares of our common stock, but those
who own shares of Sara Lee common stock will be treated on the same terms as
other holders of Sara Lee stock in any exchange or other distribution of our
common stock by Sara Lee. See "Management--Stock Ownership of Directors and
Executive Officers" for a description of the ownership of Sara Lee stock by our
directors and executive officers.

DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING DESCRIPTION OF THE TERMS OF OUR CAPITAL STOCK IS ONLY A
SUMMARY. FOR A COMPLETE DESCRIPTION, WE REFER YOU TO THE MARYLAND GENERAL
CORPORATE LAW, OUR CHARTER AND BYLAWS. WE HAVE FILED OUR CHARTER AND BYLAWS AS
EXHIBITS TO THIS REGISTRATION STATEMENT.

GENERAL

Our charter provides that we may issue up to 100,000,000 shares of common
stock, par value $.01 per share, and up to 25,000,000 shares of preferred stock,
par value $.01 per share, and permits our board, without stockholder approval,
to amend the charter to increase or decrease the aggregate number of shares of
stock or the number of shares of stock of any class or series that we have
authority to issue. Upon completion of this offering, shares of common
stock, or shares of our common stock if the underwriters fully exercise
their options to purchase additional shares and no shares of preferred stock
will be issued and outstanding. Under Maryland law, our stockholders generally
are not liable for our debts or obligations.

COMMON STOCK

All shares of common stock offered by this prospectus will be duly
authorized, fully paid and nonassessable. Holders of our common stock have no
preference, conversion, exchange, sinking fund, redemption or appraisal rights
and have no preemptive rights to subscribe for any of our securities. Holders of
our common stock are entitled to receive dividends when authorized by our board
of directors out of assets legally available for the payment of dividends. They
are also entitled to share ratably in our assets legally available for
distribution to our stockholders in the event of our liquidation, dissolution or
winding up, after payment of or adequate provision for all of our known debts
and liabilities. These rights are subject to the preferential rights of any
other class or series of our stock.

Each outstanding share of common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors. Except as provided with respect to any other class or series of
stock, the holders of our common stock will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of common stock can elect all of
the directors then standing for election, and the holders of the remaining
shares will not be able to elect any directors.

Under Maryland law, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business, unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter. However, a
Maryland corporation may provide in its charter for approval of these matters by
a lesser percentage, but not less than a majority of all the votes entitled to
be cast on the matter. Our charter provides for approval by a majority of all
the votes entitled to be cast in these situations.

POWER TO RECLASSIFY SHARES OF OUR STOCK

Our charter authorizes our board of directors to classify and reclassify any
unissued shares of our common stock and preferred stock into other classes or
series of stock and permits our board, without stockholder approval, to amend
the charter to increase or decrease the aggregate number of shares of stock or
the number of shares of stock of any class or series that we have authority to
issue. Prior to issuance of shares of each class or series, the board is
required by Maryland law and by our charter to set the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of

redemption for each class or series. Thus, the board could authorize the
issuance of shares of preferred stock with terms and conditions that could have
the effect of delaying, deferring or preventing a transaction or a change in
control that might involve a premium price for holders of our common stock or
otherwise be in their best interest. No shares of our preferred stock are
presently outstanding and we have no present plans to issue any preferred stock.

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

We believe that the power to issue additional shares of common stock or
preferred stock and to classify or reclassify unissued shares of common or
preferred stock and thereafter to issue the classified or reclassified shares
provides us with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs which might arise. These actions can
be taken without stockholder approval, unless stockholder approval is required
by applicable law or the rules of any stock exchange or automated quotation
system on which our securities may be listed or traded. Although we have no
present intention of doing so, we could issue a class or series of stock that
could have the effect of delaying, deferring or preventing a transaction or a
change in control that might involve a premium price for holders of common stock
or otherwise be in their best interest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is .

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS

BOARD OF DIRECTORS

Our charter and bylaws provide that the number of our directors may be
established by the board of directors. Our charter provides that any vacancy
will be filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the remaining directors; PROVIDED, HOWEVER, that while
Sara Lee, its affiliates or certain of its transferees own a majority of our
voting stock, any vacancy on our board of directors which results from the
removal of a director may be filled only by the affirmative vote of a majority
of our voting stock and any vacancy which results from any reason other than
removal shall be filled only by the affirmative vote of a majority of the
remaining directors and only with a director having the qualification of having
been nominated, and whose election has been consented to, by Sara Lee or, if
such vacancy remains unfilled at the time of the next meeting of the
stockholders, by the affirmative vote of the holder or holders of a majority of
our voting stock.

Our board is not currently classified and, although it would otherwise be
permissible under Maryland law for our board to become classified without
stockholder approval, we have included a provision in our charter prohibiting
the classifying of our board without the approval of a majority of the votes
cast on such matter by holders of our common stock.

REMOVAL OF DIRECTORS

Our charter provides that a director may be removed with or without cause by
the affirmative vote of a majority of the votes entitled to be cast in the
election of directors.

BUSINESS COMBINATIONS

Under Maryland law, "business combinations" between a Maryland corporation
and an interested stockholder or an affiliate of an interested stockholder are
prohibited for five years after the most recent date on which the interested
stockholder becomes an interested stockholder. These

business combinations include certain mergers, asset transfers or issuances or
reclassifications of equity securities. An interested stockholder is defined as:

- any person who beneficially owns ten percent or more of the voting power
of the corporation's shares; or

- an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial owner of
10% or more of the voting power of the then outstanding voting stock of
the corporation.

A person is not an interested stockholder under the statute if the board of
directors approved in advance the transaction by which the stockholder otherwise
would have become an interested stockholder.

After the five-year prohibition, any business combination between the
Maryland corporation and an interested stockholder generally must be recommended
by the board of directors of the corporation and approved by the affirmative
vote of at least:

- 80% of the votes entitled to be cast by holders of outstanding shares of
voting stock of the corporation; and

- two-thirds of the votes entitled to be cast by the holders of voting stock
of the corporation other than shares held by the interested stockholder
with whom or with whose affiliate the business combination is to be
effected or held by an affiliate or associate of the interested
stockholder.

These super-majority vote requirements do not apply if the corporation's common
stockholders receive a minimum price, as defined under Maryland law, for their
shares in the form of cash or other consideration in the same form as previously
paid by the interested stockholder for its shares.

The statute provides for various exemptions from its provisions, including
business combinations that are exempted by the board of directors prior to the
time that the interested stockholder becomes an interested stockholder. Pursuant
to the statute, our board of directors has exempted any business combination
involving Sara Lee or its affiliates. Consequently, the five-year prohibition
and the super-majority vote requirements will not apply to business combinations
between us and any of them. As a result, Sara Lee or its affiliates may be able
to enter into business combinations with us that may not be in the best interest
of our stockholders, without compliance with the super-majority vote
requirements and the other provisions of the statute.

The business combination statute could have the effect of delaying,
deferring or preventing a transaction or a change in control that might involve
a premium price for holders of our common stock or otherwise be in their best
interest.

CONTROL SHARE ACQUISITIONS

Our bylaws contain a provision exempting from the control share acquisition
statute any and all acquisitions by any person of shares of our stock. However,
this provision could be amended or eliminated in the future.

Maryland's control share acquisition statute provides that control shares of
a Maryland corporation acquired in a control share acquisition have no voting
rights, except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter. Shares owned by the acquiror, by officers or
by directors who are employees of the corporation are excluded from shares
entitled to vote on the matter. Control shares are voting shares of stock,
which, if aggregated with all other shares of stock owned by the acquiror or in
respect of which the acquiror

is able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power

- one-tenth or more but less than one-third,

- one-third or more but less than a majority, or

- a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A control
share acquisition means the acquisition of control shares, subject to certain
exceptions.

A person who has made or proposes to make a control share acquisition may
compel the board of directors of the corporation to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. The right to compel the calling of a special meeting is subject
to the satisfaction of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made, the corporation
may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then
the corporation may redeem for fair value any or all of the control shares,
except those for which voting rights have previously been approved. The right of
the corporation to redeem control shares is subject to certain conditions and
limitations. Fair value is determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquiror or, if a meeting of stockholders is held, at which
the voting rights of the shares are considered and not approved, as of the date
of such meeting. If voting rights for control shares are approved at a
stockholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of appraisal rights may
not be less than the highest price per share paid by the acquiror in the control
share acquisition.

The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

AMENDMENT TO THE CHARTER

Our charter may be amended only by the affirmative vote of the holders of
not less than a majority of all of the votes entitled to be cast on the matter.

DISSOLUTION OF THE COMPANY

The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be cast
on the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

Our bylaws provide that with respect to an annual meeting of stockholders,
nominations of persons for election to the board of directors and the proposal
of business to be considered by stockholders may be made only (1) pursuant to
our notice of the meeting, (2) by the board of directors, (3) by Sara Lee during
the period it holds a majority of our outstanding common stock or (4) by a
stockholder who is entitled to vote at the meeting and who has complied with the
advance notice procedures of the bylaws. With respect to special meetings of
stockholders, only the business specified in our notice of the meeting may be
brought before the meeting. Nominations of

persons for election to the board of directors at a special meeting may be made
only (1) pursuant to our notice of the meeting, (2) by the board of directors,
(3) by Sara Lee during the period it holds a majority of our outstanding common
stock or (4) provided that the board of directors has determined that directors
will be elected at the meeting, by a stockholder who is entitled to vote at the
meeting and who has complied with the advance notice provisions of the bylaws.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Maryland law permits us to include in our charter a provision limiting the
liability of our directors and officers to us and our stockholders for money
damages, except for liability resulting from (1) actual receipt of an improper
benefit or profit in money, property or services or (2) active and deliberate
dishonesty established by a final judgment as material to the cause of action.
Our charter contains a provision which eliminates directors' and officers'
liability to the maximum extent permitted by Maryland law.

Maryland law requires us (unless our charter provides otherwise, which our
charter does not) to indemnify a director or officer who has been successful in
the defense of any proceeding to which he is made a party by reason of his
service in that capacity. Maryland law permits us to indemnify our present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding unless it is established that:

- the act or omission was material to the matter giving rise to the
proceeding and (1) was committed in bad faith or (2) was the result of
active and deliberate dishonesty;

- the director or officer actually received an improper personal benefit in
money, property or services; or

- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.

However, under Maryland law, we may not indemnify for an adverse judgment in a
suit by or in our right or for a judgment on the basis that personal benefit was
improperly received, unless, in either case, a court orders indemnification and
then only for expenses.

In addition, Maryland law permits us to advance reasonable expenses to a
director or officer upon our receipt of (1) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification and (2) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by us if it is ultimately
determined that the standard of conduct was not met.

Our charter also authorizes us and our bylaws obligate us, to the maximum
extent permitted by Maryland law, to indemnify (1) any present or former
director or officer, or person who has agreed to become a director or officer,
or (2) any director or officer who, at our request, serves another corporation
or other enterprise as a director, officer, partner or trustee against any claim
or liability arising from that status and to pay or reimburse their reasonable
expenses in advance of final disposition of a proceeding. Our charter and bylaws
also permit us to indemnify and advance expenses to any person who served our
predecessor in any of the capacities described above and any employee or agent
of us or our predecessor.

ANTI-TAKEOVER EFFECT OF PARTICULAR PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS

The business combination provisions and, if the applicable provision in our
bylaws is rescinded, the control share acquisition provisions of Maryland law
and the advance notice

provisions of our bylaws could have the effect of delaying, deferring or
preventing a transaction or a change in control that might involve a premium
price for holders of common stock or otherwise be in their best interest.

CORPORATE OPPORTUNITIES

Under the terms of our charter, Sara Lee shall not have a duty to refrain
from engaging directly or indirectly in the same or similar business activities
or lines of business as us, and neither Sara Lee nor any of its officers or
directors shall be liable to us or our stockholders for breach of any duty by
reason of any such activities. If Sara Lee acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for Sara Lee and us,
Sara Lee shall have no duty to communicate or offer such corporate opportunity
to us and shall not be liable to us or our stockholders for breach of any duty
as our stockholder if Sara Lee pursues or acquires such corporate opportunity
for itself, directs such corporate opportunity to another person or entity, or
does not communicate information regarding, or offer, such corporate opportunity
to us.

If one of our directors, officers or employees who is also a director,
officer or employee of Sara Lee acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both us and Sara Lee, such
director, officer or employee shall be entitled to offer such corporate
opportunity to us or Sara Lee as such director, officer or employee deems
appropriate under the circumstances in his or her sole discretion, and no such
director, officer or employee shall be liable to us or our stockholders for
breach of any duty by reason of the fact that (1) such director, officer or
employee offered such corporate opportunity to Sara Lee (rather than us) or did
not communicate information regarding such corporate opportunity to us or
(2) Sara Lee pursues or acquires such corporate opportunity for itself or
directs such corporate opportunity to another person or does not communicate
information regarding such corporate opportunity to us. Neither Sara Lee nor any
officer or director of Sara Lee shall be liable to us or our stockholders for
breach of any duty by reason of the fact that Sara Lee or an officer or director
of Sara Lee takes or fails to take any action or exercises or fails to exercise
any rights or gives or withholds any consent in connection with any agreement or
contract between Sara Lee and us.

SHARES ELIGIBLE FOR FUTURE SALE

RULE 144

All of the shares of our common stock sold in this offering will be freely
tradable without restriction under the Securities Act, except for any shares
which be may acquired by our "affiliates," as that term is defined in Rule 144
under the Securities Act. Persons who may be deemed to be our affiliates
generally include individuals or entities that control, are controlled by, or
are under common control with PYA/Monarch and may include our directors and
officers as well as our significant stockholders.

Sara Lee currently is planning to effect an exchange or other distribution
of all or a significant portion of its shares of our common stock within
18 months of this offering. Shares of our common stock distributed to Sara Lee
stockholders in the exchange or other distribution generally will be freely
transferable, except for shares of common stock received by persons who may be
deemed to be affiliates of PYA/Monarch. Persons who are deemed to be our
affiliates will be permitted to sell the shares of common stock that are issued
in this offering or that they receive in the exchange or other distribution only
through registration under the Securities Act, unless an exemption from
registration is available, including an exemption pursuant to Rule 144.

The shares of our common stock held by Sara Lee before the exchange or other
distribution are deemed "restricted securities" as defined in Rule 144, and may
not be sold other than through registration under the Securities Act, unless an
exemption from registration is available, including an exemption pursuant to
Rule 144. Sara Lee, our directors and officers and we have agreed not to offer
or sell any shares of our common stock, subject to exceptions, for a period of
180 days after the date of this prospectus, without the prior written consent of
the underwriters.

STOCK PLANS

We will grant shares of restricted stock and options to purchase our common
stock under our stock plans subject to restrictions. In connection with this
offering, we intend to grant to our employees options to purchase approximately
shares of our common stock at the initial offering price. None of these
options will be exercisable for one year. We currently expect to file a
registration statement under the Securities Act to register shares reserved for
issuance under our stock plans. Shares issued under awards after the effective
date of the registration statement, other than shares issued to affiliates,
generally will be freely tradable without further registration under the
Securities Act subject to any contractual restrictions on transfer.

REGISTRATION RIGHTS

Under the master separation agreement with Sara Lee, we have granted Sara
Lee the right to cause us to file up to three registration statements under the
Securities Act covering resales of all shares of common stock held by Sara Lee
and to cause the registration statements to become effective. Sara Lee may not
request more than one demand registration in any calendar year. We have also
granted Sara Lee the right to include its shares of our common stock in other
registrations of our common stock initiated by us or on behalf of our other
stockholders. We will pay the expenses of these registrations.

UNDERWRITING

PYA/Monarch and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Bear,
Stearns & Co. Inc. and Salomon Smith Barney Inc. are the representatives of the
underwriters.

Underwriter Number of Shares
----------- ------------------

Goldman, Sachs & Co.....................................
Bear, Stearns & Co. Inc.................................
Salomon Smith Barney Inc................................

-----------
Total...............................................
===========

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from PYA/Monarch to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by PYA/Monarch. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

Paid by PYA/Monarch
-------------------
No Exercise Full Exercise
------------ -------------

Per Share...................................... $ $
Total.......................................... $ $

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
selected other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.

PYA/Monarch, Sara Lee and PYA/Monarch's directors and officers have agreed
with the underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of PYA/Monarch's common
stock during the period from the date of this prospectus continuing through the
date 180 days after the date of this prospectus, except with the prior written
consent of the representatives. This agreement does not apply to PYA/Monarch
with respect to any grants under existing employee benefit plans. See "Shares
Eligible For Future Sale" for a discussion of transfer restrictions.

Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among PYA/Monarch and the
representatives of the underwriters. Among

the factors to be considered in determining the initial public offering price of
the shares, in addition to prevailing market conditions, will be PYA/Monarch's
historical performance, estimates of the business potential and earnings
prospects, an assessment of PYA/Monarch's management and the consideration of
the above factors in relation to market valuation of companies in related
businesses.

PYA/Monarch intends to list the common stock on the New York Stock Exchange
under the symbol "PYA". In order to meet one of the requirements for listing the
common stock on the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

At the request of PYA/Monarch, the underwriters have reserved for sale, at
the initial public offering price, approximately % of the shares of common
stock for its directors and select employees, including directors and officers
and executive officers of Sara Lee. There can be no assurance that any of the
reserved shares will be so purchased. The number of shares available for sale to
the general public in the offering will be reduced by the number of reserved
shares sold. Any reserved shares not so purchased will be offered to the general
public on the same basis as the other shares offered hereby.

A prospectus in electronic format may be made available on websites
maintained by one or more of the underwriters. The underwriters may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. Internet distributions will be allocated by the lead managers
to underwriters that may make Internet distributions on the same basis as other
allocations.

PYA/Monarch estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .

PYA/Monarch has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

Goldman, Sachs & Co. has from time to time performed various investment
banking services for Sara Lee in the past, and it may from time to time in the
future perform investment banking services for Sara Lee and PYA/Monarch, for
which it has received and will receive customary fees.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Ballard Spahr Andrews & Ingersoll, LLP. Certain
legal matters will be passed upon for the underwriters by Kirkland & Ellis,
Chicago, Illinois. Kirkland & Ellis represents Sara Lee and PYA/ Monarch from
time to time in connection with various legal matters.

EXPERTS

The financial statements and the schedule included in this prospectus and
elsewhere in the registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement. Some
items included in the registration statement are omitted from this prospectus in
accordance with the rules and regulations of the SEC. For further information
about us and our common stock, reference is made to the registration statement
and the exhibits and any schedules to the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance, if the
contract or document is filed as an exhibit, reference is made to the copy of
the contract or other documents filed as an exhibit to the registration
statement, each statement being qualified in all respects by such reference. A
copy of the registration statement, including the exhibits and schedules to the
registration statement, may be read and copied at the SEC's Public Reference
Room at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and inspected
at the regional offices of the SEC located at 7 World Trade Center, Suite 1300,
New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. For further information on the Public Reference Rooms, please
call the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site
at http://www.sec.gov, from which interested persons can electronically access
the registration statement, including the exhibits and any schedules to the
registration statement.

As a result of this offering, we will become subject to the full
informational requirements of the Securities Exchange Act of 1934. We will
fulfill our obligations with respect to those requirements by filing periodic
reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing financial statements certified by an
independent public accounting firm.

INDEX TO FINANCIAL STATEMENTS

PAGE
--------

Report of Independent Public Accountants................ F-2

Balance Sheets.......................................... F-3

Statements of Income.................................... F-4

Statements of Stockholder's Equity...................... F-5

Statements of Cash Flows................................ F-6

Notes to the Financial Statements....................... F-7

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To PYA/Monarch, Inc.:

After the stock split and mergers discussed in Notes 2 and 3 to PYA/Monarch,
Inc.'s financial statements are effected, we expect to be in a position to
render the following audit report.

ARTHUR ANDERSEN LLP

Charlotte, North Carolina,
June 21, 2000.

Report of Independent Public Accountants

To PYA/Monarch, Inc.:

We have audited the accompanying balance sheets of PYA/Monarch, Inc. (a
Maryland corporation) as of July 3, 1999 and June 27, 1998, and the related
statements of income, stockholder's equity and cash flows for the three
years ended July 3, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PYA/Monarch, Inc. as of
July 3, 1999 and June 27, 1998, and the results of its operations and its
cash flows for the three years ended July 3, 1999 in conformity with
accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule identified in
Item 16(B) of the registration statement is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

Charlotte, North Carolina,
, 2000.

F-2

PYA/MONARCH, INC.

BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

PRO FORMA
JUNE 27, JULY 3, APRIL 1, APRIL 1,
1998 1999 2000 2000
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)

ASSETS
Cash and cash equivalents..................... $ 41,257 $ 31,760 $ 19,985 $
Note receivable from Sara Lee................. 144,666 169,131 165,445
Inventories, net.............................. 101,194 105,195 110,876
Deferred income taxes......................... 5,574 6,286 2,545
Other receivables............................. 23,470 26,635 27,614
Prepaid expenses.............................. 2,446 2,299 3,289
--------- --------- --------- ---------
Total current assets.......................... 318,607 341,306 329,754
--------- --------- --------- ---------
Property
Land........................................ 8,317 8,033 11,205
Buildings and improvements.................. 155,398 140,526 143,162
Machinery and equipment..................... 76,589 80,408 83,076
Construction in progress.................... 1,531 1,711 15,621
--------- --------- --------- ---------
241,835 230,678 253,064
Accumulated depreciation.................... 96,858 86,604 97,264
--------- --------- --------- ---------
Net property.................................. 144,977 144,074 155,800
--------- --------- --------- ---------
Goodwill, net................................. 130,941 125,875 127,576
Other non-current assets...................... 2,286 1,974 1,913
--------- --------- --------- ---------
Total assets.................................. $ 596,811 $ 613,229 $ 615,043 $
========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Book overdrafts............................... $ 57,589 $ 83,326 $ 53,329 $
Accounts payable.............................. 157,253 145,616 177,867
Accrued payroll and employee benefits......... 9,634 8,471 12,206
Accrued expenses other........................ 21,551 16,516 18,282
Accrued income taxes payable.................. 5,130 5,351 5,799
--------- --------- --------- ---------
Total current liabilities..................... 251,157 259,280 267,483
--------- --------- --------- ---------
Deferred income taxes......................... 1,349 4,733 2,424
Other non-current liabilities................. 1,709 4,673 6,155
Payable to Sara Lee........................... 187,258 152,196 103,637
Stockholder's equity
Preferred stock: (authorized 25,000,000
shares; $.01 par value); None issued...... -- -- --
Common stock: (authorized 100,000,000
shares; $.01 par value); Issued--1,000
shares.................................... -- -- --
Paid-in capital surplus..................... 20,769 20,769 37,129
Retained earnings........................... 135,347 173,259 199,896
Accumulated other comprehensive loss........ (778) (1,681) (1,681)
--------- --------- --------- ---------
Total stockholder's equity.................... 155,338 192,347 235,344
--------- --------- --------- ---------
Total liabilities and stockholder's equity.... $ 596,811 $ 613,229 $ 615,043 $
========= ========= ========= =========

THE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
BALANCE SHEETS.

F-3

PYA/MONARCH, INC.

STATEMENTS OF INCOME

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

YEARS ENDED 39 WEEKS ENDED
---------------------------------------------- -------------------------------
JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
1997 1998 1999 1999 2000
-------------- -------------- ------------ --------------- -------------
(UNAUDITED) (UNAUDITED)

Net sales......................... $2,372,694 $2,584,878 $2,742,110 $1,981,538 $2,113,021

Cost of sales..................... 2,024,154 2,202,020 2,331,734 1,688,178 1,785,899
---------- ---------- ---------- ---------- ----------

Gross profit...................... 348,540 382,858 410,376 293,360 327,122
Selling, general and
administrative expenses......... 269,107 293,819 316,658 231,413 259,484
Loss on sale to Sara Lee of trade
receivables, net of
collection fees................. 14,710 41,535 44,287 31,907 34,367
Impairment of long-lived assets... -- 1,336 -- -- 1,100
---------- ---------- ---------- ---------- ----------
Operating income.................. 64,723 46,168 49,431 30,040 32,171
Interest income, net.............. (4,663) (12,116) (14,684) (10,570) (13,293)
---------- ---------- ---------- ---------- ----------
Income before income taxes........ 69,386 58,284 64,115 40,610 45,464
Income taxes...................... 28,342 24,022 26,203 16,609 18,827
---------- ---------- ---------- ---------- ----------
Net income........................ $ 41,044 $ 34,262 $ 37,912 $ 24,001 $ 26,637
========== ========== ========== ========== ==========
Net income per share--basic and
diluted......................... $ $ $ $ $
========== ========== ========== ========== ==========
Shares used in computing net
income per share--basic and
diluted.........................
========== ========== ========== ========== ==========

THE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.

F-4

PYA/MONARCH, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

(AMOUNTS IN THOUSANDS)

ACCUMU-
LATED
OTHER COMPRE-
PAID-IN COMPRE- HENSIVE
COMMON CAPITAL RETAINED HENSIVE INCOME
TOTAL STOCK SURPLUS EARNINGS LOSS (LOSS)
--------- -------- -------- --------- -------- --------

BALANCES AT JUNE 29, 1996........... $ 65,499 $-- $ 5,458 $ 60,041 $ --
Net income........................ 41,044 -- -- 41,044 -- $41,044
-------
Comprehensive income.............. $41,044
=======
Capital contribution.............. 5,181 -- 5,181 -- --
-------- --- ------- -------- -------
BALANCES AT JUNE 28, 1997........... 111,724 -- 10,639 101,085 --
Net income........................ 34,262 -- -- 34,262 -- $34,262
Minimum pension liability, net of
tax of $540..................... (778) -- -- -- (778) (778)
-------
Comprehensive income.............. $33,484
=======
Capital contribution.............. 10,130 -- 10,130 -- --
-------- --- ------- -------- -------
BALANCES AT JUNE 27, 1998........... 155,338 -- 20,769 135,347 (778)
Net income........................ 37,912 -- -- 37,912 -- $37,912
Minimum pension liability, net of
tax of $627..................... (903) -- -- -- (903) (903)
-------
Comprehensive income.............. $37,009
=======
-------- --- ------- -------- -------
BALANCES AT JULY 3, 1999............ 192,347 -- 20,769 173,259 (1,681)
Net income (1).................... 26,637 -- -- 26,637 -- $26,637
-------
Comprehensive income (1).......... $26,637
=======
Capital contribution (1).......... 16,360 -- 16,360 -- --
-------- --- ------- -------- -------
BALANCES AT APRIL 1, 2000(1)........ $235,344 $-- $37,129 $199,896 $(1,681)
======== === ======= ======== =======

- --------------------------

(1) Unaudited

THE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.

F-5

PYA/MONARCH, INC.

STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

YEARS ENDED 39 WEEKS ENDED
------------------------------- -------------------------
JUNE 28, JUNE 27, JULY 3, MARCH 27, APRIL 1,
1997 1998 1999 1999 2000
--------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)

OPERATING ACTIVITIES
Net income..................................... $ 41,044 $ 34,262 $ 37,912 $ 24,001 $ 26,637
Adjustments for noncash charges included in net
income:
Depreciation................................. 13,764 17,462 16,034 12,026 11,350
Amortization of goodwill..................... 4,044 4,606 5,066 3,721 3,913
Deferred income tax provision................ 910 2,692 3,299 2,377 (216)
Increase (decrease) in other................. 53 (3,522) 2,161 950 1,443
Impairment of long-lived assets.............. -- 1,336 -- -- 1,100
Loss (gain) on sale of property.............. 41 778 100 75 (34)
Changes in current assets and liabilities,
net of businesses acquired
(Increase) decrease in note receivable from
Sara Lee................................. (12,575) (30,180) (24,465) 12,232 3,686
Increase in inventories.................... (5,021) (7,179) (4,001) (4,236) (2,813)
(Increase) decrease in other current
assets................................... (5,349) 491 (3,018) (3,331) 2,604
Increase (decrease) in accounts payable.... 1,004 6,716 (11,637) (8,305) 28,678
Increase (decrease) in accrued
liabilities.............................. 4,818 (9,659) (5,977) (8,795) 7,316
--------- -------- -------- -------- --------
Net cash provided by operating activities...... 42,733 17,803 15,474 30,715 83,664
--------- -------- -------- -------- --------

INVESTMENT ACTIVITIES
Purchases of property and equipment............ (37,001) (38,424) (18,592) (12,708) (19,170)
Acquisitions of businesses; net of cash
acquired..................................... (5,200) -- -- -- --
Proceeds from sale of property................. 36 11,202 2,946 360 65
--------- -------- -------- -------- --------
Net cash used in investment activities......... (42,165) (27,222) (15,646) (12,348) (19,105)
--------- -------- -------- -------- --------

FINANCING ACTIVITIES
Additional capital contribution................ 5,181 -- -- -- 2,222
Repayment of long-term debt to third party..... (2,070) (4,427) -- -- --
Decrease in payable to Sara Lee................ (13,324) (10,001) (35,062) (40,488) (48,559)
Increase (decrease) in book overdrafts, net.... 19,567 23,412 25,737 5,233 (29,997)
--------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities................................... 9,354 8,984 (9,325) (35,255) (76,334)
--------- -------- -------- -------- --------
Increase (decrease) in cash and equivalents.... 9,922 (435) (9,497) (16,888) (11,775)
Cash and equivalents at beginning of year...... 31,770 41,692 41,257 41,257 31,760
--------- -------- -------- -------- --------
Cash and equivalents at end of year............ $ 41,692 $ 41,257 $ 31,760 $ 24,369 $ 19,985
========= ======== ======== ======== ========

THE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-6

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

1.) BACKGROUND AND BASIS OF PRESENTATION

On May 30, 2000, Sara Lee Corporation ("Sara Lee") announced its plan to
initiate a public offering of PYA/Monarch, Inc. ("PYA/Monarch"), its foodservice
distribution business. After completion of PYA/Monarch's initial public
offering, Sara Lee will own at least 80.1% of PYA/ Monarch's outstanding common
stock.

PYA/Monarch distributes dry, refrigerated and frozen foods, paper supplies
and foodservice equipment to restaurants, hotels, hospitals and other
foodservice businesses in the Southeastern and Mid-Atlantic regions of the
United States. PYA/Monarch's customer base is comprised of street accounts and
multi-unit accounts. Street accounts consist of independent restaurants, hotels
and other foodservice businesses, while the majority of multi-unit accounts
consist of franchises or corporate-owned units of national or regional family
dining and other restaurant concepts. PYA/ Monarch operates as one business with
15 distribution centers in a contiguous geographic region, and most of its
individual distribution centers service both street accounts and multi-unit
accounts. Although PYA/Monarch makes pricing decisions on a customer by customer
basis, it does not report or separately track profitability by type of customer.
No one customer constitutes more than 10% of PYA/Monarch's total sales.

As a result of PYA/Monarch's relationship with Sara Lee, the accompanying
balance sheets, results of operations, and cash flows are not necessarily
indicative of what actually would have occurred had PYA/Monarch been a
stand-alone entity. In addition, these financial statements are not necessarily
indicative of future financial position, results of operations or cash flows.

The statements of income of PYA/Monarch include direct expenses and certain
expenses incurred by Sara Lee on PYA/Monarch's behalf. With limited exceptions,
PYA/Monarch operates as an autonomous entity. All expenses associated with
legal, risk management, and employee benefit plan management incurred by Sara
Lee on PYA/Monarch's behalf are charged to PYA/Monarch. Sara Lee provides
certain corporate, general and administrative services which are allocated to
PYA/Monarch. The expense allocations have been determined on the basis that Sara
Lee and PYA/ Monarch considered to be reasonable reflections of the utilization
of services provided by Sara Lee.

All significant intracompany transactions and balances within PYA/Monarch
are eliminated in these statements.

2.) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FISCAL YEAR--PYA/Monarch's fiscal year ends on the Saturday closest to June
30. Fiscal 1997 and fiscal 1998 were 52 week years while fiscal 1999 was a 53
week year.

INTERIM FINANCIAL INFORMATION--The financial information as of April 1, 2000
and for the 39 weeks ended March 27, 1999 and April 1, 2000 is unaudited and
includes all normal and recurring adjustments that management considered
necessary for a fair presentation of its financial

F-7

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

2.) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
position, operating results and cash flows. Results for the 39 weeks ended
March 27, 1999 and April 1, 2000 are not necessarily indicative of results to be
expected for the full year or for any future period.

CASH AND CASH EQUIVALENTS--Cash consists of cash balances and short-term
investments with a maturity of less than 90 days. Book overdrafts consist of
checks which have been issued by PYA/ Monarch but not yet presented to the bank
for payment.

REVENUE AND RECEIVABLES--Revenue is recognized when product is shipped to
customers. Since February 1997, PYA/Monarch has sold to Sara Lee without
recourse 100% of its third-party trade accounts receivable. As a result,
PYA/Monarch requires no allowance for uncollectible accounts on its trade
receivables. Allowances and credits from suppliers for buying and merchandising
activities are recorded as earned.

INVENTORIES--Inventories, which consist of dry, refrigerated and frozen
foods, paper supplies and foodservice equipment, are valued at the lower of
last-in, first-out ("LIFO") cost or market. Inventories recorded at LIFO cost
are lower than if they had been valued on a first-in, first-out ("FIFO") cost
basis by $5,012 at June 27, 1998, $7,293 at July 3, 1999 and $7,704 at April 1,
2000 (unaudited).

PROPERTY AND DEPRECIATION--Property is carried at cost, and depreciation is
computed on a straight line basis over the estimated useful lives of the
property. The useful lives range from 10 to 40 years for buildings and
improvements and from 5 to 15 years for machinery and equipment. Additions and
improvements that substantially extend the useful life of a particular asset and
interest costs incurred during the construction period of major properties are
capitalized. Repair and maintenance costs are charged to expense when incurred.
Depreciation expense is included in selling, general and administrative expenses
in the accompanying statements of income. Upon sale or other disposition of an
asset, the cost and related accumulated depreciation are removed from the
accounts.

GOODWILL--The excess of cost over fair market value of the net assets of
acquired businesses is amortized on a straight-line basis over the periods of
expected benefit, which range from 10 years to 40 years. Accumulated
amortization of goodwill amounted to $28,804 at June 27, 1998, $33,870 at
July 3, 1999 and $37,783 at April 1, 2000 (unaudited).

LONG-LIVED ASSETS--Long-lived assets primarily include property,
identifiable intangible assets and goodwill. Long-lived assets being retained
for use by PYA/Monarch are periodically reviewed for impairment by comparing the
carrying value of the assets with their estimated future undiscounted cash
flows. If it is determined that an impairment loss has occurred, the loss would
be recognized during the period. The impairment loss is calculated as the
difference between asset carrying values and the present value of estimated net
cash flows or comparable market values, giving consideration to recent operating
performance.

Long-lived assets which are to be disposed of are reported at the lower of
carrying value or fair value less cost to sell. Reductions in carrying value are
recognized in the period in which management commits to a plan to dispose of the
assets.

F-8

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

2.) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION--Employee stock options are accounted for under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"). APB No. 25 requires the use of the
intrinsic value method, which measures compensation costs as the excess, if any,
of the quoted market price of the stock at grant over the amount an employee
must pay to acquire the stock. PYA/Monarch makes pro forma disclosures of net
earnings and earnings per share as if the fair value based method of accounting
had been applied as required by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Based Compensation".

INCOME TAXES--PYA/Monarch has been included in Sara Lee's consolidated
income tax returns, but records its income tax provision on a separate entity
basis for financial reporting purposes. Deferred income tax assets and
liabilities are recognized for the estimated future income tax effects of
temporary differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred taxes are calculated
based on provisions of enacted tax law. As long as Sara Lee continues to own
more than 80.0% of PYA/Monarch's common stock, PYA/Monarch will continue to be
included in Sara Lee's consolidated return.

COMPREHENSIVE INCOME--During 1998, PYA/Monarch adopted SFAS No. 130,
"Reporting Comprehensive Income", which requires companies to report all changes
in equity during a period, except those resulting from investment by owners and
distribution to owners, in a financial statement for the period in which they
are recognized. PYA/Monarch has chosen to disclose comprehensive income, which
encompasses net income and net minimum pension liability adjustments during the
period, in the accompanying statements of stockholder's equity.

EARNINGS PER SHARE--In 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No.
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share, respectively. Basic earnings
per share is similar to the previously reported primary earnings per share.
Earnings per share amounts for all periods presented have been calculated in
accordance with the requirements of SFAS No. 128. Net income per share--basic is
computed by dividing net income available to common stockholders by the weighted
average number of common shares outstanding for the respective period. Net
income per share--diluted reflects the potential dilution that could occur if
options or other contracts to issue common stock were exercised or converted
into common stock.

On , 2000 PYA/Monarch effected a for 1 stock split in the
form of a stock dividend. All share and per share amounts have been adjusted to
reflect this stock dividend.

3.) RELATIONSHIP WITH SARA LEE

SALE OF TRADE RECEIVABLES TO SARA LEE--Since February 1997, PYA/Monarch has
sold to Sara Lee without recourse 100% of its third-party trade receivables as
they were generated, and subsequently collected them from the trade customers on
behalf of Sara Lee. The receivables were sold at estimated fair value,
reflecting a 2.0% discount in fiscal 1997 and a 1.75% discount in fiscal 1998
and fiscal 1999. PYA/Monarch's loss on the receivables sold amounted to $16,252
in fiscal 1997, $45,235 in fiscal 1998 and $47,987 in fiscal 1999. Collection
fees earned by PYA/Monarch of

F-9

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) RELATIONSHIP WITH SARA LEE (CONTINUED)
$1,542 in fiscal 1997 and $3,700 in both fiscal 1998 and fiscal 1999 were
reported as an offset to the loss in the accompanying statements of income. Sara
Lee owned PYA/Monarch trade receivables of $132,664 at June 27, 1998, $141,131
at July 3, 1999 and $156,309 at April 1, 2000 (unaudited).

In conjunction with PYA/Monarch's planned initial public offering, this
arrangement is being terminated and PYA/Monarch is to purchase from Sara Lee the
outstanding trade receivables for fair market value.

NOTE RECEIVABLE FROM SARA LEE--In exchange for selling Sara Lee its trade
receivables, PYA/ Monarch has received a note receivable from Sara Lee. Under
the terms of the note, the note balance increases by the amount of sold trade
receivables net of the loss on the sale, and decreases upon collection of the
receivables. PYA/Monarch earns interest on the note at an annual rate of 10.0%,
which amounted to $4,701 in fiscal 1997, $12,121 in fiscal 1998 and $14,717 in
fiscal 1999, and is included in the note balance. The note receivable will be
repaid by a combination of cash and the repurchase of the outstanding
PYA/Monarch trade receivables at fair market value from Sara Lee.

PURCHASES FROM SARA LEE AFFILIATES--PYA/Monarch purchases inventory from
affiliates of Sara Lee. The amounts purchased in each fiscal year were as
follows:

1997 1998 1999
--------- --------- ---------

Purchases from Sara Lee Affiliates.......... $120,193 $125,175 $132,478

Purchases from affiliates are made at prices that approximate the prices for
purchases from non-affiliated companies. Amounts owed by PYA/Monarch to Sara Lee
affiliates of $7,874 at June 27, 1998, $6,581 at July 3, 1999 and $7,975 at
April 1, 2000 (unaudited) are included in accounts payable in the accompanying
balance sheets. Amounts owed by Sara Lee affiliates to PYA/Monarch of $732 at
June 27, 1998, $899 at July 3, 1999, and $1,218 at April 1, 2000 (unaudited) are
included in other receivables in the accompanying balance sheets.

PAYABLE TO SARA LEE--PYA/Monarch participates in a centralized cash
management program administered by Sara Lee. Cash collected from operations is
remitted to Sara Lee, and cash advances are made by Sara Lee as needed to cover
PYA/Monarch's operating expenses and capital requirements. Cash remitted to Sara
Lee decreases the advances from Sara Lee; conversely, expenses paid by Sara Lee
increase the advances from Sara Lee. These amounts, which do not bear interest,
are included in "Payable To Sara Lee" in the accompanying balance sheets.

PYA/Monarch's costs and expenses include allocations from Sara Lee for
certain centralized treasury, real estate, accounting, auditing, tax, risk
management, human resources, and benefits administration. These allocations have
been determined on bases that PYA/Monarch and Sara Lee considered to be
reasonable reflections of the utilization of services provided to or the benefit
received by PYA/Monarch. These allocation methods include relevant operating
profit, fixed assets, sales, tax benefits, or headcount. Allocated costs
included in selling, general and administrative expenses in the accompanying
statements of income for the fiscal years 1997, 1998, and 1999 and

F-10

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) RELATIONSHIP WITH SARA LEE (CONTINUED)
the 39 weeks ended March 27, 1999 (unaudited) and April 1, 2000 (unaudited) are
$571, $781, $920, $597 and $667, respectively.

Certain corporate costs are paid by Sara Lee and charged to PYA/Monarch.
These items are recorded by PYA/Monarch as expenses in "Payable to Sara Lee."
These costs generally include business insurance, medical insurance, employee
benefit plan amounts, and income, employment and other tax amounts. These
amounts are charged to PYA/Monarch based on actual PYA/Monarch experience or
specific identification of expense amounts.

For the periods presented, intercompany transactions and balances between
PYA/Monarch and Sara Lee consisted of the following:

39 WEEKS
YEARS ENDED ENDED
--------------------------------- -----------
JUNE 28, JUNE 27, JULY 3, APRIL 1,
1997 1998 1999 2000
--------- --------- --------- -----------
(UNAUDITED)

Payable balance at beginning of
period........................ $210,583 $197,259 $187,258 $152,196
Net cash transfers to Sara
Lee........................... (73,297) (68,041) (97,301) (97,177)
Allocation of corporate costs... 55,126 48,327 54,562 40,592
Acquisition..................... 7,177 -- -- --
Other........................... (2,330) 9,713 7,677 8,026
-------- -------- -------- --------
Payable balance at end of
period........................ $197,259 $187,258 $152,196 $103,637
======== ======== ======== ========
Average outstanding balance..... $203,921 $192,259 $169,727 $127,917
======== ======== ======== ========

Prior to completing the initial public offering, PYA/Monarch will enter into
a revolving credit facility with Sara Lee under which PYA/Monarch may borrow
funds from and invest excess funds with Sara Lee. Borrowings from Sara Lee under
this arrangement will accrue interest at U.S. dollar LIBOR plus 0.3%. Any
receivable balance under this arrangement will accrue interest at U.S. dollar
LIBOR less 0.2%. Once Sara Lee's ownership of PYA/Monarch common stock falls
below 80.0%, this facility will terminate and become due and payable. This
credit facility will include certain restrictions against additional secured
debt and sale and leaseback transactions and will require defined levels of
interest coverage.

ACQUISITIONS AND MERGERS--During fiscal 1997 and fiscal 1998, PYA/Monarch
acquired two privately held food distributors for $5,200 in cash in fiscal 1997
and $10,130 in Sara Lee stock in fiscal 1998. These acquisitions were accounted
for as purchases and, accordingly, the assets and liabilities of the acquired
entities have been recorded at their estimated fair market values at the dates
of acquisition. The excess of purchase price over the estimated fair market
value of the net assets acquired, in the amount of $6,771 in fiscal 1997 and
$8,071 in fiscal 1998, has been recorded as goodwill and is amortized over the
estimated useful life of 15 years. The pro forma results for fiscal 1997 and
fiscal 1998, assuming these acquisitions had been made at the beginning of the
fiscal year, would not be materially different from reported results.

F-11

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) RELATIONSHIP WITH SARA LEE (CONTINUED)
In August 1999, PYA/Monarch acquired a privately held food distributor for
$3,000 in cash and $12,000 in Sara Lee stock. The acquisition is being accounted
for as a purchase and, based upon the preliminary purchase price allocation,
PYA/Monarch recognized $5,614 of goodwill which is amortized over the estimated
useful life of 15 years. All noncash activity has been excluded from the
accompanying statements of cash flows.

Two of the acquired companies, Kesterson Food Companies, Inc. ("Kesterson")
and D. Canale Food Services, Inc. ("D. Canale"), were acquired by Sara Lee. On
, 2000, Kesterson and D. Canale were merged with and into PYA/Monarch.
This reorganization of entities controlled by Sara Lee has been reported in a
manner similar to a pooling of interests. Accordingly, the financial statements
present the results of operations, cash flows and financial position of
PYA/Monarch as if Kesterson and D. Canale had been merged into PYA/Monarch as of
their respective dates of acquisition.

EQUIPMENT SUBLEASE ARRANGEMENT--PYA/Monarch subleases certain vehicles and
equipment from Sara Lee under a month-to-month rental agreement. The sublease is
cancelable by either party at any time. Sara Lee charges PYA/Monarch for the
costs it incurs under this arrangement. PYA/Monarch is not a party to Sara Lee's
leasing agreement with a third party lessor and has no obligations beyond the
monthly rental payments.

AGREEMENTS BETWEEN SARA LEE AND PYA/MONARCH

Prior to completion of this offering, PYA/Monarch and Sara Lee intend to
enter into various agreements to govern their on-going relationship. A brief
description of each of the agreements that PYA/Monarch and Sara Lee intend to
enter into are as follows:

MASTER SEPARATION AGREEMENT

The Master Separation Agreement will contain the key provisions relating to
PYA/Monarch's separation from Sara Lee, the initial public offering of
PYA/Monarch and Sara Lee's plans to complete the divestiture of PYA/Monarch. The
agreement will list the documents and other items that must be delivered in
order to accomplish the transfer of assets and liabilities from Sara Lee to
PYA/Monarch. The agreement also will contain certain covenants and conditions of
the parties, including covenants to engage in certain auditing practices, not
take any action that would jeopardize Sara Lee's ownership of over 80.0% of
PYA/Monarch's outstanding capital stock, maintain confidentiality of certain
information, engage in certain environmental and safety practices and resolve
disputes in a particular manner.

INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

Effective immediately prior to the completion of this offering, PYA/Monarch
and Sara Lee will each release the other from any liabilities arising from
events occurring on or before the separation date, including events occurring in
connection with the activities to implement the separation and the initial
public offering. The agreement also will contain provisions governing
indemnification. In general, PYA/Monarch will indemnify Sara Lee against
liabilities arising from PYA/Monarch's business and Sara Lee will indemnify
PYA/Monarch against liabilities arising from Sara Lee's

F-12

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) RELATIONSHIP WITH SARA LEE (CONTINUED)
business, excluding PYA/Monarch. PYA/Monarch will be covered under Sara Lee's
insurance policies after the initial public offering until such time that Sara
Lee disposes of its shares of PYA/ Monarch.

MASTER TRANSITIONAL SERVICES AGREEMENT

The Master Transitional Services Agreement will govern the specific services
that will be provided by Sara Lee to PYA/Monarch. These services will include
assistance with various treasury, environmental, legal, real estate, accounting,
auditing, tax, risk management, investor relations, human resources and benefits
processing and management functions. The services will be provided for a
two-year period for a fee of $1.0 million per year; however, this agreement
automatically terminates on the date Sara Lee disposes of its shares of
PYA/Monarch.

TAX SHARING AGREEMENT

The Tax Sharing Agreement will govern how PYA/Monarch and Sara Lee will
report and account for tax related matters. While Sara Lee owns over 80.0% of
PYA/Monarch's common stock, PYA/Monarch will continue to be included in the
consolidated Sara Lee tax returns. Sara Lee will prepare and file all income tax
reporting on behalf of PYA/Monarch. Sara Lee will have the exclusive right to
determine the manner in which all tax returns will be prepared, methods of
accounting, tax positions and any elections that are made. PYA/Monarch will
reimburse Sara Lee for the incremental tax costs of PYA/Monarch's inclusion in
the consolidated tax return with Sara Lee. The fee that will be payable to Sara
Lee under the Master Transitional Services Agreement includes the estimated
costs to Sara Lee of providing these services.

EMPLOYEE MATTERS AGREEMENT

The Employee Matters Agreement will allocate to PYA/Monarch certain
employee-related assets, liabilities and responsibilities relating to
PYA/Monarch employees. Under the agreement, PYA/Monarch employees will be
entitled to continue to participate in Sara Lee sponsored benefit plans, such as
the pension and retirement plan, health benefit program and group insurance
plan, on terms comparable to those for Sara Lee employees, until the earlier of
the time Sara Lee ceases to own a majority of PYA's common stock or until
PYA/Monarch establishes benefit plans for its employees.

4.) STOCK-BASED COMPENSATION

SARA LEE STOCK-BASED PLANS

PYA/Monarch employees participate in stock-based compensation plans of Sara
Lee. Sara Lee maintains various stock option, employee stock purchase and stock
award plans.

STOCK OPTIONS. The exercise price of each stock option equals 100% of the
market price of Sara Lee's stock on the date of grant and generally has a
maximum term of 10 years. Options generally vest ratably over three years.
During 1998, Sara Lee instituted a broad-based stock option

F-13

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

4.) STOCK-BASED COMPENSATION (CONTINUED)
incentive program under which Sara Lee granted options to substantially all
full-time PYA/Monarch employees to purchase a total of approximately 778 shares
of Sara Lee's common stock.

Under certain stock option plans, an active employee may receive a
replacement Sara Lee stock option equal to the number of shares surrendered upon
a stock-for-stock exercise. The exercise price of the replacement option is 100%
of the market value at the date of exercise of the original option and will
remain exercisable for the remaining term of the original option. Replacement
stock options generally vest six months from the grant date.

A summary of options held by PYA/Monarch employees under the Sara Lee option
plans follows:

NUMBER OF WEIGHTED
SARA LEE AVERAGE
OPTIONS EXERCISABLE EXERCISE
OUTSTANDING SHARES PRICE
------------ ------------ ---------

Outstanding at June 29, 1996......... 743 353 $10.47
Granted............................ 389
Exercised.......................... (126)
Canceled/Expired................... (22)
-----

Outstanding at June 28, 1997......... 984 443 12.60
Granted............................ 1,788
Exercised.......................... (295)
Canceled/Expired................... (164)
Transfers.......................... (32)
-----

Outstanding at June 27, 1998......... 2,281 459 14.65
Granted............................ 635
Exercised.......................... (361)
Canceled/Expired................... (163)
-----

Outstanding at July 3, 1999.......... 2,392 904 20.02
Granted(1)......................... 575
Exercised(1)....................... (161)
Canceled/Expired(1)................ (43)
-----

Outstanding at April 1, 2000(1)...... 2,763 1,542 21.20
=====

- ------------------------

(1) Unaudited

F-14

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

4.) STOCK-BASED COMPENSATION (CONTINUED)

The fair value of each PYA/Monarch option grant under the Sara Lee plans is
estimated on the date of grant using the Black-Scholes option-pricing model and
the following weighted average assumptions:

1997 1998 1999
--------- --------- ---------

Expected lives.............................. 2.8 years 4.0 years 3.3 years
Risk-free interest rate..................... 6.0% 5.9% 5.2%
Expected volatility......................... 22.6% 22.7% 24.7%
Dividend yield.............................. 2.2% 1.7% 1.9%

The weighted average fair value of individual options granted during fiscal
years 1997, 1998 and 1999 was $2.77, $4.31 and $4.70, respectively.

EMPLOYEE STOCK PURCHASE PLAN (ESPP). Sara Lee maintains an ESPP that
permits full-time PYA/Monarch employees to purchase a limited number of Sara Lee
common shares at 85% of market value. Under the plan, Sara Lee sold 256, 232 and
256 shares to PYA/Monarch employees in fiscal 1997, fiscal 1998 and fiscal 1999,
respectively. Pro forma compensation expense is calculated for the fair value of
the employees' purchase rights using the Black-Scholes model. Assumptions
include an expected life of 1/4 of a year and weighted average risk-free
interest rates of 5.1%, 5.2% and 4.6% in fiscal 1997, fiscal 1998 and fiscal
1999, respectively. Other underlying assumptions are consistent with those used
for the Sara Lee stock option plans described above.

Under APB No. 25, no compensation cost is recognized for stock options and
replacement stock options under the various Sara Lee stock-based compensation
plans and shares purchased under the ESPP. Had compensation cost for the grants
for stock-based compensation been determined consistent with SFAS No. 123,
PYA/Monarch's pro forma net income and per share net income for fiscal years
1997, 1998 and 1999 would have been as follows:

1997 1998 1999
-------- -------- --------

Net income..................................... $39,993 $31,268 $34,508
Net income per share--basic and diluted........ $ $ $

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1996, and additional awards in future years are anticipated.

STOCK UNIT AWARDS. Stock unit awards of Sara Lee stock are restricted and
subject to forfeiture until service restrictions, and in some cases, Sara Lee
financial performance restrictions, are met. Performance goals typically extend
over three years. All restricted stock awards entitle the participant to
dividends that are escrowed until the participant receives the shares. The value
of stock awards is accrued over the performance goal period.

PYA/MONARCH'S STOCK-BASED PLANS

STOCK OPTIONS. Concurrent with the initial public offering, PYA/Monarch
intends to establish a stock option plan for PYA/Monarch employees. PYA/Monarch
employees can continue to participate

F-15

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

4.) STOCK-BASED COMPENSATION (CONTINUED)
in the Sara Lee plan while Sara Lee maintains an ownership interest in
PYA/Monarch. No future stock option grants will be made under the Sara Lee plan
to PYA/Monarch employees; instead, future grants to PYA/Monarch employees will
be made under the PYA/Monarch plan. Certain PYA/Monarch executive employees who
are Sara Lee option holders will receive the right to convert their Sara Lee
options into PYA/Monarch options at the IPO date using a conversion ratio of
PYA/Monarch's stock price to Sara Lee's stock price with a conversion ratio
floor of 1.00. Any Sara Lee option converted into a PYA/Monarch option may not
be exercised for one year following conversion, subject to the original vesting
requirements. At April 1, 2000, there were 2,282 stock options outstanding and
held by executive employees of PYA/Monarch, of which 1,259 were exercisable at a
weighted average exercise price of $21.35. Sara Lee options which are converted
to PYA/Monarch options will result in an expense being recorded over the
remaining vesting period of the option equal to the intrinsic value (if any) on
the date of conversion.

ESPP. PYA/Monarch will continue to participate in the Sara Lee ESPP until
either Sara Lee completes an exchange or other distribution of its PYA/Monarch
stock or PYA/Monarch establishes a separate ESPP.

STOCK UNITS AWARDS. Certain PYA/Monarch employees who hold approximately
49 Sara Lee restricted stock units will be given the election to convert these
stock units into PYA/Monarch restricted stock units, maintaining the same market
value relationship on the date of conversion.

5.) RENTAL EXPENSE

PYA/Monarch subleases certain vehicles from Sara Lee under a month-to-month
rental agreement cancellable by either party. PYA/Monarch is not a party to Sara
Lee's leasing agreement with a third-party lessor and has no obligations beyond
the monthly rental payments to Sara Lee. Rental expense under this arrangement
was $7,042 in fiscal 1997, $5,889 in fiscal 1998 and $8,868 in fiscal 1999. In
1998, PYA/Monarch sold certain vehicles to the third-party lessor. Proceeds of
about $11.0 million, which approximates the net book value of the assets, were
received by PYA/ Monarch upon the sale of these assets.

Rental expense under third party operating leases amounted to approximately
$6,359 in 1999, $5,430 in 1998, and $4,785 in 1997. Future minimum annual fixed
rentals required during the years ending in 2000 through 2004 under
noncancelable operating leases having an original term of more than one year are
$6,264, $6,336, $5,949, $5,274, and $4,119, respectively. The aggregate
obligation subsequent to 2004 is $2,266. Sara Lee guarantees certain of these
third-party lease obligations.

6.) COMMITMENTS AND CONTINGENCIES

From time to time, PYA/Monarch is involved in litigation and proceedings
arising in the ordinary course of business. There are no pending material legal
proceedings to which PYA/Monarch is a party or to which its property is subject.
PYA/Monarch is subject to federal, state, and local laws and regulations
concerning the environment. When it is possible to reasonably estimate
PYA/Monarch's liability with respect to such matters, provisions are made in
accordance with generally accepted accounting principles.

F-16

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

7.) IMPAIRMENT COSTS

In fiscal 1998, the management of PYA/Monarch and Sara Lee committed to a
plan involving the closure of its distribution center in Nashville, Tennessee.
As a result of this decision an impairment loss of $311 was recognized in fiscal
1998 to reduce the carrying amount to the estimated fair market value.

In fiscal 1998, the management of PYA/Monarch and Sara Lee also committed to
a plan involving the closure of its distribution center in Daytona, Florida.
This commitment was made in conjunction with a decision to move to a larger more
efficient facility in the same city. As a result of this decision an impairment
loss of $1,025 was recognized in fiscal 1998 to reduce the carrying amount to
the estimated fair market value. All employees in the closed distribution center
were transferred to the new distribution center. The facility is closed and
awaiting sale.

In fiscal 2000, the management of PYA and Sara Lee committed to a plan
involving the closure of one of its facilities in Raleigh, North Carolina. This
commitment was made in order to more efficiently utilize existing warehouse
space in the area. As a result of this decision an impairment loss of $1,100 was
recognized in fiscal 2000 to reduce the carrying amount to the estimated fair
market value. No severance was associated with this action. This facility is
currently in use; however, it is expected to be closed by the end of July 2000.

8.) RETIREMENT PLANS

PYA/Monarch sponsors a noncontributory defined benefit plan (PYA/Monarch,
Inc. Hourly Operations Pension Plan) for warehousemen and drivers who are paid
hourly and who are not part of a collective bargaining agreement.

Employees who meet certain eligibility requirements and are not part of a
collective bargaining arrangement participate in defined benefit pension plans
sponsored by Sara Lee. These defined benefit pension plans include employees
from a number of domestic Sara Lee business units. The annual cost of the Sara
Lee defined benefit pension plans is allocated to the participating businesses
based upon an actuarial formula which is consistently followed.

The annual expense for the defined benefit pension plans was as follows:

1997 1998 1999
-------- -------- --------

PYA/Monarch, Inc. Hourly Operations Pension
Plan............................................ $ 842 $1,142 $1,683
Participation in Sara Lee sponsored defined
benefit plans................................... 1,229 1,274 1,608
------ ------ ------
Total defined benefit plan expense................ $2,071 $2,416 $3,291
====== ====== ======

F-17

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

8.) RETIREMENT PLANS (CONTINUED)
The components of the PYA/Monarch Inc. Hourly Operations Pension Plan net
periodic pension cost were as follows:

1997 1998 1999
-------- -------- --------

Service cost................................. $ 773 $1,007 $ 1,471
Interest cost................................ 547 657 930
Expected return on assets.................... (663) (715) (1,100)
Amortization of:
Net initial asset.......................... (32) (32) (32)
Prior service cost......................... 211 210 300
Net actuarial loss......................... 6 15 114
------- ------ -------
Net periodic pension cost.................... $ 842 $1,142 $ 1,683
======= ====== =======

The funded status of the PYA/Monarch, Inc. Hourly Operations Pension Plan at
the respective year-ends was as follows:

1997 1998 1999
-------- -------- --------

Projected benefit obligation:
Beginning of year............................ $ 7,613 $ 9,204 $15,009
Service cost................................. 773 1,007 1,471
Interest cost................................ 547 657 930
Plan amendments.............................. -- 801 --
Benefits paid................................ (227) (193) (265)
Actuarial loss............................... 498 3,533 563
------- ------- -------
End of year.................................. $ 9,204 $15,009 $17,708
======= ======= =======
Fair value of plan assets:
Beginning of year............................ $ 7,637 $ 8,319 $13,064
Actual return on plan assets................. 909 2,762 (280)
Employer contributions....................... -- 2,176 --
Benefits paid................................ (227) (193) (265)
------- ------- -------
End of year.................................. $ 8,319 $13,064 $12,519
======= ======= =======
Funded status.................................. $ (885) $(1,945) $(5,189)
Unrecognized:
Prior service cost........................... 1,060 2,162 1,863
Net actuarial loss........................... 1,572 2,532 4,359
Net initial asset............................ (191) (159) (127)
------- ------- -------
Prepaid benefit cost recognized................ $ 1,556 $ 2,590 $ 906
======= ======= =======

F-18

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

8.) RETIREMENT PLANS (CONTINUED)

1997 1998 1999
-------- -------- --------

Amounts recognized on the balance sheets:
Other noncurrent assets...................... $ 1,556 $ 2,161 $ 1,862
Noncurrent benefit liability................. -- (889) (3,804)
Accumulated other comprehensive loss......... -- 1,318 2,848
------- ------- -------
Prepaid benefit cost recognized................ $ 1,556 $ 2,590 $ 906
======= ======= =======

Net pension expense is determined using assumptions as of the beginning of
each year. Funded status is determined using assumptions as of the end of each
year. The assumptions at the respective fiscal year-ends were as follows:

1997 1998 1999
-------- -------- --------

Discount rate.......................................... 7.25% 6.25% 6.25%
Long-term rate of return on plan assets................ 8.75 8.50 8.50
Average rate of compensation increase.................. 4.50 4.50 4.50

Certain employees participate in a postretirement medical benefit plan
sponsored by Sara Lee. This benefit plan includes employees from a number of
domestic Sara Lee business units. Generally, employees who have attained age 55
and who have rendered 10 years of service are eligible for this postretirement
benefit. Certain employees are required to contribute to plans in order to
maintain coverage. Coverage is available only until Medicare eligibility. The
annual cost of the Sara Lee postretirement plan is allocated to the
participating businesses based on an actuarial formula which is consistently
followed.

PYA/Monarch sponsors a benefit plan which provides health care benefits to
certain retired employees and their covered dependents. The accumulated
postretirement medical benefit expense obligation relating to the PYA/Monarch
sponsored plan is not material.

The annual expense for the postretirement benefit plans is as follows:

1997 1998 1999
-------- -------- --------

Participation in Sara Lee sponsored postretirement
medical benefit plan............................... $602 $853 $1,177
PYA/Monarch, Inc. postretirement medical benefit
plan............................................... 29 22 19
---- ---- ------
Total postretirement medical benefit plan expense.... $631 $875 $1,196
==== ==== ======

F-19

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

9.) INCOME TAXES

The provisions for income taxes applying the U.S. statutory rate to income
before taxes as reconciled to the actual provisions were as follows:

1997 1998 1999
------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- -------- --------

Income before income taxes....... $69,386 100.0% $58,284 100.0% $64,115 100.0%
======= ===== ======= ===== ======= =====
Tax expense at U.S. statutory
rate........................... $24,285 35.0% $20,399 35.0% $22,440 35.0%
State taxes, net of federal
benefit........................ 2,569 3.7 2,085 3.5 2,186 3.4
Nondeductible amortization....... 1,338 1.9 1,442 2.5 1,595 2.5
Other, net....................... 150 0.2 96 0.2 (18) --
------- ----- ------- ----- ------- -----
Taxes at effective tax rates..... $28,342 40.8% $24,022 41.2% $26,203 40.9%
======= ===== ======= ===== ======= =====

The current and deferred income tax provisions were as follows:

1997 1998 1999
-------- -------- --------

Current........................................ $27,432 $21,330 $22,904
Deferred....................................... 910 2,692 3,299
------- ------- -------
Net provision.................................. $28,342 $24,022 $26,203
======= ======= =======

The components of the deferred tax (benefits) provisions occurring as a
result of transactions being reported in different years for financial and tax
reporting are as follows:

1997 1998 1999
-------- -------- --------

Depreciation.................................... $ 3,304 $ 788 $ 224
Nondeductible expenses.......................... 1,964 (2,212) 309
Nondeductible reserves.......................... (3,708) 2,754 2,359
Other, net...................................... (650) 1,362 407
------- ------- -------
Deferred tax provision.......................... $ 910 $ 2,692 $ 3,299
======= ======= =======

The deferred tax (assets) liabilities at the respective year-ends were as
follows:

1998 1999
-------- --------

Reserves not deductible until paid....................... $(4,794) $(2,534)
Pension, post retirement, and other employee benefits.... (2,553) (3,079)
Property................................................. 7,600 7,939
Net operating loss carryforward.......................... (3,517) (3,665)
Other.................................................... (961) (214)
------- -------
Net deferred tax assets.................................. $(4,225) $(1,553)
======= =======

F-20

PYA/MONARCH, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

9.) INCOME TAXES (CONTINUED)
The above amounts have been classified in the balance sheets as follows:

1998 1999
-------- --------

Current assets........................................... $(5,574) $(6,286)
Non-current liabilities.................................. 1,349 4,733
------- -------
$(4,225) $(1,553)
======= =======

At July 3, 1999, PYA/Monarch had unused net operating loss carryforwards of
approximately $9,500. These carryforwards expire from 2004 through 2006.

Cash taxes paid by PYA/Monarch and by Sara Lee on behalf of PYA/Monarch were
$28,322 in fiscal 1997, $32,225 in fiscal 1998, and $23,310 in fiscal 1999.

10.) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, June 1999 and June 2000, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities and SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133 and SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an amendment of
SFAS No. 133. These statements outline the accounting treatment for all
derivative activity. PYA/Monarch does not use derivative instruments, and
therefore these accounting statements should not have an effect on PYA/Monarch.

In May 2000, the Emerging Issues Task Force of the FASB announced that it
had reached a conclusion on Issue 00-14, "Accounting for Certain Sales
Incentives". Issue 00-14 establishes requirements for the recognition and
display of sales incentives such as discounts, coupons and rebates within the
financial statements. The Emerging Issues Task Force conclusions on this issue
will become effective for reporting periods beginning after May 18, 2000.
Because of the timing of the release of these conclusions, we have yet to fully
assess their effect on the results of operations and financial position. Based
upon the available information it is likely that the adoption of this statement
will result in the reclassification of various costs within the captions of the
income statement. At this time, we do not believe that the adoption of this
statement would modify the pretax earnings or net income presented in these
statements.

11.) SUBSEQUENT EVENTS

On June 21, 2000, PYA/Monarch amended and restated its Articles of
Incorporation to increase the authorized number of shares of common stock at
$.01 par value per share to 100,000 and the number of shares of preferred stock
at $.01 par value per share to 25,000.

F-21

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

------------------

TABLE OF CONTENTS

Page
--------

Prospectus Summary.................... 1
Risk Factors.......................... 6
Special Note Regarding Forward-
Looking Statements and Market Data.. 11
Our Separation from Sara Lee.......... 12
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 33
Arrangements between Sara Lee and
PYA/Monarch......................... 46
Principal Stockholder................. 52
Description of Capital Stock.......... 53
Shares Eligible for Future Sale....... 59
Underwriting.......................... 60
Legal Matters......................... 62
Experts............................... 62
Where You Can Find More Information... 62
Index to Financial Statements......... F-1

------------------

Through and including , 2000 (the 25(th) day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.

PYA/MONARCH, INC.

Common Stock

-------------

[LOGO]

-------------

GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY

Representatives of the Underwriters

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, we will pay in connection with the sale
of common stock being registered. All amounts other than the SEC registration
fee and the NASD filing fee are estimates.

SEC registration fee........................................ 42,240
NASD Filing fee............................................. 16,500
New York Stock Exchange listing fee......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent and registrar fees and expenses.............. *
Miscellaneous fees and expenses............................. *
------
Total................................................... $ *
======

- ------------------------

* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as material to the cause of action. Our charter contains such a
provision which eliminates directors' and officers' liability to the maximum
extent permitted by Maryland law.

Our charter authorizes us and our bylaws obligate us, to the maximum extent
permitted by Maryland law, to indemnify any present or former director or
officer or any individual who has agreed to become a director or officer or who,
while a director or officer of the Company and at the request of the Company,
serves or has served another corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise as
a director, officer, partner or trustee from and against any claim or liability
to which that person may become subject or which that person may incur by reason
of his or her status as a present or former director or officer, or a person who
has agreed to become a director or officer, of the Company and to pay or
reimburse their reasonable expenses in advance of final disposition of a
proceeding. The charter and bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any of
the capacities described above and any employee or agent of the Company or a
predecessor of the Company.

Maryland law requires a corporation (unless its charter provides otherwise,
which the Company's charter does not) to indemnify a director or officer who has
been successful in the defense of any proceeding to which he is made a party by
reason of his service in that capacity. Maryland law permits a corporation to
indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (1) was

II-1

committed in bad faith or (2) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under Maryland law, a Maryland corporation
may not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, unless in either case a court orders indemnification
and then only for expenses. In addition, Maryland law permits a corporation to
advance reasonable expenses to a director or officer upon the corporation's
receipt of (a) a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it is
ultimately determined that the standard of conduct was not met. Directors and
officers of the Company are also covered by liability insurance maintained by
Sara Lee.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS:

EXHIBIT NO. DESCRIPTION
- ----------- -----------

1.1* Form of Underwriting Agreement.

2.1* Form of Master Separation Agreement between Sara Lee and
PYA/Monarch.

2.2* Form of Tax Sharing Agreement between Sara Lee and
PYA/Monarch.

2.3* Form of Employee Matters Agreement between Sara Lee and
PYA/Monarch.

2.4* Form of Real Estate Matters Agreement between Sara Lee and
PYA/Monarch.

2.5* Form of Transitional Services Agreement between Sara Lee and
PYA/Monarch.

2.6* Form of Indemnification and Insurance Matters Agreement
between Sara Lee and
PYA/Monarch.

3.1 Articles of Incorporation of the Registrant.

3.2 Bylaws of the Registrant.

4.1* Specimen Certificate for the Registrant's Common Stock.

5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special
counsel to the Registrant.

10.1* PYA/Monarch, Inc. 2000 Stock Incentive Plan.

10.2* PYA/Monarch, Inc. Employee Stock Purchase Plan.

10.3* PYA/Monarch, Inc. Executive Deferred Compensation Plan.

10.4* PYA/Monarch, Inc. Performance-Based Annual Incentive Plan.

10.5* PYA/Monarch, Inc. Non-Employee Director Stock Plan.

10.6* PYA/Monarch, Inc. Non-Employee Directors' Deferred
Compensation Plan.

11.1* Statement Regarding Computation of Per Share Earnings.

II-2

EXHIBIT NO. DESCRIPTION
- ----------- -----------

23.1 Consent of Arthur Andersen LLP.

23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1).

24.1 Power of Attorney (included on signature page).

27.1 Financial Data Schedule.

- ------------------------

* To be filed by amendment.

(B) FINANCIAL STATEMENT SCHEDULES:

SCHEDULE II
PYA/MONARCH, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED APRIL 1, 2000
(IN THOUSANDS)

PROVISION
BALANCE AT CHARGED TO WRITE-OFFS/ OTHER
BEGINNING OF COSTS AND ALLOWANCES ADDITIONS BALANCE AT
YEAR EXPENSES TAKEN (DEDUCTIONS) END OF PERIOD
------------ ---------- ----------- ------------ -------------

For the Year Ended June 28, 1997
Allowance for bad debts.................. $7,406 $(874) $(494) $(6,038)(1) $ --

For the Year Ended June 27, 1998
Allowance for bad debts.................. $ -- $ -- $ -- $ -- $ --

For the Year Ended July 3, 1999
Allowance for bad debts.................. $ -- $ -- $ -- $ -- $ --

For the 39 Weeks Ended April 1, 2000
Allowance for bad debts.................. $ -- $ -- $ -- $ -- $ --

- --------------------------

(1) Amount eliminated upon the initial nonrecourse sale to Sara Lee of trade
receivables in February 1997.

All other schedules have been omitted because the information required to be
set forth in those schedules is not applicable or is shown in the financial
statements or notes thereto.

II-3

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Greenville, State of
South Carolina, on June 26, 2000.

PYA/MONARCH, INC.

By: /s/ W. MCFALL PEARCE
-----------------------------------------
W. McFall Pearce
Chairman of the Board, Chief Executive
Officer and President

POWER OF ATTORNEY

We the undersigned directors and officers of PYA/Monarch do hereby
constitute and appoint W. McFall Pearce and Kelly A. Elliott our true and lawful
attorneys-in-fact and agents, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us an din our name in the capacities indicated below, which
said attorneys and agents may deem necessary or advisable to enable said
Registrant to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration statements, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereof; and we do
hereby ratify and confirm all that said attorneys and agents shall do our cause
to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on June 26, 2000:

SIGNATURE TITLE
--------- -----

/s/ W. MCFALL PEARCE
------------------------------------------- Chairman of the Board, Chief Executive Officer
W. McFall Pearce and President

Vice President--Corporate Controller of Sara
/s/ WAYNE SZYPULSKI Lee (as principal financial officer and
------------------------------------------- principal accounting officer for
Wayne Szypulski PYA/Monarch)

/s/ ROBERT M. STOUT
------------------------------------------- Director
Robert M. Stout

II-5

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
- ----------- -----------

1.1* Form of Underwriting Agreement.

2.1* Form of Master Separation Agreement between Sara Lee and
PYA/Monarch.

2.2* Form of Tax Sharing Agreement between Sara Lee and
PYA/Monarch.

2.3* Form of Employee Matters Agreement between Sara Lee and
PYA/Monarch.

2.4* Form of Real Estate Matters Agreement between Sara Lee and
PYA/Monarch.

2.5* Form of Transitional Services Agreement between Sara Lee and
PYA/Monarch.

2.6* Form of Indemnification and Insurance Matters Agreement
between Sara Lee and PYA/Monarch.

3.1 Articles of Incorporation of the Registrant.

3.2 Bylaws of the Registrant.

4.1* Specimen Certificate for the Registrant's Common Stock.

5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special
counsel to the Registrant.

10.1* PYA/Monarch, Inc. 2000 Stock Incentive Plan.

10.2* PYA/Monarch, Inc. Employee Stock Purchase Plan.

10.3* PYA/Monarch, Inc. Executive Deferred Compensation Plan.

10.4* PYA/Monarch, Inc. Performance-Based Annual Incentive Plan.

10.5* PYA/Monarch, Inc. Non-Employee Director Stock Plan.

10.6* PYA/Monarch, Inc. Non-Employee Directors' Deferred
Compensation Plan.

11.1* Statement Regarding Computation of Per Share Earnings.

23.1 Consent of Arthur Andersen LLP.

23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1).

24.1 Power of Attorney (included on signature page).

27.1 Financial Data Schedule.

- ------------------------

* To be filed by amendment.