<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VOLUME SERVICES AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5812 57-0969174
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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201 EAST BROAD STREET
SPARTANBURG, SC 29306
(864) 598-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JANET L. STEINMAYER, ESQ.
VOLUME SERVICES AMERICA, INC.
300 FIRST STAMFORD PLACE
P.O. BOX 10203
STAMFORD, CT 06904-2203
(203) 975-5900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
With a copy to:
RISE B. NORMAN, ESQ
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 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
Registration Statement number of the earlier effective Registration Statement
for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
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11 1/4% Senior Subordinated Notes due 2009...... $100,000,000 100% $ 100,000,000 $ 27,800
Guarantee of 11 1/4% Senior Subordinated Notes
due 2009(2)................................... $100,000,000 100% $ 100,000,000 (3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) See inside facing page for additional registrant guarantors.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate fee for the Guarantee is payable.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
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TABLE OF ADDITIONAL REGISTRANT GUARANTORS
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<CAPTION>
EXACT NAME OF STATE OR OTHER I.R.S. ADDRESS INCLUDING ZIP CODE,
REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER AND TELEPHONE NUMBER INCLUDING AREA CODE,
AS SPECIFIED INCORPORATION OR IDENTIFICATION OF REGISTRANT GUARANTOR'S
IN ITS CHARTER ORGANIZATION NUMBER PRINCIPAL EXECUTIVE OFFICES
- ------------------------------ ---------------- ------------- -----------------------------------------
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Events Center Catering, Inc. Wyoming 57-1007720 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
Service America Maryland 06-1182149 201 East Broad Street,
Concessions Corporation Spartanburg, SC 29306 (864) 598-8600
Service America Corporation Delaware 13-1939453 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
Service America Corporation Wisconsin 39-1655756 201 East Broad Street,
of Wisconsin Spartanburg, SC 29306 (864) 598-8600
Servo-Kansas, Inc. Kansas 06-1238400 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
Servomation Duchess, Inc. California 95-1943117 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
SVM of Texas, Inc. Texas 75-1913406 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
Volume Services America Delaware 13-3870167 201 East Broad Street,
Holdings, Inc. Spartanburg, SC 29306 (864) 598-8600
Volume Services, Inc. Delaware 36-2786575 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
Volume Services, Inc. Kansas 57-0973901 201 East Broad Street,
Spartanburg, SC 29306 (864) 598-8600
</TABLE>
<PAGE>
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 27, 1999
Prospectus
$100,000,000 [LOGO]
VOLUME SERVICES AMERICA
VOLUME SERVICES AMERICA, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 11 1/4% SENIOR SUBORDINATED NOTES
DUE 2009 FOR 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER
o We will exchange all outstanding Notes that are validly tendered and not
validly withdrawn for an equal principal amount of exchange Notes that are
freely tradeable.
o You may withdraw tenders of outstanding Notes at any time prior to the
expiration of the exchange offer.
o The exchange offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended. We do not currently intend to extend the expiration
date.
o The exchange of outstanding Notes for exchange Notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes.
o We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
o The exchange Notes are being offered in order to satisfy certain of our
obligations under the exchange and registration rights agreement entered into
in connection with the placement of the outstanding Notes.
o The terms of the exchange Notes to be issued in the exchange offer are
substantially identical to the outstanding Notes, except that the exchange
Notes will be freely tradeable.
RESALES OF EXCHANGE NOTES
o The exchange Notes may be sold in the over-the-counter market, in negotiated
transactions or through a combination of such methods.
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If you are a broker-dealer and you receive exchange Notes for your own
account, you must acknowledge that you will deliver a prospectus in connection
with any resale of such exchange Notes. By making such acknowledgment, you will
not be deemed to admit that you are an "underwriter" under the Securities Act of
1933.
Broker-dealers may use this prospectus in connection with any resale of
exchange Notes received in exchange for outstanding Notes where such outstanding
Notes were acquired by the broker-dealer as a result of market-making activities
or other trading activities.
We will make this prospectus available to any broker-dealer for use in any
such resale for a period of up to 180 days after the date of this prospectus.
A broker-dealer may not participate in the exchange offer with respect to
outstanding Notes acquired other than as a result of market-making activities or
trading activities.
If you are an affiliate of Volume Services America or are engaged in, or
intend to engage in, or have an agreement or understanding to participate in, a
distribution of the exchange Notes, you cannot rely on the applicable
interpretations of the Securities and Exchange Commission and you must comply
with the registration requirements of the Securities Act of 1933 in connection
with any resale transaction.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
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PAGE
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Prospectus Summary............................ 1
Risk Factors.................................. 15
Use of Proceeds............................... 29
Capitalization................................ 30
Unaudited Pro Forma Combined Financial
Information of Volume Holdings.............. 31
Selected Historical Financial Information of
Volume Holdings............................. 38
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations.................................. 41
Business...................................... 53
Management.................................... 68
Certain Relationships and Related
Transactions................................ 74
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PAGE
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Security Ownership............................ 78
Description of the Senior Credit Facilities... 79
The Exchange Offer............................ 82
Description of the Notes...................... 92
Exchange and Registration Rights Agreement.... 134
Book-Entry; Delivery and Form................. 137
Certain United States Federal Income Tax
Consequences of the Exchange Offer.......... 141
Plan of Distribution.......................... 144
Legal Matters................................. 145
Experts....................................... 145
Where You Can Find More Information........... 145
Index to Financial Statements................. F-1
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements including, in
particular, the statements about our plans, strategies and prospects under the
headings "Prospectus Summary", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business". We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
o Our high degree of leverage and significant debt service obligations
o Our history of net losses
o The successful integration of Volume Services, Inc. and Service America
Corporation and the realization of the cost savings we expect to achieve
o The level of attendance at events held at the facilities at which we
provide our services and the level of spending on the services which we
provide at such events
o The risk of labor stoppages affecting sports teams at whose facilities we
provide our services
o The risk of sports facilities at which we provide services losing their
sports team tenants
o Our ability to retain existing clients or obtain new clients
o The highly competitive nature of the recreational food service industry
o Any future changes in management
o General risks associated with the food industry
o Future changes in government regulation
o The potential effect of year 2000 computer issues
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information that
is important to you. We encourage you to read this prospectus in its entirety.
In this prospectus, "Volume Holdings," "we," "us," or "our" refers to Volume
Services America Holdings, Inc. and its subsidiaries. Volume Holdings is a
holding company. Its principal assets are the capital stock of its subsidiary,
Volume Services America, Inc. In this prospectus, "Volume Services America" or
the "Issuer" refers to Volume Services America, Inc. Volume Services America is
also a holding company. Its principal assets are the capital stock of its
subsidiaries, Volume Services, Inc. and Service America Corporation. In this
prospectus, "Volume Services" refers to Volume Services Inc. and "Service
America" refers to Service America Corporation.
VOLUME HOLDINGS
OVERVIEW
We are a leading provider of catering, concession and merchandise services
for sports facilities, convention centers and other entertainment facilities
throughout the United States. We represent the combination in August 1998 of
Volume Services, one of the leading suppliers of food and beverages services to
sports facilities in the United States, with Service America, one of the leading
suppliers of food and beverages to convention centers in the United States. As a
result of this combination, based on the number of facilities served, we are the
largest provider of food and beverage services to:
o facilities which are home to National Football League teams;
o minor league baseball and spring training facilities in the United
States, and
o major convention centers (defined for the purposes of this prospectus as
those with at least 300,000 square feet of exhibition space) in the
United States.
We are also the third largest provider of food and beverage services to
facilities which are home to Major League Baseball teams.
We currently provide our services at 119 client facilities. We typically
have long-term contracts at these facilities which grant us the exclusive right
to provide our services. Our major clients include Yankee Stadium in New York,
Qualcomm Stadium in San Diego, the Jacob K. Javits Center in New York, the
Cobb-Galleria Center in Atlanta and the Los Angeles Zoo.
We were recently awarded the contract to provide food and beverage services
to the Louisiana Superdome (home of the New Orleans Saints NFL team), the
Tennessee Titans' new NFL stadium (scheduled to open in 1999), the Seattle
Mariners' Northwest Baseball Park (scheduled to open in 1999), the San Francisco
Giants' Pacific Bell Ballpark (scheduled to open in 2000) and the Cleveland
Convention Center.
As of March 30, 1999, our contracts had an average remaining life of
approximately 8.2 years weighted by pro forma EBITDA before allocation of
overhead expenses (referred to as "Contract EBITDA") for the preceding fifty-two
week period. The 120 facilities which we serve are comprised of 56 sports
facilities, 30 convention centers and 34 other entertainment facilities,
representing approximately 64%, 27% and 9%, respectively, of Contract EBITDA for
the fifty-two week period ended March 30, 1999.
Our pro forma net sales and pro forma Adjusted EBITDA were $404.2 million
and $46.8 million, respectively, for the fifty-two week period ended March 30,
1999.
INDUSTRY
The recreational food service industry primarily consists of the supply of
food and beverage services to a range of recreational facilities. For the
purposes of our business, these facilities fall into three main categories:
1
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o sports facilities (consisting of stadiums and arenas);
o convention centers; and
o other entertainment facilities (which include horse racing tracks, music
amphitheaters, motor speedways, national and state parks, skiing
facilities, theme parks and zoos).
Management estimates that annual sales in these categories of the North
American recreational food service industry, whether generated by the owner of
the facility or outsourced to an organization like us, are currently more than
$4.0 billion.
COMPETITIVE STRENGTHS
We believe that we will be able to develop our business because we possess
the following attributes:
o Leading Market Position
o Diversified Client Base with Long-Term Contracts
o Exclusive Service Contracts with High Retention Rate
o High Quality, Full Service Capabilities
o Experienced Management Team
BUSINESS STRATEGY
Our strategic objectives are to maintain and strengthen our position as an
industry leader by selectively retaining existing contracts and adding new
contracts through the following initiatives:
o Leverage Complementary Strengths of Volume Services and Service America
o Exploit our National Presence
o Develop Innovative Contract Structures
o Capitalize on our Ability to Provide High Quality, Reliable and
Innovative Service
ACQUISITION OF SERVICE AMERICA
On August 24, 1998, Volume Holdings purchased substantially all of the
capital stock of Service America from General Electric Capital Corporation
(referred to as "GE Capital") and members of Service America's management team
under an exchange agreement for aggregate consideration of (i) $1,000 in cash,
(ii) newly issued shares representing approximately 28.5% of the outstanding
common stock of Volume Holdings and (iii) the issuance to GE Capital of a senior
subordinated promissory note (referred to as the "GE Capital Note") in an
aggregate principal amount of $500,000.
This consideration was contributed to Recreational Services L.L.C., a
limited liability company owned by GE Capital and members of our current
management team, of which GE Capital is the managing member.
Volume Holdings subsequently purchased the remainder of the capital stock
of Service America for consideration valued at less than $0.2 million, and
contributed all of the capital stock of Service America to Volume Services
America. Service America then became a wholly owned subsidiary of Volume
Services America.
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CORPORATE STRUCTURE
The following table sets forth our corporate structure:
- --------------- -------------- -----------------
VSI Management Blackstone Recreational
Driect L.P. Services
- --------------- -------------- -----------------
| | |
| 4.2% | 59.4% | 36.4%
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|
|
------------------
Volums Holdings
------------------
|
| 100%
------------------
Volume Services
America
------------------
| |
| 100% | 100%
------------------- -------------------
Volume Services Service America
------------------- -------------------
| | |
| | |
- ----------------- ----------------- ---------------
Canadian
Wholly-Owned Wholly-Owned Subsidiary/Non-
U.S. Subsidiaries U.S. Subsidiaries Wholly-Owned
Interests
- ----------------- ----------------- ---------------
The exchange agreement contains ongoing indemnification obligations of the
stockholders of Volume Holdings to be satisfied by transfers of shares of Volume
Holdings common stock. If made, any such transfers could affect the percentage
of common stock owned by each stockholder. All share ownership information
assumes that no transfers of shares pursuant to such indemnification obligations
will be made.
THE ISSUER
Volume Services America, Inc. is a Delaware corporation incorporated on
December 31, 1992. Our principal offices are located at 201 East Broad Street,
Spartanburg, South Carolina 29306, and our telephone number is (864) 598-8600.
3
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THE TRANSACTIONS
On December 3, 1998, the Issuer entered into a credit agreement with and
obtained senior credit facilities from Goldman Sachs Credit Partners L.P., The
Chase Manhattan Bank and other financial institutions. These senior credit
facilities comprised a $75.0 million revolving credit facility and $160.0
million of term loans. For a detailed description of the senior credit
facilities see "Description of the Senior Credit Facilities".
References in this prospectus to the "Financings" are a collective
reference to the following:
o the offering of the outstanding Notes and the use of proceeds from the
offering; and
o the borrowing of the term loans under the senior credit facilities and
the use of proceeds from the borrowing.
References in this prospectus to the "Transactions" are a collective
reference to the following:
o the acquisition of Service America;
o the offering of the outstanding Notes and the use of proceeds from the
offering; and
o the borrowing of the term loans under the senior credit facilities and
the use of proceeds from the borrowing.
THE SPONSOR
The Blackstone Group L.P. (referred to as the "Blackstone Group") is a
private investment bank based in New York and founded in 1985 by Peter G.
Peterson, its current Chairman, and Stephen A. Schwarzman, its current President
and Chief Executive Officer. The Blackstone Group's main businesses include
private equity investments, merger and acquisition advisory services,
restructuring advisory services, real estate investing and asset management.
The Blackstone Group's primary private equity investment vehicle is
Blackstone Capital Partners III Merchant Banking Fund L.P. (referred to as
"BCP III"), which had its final closing in October 1997 and has raised
approximately $3.8 billion of equity capital for investment. BCP III is the
successor to Blackstone Capital Partners II Merchant Banking Fund L.P. (referred
to as "BCP II"), which was established in 1993 and raised approximately $1.3
billion of equity capital, substantially all of which has been invested.
Beginning with Blackstone Capital Partners I Merchant Banking Fund L.P. in 1987,
the Blackstone Group has invested approximately $2.6 billion of equity in 35
transactions having an aggregate transaction value of approximately $22.8
billion.
As used in this prospectus, the term "Blackstone" refers collectively to
BCP Volume L.P. and BCP Offshore Volume L.P. These entities are the two limited
partnerships through which the Blackstone Group holds its primary interest in
Volume Holdings.
4
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SUMMARY OF TERMS OF THE EXCHANGE OFFER
On March 4, 1999, the Issuer completed the private offering of the
outstanding Notes. References to "Notes" in this prospectus are references to
both the outstanding Notes and the exchange Notes.
The Issuer and the guarantors entered into an exchange and registration
rights agreement with the initial purchasers in the private offering in which
the Issuer and the guarantors agreed to deliver to you this prospectus and the
Issuer agreed to complete the exchange offer within 210 days after the date of
original issuance of the outstanding Notes. You are entitled to exchange in the
exchange offer your outstanding Notes for exchange Notes which are identical in
all material respects to the outstanding Notes except that:
o the exchange Notes have been registered under the Securities Act;
o the exchange Notes are not entitled to certain registration rights which
are applicable to the outstanding Notes under the exchange and
registration rights agreement; and
o certain contingent interest rate provisions are no longer applicable.
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The Exchange Offer.................. The Issuer is offering to exchange up to $100.0 million aggregate principal
amount of exchange Notes for up to $100.0 million aggregate principal
amount of outstanding Notes. Outstanding Notes may be exchanged only in
integral multiples of $1,000.
Resales............................. Based on an interpretation by the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties, we
believe that the exchange Notes issued pursuant to the exchange offer in
exchange for outstanding Notes may be offered for resale, resold and
otherwise transferred by you (unless you are an "affiliate" of Volume
Services America within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that you are acquiring the exchange Notes
in the ordinary course of your business and that you have not engaged in,
do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of the exchange Notes.
Each participating broker-dealer that receives exchange Notes for its own
account pursuant to the exchange offer in exchange for outstanding Notes
that were acquired as a result of market-making or other trading activity
must acknowledge that it will deliver a prospectus in connection with any
resale of the exchange Notes. See "Plan of Distribution."
Any holder of outstanding Notes who
o is an affiliate of Volume Services America,
o does not acquire exchange Notes in the ordinary course of its business,
or
o tenders in the exchange offer with the intention to participate, or for
the purpose of participating, in a distribution of exchange Notes,
cannot rely on the position of the staff of the Commission enunciated in
Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or
similar no-action letters and, in the absence of an exemption therefrom,
must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with the resale of the exchange Notes.
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Expiration Date; Withdrawal of
Tenders........................... The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, or such later date and time to which the Issuer
extends it (referred to as the "expiration date"). The Issuer does not
currently intend to extend the expiration date. A tender of outstanding
Notes pursuant to the exchange offer may be withdrawn at any time prior to
the expiration date. The expiration date for the exchange offer will not in
any event be extended to a date later than , 1999. Any
outstanding Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder promptly after the expiration or
termination of the exchange offer.
Certain Conditions to the Exchange
Offer............................. The exchange offer is subject to customary conditions, which the Issuer may
waive. Please read the section captioned "The Exchange Offer--Certain
Conditions to the Exchange Offer" of this prospectus for more information
regarding the conditions to the exchange offer.
Procedures for Tendering Outstanding
Notes............................. If you wish to accept the exchange offer, you must complete, sign and date
the accompanying letter of transmittal, or a facsimile of the letter of
transmittal, according to the instructions contained in this prospectus and
the letter of transmittal. You must also mail or otherwise deliver the
letter of transmittal, or a facsimile of the letter of transmittal,
together with the outstanding Notes and any other required documents, to
the exchange agent at the address set forth on the cover page of the letter
of transmittal. If you hold outstanding Notes through The Depository Trust
Company ("DTC") and wish to participate in the exchange offer, you must
comply with the Automated Tender Offer Program procedures of DTC, by which
you will agree to be bound by the letter of transmittal. By signing, or
agreeing to be bound by, the letter of transmittal, you will represent to
us that, among other things:
o any exchange Notes that you receive will be acquired in the ordinary
course of your business;
o you have no arrangement or understanding with any person or entity to
participate in a distribution of the exchange Notes;
o if you are a broker-dealer that will receive exchange Notes for your
own account in exchange for outstanding Notes that were acquired as a
result of market-making activities, that you will deliver a prospectus,
as required by law, in connection with any resale of such exchange
Notes; and
o you are not an "affiliate," as defined in Rule 405 of the Securities
Act, of Volume Services America or, if you are an affiliate, you will
comply with any applicable registration and prospectus delivery
requirements of the Securities Act.
Special Procedures for Beneficial
Owners............................ If you are a beneficial owner of outstanding Notes which are registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee, and you wish to tender such outstanding Notes in the exchange
offer, you should contact such registered holder promptly and instruct such
registered holder to
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6
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tender on your behalf. If you wish to tender on your own behalf, you must,
prior to completing and executing the letter of transmittal and delivering
your outstanding Notes, either make appropriate arrangements to register
ownership of the outstanding Notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time and may not be able to be completed
prior to the expiration date.
Guaranteed Delivery Procedures...... If you wish to tender your outstanding Notes and your outstanding Notes are
not immediately available or you cannot deliver your outstanding Notes, the
letter of transmittal or any other documents required by the letter of
transmittal or comply with the applicable procedures under DTC's Automated
Tender Offer Program prior to the expiration date, you must tender your
outstanding Notes according to the guaranteed delivery procedures set forth
in this prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures."
Effect on Holders of Outstanding
Notes............................. As a result of the making of, and upon acceptance for exchange of all
validly tendered outstanding Notes pursuant to the terms of the exchange
offer, we will have fulfilled a covenant contained in the exchange and
registration rights agreement and, accordingly, we will not be obligated to
pay liquidated damages as described in the exchange and registration rights
agreement. If you are a holder of outstanding Notes and you do not tender
your outstanding Notes in the exchange offer, you will continue to hold
such outstanding Notes and you will be entitled to all the rights and
limitations applicable to the outstanding Notes in the indenture, except
for any rights under the exchange and registration rights agreement that by
their terms terminate upon the consummation of the exchange offer.
To the extent that outstanding Notes are tendered and accepted in the
exchange offer, the trading market for outstanding Notes could be adversely
affected.
Consequences of Failure to
Exchange.......................... All untendered outstanding Notes will continue to be subject to the
restrictions on transfer provided for in the outstanding Notes and in the
indenture. In general, the outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Other than in connection with the exchange offer,
the Issuer does not currently anticipate that it will register the
outstanding Notes under the Securities Act.
Certain U.S. Federal Income Tax
Considerations.................... The exchange of outstanding Notes for exchange Notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes. See
"Certain United States Federal Income Tax Consequences of the Exchange
Offer."
Use of Proceeds..................... We will not receive any cash proceeds from the issuance of exchange Notes
pursuant to the exchange offer.
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<TABLE>
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Exchange Agent...................... Norwest Bank Minnesota, National Association is the exchange agent for the
exchange offer. The address and telephone number of the exchange agent are
set forth in the section captioned "Exchange Offer--Exchange Agent" of this
prospectus.
</TABLE>
8
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
<TABLE>
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Issuer.............................. Volume Services America, Inc.
Notes Offered....................... $100,000,000 aggregate principal amount of 11 1/4% Senior Subordinated
Notes due 2009.
Maturity Date....................... March 1, 2009.
Interest............................ Annual rate: 11 1/4%.
Payment frequency: every six months on March 1 and September 1.
First payment: September 1, 1999.
Optional Redemption................. On or after March 1, 2004, the Issuer may redeem some or all of the Notes
at the redemption prices listed in the section entitled "Description of the
Notes--Optional Redemption."
At any time on or prior to March 1, 2002, the Issuer may redeem up to
$35,000,000 of the Notes with the proceeds of certain public or private
offerings of equity at the price listed in the section entitled
"Description of the Notes--Optional Redemption."
Change of Control................... Upon the occurrence of a change of control,
o we will have the right at any time on or prior to March 1, 2004 to
repurchase your notes at a price equal to 100% of the principal amount,
plus any premium which may be payable, together with accrued and unpaid
interest if any to the date of repurchase; and
o you will have the right to require the Issuer to repurchase your Notes
at a price equal to 101% of the principal amount together with accrued
and unpaid interest, if any, to the date of repurchase.
See "Description of the Notes--Optional Redemption" and "Description of
Notes--Change of Control."
Ranking and Guarantees.............. The outstanding Notes are, and the exchange Notes will be, guaranteed by
Volume Holdings, Volume Services, Service America and each of Volume
Services' and Service America's wholly-owned U.S. subsidiaries. The Notes
and the guarantees are unsecured senior subordinated debts. The guarantees
will be junior to the guarantees of senior indebtedness issued by the
guarantors under the senior credit facilities. See "Description of the
Notes--Guarantees."
The Notes and the guarantees rank behind all of the Issuer's and the
guarantors' current and future indebtedness (other than trade payables),
except indebtedness that expressly provides that it is not senior to the
Notes or the guarantees and certain other types of indebtedness. The Issuer
is a holding company that derives all of its operating income and cashflow
from its subsidiaries. See "Description of the Notes--Ranking."
As of March 30, 1999,
o the Issuer had $119.2 million of senior secured debt to which the Notes
would be subordinated;
o the Issuer had no senior subordinated debt with which the Notes would
rank equally;
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
o the guarantors had $0.8 million of senior secured debt to which the
Notes would be subordinated;
o the guarantors had no senior subordinated debt with which the Notes
would rank equally; and
o the guarantors had total liabilities (excluding liabilities owed to
Volume Holdings) of $274.4 million.
As of March 30, 1999, the subsidiaries of Volume Services and Service
America that are not guaranteeing the Notes had total liabilities
(excluding liabilities owed to Volume Holdings) of $1.2 million.
Certain Covenants................... The Issuer issued the outstanding Notes, and will issue the exchange Notes,
under an indenture with Norwest Bank Minnesota, National Association, the
trustee. The indenture, among other things, restricts our ability and the
ability of our subsidiaries to:
o borrow money and issue preferred stock;
o pay dividends on stock, purchase stock or purchase debt that is junior
to the Notes
o make investments;
o sell certain assets or merge with or into other companies;
o use assets as security in other transactions;
o engage in transactions with our affiliates;
o guarantee other indebtedness; and
o allow certain restrictions on distributions from our subsidiaries.
For more details, see "Description of the Notes--Certain Covenants."
Absence of a Public Market
for the Exchange Notes............ The exchange Notes generally will be freely transferable but will also be
new securities for which there will not initially be a market. Accordingly,
we cannot assure you whether a market for the exchange Notes will develop
or as to the liquidity of any such market. We do not intend to apply for a
listing of the exchange Notes on any securities exchange or automated
dealer quotation system. The initial purchasers in the private offering of
the outstanding Notes have advised us that they currently intend to make a
market in the exchange Notes. However, they are not obligated to do so, and
any market making with respect to the exchange Notes may be discontinued
without notice.
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION OF
VOLUME HOLDINGS
The following table sets forth summary historical financial information of
Volume Holdings as of and for fiscal years 1996, 1997, and 1998 and as of and
for the thirteen week periods ended March 31, 1998 and March 30, 1999. The
fiscal year of Volume Holdings ends on the Tuesday closest to December 31 and
references herein to a specific fiscal year of Volume Holdings mean the year
ended on the Tuesday closest to December 31 of that year.
The historical financial information as of and for fiscal years 1996, 1997,
and 1998 has been derived from the consolidated financial statements of Volume
Holdings and the notes thereto, which have been audited by Deloitte and
Touche LLP, independent auditors, and which are included elsewhere in this
prospectus. The historical financial information as of and for the thirteen week
periods ended March 31, 1998 and March 30, 1999 has been derived from the
unaudited consolidated financial statements of Volume Holdings and the notes
thereto, which are included elsewhere in this prospectus. The unaudited
consolidated financial statements of Volume Holdings include, in the opinion of
management, all adjustments, which consist only of normal recurring accruals,
necessary for a fair presentation of the results of operations and financial
positions for and as of the end of such periods. Results of operations for the
thirteen week period ended March 30, 1999 are not necessarily indicative of the
results to be expected for the full year or for any future period. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Selected Historical Financial Information of Volume Holdings" and the
consolidated financial statements of Volume Holdings and the notes thereto
included elsewhere in this prospectus.
Volume Holdings is a guarantor of the Notes and the senior credit
facilities and has no substantial operations or assets other than the capital
stock of the Issuer. As a result, the consolidated financial position and
results of operations of Volume Holdings are substantially the same as those of
the Issuer.
As a result of the consummation of the acquisition of Service America on
August 24, 1998, the financial position and results of operations of Service
America after August 24, 1998 are consolidated in the financial position and
results of operations of Volume Holdings for the period subsequent to that date.
The following table also sets forth certain unaudited summary pro forma
combined financial information of Volume Holdings for the periods indicated. The
unaudited summary pro forma combined statement of operations data for fiscal
year 1998 and for the thirteen week period ended March 30, 1999 each give effect
to the Transactions as if they had occurred on January 1, 1998. The unaudited
summary pro forma combined financial information does not purport to represent
what Volume Holdings' results of operations would actually have been had the
Transactions in fact occurred as of such dates or to project Volume Holdings'
results of operations for any future period. The unaudited summary pro forma
combined financial data should be read in conjunction with the Unaudited Pro
Forma Combined Statements of Operations and the notes thereto appearing
elsewhere in this prospectus.
11
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION OF
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PROFORMA
-----------------
THIRTEEN THIRTEEN THIRTEEN
FISCAL YEAR WEEK PERIOD WEEK PERIOD WEEK PERIOD
------------------------ PROFORMA ENDED ENDED ENDED
1996 1997 1998 1998(A) MARCH 31, 1998 MARCH 30, 1999 MARCH 30, 1999(A)
------ ------ ------ --------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $190.4 $196.0 $283.4 $ 405.9 $ 27.3 $ 66.3 $ 66.3
Depreciation and amortization.... 12.6 12.9 18.2 28.4 2.9 6.4 6.4
Operating profit (loss)(b)....... 2.9 4.8 8.7 7.7 (2.5) (4.9) (4.9)
Interest expense................. 7.3 7.9 11.3 23.6 2.3 4.6 5.8
Loss before income taxes,
extraordinary item and
cumulative effect of change in
accounting principle........... (3.9) (2.8) (2.2) (15.5) (4.8) (9.4) (10.6)
Income tax provision (benefit)... -- 0.3 1.5 (5.6) -- (2.7) (4.1)
Net loss(c)...................... (3.9) (3.1) (5.2) (9.9) (4.8) (7.8) (7.6)
OTHER DATA:
EBITDA(d)........................ $ 16.0 $ 20.5 $ 31.8 $ 41.2 $ 0.4 $ 2.6 $ 2.6
Adjusted EBITDA(e)............... $ 46.1 $ 3.5
Net cash provided by used in
operating activities........... 11.0 15.3 1.4 (9.1) (5.9)
Net cash used in investing
activities..................... (13.5) (31.0) (5.3) (0.5) (1.2)
Net cash provided by (used in)
financing activities........... (0.4) 15.9 7.3 16.3 7.3
Total capital expenditures(f).... 20.7 37.6 18.8 5.8 1.2
Cash interest expense(g)......... 6.9 7.4 10.8 22.2 2.2 4.3 5.5
Ratio of earnings to fixed
charges(h)..................... -- -- -- -- -- -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents........ $ 5.2 $ 5.4 $ 8.8 $ 12.1 $ 9.0
Working capital (deficit)(i)..... (5.4) 0.5 (6.4) (4.6) (8.5)
Total assets..................... 117.3 137.8 267.2 144.5 268.8
Total debt(j).................... 69.7 79.0 161.3 93.9 220.0
Total stockholders' equity....... 21.9 25.2 49.9 23.9 (6.8)
</TABLE>
12
<PAGE>
NOTES TO SUMMARY HISTORICAL FINANCIAL INFORMATION OF
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
(a) For a discussion of the transactions reflected in the pro forma information
set forth in the table, see "Unaudited Pro Forma Combined Statements of
Operations," "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" and "Prospectus Summary--The Transactions."
(b) Operating profit (loss) includes non-cash charges of $2.5 and $1.4 in fiscal
years 1997 and 1998, respectively, related to contract termination costs.
Operating profit (loss) for fiscal years 1996, 1997 and 1998 and the
thirteen week periods ended March 31, 1998 and March 30, 1999, includes
management fees paid to equity holders of $0.3, $0.3 and $0.3, $0.1 and
$0.1, respectively.
(c) Net loss for Volume Holdings includes an extraordinary loss (net of income
taxes) of $1.5 and $0.9 for the non-cash write-off of deferred financing
costs for fiscal year 1998 and the thirteen week period ended March 30,
1999, respectively, and $0.3 resulting from cumulative change in accounting
principles (net of income taxes) in the thirteen week period ended
March 30, 1999.
(d) EBITDA is defined as net loss before extraordinary item, interest expense,
income tax expense, depreciation, amortization and:
o for fiscal year 1997, a $2.5 non-cash charge related to contract
termination costs for Volume Holdings;
o for fiscal year 1998, $1.4 million of non-cash charge related to contract
termination costs for Volume Holdings and $3.1 of non-recurring severance
expense associated with Volume Services' employees;
o for fiscal 1998, on a proforma basis, $3.1 of non-recurring severance
expense associated with Volume Services' employees and other Service
America expenses in connection with the acquisition of Service America,
$1.4 of non-charges related to contract termination costs for Volume
Holding and $0.2 of non-cash charges related to contract termination
costs for Service America; and
o for the thirteen week period ended March 30, 1999, and the thirteen week
period ended March 30, 1999 on a proforma basis, $1.0 of non-recurring
severance expenses and other non-recurring expenses in connection with
the acquisition of Service America.
We believe that EBITDA provides useful information regarding our ability to
service debt but should not be considered in isolation, or as a substitute
for the consolidated statement of operations or cash flow data prepared in
accordance with generally accepted accounting principles and included
elsewhere in this prospectus, or as a measure of our operating performance,
profitability or liquidity. While EBITDA is frequently used as a measure of
operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies
due to differences in methods of calculation.
13
<PAGE>
(e) Pro forma adjusted EBITDA reflects the following changes in our cost
structure as a result of implementation of the Integration Plan:
<TABLE>
<CAPTION>
THIRTEEN WEEK
PERIOD ENDED
MARCH 30,
FISCAL YEAR 1998 1999
----------------- -------------
<S> <C> <C>
Pro forma EBITDA................................... $41.2 $ 2.6
Cost savings:
Elimination of overlapping regional office
personnel..................................... 1.1 0.3
Corporate overhead staff reductions.............. 1.5 0.4
Reduction in operating costs..................... 2.5 0.6
----- -----
Total......................................... 5.1 1.3
Cost savings realized in the applicable period... 0.2 0.4
----- -----
Remaining cost savings to be realized............ 4.9 0.9
----- -----
Pro Forma adjusted EBITDA.......................... $46.1 $ 3.5
----- -----
----- -----
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Integration Plan" for a full explanation of these savings and
of the Integration Plan.
(f) In connection with entering into certain new contracts, or extending or
renewing certain existing contracts, we are required to make some form of
up-front or committed future capital investment. We account for these
capital investments as purchases of property and equipment and we account
for grants as purchases of contract rights. We capitalize these investments
and depreciate or amortize them over the lesser of the useful life of the
applicable asset or the remaining life of the contract. For a detailed
explantion of these capital investments, see "Business--Contracts."
(g) Cash interest expense represents interest expense less amortization of debt
issuance costs.
(h) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as loss before income taxes and extraordinary item plus fixed
charges. Fixed charges include interest expense on all indebtedness,
amortization of deferred financing costs, and one-third of rental expense on
operating leases representing that portion of rental expense deemed to be
attributable to interest. Earnings were insufficient to cover fixed charges
by $3.9, $2.8, $2.2, $4.8 and $9.4 for fiscal years 1996, 1997 and 1998 and
the thirteen week periods ended March 31, 1998 and March 30, 1999,
respectively.
(i) Working capital is defined as current assets less current liabilities.
(j) Includes the current portion of long-term debt.
14
<PAGE>
RISK FACTORS
Before you participate in the exchange offer, you should be aware that
there are various risks, including those described below. You should carefully
consider these risk factors, together with the other information in this
prospectus, before deciding to participate in the exchange offer.
Failure to Exchange--There may be adverse consequence if you do not exchange
your outstanding Notes.
If you do not exchange your outstanding Notes for exchange Notes under the
exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding Notes as set forth in the offering memorandum
distributed in connection with the offering of the outstanding Notes. In
general, the outstanding Notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act and applicable
state securities laws. Except as required by the exchange and registration
rights agreement, we do not intend to register resales of the outstanding Notes
under the Securities Act. You should refer to "Prospectus Summary--Summary of
Terms of the Exchange Offer" and "The Exchange Offer" for information about how
to tender your outstanding Notes.
The tender of outstanding notes under the exchange offer will reduce the
principal amount of the outstanding Notes outstanding, which may have an adverse
effect upon, and increase the volatility of, the market price of the outstanding
Notes due to a reduction in liquidity.
Substantial Leverage and Debt Service--We have substantial indebtedness and
have significant interest payment requirements.
We have a substantial amount of debt. As of March 30, 1999, we had debt of
$220.0 million (excluding unused commitments), of which $120.0 million was
senior debt, and stockholders' deficit of $6.8 million. In addition, subject to
restrictions in our senior credit facilities and in the indenture governing the
Notes, we may borrow more money for working capital, capital expenditures,
acquisitions or for other purposes. On a pro forma basis after giving effect to
the Transactions, our earnings would have been insufficient to cover our fixed
charges by $15.5 million for fiscal year 1998 and $10.6 million for the thirteen
week period ended March 30, 1999.
Our high level of debt could have important consequences for you, including
the following:
o we will need to use a large portion of the money earned by our
subsidiaries to pay principal and interest on the senior credit
facilities, the Notes and on other debt, which will reduce the amount of
money available to us to finance our operations and other business
activities;
o some of our debt has a variable rate of interest, which exposes us to the
risk of increased interest rates;
o we may have difficulty borrowing money in the future for working capital,
capital expenditures, acquisitions or other purposes which may adversely
affect, among other things, our ability to make capital investments and
therefore obtain new contracts and/or retain existing contracts;
o we may have a much higher level of debt than our competitors, which may
put us at a competitive disadvantage;
o debt under the senior credit facilities is secured by all our assets and
will mature prior to the Notes;
o our debt level makes us more vulnerable to economic downturns and adverse
developments in our business;
o our debt level reduces our flexibility in responding to changing business
and economic conditions, including increased competition in the
recreational food service industry; and
15
<PAGE>
o our debt level could prevent us from repurchasing all of the Notes
tendered to us upon a change of control.
We expect to obtain the money to pay our expenses and to pay the principal
and interest on the Notes, the senior credit facilities and other debt and to
fund capital expenditures or to finance acquisitions from the operations of our
subsidiaries and from additional loans under the senior credit facilities. Our
ability to meet our expenses therefore depends on the future performance of our
subsidiaries, which will be affected by financial, business, economic and other
factors. We will not be able to control many of these factors, such as economic
conditions in the markets where our subsidiaries operate, and pressure from
competitors. We cannot be certain that the money earned by our subsidiaries will
be sufficient to allow us to pay principal and interest on our debt (including
the Notes) and meet our other obligations. If we do not have enough money, we
may be required to reduce or delay planned capital expenditures, obtain
additional equity capital, refinance all or part of our existing debt, including
the Notes, sell assets or borrow more money. We cannot guarantee that we will be
able to refinance our debt, sell assets or borrow more money on terms acceptable
to us. In addition, the terms of existing or future debt agreements, including
the senior credit facilities and the indenture, may restrict us from adopting
any of these alternatives.
Under the senior credit facilities, we must also comply with certain
specified financial ratios and tests. If we do not comply with these or other
covenants and restrictions contained in the senior credit facilities, we could
default under the senior credit facilities. Such debt, together with accrued
interest, could then be declared immediately due and payable. This could, in
turn, result in other debt being declared due and payable. Our ability to comply
with such provisions may be affected by events beyond our control.
Structural Subordination--The Notes are subordinated to the debt of the
Issuer's subsidiaries and the debt of the Non-Guarantor Subsidiaries.
The Issuer is a holding company with no significant assets other than the
capital stock of Volume Services and Services America, its operating
subsidiaries. Consequently, the Issuer is dependent upon dividends or other
intercompany transfers of funds from its subsidiaries to meet its debt service
and other obligations. Claims of creditors of the Issuer's subsidiaries will
generally have priority over claims of the Issuer to the assets of such
subsidiaries. The Notes therefore will be effectively subordinated to creditors
of the direct and indirect subsidiaries of the Issuer.
Although the guarantees provide you with a direct claim against the assets
of the guarantors, enforcement of the guarantees:
o may be challenged by creditors of such guarantors in the case of
bankruptcy; and
o would be subject to certain defenses available to guarantors generally.
See "--Fraudulent or Preferential Transfer Considerations."
To the extent the guarantees are not enforceable, the Notes would be
effectively subordinated to all liabilities of the guarantors, whether or not
these liabilities are senior indebtedness. The Notes will also be effectively
subordinated to all liabilities of the subsidiaries of Volume Services and
Service America which are not wholly-owned domestic subsidiaries and which are
therefore not guarantors (referred to as "Non-Guarantor Subsidiaries").
As of March 30, 1999,
o the guarantors had total liabilities (excluding liabilities owed to
Volume Holdings) of $274.4 million;
o the Non-Guarantor Subsidiaries had total liabilities (excluding
liabilities owed to Volume Holdings) of $1.2 million; and
o the Non-Guarantor Subsidiaries generated 7.2% of our net sales and 4.6%
of our contract EBITDA for the preceding fifty-two week period, and
accounted for 4.2% of our assets.
16
<PAGE>
If the Issuer were unable to pay its debts, or entered into a
reorganization, you may not receive any amounts from the Issuer in respect of
the Notes until it had paid the creditors of its subsidiaries in full. In
addition, the ability of the Issuer's subsidiaries to pay dividends and make
other payments to it may be restricted by, among other things, applicable
corporate and other laws and regulations and agreements of the subsidiaries.
Although the indenture limits the ability of such subsidiaries to enter into
consensual restrictions on their ability to pay dividends and make other
payments, such limitations are subject to a number of significant qualifications
and exceptions. See "Description of the Notes--Certain Covenants--Dividend and
Other Payment Restrictions Affecting Subsidiaries."
History of Net Losses--We have a history of recording net losses and may not
achieve profitability in the future.
Volume Holdings incurred net losses of:
o $1.0 million in fiscal year 1995;
o $3.9 million in fiscal year 1996;
o $3.1 million in fiscal year 1997; and
o $5.2 million in fiscal year 1998.
Service America incurred net losses of:
o $91.0 million in fiscal year 1994;
o $11.5 million in fiscal year 1995;
o $14.3 million in fiscal year 1997;
o $3.4 million in the twenty-six week period ended June 28, 1997; and
o $2.0 million in the twenty-six week period ended June 27, 1998.
On a pro forma basis, we would have incurred net losses of $11.4 million in
fiscal year 1998 and $7.6 million in the thirteen week period ended March 30,
1999.
We may not achieve profitability in the future or be able to generate cash
flow sufficient to meet our interest and principal payment obligations and other
capital needs.
Restrictive Debt Covenants--We are subject to certain restrictive debt
covenants.
The indenture imposes restrictions on us and our restricted subsidiaries.
These restrictions include:
o the incurrence of additional indebtedness;
o the issuance of disqualified stock and preferred stock;
o the payment of dividends on, and purchases of, capital stock;
o the purchase of indebtedness that is junior in right of payment to the
Notes;
o certain other restricted payments including investments;
o certain sales of assets;
o certain transactions with affiliates;
o the creation of certain liens; and
o consolidations, mergers and transfers of all or substantially all of our
assets.
The indenture also prohibits certain restrictions on distributions from our
restricted subsidiaries. The terms of the senior credit facilities include other
and more restrictive covenants and prohibit us from prepaying our other
indebtedness (including the Notes) while indebtedness under the senior
17
<PAGE>
credit facilities is outstanding. See "Description of the Notes--Certain
Covenants" and "Description of Senior Credit Facilities." The senior credit
facilities also require us to maintain specified financial ratios and satisfy
financial condition tests. A breach of any of these covenants, ratios or tests
could result in a default under the senior credit facilities and/or the
indenture. Our ability to comply with the ratios or tests may be affected by
events beyond our control, including prevailing economic, financial and industry
conditions. Certain events of default under the senior credit facilities would
prohibit the Issuer from making payments on the Notes, including payment of
interest when due. In addition, upon the occurrence of an event of default under
the senior credit facilities, the lenders could elect to declare all amounts
outstanding under the senior credit facilities, together with accrued interest,
to be immediately due and payable. If we were unable to repay those amounts, the
lenders could proceed against the security granted to them to secure that
indebtedness. If the lenders accelerate the payment of the indebtedness, our
assets may not be sufficient to repay in full such indebtedness and our other
indebtedness, including the Notes. See "--Contractual Subordination," "--Asset
Encumbrance" and "Description of Senior Credit Facilities."
Contractual Subordination--The Notes and the guarantees are contractually
subordinated to our senior debt.
The Notes are contractually subordinated in right of payment to all senior
indebtedness of the Issuer and the guarantees are contractually subordinated in
right of payment to all senior indebtedness of the guarantors. As of March 30,
1999,
o the Issuer had $119.2 million of senior secured debt to which the Notes
would be subordinated;
o the Issuer had no senior subordinated debt with which the Notes would
rank equally;
o the guarantors had $0.8 million of senior secured debt to which the Notes
would be subordinated;
o the guarantors had no senior subordinated debt with which the Notes would
rank equally; and
o the guarantors had total liabilities (excluding liabilities owed to the
Volume Holdings) of $274.4 million.
As of March 30, 1999, the Non-Guarantor Subsidiaries had total liabilities
(excluding liabilities owed to Volume Holdings) of $1.2 million.
The indenture permits the Issuer and the guarantors to borrow additional
debt, which may be senior indebtedness and which may be substantial.
The indenture provides that the Issuer, the guarantors and the
Non-Guarantor Subsidiaries may not borrow any debt which is junior to senior
indebtedness and senior in right of payment to the Notes. Furthermore, under
certain circumstances, any of the Guarantees could be set aside under fraudulent
conveyance or similar laws. See "--Fraudulent or Preferential Transfer
Considerations."
If the Issuer or the guarantors are declared bankrupt or insolvent, or if
there is a payment default under any senior indebtedness, we are required to pay
the lenders under the senior credit facilities and any other creditors who are
holders of senior indebtedness in full before we pay you. Accordingly, we may
not have enough assets remaining after payments to holders of such senior
indebtedness to pay you. In addition, under certain circumstances, the Issuer
may not pay any amount on the Notes if certain senior indebtedness (including
debt under the senior credit facilities) is not paid when due or any other
default on such senior indebtedness exists. See "Description of the
Notes--Ranking."
Asset Encumbrance--Our assets are pledged to secure payment of the senior
credit facilities.
In addition to being junior to all existing and future senior indebtedness,
our obligations under the Notes are unsecured while our obligations under the
senior credit facilities are secured. We have granted the lenders under the
senior credit facilities security interests in substantially all of the current
and future assets of Volume Holdings, the Issuer and the wholly-owned domestic
subsidiaries of the
18
<PAGE>
Issuer, including a pledge of all of the capital stock of Volume Holdings, the
Issuer and the wholly-owned domestic subsidiaries of the Issuer. If we default
under the senior credit facilities, the lenders will have a superior claim on
our stock and assets. If we were unable to repay such indebtedness, the lenders
could foreclose on the pledged stock of our subsidiaries to your exclusion, even
if an event of default exists under the indenture at such time.
Integration of Volume Services and Service America--We may not be able to
successfully integrate the two businesses.
Volume Services and Service America have historically operated
independently, and our success depends on the ability of management to
coordinate and integrate the operations and the businesses of Volume Services
and Service America and successfully implement their business strategy.
Management may not be able to achieve this. If we fail to successfully integrate
the operations of Volume Services and Service America, it may affect our
revenues and/or results of operations. We may not be able to pay our expenses or
the principal and interest on the Notes, the senior credit facilities or any
other debt.
We adopted a plan (referred to as the "Integration Plan") in the fourth
quarter of fiscal year 1998 in order to realize cost savings as a result of the
combination of Volume Services and Service America. When its benefits are fully
realized, we expect the Integration Plan to result in annual cost savings of
approximately $6.3 million and an incremental increase in annual overhead
expenses of approximately $1.2 million, resulting in net annual cost savings of
approximately $5.1 million. We also expect to incur a total of $6.5 million of
one-time expenses and charges in connection with the implementation of the
Integration Plan. However, the Integration Plan may not produce the expected
future cost savings, and, in implementing the Integration Plan, we may incur
expenses or charges beyond those currently expected. Realization of the cost
savings could be affected by a number of factors beyond our control, including
general economic conditions, increased operating costs, the response of
competitors or clients, regulatory developments and delays in implementation.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Integration Plan" for a detailed discussion and explanation of the
Integration Plan.
Dependence on Attendance at Client Facilities--Our revenues would be
affected by a decline in attendance at client facilities.
We depend on our clients to attract events to their facilities and to
encourage attendance at these events. The number of events held, the level of
attendance at such events and the per capita spending rates of the attendees
have a direct impact on our net sales and results of operations. The level of
maintenance and upkeep is the responsibility of our client, and the poor
condition of a facility may adversely affect the number of events held or
attendance at these events. If facility owners and managers fail to attract an
adequate number of well-attended events to their facilities, it may affect our
revenues and results of operations.
Factors such as labor stoppages involving sports leagues, poor performance
by the sports teams using a facility, loss of a major sports team using a
facility, changing consumer preferences for leisure time activities and
inclement weather could also limit the number of events at a facility or reduce
attendance. This would also reduce our revenues and results of operations. For
example, our revenues and results of operations were materially adversely
affected by the labor stoppage which disrupted the 1995 MLB season. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Similar labor stoppages may affect us in the future.
Furthermore, a significant recession may cause persons sponsoring and
attending events held at convention center facilities at which we operate to
cancel, reduce or postpone their use of the facilities and/or may cause
attendees at these facilities to reduce spending on discretionary purchases,
such as the products which we sell. This would also reduce our revenues.
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Limitation on Change of Control--We may not be able to finance a change of
control offer required by the indenture.
Upon a change of control under the indenture, the Issuer will be required
to offer to purchase all of the Notes then outstanding at 101% of their
principal amount, plus any accrued interest and liquidated damages to the date
of repurchase. If a change of control were to occur, we can provide no assurance
that the Issuer would have sufficient funds to pay the purchase price (as
defined in the indenture) for the Notes then outstanding, and we expect that the
Issuer would require third party financing. However, the Issuer may not be able
to obtain such financing on favorable terms, if at all. The Issuer will not be
required to offer to purchase the Notes, and the indenture does not offer you
any other protection, if we are involved in any highly leveraged or similar
transaction which may adversely affect you but which does not result in a change
of control. A change of control under the indenture will result in an event of
default under the senior credit facilities and may cause the acceleration of
other senior indebtedness, if any, in which case the subordination provisions of
the Notes would require payment in full of the senior credit facilities and any
other senior indebtedness before repurchase of the Notes. In addition, the
senior credit facilities restrict the Issuer's ability to repurchase the Notes,
including pursuant to an offer in connection with a change of control, until the
borrowings under the senior credit facilities have been repaid or the lenders of
the senior credit facilities have consented. If we fail to repay the borrowings
or obtain this consent we will have defaulted under the indenture and senior
credit facilities.
Any future debt which we incur may also contain restrictions or
requirements regarding a change of control. In the event of a change of control,
we may not have sufficient assets to satisfy our obligations under the indenture
and the senior credit facilities.
The change of control provisions in the indenture may also make it more
difficult for us to be sold or taken over. See "Description of the Notes--Change
of Control" and "Description of the Senior Credit Facilities." The inability to
repay senior indebtedness, if accelerated, and to purchase all of the tendered
Notes, would constitute an event of default under the indenture.
Nature of Contracts--The nature of our contracts exposes us to certain
risks.
We generally supply our services pursuant to one of three different types
of contract:
o Profit & Loss Contract;
o Profit Sharing Contract; or
o Management Fee Contract.
The P&L Contract is our most common type of contract, and accounted for
approximately 86.1% and 90.3% of our pro forma net sales and Contract EBITDA,
respectively, for the fifty-two week period ended March 30, 1999. Under a P&L
Contract, we receive all of the revenues from the provision of our services at a
facility and bear all of the expenses. We must therefore carefully control our
operating expenses and obtain price increases commensurate with cost increases
in order to achieve our anticipated level of profitability. Some of our P&L
Contracts contain minimum guaranteed commissions or equivalent payments to the
client regardless of the level of sales at the facility or whether or not a
profit is being generated. In the event that revenues do not exceed our costs
under a contract which contains minimum guaranteed commissions we will be liable
for bearing any losses which are incurred. We may incur losses under our P&L
Contracts, and these losses may materially affect our results of operations.
Profit Sharing Contracts are our second most common type of contract, and
accounted for approximately 13.5% and 6.7% of our pro forma net sales and
Contract EBITDA, respectively, for the fifty-two week period ended March 30,
1999. Under Profit Sharing Contracts, we receive a percentage of any profits
earned from the provision of our services at a facility after deducting
expenses. Any Profit Sharing Contract which incurs a loss will not generate any
profits for us.
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A few of our contracts give the client the right to terminate the contract
without cause on little or no notice. Additionally, some of our contracts
exclude certain events or products from within the scope of the contract, or
give the client the right to modify the terms under which we may operate at
certain events. Our revenues and results of operations could be adversely
affected if one or more clients were to exercise these rights in a way which was
detrimental to us.
We are typically obliged to comply with the instructions of our clients in
determining which products are sold at individual venues. In addition,
substantially all of our contracts limit our ability to raise prices on the
food, beverages and merchandise we sell within a particular facility without the
client's consent. The refusal by individual clients to permit the sale of
certain products at their venues, or the imposition by clients of maximum prices
which are not economically feasible for us, could adversely affect our revenues
or results of operations.
We negotiate mutually agreed terminations of certain of our contracts from
time to time. We typically do not recover all of the unamortized portion of our
capital investment upon a mutually agreed termination of such contract. When
this happens, we recognize a loss in our operating profit equal to the
unrecovered portion. In addition, disputes with clients arise under contracts
from time to time. A dispute may arise under one or more of our existing or
future contracts, which could have an adverse effect on our revenues or results
of operations.
Inability to Retain Existing or Obtain New Contracts--Our revenues would be
affected if we were unable to retain existing or obtain new clients.
We are dependent upon our ability to extend or renew existing client
contracts on favorable terms and to negotiate and obtain acceptable new client
contracts. Contracts in the recreational food service industry are generally
gained or renewed through a competitive bidding process. Some of our competitors
may be prepared to accept less favorable commission structures than us when
negotiating contracts. See "--Competition." Furthermore, providers of
recreational food services often accept less favorable terms from their clients
when negotiating the renewal of existing contracts. If we are unable to extend
or renew existing contracts on terms which are as favorable as the initial
contract terms, or at all, or if we are unable to negotiate and obtain new
contracts, our revenues and results of operations could suffer.
Many professional sports teams, including many of our clients, are
currently either planning to move to a new facility or are considering doing so.
Some of our sports facility contracts do not contain any protection for us in
the event that the sports team tenant of the facility moves to a new facility.
In addition, changes in the ownership of a facility which we serve, or of a
sports team tenant of such a facility, may result in disputes concerning the
terms under which we provide our services at such facility. Jack Kent Cooke
Stadium, home of the NFL's Washington Redskins, is currently owned by the estate
of its former owner. The trustees of the estate are obliged to sell the NFL team
and stadium. Any such sale is subject to approval by the NFL and certain other
conditions. We have operated at Jack Kent Cooke Stadium since 1997 under a
letter of agreement signed by us and the current owners, pursuant to which we
have made a substantial capital investment. Although we believe that any new
owners of the stadium will be subject to the terms of the letter of agreement,
we cannot predict how a new owner would seek to conduct its operations. Change
of ownership of a facility which we serve, or of a sports team tenant of such a
facility, or the move by the sports team tenant of a facility which we serve to
a facility which we do not serve, could have a material adverse effect on our
revenues or results of operations.
Nine of our 20 largest contracts (by Contract EBITDA), representing
approximately 20.2% of Contract EBITDA for the fifty-two week period ended March
30, 1999 are scheduled to expire by the end of 2001. In addition, 10 of our 20
largest contracts (by Contract EBITDA), representing approximately 35.1% of
Contract EBITDA for the fifty-two week period ended March 30, 1999 are scheduled
to expire by the end of 2003. We may not be able to extend or renew these, or
any of our other, contracts. Our revenues or results of operations could be
affected if we fail to do so. During the period from 1993 through 1998, we
failed to retain 31 contracts, representing approximately 15% of
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total Contract EBITDA up for renewal during such period, calculated by reference
to the amount of Contract EBITDA generated by each contract in the last full
year prior to its expiration. Excluded from this calculation are seven contracts
which we terminated by mutual agreement with the client and 11 contracts for
which we did not submit a final bid. These contracts accounted in the aggregate
for approximately $3.9 million of Contract EBITDA in their last full fiscal year
of operation.
Our ability to obtain and retain contracts will depend in part upon our
ability to make capital investments, including grants, and to obtain performance
bonds, bid bonds or letters of credit. Our ability to do so may be limited by
restrictions imposed by the senior credit facilities and by the significant
amount we have borrowed. See "--Substantial Leverage and Debt Service"
Dependence on Major Clients--We depend on a few of our largest clients for a
large proportion of our revenues.
We are dependent to a significant extent on the Contract EBITDA generated
by certain of our key facilities. On a pro forma basis, for the fifty-two week
period ended March 30, 1999:
o our largest client contract accounted for approximately 14.8% of our
Contract EBITDA;
o our three largest client contracts together accounted for approximately
33.7% of our Contract EBITDA; and
o our ten largest client contracts accounted for approximately 59.5% of our
Contract EBITDA.
We expect to continue to be dependent upon key facilities and our revenues
or results of operations could be affected if we lost or failed to renew the
contract to provide our services at any one of them.
Investment in Contracts and Grants to Clients--The ability to make
investments in contracts and grants to clients is an important part of our
business.
When we enter into new contracts, or extend or renew existing contracts, we
are often required to make some form of up-front or committed future capital
investment to help finance facility construction or renovation. This expenditure
typically takes the form of investment in:
o leasehold improvements;
o food service equipment; and/or
o grants to owners or operators of facilities.
During the period from 1994 through 1998, we made capital investments with
respect to client contracts aggregating approximately $148.0 million. We are
currently committed to fund capital investments of approximately $25.7 million
and $1.2 million in 1999 and 2000, respectively. We will rely on availability
under the revolving credit facility and cash flow from operations to meet our
future capital investment requirements. However, such availability or cash flow
may not be sufficient to meet these requirements. If we fail to meet our capital
investment obligations under a contract we will have breached the contract,
which may result in termination of the contract or other action against us.
The ability to make capital investments has become an important element in
the competitive process of bidding for new contracts and renewing existing
contracts. The inability to make capital commitments would place us at a
competitive disadvantage and could affect our ability to obtain new contracts
and retain existing contracts. This would have a material adverse effect on our
revenues and results of operations.
We are also often required to obtain performance bonds, bid bonds or
letters of credit to secure our contractual obligations. As of March 30, 1999,
we had requirements for performance bonds and letters of credit of $5.8 million
and $13.5 million, respectively. Under the revolving credit facility, we have an
aggregate of $35.0 million available for letters of credit, subject to an
overall borrowing limit of
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$75.0 million under such facility. This may not be sufficient to satisfy our
anticipated future performance bond, bid bond or letter of credit obligations.
We amortize capital investments made in contracts over the shorter of the
useful life of the applicable asset and the remaining life of the contract. As
of March 30, 1999, we had unamortized capital investments of approximately
$138.7 million. Many of our contracts provide that we will not recover any part
of our capital investment if a contract is terminated prior to its expiration
date due to our default. If a contract is terminated prior to its expiration
date for any other reason, the client typically is contractually required to
return the portion of our capital investment which is unamortized at the date of
termination (excluding the amounts related to the adjustment of Service
America's assets to fair value). However, not all of our clients are obligated
to do this. Our profits at a given facility over the term of a contract may not
exceed the amortization of our capital investment. If we fail to recover the
unamortized portion of our investment on termination of a contract, our results
of operations will be adversely affected.
Competition--We operate in a very competitive business environment.
The recreational food service industry is highly fragmented and
competitive, with several national food service providers as well as a large
number of smaller independent businesses serving discrete local and regional
markets and/or competing in distinct areas. Those companies that lack a
full-service capability, because, for example, they cannot cater for luxury
suites at stadiums and arenas, often bid for contracts in conjunction with one
of the other national food service companies that can offer such services.
We compete for contracts against a variety of food service providers.
However, we consider our major competitors to be other national food service
providers, including ARAMARK, Delaware North Corporation, Ogden Corporation,
Fine Host Corporation and Levy Restaurants. We also face competition from
regional and local service contractors, some of which are better established
within a specific geographic region. Existing or potential clients may also
elect to "self operate" their food services, eliminating the opportunity for us
to compete for the account.
Contracts are generally gained and renewed through a competitive bidding
process. We selectively bid on contracts to provide services at both privately
owned and publicly controlled facilities. The privately negotiated transactions
are generally competitive in nature, with several other large national
competitors submitting proposals. Contracts for publicly controlled facilities
are generally awarded pursuant to a request-for-proposal process. Successful
bidding on contracts for such publicly controlled facilities often requires a
long-term effort focused on building relationships in the community in which the
venue is located.
We compete primarily on the following factors:
o the ability to make capital investments;
o commission or management fee structure;
o service innovation;
o quality and breadth of products and services; and
o reputation within the industry.
Some of our competitors may be prepared to accept less favorable commission
or management fee structures than us when bidding for contracts. A number of our
competitors also have substantially greater financial and other resources than
us. Furthermore, the fact that we have more debt than certain of our competitors
could place us at a competitive disadvantage. See "--Substantial Leverage and
Debt Service." We may not be able to compete successfully against our
competitors, which could have a material adverse effect on our revenues and
results of operations.
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Contractual Limitations on Business Development--We have accepted some
contractual limitations on the type of business we may be involved in.
Service America has entered into noncompetition agreements in connection
with the sale of portions of its institutional vending and dining operations.
With some exceptions, these agreements prohibit us from providing certain
vending and dining services in specified geographical areas. These agreements
have differing durations, with the last such agreement terminating in May 2002.
These agreements may prevent us from engaging in certain sectors of the food
service industry during their respective terms and may prevent us from
completing acquisitions (or structuring such acquisitions in desirable forms)
with companies which compete in these markets.
Dependence on Key Personnel--We are dependent on key personnel.
We believe our success is largely dependent on the abilities and experience
of our senior management team. The loss of the services of one or more of these
senior executives could affect our ability to:
o effectively retain existing contracts;
o obtain new contracts;
o manage our overall operations; or
o successfully execute current or future business strategies.
This could have a material adverse effect on our revenues or results of
operations. Our success will also depend upon our ongoing ability to attract and
retain qualified management and other employees. See "Management."
Seasonality--Our business is seasonal in nature and our revenues and results
vary from quarter to quarter.
Our revenues and operating results have varied, and we expect them to
continue to vary, from quarter to quarter as a result of factors which include:
o seasonal patterns within the industry;
o the unpredictability in the number, timing and type of new contracts;
o the timing of contract expirations and special events; and
o the level of attendance at facilities which we serve.
Business at the principal types of facilities which we serve is seasonal in
nature, with MLB and minor league baseball sales concentrated in the second and
third quarters, the majority of NFL activity occurring in the fourth quarter and
convention centers and arenas generally hosting fewer events during the summer
months. Consequently, our results of operations for the first quarter are
typically substantially lower than in other quarters. Results of operations for
any particular quarter may not be indicative of results of operations for future
periods. Seasonal and quarterly fluctuations may have a material adverse effect
on our revenues or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Risks Related to Labor Costs--The cost of providing our services is affected
by changing labor costs.
As substantially all of our client contracts require us to obtain the
consent of the facility owner before raising prices, we may not be able to
offset any increases in our wage costs through price changes. Therefore, any
factors which increase the wage rates that we have to pay in order to attract
suitable employees, including any tightening of the labor supply in any of the
markets where we operate, may affect our results of operations. See "--Nature of
Contracts."
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We operate at certain facilities under collective bargaining agreements.
Under certain of these agreements, we are obligated to contribute to
multi-employer pension plans. If any of our service contracts at these
facilities were terminated or not renewed, and the applicable multi-employer
pension plan at that time had unfunded vested benefits, we could be subject to
withdrawal liability to the multi-employer plan. It is impossible to determine
the extent of our potential liability, if any, for any withdrawal in the future.
However, we may be exposed to material withdrawal liability under these
circumstances.
Concentration of Ownership and Control--We are controlled by a principal
stockholder.
Blackstone owns approximately 60% of Volume Holdings' common stock. In
addition, an agreement among certain of our large stockholders contains
restrictions prohibiting Volume Holdings from taking certain corporate actions
without the consent of both Blackstone and Recreational Services. See "Certain
Relationships and Related Transactions--Amended Stockholders' Agreement." As a
result of Volume Holdings' ownership of the Issuer, Blackstone and/or GE Capital
have the ability to determine whether or not the Issuer takes certain actions.
The interests of Blackstone and/or GE Capital may not coincide with the
interests of holders of the Notes.
General Risks of Food Industry--There are risks associated with the service
of food and beverages to the public.
We are subject to the general risks of the food industry, and particularly
to:
o consumer product liability claims;
o the risk of product tampering;
o evolving consumer preferences;
o nutritional and health-related concerns;
o federal, state, and local food controls; and
o the availability and expense of insurance.
Claims of illness or injury relating to food quality or handling are common
in the food service industry and a number of such claims may exist at any given
time. Food service providers can also be adversely affected by negative
publicity resulting from food quality or handling claims at one or more
facilities. Although we maintain product liability insurance, the level of
coverage presently in place may not be adequate and adequate coverage may not be
available in the future. Any losses that we may suffer from future liability
claims, including the successful assertion against us of one or a series of
large claims in excess of our insurance coverage, could affect our results of
operations.
Government Regulation--We are subject to various governmental regulations.
Our operations are subject to various governmental regulations, such as
those governing:
o the service of food and alcoholic beverages;
o minimum wage regulations;
o employment;
o environmental protection; and
o human health and safety.
In addition, our facilities and products are subject to periodic inspection
by federal, state, and local authorities. We cannot assure you that we are in
compliance with all applicable laws and regulations or that we will be able to
comply with any future laws and regulations. Furthermore, additional federal or
state legislation, or changes in regulatory implementation, may limit our
activities in the future or significantly increase the cost of regulatory
compliance. If we fail to comply with
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applicable laws and regulations, we could be subject to civil remedies,
including fines, injunctions, recalls, or seizures, as well as potential
criminal sanctions. This could have a material adverse effect on our results of
operations.
Our kitchens are subject to regulation and inspection by the United States
Food and Drug Administration. Every commercial kitchen in the United States must
meet the FDA's minimum standards relating to the handling, preparation and
delivery of food, including requirements relating to the temperature of food and
the cleanliness of the kitchen and the hygiene of its personnel. We are also
subject to certain state, local and federal laws regarding the disposition of
property and leftover foodstuffs. We cannot assure you that we are in compliance
with all applicable laws and regulations or that we will be able to comply with
any future laws and regulations. Furthermore, additional or amended regulations
by the FDA may limit our activities in the future, or significantly increase the
cost of compliance.
We serve alcoholic beverages at many facilities, and are subject to the
"dram-shop" statutes of the states in which we serves alcoholic beverages.
"Dram-shop" statutes generally provide that serving alcohol to an intoxicated or
minor patron is a violation of law. In most states, if one of our employees
sells alcoholic beverages to an intoxicated or minor patron, we may be liable to
third parties for the acts of the patron. Although we sponsor regular training
programs in cooperation with state authorities to minimize the likelihood of
this, we cannot assure you that such patrons will not be served or that we will
not be subject to liability for their acts. We also maintain general liability
insurance, which includes liquor liability coverage. However, we cannot assure
you that such insurance will be adequate to cover any potential liability or
that such insurance will continue to be available on commercially acceptable
terms. A large uninsured damage award could have a material adverse impact on
our results of operations.
We are also subject to licensing with respect to the sale of alcoholic
beverages in the states in which we serve such beverages. Failure to receive or
retain, or the suspension of, liquor licenses or permits would interrupt or
terminate our ability to serve alcoholic beverages at the applicable locations
and, if a significant number of locations were affected, could have a material
adverse effect on our revenues or results of operations. Some of our contracts
require us to pay liquidated damages during any period in which our liquor
license for the relevant facility is suspended, and most contracts are subject
to termination in the event that we lose our liquor license for the relevant
facility. Additional regulation relating to liquor licenses may limit our
activities in the future or significantly increase the cost of compliance.
Fraudulent or Preferential Transfer Considerations--Bankruptcy or fraudulent
conveyance law may interfere with the payment of the Notes.
The incurrence of indebtedness by the Issuer, such as the Notes, may be
subject to review under U.S. federal bankruptcy law or relevant state fraudulent
conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of
unpaid creditors of the Issuer. Under these laws, if in such a case or lawsuit a
court were to find that, at the time the Issuer incurred indebtedness (including
indebtedness under the Notes),
(1) the Issuer incurred such indebtedness with the intent of hindering,
delaying or defrauding current or future creditors; or
(2) (a) the Issuer received less than reasonably equivalent value or fair
consideration for incurring such indebtedness; and
(b) the Issuer
o was insolvent or was rendered insolvent by reason of any of the
transactions;
o was engaged, or about to engage, in a business or transaction for
which our assets remaining with the Issuer constituted unreasonably
small capital to carry on our business;
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o intended to incur, or believed that it would incur, debts beyond our
ability to pay as such debts matured (as all of the foregoing terms
are defined in or interpreted under the relevant fraudulent transfer
or conveyance statutes); or
o was a defendant in an action for money damages, or had a judgment
for money damages docketed against it (if, in either case, after
final judgment the judgment is unsatisfied),
then such court could avoid or subordinate the amounts owing under the Notes to
presently existing and future indebtedness of the Issuer and take other actions
detrimental to you.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction that is being applied in any such proceeding. Generally,
however, the Issuer would be considered insolvent if, at the time it incurred
the indebtedness, either (1) the sum of its debts (including contingent
liabilities) is greater than its assets, at fair valuation, or (2) the present
fair saleable value of its assets is less than the amount required to pay the
probable liability on its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured. There can be no
assurance as to what standards a court would use to determine whether the Issuer
was solvent at the relevant time, or whether, whatever standard was used, the
Notes would not be avoided or further subordinated on another of the grounds set
forth above.
Additionally, under federal bankruptcy or applicable state insolvency law,
if:
(1) certain bankruptcy or insolvency proceedings were initiated by or
against the Issuer or any Guarantor within 90 days after (a) any
payment by the Issuer or any Guarantor with respect to the Notes or the
guarantees or (b) the incurrence of any future guarantee; or
(2) the Issuer or any Guarantor anticipated becoming insolvent at the time
of such payment or incurrence,
all or a portion of such payment or such future guarantee could be avoided as a
preferential transfer, and the recipient of such payment could be required to
return it.
Year 2000--We may be adversely affected by the year 2000 problem.
The "year 2000 problem" relates to computer systems that are designed using
two digits, rather than four, to represent a given year. Therefore, such systems
may recognize "00" as the year 1900 rather than 2000, possibly resulting in
major system failures or miscalculations and causing disruptions in our
operations. Also, our operations could be disrupted by reason of any failure by
our clients, suppliers or other third parties with whom we conduct business to
achieve their own year 2000 compliance in a timely fashion.
We have conducted a review of our computer systems to identify the systems
that could be affected by the year 2000 problem, and believe that most of them
are year 2000 compliant. We do not expect to exceed the $80,000 which we have
budgeted for expenditures related to our year 2000 compliance program.
While we believe that we will be taking appropriate steps to achieve our
year 2000 compliance in a timely fashion, we cannot assure you that our
computers (or those of third parties with whom we conduct business) will be year
2000 compliant prior to December 31, 1999, or that the costs incurred will not
materially exceed amounts budgeted.
Certain of our largest suppliers have contacted us stating that they expect
to be year 2000 compliant in a timely fashion. However, we have not been in
contact with all of our suppliers or clients. If any of our suppliers or clients
do not successfully achieve year 2000 compliance in a timely manner, our results
of operations could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000."
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Lack of Public Market--You may not be able to sell your exchange Notes.
There is no existing market for the exchange Notes, and we cannot assure
you as to:
o the liquidity of any markets that may develop for the exchange Notes;
o your ability to sell your exchange Notes; or
o the prices at which you would be able to sell your exchange Notes.
Future trading prices of the exchange Notes will depend on many factors,
including, among other things, prevailing interest rates, our operating results
and the market for similar securities. We do not intend to apply for a listing
of the exchange Notes on any securities exchange or automated dealer quotation
system. The initial purchasers of the outstanding Notes have advised us that
they currently intend to make a market in the exchange Notes. However, they are
not obligated to do so and any market making may be discontinued at any time
without notice.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused volatility in prices. It is possible that the
market for the exchange Notes will be subject to disruptions. Any such
disruptions may have a negative effect on you (as a holder of the exchange
Notes) regardless of our prospects and financial performance.
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USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
Notes. In consideration for issuing the exchange Notes as contemplated in this
prospectus, we will receive in exchange a like principal amount of outstanding
Notes, the terms of which are identical in all material respects to the exchange
Notes. The outstanding Notes surrendered in exchange for the exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange Notes will not result in any change in our capitalization.
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CAPITALIZATION
The following table sets forth our historical unaudited consolidated
capitalization as of March 30, 1999. You should read this information in
conjunction with the "Selected Historical Financial Information of Volume
Holdings," "Unaudited Pro Forma Combined Financial Information of Volume
Holdings," the consolidated financial statements of Volume Holdings and Service
America, in each case together with the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 30, 1999
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Cash and cash equivalents.................................................................... $ 9.0
-------
-------
Long-term debt (including current portion):
Revolving credit facility(1)............................................................ 4.5
Term loans.............................................................................. 114.7
Senior Subordinated Notes............................................................... 100.0
Capital lease obligations............................................................... 0.8
-------
Total long-term debt and capital lease obligations.................................... 220.0
Stockholders' deficit........................................................................ (6.8)
-------
Total capitalization.................................................................. 213.2
-------
-------
</TABLE>
- ------------------
(1) The revolving credit facility provides for borrowings of up to $75.0 million
with a sublimit of $35.0 million for letters of credit. As of March 30,
1999, we had approximately $4.5 million of outstanding borrowings under the
revolving credit facility and approximately $13.5 million of letters of
credit outstanding, which had not been drawn upon and which reduced
availability under the revolving credit facility to $57.0 million.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS OF
VOLUME HOLDINGS
The following unaudited pro forma combined statements of operations have
been prepared based on the historical financial statements of Volume Holdings
and Service America included elsewhere in this prospectus, adjusted to give pro
forma effect to the Transactions. For a description of the Transactions, see
"Prospectus Summary--The Transactions".
The unaudited pro forma combined statements of operations for fiscal year
1998 and the thirteen week period ended March 30, 1999 give effect to the
Transactions as if they had occurred on January 1, 1998. The unaudited pro forma
adjustments, which are based upon available information and upon certain
assumptions that management believes are reasonable, are described in the
accompanying notes. The unaudited pro forma combined statements of operations
are for informational purposes only and do not purport to represent what our
results of operations would actually have been had the Transactions in fact
occurred on such date or to project our results of operations for any future
period or date. The unaudited pro forma combined statements of operations should
be read in conjunction with "Selected Historical Financial Information of Volume
Holdings," the consolidated financial statements of Volume Holdings and the
consolidated financial statements of Service America, in each case together with
the notes thereto, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the other financial information included
elsewhere in this prospectus.
The acquisition of Service America was accounted for using the purchase
method of accounting. The total purchase cost was allocated to the assets
acquired and liabilities assumed, based on their respective fair values. The
allocation of the total purchase cost reflected in the unaudited pro forma
combined financial information is preliminary. The actual purchase accounting
adjustment to reflect the fair values of the assets acquired and liabilities
assumed will be based upon appraisals that are currently in process. A
preliminary allocation of the purchase cost has been made to major categories of
assets and liabilities in the accompanying unaudited pro forma combined
financial information based on our estimates. Accordingly, the adjustments that
have been included in the unaudited pro forma combined financial information may
change based upon the final allocation of the total purchase cost of the
acquisition of Service America. The actual allocation of the purchase cost and
the resulting effect on income may differ significantly from the unaudited pro
forma amounts included herein.
The unaudited pro forma combined statements of operations do not include
any adjustments for the cost savings, incremental overhead expenses or one-time
charges and expenses which we expect the Integration Plan to generate.
Volume Holdings is a guarantor of the Notes and the senior credit
facilities and has no substantial operations or assets other than the capital
stock of the Issuer. As a result, the consolidated financial position and
results of operations of Volume Holdings are substantially the same as those of
the Issuer.
As a result of the consummation of the acquisition of Service America on
August 24, 1998, the financial position and results of operations of Service
America after August 24, 1998 are consolidated in the financial position and
results of operations of Volume Holdings for periods subsequent to that date.
31
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR FISCAL YEAR 1998
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
VOLUME SERVICE AMERICA VOLUME
HOLDINGS THIRTY-FOUR WEEK HOLDINGS
FISCAL YEAR PERIOD ENDED TRANSACTION FISCAL YEAR
1998 AUGUST 24, 1998 ADJUSTMENTS 1998
----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................ $ 283.4 $122.5 $ -- $ 405.9
Cost of sales........................................ 222.5 97.1 319.6
Selling, general and administrative expense.......... 30.9 16.1 0.1 (b) 47.1
Depreciation and amortization........................ 18.2 5.5 4.7 (a) 28.4
Transaction fees and expenses........................ 3.1 3.0 (3.0)(c) 3.1
------- ------ ------- -------
Operating profit (loss)............................ 8.7 0.8 (1.8) 7.7
Other income, net.................................... (0.4) -- (0.4)
Interest expense, net................................ 11.3 4.5 7.8 (d) 23.6
------- ------ ------- -------
Loss before income taxes and extraordinary item.... (2.2) (3.7) (9.6) (15.5)
Income tax provision (benefit)....................... 1.5 -- (7.1)(e) (5.6)
------- ------ ------- -------
Loss before extraordinary item(f).................. $ (3.7) $ (3.7) $ (2.5) $ (9.9)
------- ------ ------- -------
------- ------ ------- -------
OTHER DATA:
Ratio of earnings to fixed charges(g)................ --
-------
-------
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIOD ENDED MARCH 30, 1999
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
VOLUME VOLUME
HOLDINGS HOLDINGS
THIRTEEN WEEK THIRTEEN WEEK
PERIOD ENDED TRANSACTION PERIOD ENDED
MARCH 30, 1999 ADJUSTMENTS MARCH 30, 1999
-------------- ----------- --------------
<S> <C> <C> <C>
Net sales....................................................... $ 66.3 $ 66.3
Cost of sales................................................... 54.3 54.3
Selling, general and administrative expense..................... 9.5 9.5
Depreciation and amortization................................... 6.4 6.4
Transaction fees and expenses................................... 1.0 1.0
------ ------
Operating loss................................................ (4.9) (4.9)
Other income, net............................................... (0.1) (0.1)
Interest expense, net........................................... 4.6 $ 1.2 (d) 5.8
------ ----- ------
Loss before income taxes, extraordinary item and cumulative
effect of change in accounting principle................... (9.4) (1.2) (10.6)
Income tax benefit.............................................. (2.7) (1.4)(e) (4.1)
------ ----- ------
Income (loss) before extraordinary item and cumulative effect
of change in accounting principles(f)......................... $ (6.7) $ 0.2 $ (6.5)
------ ----- ------
------ ----- ------
OTHER DATA:
Ratio of earnings to fixed charges (g).......................... --
------
------
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
(a) The acquisition of Service America was accounted for using the purchase
method of accounting. The total purchase cost was allocated to the assets
acquired and liabilities assumed, based on their respective fair values. The
allocation of the total purchase cost reflected in the Volume Holdings,
balance sheets at March 30, 1999 and December 29, 1998 is preliminary. The
actual purchase accounting adjustment to reflect the fair values of the
assets acquired and liabilities assumed will be based upon appraisals that
are currently in process. Accordingly, the adjustments that have been
included may change based upon the final allocation of the total purchase
cost of the acquisition of Service America. The actual allocation of the
purchase cost and the resulting effect on income may differ significantly
from those reflected herein. The preliminary allocation is as follows:
<TABLE>
<S> <C>
Purchase cost:
Acquisition............................................................................. $30.0(i)
Estimated acquisition fees and expenses................................................. 2.8
-----
Total purchase cost.................................................................. 32.8
-----
-----
Adjusted book value of net assets acquired:
Preferred stock, restricted stock and warrants.......................................... 28.8
Accumulated deficit of Service America at August 24, 1998............................... (65.6)
-----
Total adjusted book value of net assets acquired..................................... (36.8)
-----
Excess of purchase cost over total adjusted book value of net assets
acquired................................................................................ 69.6
-----
Preliminary allocation of purchase cost:
Increase contract rights to estimated fair value........................................ 25.7
Increase trademarks to estimated fair value............................................. 6.6
Increase in deferred tax liability resulting from purchase accounting................... (4.5)(ii)
Increase in accrued expenses............................................................ (1.4)(iii)
-----
Total preliminary allocation of purchase cost........................................ 26.4
-----
Cost in excess of net assets acquired..................................................... $43.2
-----
-----
</TABLE>
(i) The purchase price of Service America was based on an independent
appraisal.
(ii) Represents adjustments to deferred taxes resulting from the
acquisition of Service America:
<TABLE>
<S> <C>
Increase contract rights to estimated fair value..................................... $25.7
Increase trademarks to estimated fair value.......................................... 6.6
Increase in accrued expenses......................................................... (1.4)(iii)
-----
30.9
Effective tax rate................................................................... 40%
-----
Deferred tax liability credited in purchase accounting............................... 12.4
Net change in deferred tax assets:
Volume Holdings...................................................................... (5.7)
Service America...................................................................... (2.2)
-----
Net increase in deferred taxes....................................................... $ 4.5
-----
-----
</TABLE>
(iii) Represents the accrual for exit, severance and related costs in
connection with employee terminations and the write-off of assets.
34
<PAGE>
The application of purchase accounting is expected to result in an increase
in amortization expense as follows:
<TABLE>
<CAPTION>
FIFTY-TWO WEEK
PERIOD ENDED
DECEMBER 29, 1998
-----------------
<S> <C>
Contract rights....................................................... $ 3.7
Trademarks............................................................ 0.1
Cost in excess of net assets acquired................................. 0.9
-----
$ 4.7
-----
-----
</TABLE>
The adjustments for estimated unaudited pro forma amortization are based on
estimated fair values. Contract rights are expected to be amortized over a
weighted average useful life of 4.5 years. Cost in excess of net assets
acquired and trademarks are expected to be amortized over their useful
lives, not to exceed 30 years. For pro forma purposes, a 30-year life has
been used for both cost in excess of net assets acquired and trademarks.
(b) GE Capital will receive a management fee of $0.2 per annum for consulting,
monitoring and financial advisory services provided to us. For fiscal 1998,
$0.1 of this management fee was paid. See "Certain Relationships and Related
Transactions".
(c) Transaction fees and expenses include $3.0 in fees and expenses incurred by
Service America in connection with its acquisition by Volume Holdings prior
to the acquisition. These expenses have been eliminated in the Unaudited Pro
Forma Combined Statement of Operations for fiscal year 1998 as the
Transactions were assumed to occur on January 1, 1998 and the expenses were
non-recurring and directly attributable to the Transactions.
(d) Represents the net adjustment to interest expense as a result of the
borrowings under the Term Loans and the issuance of the Notes, calculated as
follows:
<TABLE>
<CAPTION>
FIFTY-TWO WEEK THIRTEEN WEEK PERIOD
PERIOD ENDED ENDED MARCH 30,
DECEMBER 29, 1998 1999
----------------- --------------------
<S> <C> <C>
Cash interest expense on term loans and
Notes(i)....................................... $ 21.4 $ 5.3
Commitment and other fees(ii).................... 0.8 0.2
------- ------
Cash interest expense.......................... 22.2 5.5
Estimated amortization of deferred financing
costs(iii)..................................... 1.4 0.3
------- ------
Pro forma interest expense(iv)................. 23.6 5.8
Elimination of historical interest expense,
net............................................ (15.8) (4.6)
------- ------
Pro forma adjustment to interest expense,
net......................................... $ 7.8 $ 1.2
------- ------
------- ------
</TABLE>
(i) Represents interest expense on the $115.0 net principal amount of term
loans and $100.0 principal amount of Notes outstanding, assuming a
weighted average blended interest rate of 9.95%.
(ii) Represents a commitment fee of 0.5% applied to the pro forma $54.3
principal amount of unused balance of the Revolving Credit Facility
and 2.5% on approximately $20.7 outstanding letters of credit, as of
December 29, 1998. As of March 30, 1999, we had approximately $4.5 of
outstanding borrowings under the revolving credit facility and
approximately $13.5 of letters of credit outstanding, which had not
been drawn upon and which reduced availability under the revolving
credit facility to $57.0.
35
<PAGE>
(iii) Deferred financing costs are amortized using the interest method over
the term of the related debt which is 10 years for the Notes, 8 years
for term loan B, and 6 years for the revolving credit facility.
(iv) Each 0.125% change in interest rates in respect of the term loan would
increase or decrease pro forma interest expense by $0.1.
(e) The adjustment necessary to reflect the pro forma income tax provision is
based upon the pro forma operating loss before income taxes and the
applicable statutory tax rates in the relevant jurisdictions.
(f) EBITDA is defined as income (loss) before extraordinary item, interest
expense, income tax expense, depreciation, amortization, and
o for fiscal year 1998, $3.1 of non-recurring severance expense associated
with Volume Services' employees and other Service America expenses in
connection with the acquisition of Service America, $1.4 of non-cash
charges related to contract termination costs for Volume Holdings and $0.2
of non-cash charges related to contract termination costs for Service
America; and
o for the thirteen week period ended March 30, 1999, $1.0 of non-recurring
severance expense and other non-recurring expenses incurred in connection
with the acquisition of Service America.
We believe that EBITDA provides useful information regarding our ability to
service debt but should not be considered in isolation or as a substitute for
the combined statement of operations or cash flow data prepared in accordance
with generally accepted accounting principles and included elsewhere in this
prospectus or as a measure of our operating performance, profitability or
liquidity. While EBITDA is frequently used as a measure of operations and the
ability to meet debt service requirements, it is not necessarily comparable to
other similarly titled captions of other companies due to differences in methods
of calculation.
<TABLE>
<CAPTION>
SERVICE AMERICA
THIRTY-FOUR WEEK PRO FORMA
VOLUME HOLDINGS PERIOD ENDED VOLUME HOLDINGS
FISCAL YEAR AUGUST 24, TRANSACTION FISCAL YEAR
1998 1998 ADJUSTMENTS 1998
----------------- ---------------- ----------- -----------------
<S> <C> <C> <C> <C>
EBITDA........................... $31.8 $9.5 $ (0.1) $41.2
----- ---- ------- -----
----- ---- ------- -----
Adjusted EBITDA.................. $46.1(i)
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA VOLUME
VOLUME HOLDINGS THIRTEEN HOLDINGS THIRTEEN WEEK
WEEK PERIOD ENDED TRANSACTION PERIOD ENDED
MARCH 30, 1999 ADJUSTMENT MARCH 30, 1999
------------------------ ----------- ----------------------
<S> <C> <C> <C>
EBITDA.................................. $2.6 -- $2.6
---- ----
---- ----
Adjusted EBITDA......................... $3.5(i)
----
----
</TABLE>
36
<PAGE>
(i) Pro forma adjusted EBITDA reflects the following changes in our cost
structure as a result of implementation of the Integration Plan:
<TABLE>
<CAPTION>
THIRTEEN WEEK
PERIOD ENDED
FISCAL YEAR MARCH 30,
1998 1999
----------------- -------------
<S> <C> <C>
Pro forma EBITDA................................... $41.2 $ 2.6
Cost savings:
Elimination of overlapping regional office
personnel..................................... 1.1 0.3
Corporate overhead staff reductions.............. 1.5 0.4
Reduction in operating costs..................... 2.5 0.6
----- -----
Total......................................... 5.1 1.3
Cost savings realized in the applicable period... 0.2 0.4
----- -----
Remaining cost savings to be realized............ 4.9 0.9
----- -----
Pro Forma adjusted EBITDA.......................... $46.1 $ 3.5
----- -----
----- -----
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Integration Plan" for a full explanation of these savings and
of the Integration Plan.
(g) For purposes of determining the pro forma ratio of earnings to fixed
charges, earnings are defined as income (loss) before income taxes and
extraordinary item, plus fixed charges. Fixed charges include interest
expense on all indebtedness, amortization of deferred financing fees, and
one third of rental expense on operating leases representing that portion of
rental expense which we deem to be attributable to interest. On a pro forma
basis, earnings were insufficient to cover fixed charges by $15.5 for fiscal
year 1998, and $10.6 for the thirteen week period ended March 30, 1999.
37
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF
VOLUME HOLDINGS
The following table sets forth selected historical financial information of
Volume Holdings as of and for fiscal years 1994, 1995, 1996, 1997, 1998 and the
thirteen week periods ended March 31, 1998 and March 30, 1999. The fiscal year
of Volume Holdings ends on the Tuesday closest to December 31 and references
herein to a specific fiscal year of Volume Holdings mean the year ended on the
Tuesday closest to December 31 of that year.
The historical financial information as of and for fiscal years 1994 and
1995 has been derived from the consolidated financial statements of Volume
Holdings and the notes thereto, which have been audited by Deloitte & Touche
LLP, independent auditors, but which are not included herein. The historical
financial information as of and for fiscal years 1996, 1997 and 1998 has been
derived from the consolidated financial statements of Volume Holdings and the
notes thereto, which have been audited by Deloitte & Touche LLP, and which are
included elsewhere in this prospectus. The historical financial information as
of the thirteen week periods ended March 31, 1998 and March 30, 1999 have been
derived from unaudited consolidated financial statements of Volume Holdings and
the notes thereto, which are included elsewhere in this prospectus. The
unaudited consolidated financial statements of Volume Holdings include, in the
opinion of management, all adjustments, which consist only of normal recurring
accruals, necessary for a fair presentation of the results of operations and
financial position for and as of the end of such periods. Results of operations
for the thirteen week period ended March 30, 1999 are not necessarily indicative
of the results to be expected for the full year or any future period. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of Volume Holdings and the notes thereto
included elsewhere in this prospectus.
Volume Holdings is a guarantor of the Notes and the senior credit
facilities and has no substantial operations or assets other than the capital
stock of the Issuer. As a result, the consolidated financial position and
results of operations of Volume Holdings are substantially the same as those of
the Issuer. Volume Holdings was formed to effect the December 21, 1995
acquisition of the Issuer. Prior to December 1995, the results of operations of
Volume Services (which are currently reported in the financial statements of
Volume Holdings) were reported in the financial statements of the Issuer. The
Issuer is therefore the predecessor entity of Volume Holdings for reporting
purposes. For convenience purposes, and due to the immateriality of the results
of operations for the 12-day period ended January 2, 1996, the results of the
two separate periods, the 353-day period ended December 21, 1995 for the
predecessor company and the 12-day period ended January 2, 1996 for Volume
Holdings, have been combined as the predecessor company for fiscal year 1995,
without any pro forma or other adjustments.
As a result of the consummation of the acquisition of Service America on
August 24, 1998, the financial position and results of operations of Service
America after August 24, 1998 are consolidated in the financial position and
results of operations of Volume Holdings for the period subsequent to that date.
38
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF
VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------ THIRTEEN WEEK PERIOD ENDED
PREDECESSOR --------------------------
--------------- MARCH 31,
1994 1995 1996 1997 1998 1998
------ ------ ------ ------ ------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........................ $186.6 $164.7 $190.4 $196.0 $283.4 $ 27.3
Depreciation and amortization.... 9.8 11.8 12.6 12.9 18.2 2.9
Operating profit (loss)(a)....... 3.2 (0.3) 2.9 4.8 8.7 (2.5)
Interest expense................. 0.4 0.5 7.3 7.9 11.3 2.3
Income (loss) before income
taxes, extraordinary item and
cumulative effect of change in
accounting principle........... 2.8 (1.0) (3.9) (2.8) (2.2) (4.8)
Income tax provision (benefit)... 1.0 -- -- 0.3 1.5 --
Net income (loss)(b)............. 1.8 (1.0) (3.9) (3.1) (5.2) (4.8)
OTHER DATA:
EBITDA(c)........................ $ 13.0 $ 11.3 $ 16.0 $ 20.5 $ 31.8 $ 0.4
Net cash provided by (used in)
operating activities........... 7.7 5.6 11.0 15.3 1.4 (9.1)
Net cash used in investing
activities..................... (18.0) (97.7) (13.5) (31.0) (5.3) (0.5)
Net cash provided by (used in)
financing activities........... 12.2 99.2 (0.4) 15.9 7.3 16.3
Total capital expenditures....... 18.1 10.6 20.7 37.6 18.8 5.8
Cash interest expense(d)......... 0.2 0.2 6.9 7.4 10.8 2.2
Ratio of earnings to fixed
charges(e)..................... 5.5x -- -- -- -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash
equivalents.................... $ 3.9 $ 6.8 $ 5.2 $ 5.4 $ 8.8 $ 12.1
Working capital (deficit)(f)..... 5.5 (2.0) (5.4) 0.5 (6.4) (4.6)
Total assets..................... 71.4 120.1 117.3 137.8 267.2 141.5
Total debt(g).................... -- 70.0 69.7 79.0 161.3 93.9
Total stockholders' equity
(deficit)...................... 49.2 26.6 21.9 25.1 49.9 23.9
<CAPTION>
THIRTEEN WEEK PERIOD ENDED
--------------------------
MARCH 30,
1999
--------------------------
<S> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........................ $ 66.3
Depreciation and amortization.... 6.4
Operating profit (loss)(a)....... (4.9)
Interest expense................. 4.6
Income (loss) before income
taxes, extraordinary item and
cumulative effect of change in
accounting principle........... (9.4)
Income tax provision (benefit)... (2.7)
Net income (loss)(b)............. (7.8)
OTHER DATA:
EBITDA(c)........................ $ 2.6
Net cash provided by (used in)
operating activities........... (5.9)
Net cash used in investing
activities..................... (1.2)
Net cash provided by (used in)
financing activities........... 7.3
Total capital expenditures....... 1.2
Cash interest expense(d)......... 4.3
Ratio of earnings to fixed
charges(e)..................... --
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash
equivalents.................... $ 9.0
Working capital (deficit)(f)..... (8.5)
Total assets..................... 268.8
Total debt(g).................... 220.0
Total stockholders' equity
(deficit)...................... (6.8)
</TABLE>
39
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL
INFORMATION OF VOLUME HOLDINGS
(DOLLARS IN MILLIONS)
(a) Operating profit (loss) includes a non-cash charge of $2.5 and $1.4 in
fiscal years 1997 and 1998, respectively, for the non-cash charges related
to contract termination costs. Operating profit (loss) for fiscal years
1994, 1995, 1996, 1997 and 1998 and the thirteen week periods ended March
31, 1998 and March 30, 1999 includes management fees paid to equity owners
of $0.9, $1.1, $0.3, $0.3, $0.3, $0.1 and $0.1, respectively.
Additionally, operating profit (loss) includes $0.9 of trademark fees
charged by the Issuer's former owners for fiscal years 1994 and 1995.
(b) Net income (loss) for Volume Holdings includes an extraordinary loss (net
of income taxes) of $1.5 and $0.9 for the non-cash write-off of deferred
financing costs in fiscal year 1998 and the thirteen week period ended
March 30, 1999, respectively. Additionally, net income (loss) for the
thirteen week period ended March 30, 1999 includes a charge of $0.3 for
the effect of a change in accounting principle (net of income taxes).
(c) EBITDA is defined as net income (loss) before interest expense, income
tax expense, depreciation, amortization, and
o for fiscal year 1997, a $2.5 non-cash charge related to contract
termination costs;
o for fiscal year 1998, $3.1 of non-recurring severance expenses
associated with Volume Services' employees and other Service America
expenses incurred in connection with the acquisition of Service America
and $1.4 of non-cash charges related to contract termination costs for
Volume Holdings; and
o for the thirteen week period ended March 30, 1999, $1.0 of
non-recurring severance expenses and other non-recurring expenses in
connection with the acquisition of Service America.
We believe that EBITDA provides useful information regarding our ability
to service debt but should not be considered in isolation or as a
substitute for the consolidated statement of operations or cash flow data
prepared in accordance with generally accepted accounting principles and
included elsewhere in this prospectus or as a measure of our operating
performance, profitability or liquidity. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to differences in methods of
calculation.
(d) Cash interest expense represents interest expense less amortization of
debt issuance costs.
(e) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income (loss) before income taxes, extraordinary
item and cumulative effect of change in accounting principle plus fixed
charges. Fixed charges include interest expense on all indebtedness,
amortization of deferred financing costs and one-third of rental expense
on operating leases representing that portion of rental expense deemed to
be attributable to interest. Earnings were insufficient to cover fixed
charges by $1.0, $3.9, $2.8, $2.2, $4.8 and $9.4 for fiscal years 1995,
1996, 1997 and 1998 and for the thirteen week periods ended March 31, 1998
and March 30, 1999, respectively.
(f) Working capital is defined as current assets less current liabilities.
(g) Includes the current portion of long-term debt.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis presents the factors that had a material
effect on our results of operations and cash flows during the three years ended
December 31, 1998, and our financial position at December 31, 1998 and December
31, 1997. You should read this discussion and analysis in conjunction with the
"Selected Historical Financial Information of Volume Holdings," and the
consolidated financial statements of Volume Services and Service America, in
each case together with the related notes, included elsewhere in this
prospectus.
OVERVIEW
We are a leading provider of food and beverage concession, high-end
catering and merchandise services for sports facilities, convention centers and
other entertainment facilities throughout the United States. We represent the
combination in August 1998 of Volume Services, one of the leading providers of
food and beverage services to sports facilities in the United States, with
Service America, one of the leading providers of food and beverage services to
convention centers in the United States. This combination was the result of the
acquisition in August 1998 by Volume Holdings of substantially all the capital
stock of Service America. We accounted for the acquisition using the purchase
method of accounting. Under purchase accounting, the total purchase cost is
allocated to the assets acquired and liabilities assumed based on their
respective fair values.
Our net sales and results of operations are primarily driven by five
factors:
o the number and terms of our contracts with clients;
o the number of events held at facilities at which we provide our services;
o the level of attendance at these events;
o the amount spent on food and beverages and merchandise by attendees at
the events; and
o our ability to provide our services on a cost-effective basis.
Many of these factors are affected by local economic conditions and the
state of repair of the facilities, which may affect the number of events held at
a facility, as well as the attendance and level of spending at these events. We
are dependent to a certain extent on the ability of our clients to attract
events to their facilities and to encourage attendance at these events. See
"Risk Factors--Dependence on Attendance at Client Facilities."
The recreational food service industry is highly fragmented and
competitive, with several national food service providers as well as a large
number of smaller independent businesses serving discrete local and regional
markets and/or competing in distinct areas. Contracts are generally gained and
renewed through a competitive bidding process. We selectively bid on contracts
to provide services at both privately owned and publicly controlled facilities.
See "Risk Factors--Competition."
We currently provide services at 119 client facilities, typically pursuant
to long-term contracts which grant us the exclusive right to provide services
within the facility. Our contracts are generally structured as:
o a P&L Contract;
o a Profit Sharing Contract; or
o a Management Fee Contract.
For further information regarding each of these categories of contracts,
see "Business--Contracts." Each of our contracts fall into one of these three
categories, although any particular contract may contain elements of any of the
other types of contracts as well as other features specific to that contract.
These modifications are made in an effort to meet our needs and the needs of the
particular client, and so obtain or retain the right to provide services at the
facility.
41
<PAGE>
In connection with entering into certain new contracts, or extending or
renewing certain existing contracts, we are required to make some form of
up-front or committed future capital investment to help finance facility
construction or renovation. While the amount of capital commitment required can
vary significantly, the ability to make such expenditures is often an essential
element of a successful bid. Commission and management fee rates vary
significantly among contracts based primarily upon the amount of capital
invested, the type of facility involved, the term of the contract and the
services provided. In general, within each client category the level of capital
investment and commission are related, such that the greater the capital
investment we make, the lower the commission we pay to the client.
We account for capital investments in leasehold improvements and food
service equipment as purchases of property and equipment, and we account for
grants as purchases of contract rights. We capitalize capital investments, and
amortize or depreciate them over the lesser of the useful life of the asset or
the remaining life of the contract. Our contracts generally provide that the
client must reimburse us for any undepreciated or unamortized capital
investments made pursuant to the terms of the contract in the event of early
termination of the contract by either party, other than due to our default. We
are currently committed under client contracts to fund capital investments of
approximately $25.7 million and $1.2 million in 1999 and 2000, respectively.
Under P&L Contracts and Profit Sharing Contracts, we recognize all food and
beverage revenues and expenses, including commissions paid to clients, in our
statement of operations. Food and beverage revenues are recognized as they are
sold to the ultimate customer. The most significant of these expenses are the
commissions paid to clients, the cost of goods sold and labor costs. The
commission percentages vary from facility to facility, depending on various
factors, including attendance, profitability and size of the capital investment
made. Under Management Fee Contracts, we record only the fixed and incentive
fees, if any, as operating revenues. We recognize Management Fee Contract
revenue on a monthly basis as earned. While Management Fee Contracts generally
provide lower profit margins than P&L Contracts and Profit Sharing Contracts, we
do not bear the risk of operating loss under these contracts.
INTEGRATION PLAN
We adopted the Integration Plan in the fourth quarter of fiscal year 1998
to realize cost savings as a result of the combination of Volume Services and
Service America. The Integration Plan identified three principal areas for cost
reduction as a result of the combination:
o eliminating overlapping personnel (and associated costs) within our
regional operations;
o reducing corporate overhead staff; and
o reducing operating costs such as property, casualty and financial
insurance premiums, payroll processing fees, computer lease costs,
facility rental and certain telecommunication costs.
When its benefits are fully realized, we expect the Integration Plan to result
in annual cost savings of approximately $6.3 million and an increase in
incremental annual overhead expenses of approximately $1.2 million, resulting in
net annual cost savings of approximately $5.1 million. We also expect to incur a
total of $6.5 million of one-time expenses and charges in connection with the
implementation of the Integration Plan, consisting of $5.7 million of cash
expenses and $0.8 million of non-cash charges. The elements of this
approximately $5.1 million annual net cost saving are as follows:
<TABLE>
<CAPTION>
ANNUAL COST SAVINGS
-------------------
(Dollars in
Millions)
<S> <C>
Elimination of overlapping regional office personal.............................. $ 1.1
Corporate overhead staff reductions(a)........................................... 1.5
Reduction in operating costs(b).................................................. 2.5
-----
Total....................................................................... $ 5.1
-----
-----
</TABLE>
(Footnotes on next page)
42
<PAGE>
(Footnotes from previous page)
(a) Net of $735,000 of estimated salaries for nine new administrative
personnel.
(b) Net of $480,000 of estimated incremental operating costs.
Within our regional operations, as of March 30, 1999 we had terminated four
employees and transferred three other employees to previously vacant positions
and eliminated their prior positions. We expect to realize annual cost savings
of approximately $1.1 million from the elimination of these employees and
positions during the remainder of fiscal 1999.
The Integration Plan also provides for the reduction of our corporate
overhead staff by terminating 18 employees at our Stamford, Connecticut
headquarters and three employees at our Spartanburg, South Carolina
headquarters, and reassigning three employees to previously vacant positions and
eliminating their prior positions. We expect to realize annual cost savings of
approximately $2.2 million upon the termination or reassignment of all of these
employees and the elimination of their positions, to be offset by approximately
$0.7 million of annual salaries for nine new administrative employees to be
hired at our Spartanburg, South Carolina headquarters. As of March 30, 1999, we
had terminated 19 of the employees and notified the remaining five employees of
their termination or reassignment. The 19 employees terminated as of March 30,
1999 account for approximately $1.6 million of the expected $2.2 million of
annual cost savings. We expect the remaining five employees to leave or begin in
their new positions by the end of the second quarter of fiscal 1999.
The final component of the Integration Plan involves the reduction of
certain of our operating expenses. These reductions consist primarily of:
o subleasing our Stamford, Connecticut headquarters office space;
o renegotiating our insurance policies;
o operating our payroll function internally rather than using an outside
vendor;
o consolidating the independent accountant services required by Service
America and Volume Services for annual audits of their respective
financial statements; and
o reducing our computer lease costs.
We expect to realize annual cost savings of approximately $3.0 million upon
the completion of this component of the Integration Plan, partially offset by an
estimated $0.5 million of additional annual operating expenses. These additional
operating expenses will consist primarily of:
o increased lease expense for replacement space in Stamford, Connecticut;
o incremental internal payroll operating costs; and
o an increase in the fees charged by our remaining independent accountants
for their annual audit of our financial statements.
As of March 30, 1999, we had taken all necessary steps to achieve
approximately $2.0 million of the total expected annual operating cost savings,
consisting primarily of:
o renegotiating our insurance policies (which accounts for $1.3 million of
the annual net savings);
o moving the payroll function in-house and terminating the arrangement with
the outside vendor;
o buying out the relevant computer leases;
o renegotiating the fee for our annual audit; and
o relocating our computer system and reducing telecommunications costs.
We expect to achieve the remainder of these annual cost savings during the
second quarter of fiscal year 1999.
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As of March 30, 1999, we had taken all steps necessary to realize
approximately $4.1 million of the annual cost savings expected in connection
with the implementation of the Integration Plan and had begun to incur
approximately $0.5 million of the offsetting incremental annual overhead
expenses. Furthermore, as of March 30, 1999, we had incurred approximately
$3.8 million of the expected $5.7 million of one-time cash expenses and recorded
all of the $0.8 million of expected one-time non-cash charges in connection with
the implementation of the Integration Plan. We expect to incur the remaining
approximately $1.9 million of expenses during the second quarter of fiscal year
1999.
The expected cost savings described above are measured relative to actual
amounts incurred by Volume Services and Service America, and their respective
subsidiaries, during fiscal year 1998. The steps that we have taken, and the
steps remaining to be taken, in connection with the implementation of the
Integration Plan may not produce the expected future cost savings and, in taking
these steps, we may incur expenses or charges beyond those currently expected.
See "Risk Factors--Integration of Volume Services and Service America."
OVERVIEW--VOLUME HOLDINGS
Volume Holdings is a holding company, the principal assets of which are the
capital stock of its subsidiary, the Issuer. Volume Holdings' financial
information is therefore substantially the same as that of the Issuer. Since
August 25, 1998, following consummation of the acquisition of Service America,
the results of operations of Volume Holdings have included those of Service
America.
Prior to December 31, 1998, Volume Holdings capitalized certain costs
related to the opening of new contract locations, such as preopening payroll and
various training expenses which were deferred until the contract locations
commenced operations. Such expenses were then amortized by Volume Holdings over
the subsequent 12 months. Pursuant to Statement of Position ("SOP") 98-5 issued
by the American Institute of Certified Public Accountants, Volume Services was
required to expense such preopening costs beginning December 31, 1998. As a
result of this SOP, we wrote off our unamortized preopening costs of $256,000
(net of tax) on December 31, 1998, as a cumulative effect of a change in
accounting principle.
RESULTS OF OPERATIONS
The following table outlines Volume Holdings' financial performance for
fiscal years 1996, 1997 and 1998 and the thirteen week periods ended March 31,
1998 and March 30, 1999:
<TABLE>
<CAPTION>
THIRTEEN WEEK
PERIOD ENDED
FISCAL YEAR ----------------------
-------------------------- MARCH 31, MARCH 30,
1996 1997 1998 1998 1999
------ ------ ------ --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $190.4 $196.0 $283.4 $27.3 $66.3
Cost of sales................................... 155.7 157.0 222.5 22.4 54.3
Selling, general and administrative expenses.... 19.2 21.3 30.9 4.5 9.4
Depreciation and amortization................... 12.6 12.9 18.2 2.9 6.4
Transaction fees and expenses................... -- -- 3.1 -- 1.0
Operating profit (loss)......................... 2.9 4.8 8.7 (2.5) (4.9)
As a Percentage of Net Sales
Net sales....................................... 100% 100% 100% 100% 100%
Cost of sales................................... 81.8 80.1 78.5 82.1 81.9
Selling, general and administrative expenses.... 10.1 10.9 10.9 16.3 14.2
Depreciation and amortization................... 6.6 6.6 6.4 10.7 9.6
Transaction fees and expenses................... -- -- 1.1 -- 1.5
Operating profit (loss)......................... 1.5 2.4 3.1 (9.1) (7.3)
</TABLE>
44
<PAGE>
THIRTEEN WEEK PERIOD ENDED MARCH 30, 1999 COMPARED TO THE THIRTEEN WEEK PERIOD
ENDED MARCH 31, 1998
Net Sales. Net sales increased 142.9% from $27.3 million in the thirteen
week period ended March 31, 1998 to $66.3 million in the thirteen week period
ended March 30, 1999. The increase was primarily due to the acquisition of
Service America, which generated $40.2 million in net sales for the thirteen
week period ended March 30, 1999. Excluding the effect of the acquisition, net
sales decreased by $1.2 million in the thirteen week period ended March 30, 1999
due to a decrease in sales at one sports facility and the demolition of another
sports facility.
Cost of Sales. Cost of sales increased 142.4% from $22.4 million in the
thirteen week period ended March 31, 1998 to $54.3 million in the thirteen week
period ended March 30, 1999. Cost of sales as a percentage of net sales was
substantially the same as the thirteen week period of the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 108.9% from $4.5 million in the thirteen
week period ended March 31, 1998 to $9.4 million in the thirteen week period
ended March 30, 1999, primarily due to the acquisition of Service America. As a
percentage of sales, selling, general and administrative expenses decreased from
16.3% in the thirteen week period ended March 31, 1998 to 14.2% in the thirteen
week period ended March 30, 1999. The decrease was due to the economies of sales
realized from the acquisition of Service America, which resulted in lower
expenses on the incremental sales.
Depreciation and amortization. Depreciation and amortization increased by
120.7% from $2.9 million in the thirteen week period ended March 31, 1998 to
$6.4 million in the thirteen week period ended March 30, 1999. Approximately
$1.7 million of the increase was due to an increase in amortization which arises
from the application of purchase accounting to the acquisition of Service
America. The remaining $1.8 million increase was due to the depreciation of
capital expenditures made during 1998 and the thirteen week period ended
March 30, 1999. As a percentage of net sales, depreciation and amortization
decreased from 10.7% in the thirteen week period ended March 31, 1998 to 9.6% in
the thirteen week period ended March 30, 1999.
Transaction fees and expenses. Volume Holdings incurred $1.0 million in
transaction fees and expenses for the thirteen week period ended March 30, 1999.
These fees and expenses primarily relate to non-recurring severance expense and
other non-recurring expenses for Volume Services in connection with the
acquisition of Service America.
Operating Profit (Loss). Operating loss increased 96.0% from a loss of
$2.5 million, or 9.1% of net sales, in the thirteen week period ended March 31,
1998 to a loss of $4.9 million, or 7.3% of net sales, in the thirteen week
period ended March 30, 1999. The increase was primarily due to the factors
discussed above.
FISCAL 1998 COMPARED TO FISCAL 1997
Net Sales. Net sales increased 44.6% from $196.0 million in fiscal year
1997 to $283.4 million in fiscal year 1998. The increase was primarily due to
the acquisition of Service America which resulted in the inclusion of
$75.5 million in revenues for the period from August 24, 1998 to the end of the
fiscal year. In addition, net sales at MLB venues serviced by the Company
increased by $11.6 million as a result of post-season playoff games and a 20.7%
increase in average attendance at one client facility.
Cost of sales. Cost of sales increased 41.7% from $157.0 million in fiscal
year 1997 to $222.5 million in fiscal year 1998. As a percentage of net sales,
cost of sales declined from 80.1% in fiscal year 1997 to 78.5% in fiscal year
1998 principally due to the inclusion of Service America whose cost of sales
percentage was 76.7% for the eighteen weeks ended December 29, 1998, compared to
Volume Holdings' percentage of 79.0%, excluding Service America. Other factors
contributing to the decrease in cost of sales percentage are directly related to
the net sales increase at Volume Holdings' MLB facilities. The increased
attendance at MLB regular season and playoff games is incrementally more
profitable due to the ability of the employment base to service more customers
without a corresponding increase in labor costs. In addition, Volume Holdings
secured a new service contract in
45
<PAGE>
1998 that had a lower commission rate than the average of its other contracts
contributing to the reduction in cost of sales as a percentage of net sales.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 45.1% from $21.3 million in fiscal 1997 to
$30.9 million in fiscal 1998. Excluding non-cash charges for the termination of
contracts in fiscal 1997 of $2.5 million and in fiscal 1998 of $1.4 million, the
percentage of selling, general and administrative expenses as a percentage of
net sales increased from 9.6% in fiscal 1997 to 10.4% in fiscal 1998. The
increase as a percentage of net sales is due to the acquisition of Service
America, with such expenses representing 13.4% of its net sales.
Depreciation and amortization. Depreciation and amortization increased
41.1% from $12.9 million in fiscal year 1997 to $18.2 million in fiscal year
1998. The dollar increase was due to: i) Service America's depreciation and
amortization from August 24, 1998 to the end of the fiscal year of
$2.4 million; ii) amortization of trademark fees, step-up value of location
contracts and costs in excess of fair value of net assets acquired of
$2.6 million resulting from the application of the purchase method of accounting
for the acquisition of Service America; and iii) capital investments made in
connection with six new contracts of $1.3 million.
Transaction fees and expenses. Transaction fees and expenses primarily
include non-recurring severence expense and other non-recurring expenses for
Volume Services in connection with the acquisition of Service America.
Operating profit. Operating profit increased 81.2% from $4.8 million, or
2.4% of net sales, in fiscal year 1997 to $8.7 million, or 3.1% of net sales, in
fiscal year 1998. The increase was primarily due to the factors as discussed
above.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales. Net sales increased 2.9% from $190.4 million in fiscal year
1996 to $196.0 million in fiscal year 1997. The increase was primarily due to
$16.8 million of net sales generated by seven new client contracts entered into
in fiscal 1997, and an increase of $10.9 million in net sales from existing MLB
and NFL contracts as a result of increased attendance and higher per capita
spending by attendees at the facilities. The increase in net sales was partially
offset by a $16.8 million reduction in net sales as a result of four terminated
or expired contracts, including a $13.1 million decrease in net sales resulting
from the expiration of the Oakland Coliseum contract on December 31, 1996.
Cost of sales. Cost of sales increased 0.8% from $155.7 million in fiscal
year 1996 to $157.0 million in fiscal year 1997. Cost of sales as a percentage
of net sales decreased from 81.8% of net sales in fiscal year 1996 to 80.1% of
net sales in fiscal year 1997. The decrease in cost of sales as a percentage of
net sales was due in part to a reduction in the commission (calculated as a
percentage of net sales) paid to the 3Com Park facility operator in connection
with our acquisition of the contract to provide services to Pacific Bell
Ballpark (future home of MLB's San Francisco Giants), which is scheduled to open
in 2000. The other significant factor contributing to the decrease in cost of
sales as a percentage of net sales was the realization of certain operating
efficiencies at two client facilities, which we achieved by altering the product
mix to sell more higher margin food items in place of lower margin food items
and a reduction in the number of employees used to staff the facilities.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 10.9% from $19.2 million, or 10.1% of net
sales, in fiscal year 1996 to $21.3 million, or 10.9% of net sales, in fiscal
year 1997. The increase was primarily due to a non-recurring non-cash charge of
$2.5 million incurred in writing down assets to net realizable value upon the
termination of the contract to provide services at Ericsson Stadium. The
increase in selling, general and administrative expenses was partially offset by
a reduction of $0.4 million in expenses at the corporate office due to the non-
recurrence of 1996 start up costs.
Depreciation and amortization. Depreciation and amortization increased
2.4% from $12.6 million in fiscal year 1996 to $12.9 million in fiscal year
1997. Depreciation and amortization as a percentage of net sales remained
constant at 6.6% of net sales for both periods. The increase in the dollar
amount
46
<PAGE>
of depreciation and amortization was primarily due to the capital investments
made in connection with seven new contracts entered into in fiscal year 1996.
The increase was partially offset by the elimination of depreciation and
amortization related to four contracts which expired or were terminated during
the same period.
Operating profit (loss). Operating profit (loss) increased 65.5% from $2.9
million, or 1.5% of net sales, in fiscal year 1996 to $4.8 million, or 2.4% of
net sales, in fiscal year 1997. The increase was primarily due to the factors
discussed above.
VOLUME HOLDINGS' HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
Volume Holdings' liquidity needs have historically been for making capital
investments in connection with client contracts, satisfying interest and
principal payment obligations and satisfying working capital requirements.
Volume Holdings has historically met its liquidity and capital investment needs
with internally generated funds, borrowings under its credit facilities and the
proceeds of equity investments.
For the thirteen week period ended March 30, 1999, net cash used in
operating activities was $5.9 million compared to $9.1 million in the thirteen
week period ended March 31, 1998. The $3.2 million decrease in cash used in
operating activities was primarily due to the acquisition of Service America.
Service America contributed net sales of $40.2 million during the thirteen weeks
ended March 30, 1999, with high concentrations of convention center business.
This business is typically more active in the first three months of the year
than Volume Services' business, as Volume Services serve a higher concentration
of baseball and football venues, which host fewer events in the first three
months of the year.
For the thirteen week period ended March 30, 1999, net cash used in
investing activities was $1.2 million compared to $0.5 million in the thirteen
week period ended March 31, 1998. The primary components of net cash used in
investing activities for these periods were purchases of property and equipment,
and investments in contract rights in connection with acquiring or renewing
contracts. The difference in the amount of net cash used in investing activities
in these two periods was primarily due to large capital investments which we
made at Tropicana Field MLB Stadium in St. Petersburg, FL, during the 1998
period. Typically, capital investments are non-recurring items from one year to
the next. We also made investments of $1.2 million in the purchase of property
and equipment at numerous locations in the 1999 period. In addition, we received
$10.0 million of proceeds from the sale of assets held for sale after the
termination of the Ericsson Stadium contract in the 1998 period, and deposited
$4.9 million of cash into a cash account restricted for future use in capital
expenditures.
For the thirteen week period ended March 30, 1999, net cash provided by
financing activities was $7.3 million compared to $16.3 million in the thirteen
week period ended March 31, 1998. The 1999 figure reflects the issuance of
$100.0 million of senior subordinated notes, and the use of the proceeds to
retire $45.0 million of senior secured debt and $0.5 million of GE Capital debt,
redeem $49.5 million of stock, and pay related fees of $5.5 million. Excluding
this financing, we borrowed $4.5 million under our revolving credit facility in
the 1999 period, and increased our bank overdrafts (outstanding checks) by
$3.1 million to fund working capital and capital expenditures. This is compared
to the borrowing of $14.3 million under our revolving credit facility, the
receipt of $3.5 million of cash equity from Blackstone and the decrease of our
bank overdrafts by $2.1 million to fund working capital and capital expenditures
which occurred in the 1998 period.
For fiscal year 1998, net cash provided by operating activities was
$1.4 million compared to $15.3 million provided by operating activities for
fiscal year 1997. The $13.9 million decrease in cash provided by operating
activities was primarily due to an increase of $2.1 million in net loss and a
larger net increase in working capital, primarily as a result of the acquisition
of Service America. This was partially offset by a $5.3 million increase in
depreciation and amortization and a $1.5 million extraordinary loss.
47
<PAGE>
For fiscal year 1998, net cash used in investing activities was
$5.3 million compared to $31.0 million for fiscal year 1997. The primary
components of net cash used in investing activities for these periods were
purchases of property and equipment, and investments in contract rights in
connection with acquiring or renewing contracts. Volume Holdings used
$12.6 million and $26.0 million in the purchase of property and equipment and
$6.2 million and $11.6 million for investments in contract rights, for fiscal
year 1998 and fiscal year 1997, respectively. The difference in the amount of
net cash used in investing activities in these two periods was primarily due to
the large capital investments which we made in Jack Kent Cooke Stadium and Pac
Bell Park in fiscal 1997. In addition, in fiscal 1998, we received
$12.6 million of proceeds from assets held for sale after the termination of the
Ericsson Stadium contract.
For fiscal year 1998, net cash provided by financing activities was
$7.3 million compared to $15.9 million for fiscal year 1997. The $8.6 million
decrease in cash provided by financing activities was primarily due to decreased
borrowings under our revolving credit facilities and lower capital contributions
to capital investments made to retain contracts or to acquire new contracts.
This decrease was partially offset by additional borrowings net of debt
repayments and payment of financing costs.
For fiscal year 1997, net cash provided by operating activities was
$15.3 million compared to $11.0 million for fiscal year 1996. The $4.3 million
increase was primarily due to a decrease of $0.8 million in net loss, a
$2.5 million non-cash loss due to the termination of a contract in the 1997
period, an increase in accounts payable and accrued salaries and vacations. This
was partially offset by an increase in accounts receivable.
For fiscal year 1997, net cash used in investing activities was
$31.0 million compared to $13.5 million for fiscal year 1996. The primary
components of net cash used in investing activities for these periods were
purchases of property and equipment, and investments in contract rights in
connection with acquiring or renewing contracts. Volume Holdings used
$26.0 million and $15.6 million in the purchase of property and equipment, and
$11.6 million and $5.0 million for investments in contract rights for fiscal
years 1997 and 1996, respectively. The increase in net cash used in investing
activities was primarily due to capital investments in 1997 at Jack Kent Cooke
Stadium, Tropicana Field and Pacific Bell Ballpark.
For fiscal year 1997, net cash provided by financing activities was
$15.9 million compared to $0.4 million for fiscal year 1996. The $15.5 million
increase in net cash provided by financing activities was primarily due to
borrowings of $16.1 million under Volume Services' revolving credit facility to
fund capital investments to acquire new contracts and retain existing contracts,
and a $6.4 million capital contribution, principally by Blackstone. This was
partially offset by a $6.5 million increase in principal payments on debt.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
We believe that cash flow from operating activities, together with
borrowings available under the revolving credit facility, will be sufficient to
fund our currently anticipated capital investment requirements, interest and
principal payment obligations and working capital requirements. See "Risk
Factors." Any future acquisitions, joint ventures or other similar transaction
will likely require additional capital and such capital may not be available to
us on acceptable terms or at all. We are currently committed under client
contracts to fund capital investments of approximately $25.7 million and
$1.2 million in 1999 and 2000, respectively.
We adopted the Integration Plan in the fourth quarter of fiscal year 1998
in order to realize cost savings as a result of the combination of Volume
Services and Service America. As of March 30, 1999, we have incurred
approximately $3.8 million of the expected $5.7 million of one-time cash
expenses and recorded all of the $0.8 million of expected one-time non-cash
charges, in connection with the implementation of the Integration Plan. We
expect to incur the remaining approximately $1.9 million of expenses in the
second quarter of fiscal 1999. The steps that we have taken, and the steps
remaining to be taken, in connection with the implementation of the Integration
Plan may not produce the
48
<PAGE>
expected future cost savings and, in taking these steps, we may incur expenses
or charges beyond those currently expected. See "Risk Factors--Integration of
Volume Services and Service America."
We are significantly leveraged. As of March 30, 1999, we had outstanding
$220.0 million in aggregate principal amount of indebtedness, with
$57.0 million of additional indebtedness available under the revolving credit
facility, and total stockholders' deficit of $6.8 million. As a result of the
Financings, our liquidity requirements have been significantly increased,
primarily due to increased interest expense obligations. On a pro forma basis,
after giving effect to the Transactions, our earnings would have been
insufficient to cover our fixed charges by $15.5 million for fiscal year 1998
and $10.6 million for the thirteen week period ended March 30, 1999. See
"Unaudited Pro Forma Combined Financial Information of Volume Holdings" and
"Risk Factors--Substantial Leverage and Debt Service."
On December 3, 1998 we obtained the senior credit facilities, consisting of
the following:
o a $75.0 million revolving credit facility, with a sublimit of $35.0
million for letters of credit, which reduces availability thereunder by
an equal amount, and a sublimit of $5.0 million for swingline loans;
o a fully drawn $40.0 million term loan A; and
o a fully drawn $120.0 million term loan B.
We used $45.0 million of the net proceeds from the offering of the Notes to
repay all of term loan A and $5.0 million of term loan B.
Installments of the outstanding term loan B are due in consecutive
quarterly installments on the last day of each fiscal quarter (each referred to
as an "Installment Date"), commencing March 30, 1999, with 25% of the annual
amounts due on each Installment Date. Annual payments for term loan B total $1.2
million in each year from 1999 through 2005, and $106.7 million in 2006.
Except for the swingline loans, which bear interest based on a base rate,
borrowings under the senior credit facilities bear interest at a rate per annum
equal, at our option, to a margin over either a base rate or an adjusted LIBO
rate. The commitments under the revolving credit facility are available to fund
capital investment requirements, working capital, general corporate and our
other cash needs. All borrowings outstanding under the revolving credit facility
are due on December 3, 2004. As of March 30, 1999 we had $4.5 million of
outstanding borrowings under the revolving credit facility and approximately
$13.5 million of letters of credit outstanding, which had not been drawn upon
and which reduced availability under the revolving credit facility to
$57.0 million.
We expect that our working capital needs and other cash requirements will
require us to obtain replacement revolving credit facilities upon the expiration
of the senior credit facilities. We cannot assure you that we will be able to
arrange any such replacement. See "Description of the Senior Credit Facilities."
The Notes will mature in 2009. The Issuer's obligations under the Notes are
subordinate and junior in right of payment to all of our existing and future
senior indebtedness, including all indebtedness under the senior credit
facilities. The obligations of the Issuer under the Notes are guaranteed, on an
unsecured senior subordinated basis by:
o Volume Holdings;
o all of the Issuer's wholly-owned U.S. subsidiaries on the date the
outstanding Notes were issued; and
o all future U.S. restricted subsidiaries that incur indebtedness or issue
shares of disqualified stock or preferred stock.
The indenture restricts, among other things, the Issuer's and its
restricted subsidiaries' ability to:
o incur additional indebtedness;
49
<PAGE>
o issue shares of disqualified stock and preferred stock;
o incur liens;
o pay dividends or make certain other restricted payments;
o enter into certain transactions with affiliates;
o merge or consolidate with any other person; or
o sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets,
and prohibits certain restrictions on the ability of a subsidiary of the Issuer
to pay dividends or make certain payments to the Issuer.
The senior credit facilities also contain other and more restrictive
covenants. The senior credit facilities prohibit us from prepaying other
indebtedness (including the Notes) and require us to maintain specified
financial ratios (such as a maximum net leverage ratio, an interest coverage
ratio and a minimum consolidated cash net worth test) and satisfy financial
condition tests. The senior credit facilities and indenture contain customary
events of default. See "Description of the Senior Credit Facilities",
"Description of the Notes" and "Risk Factors--Restrictive Debt Covenants."
Our ability to fund our capital investment requirements, interest and
principal payment obligations and working capital requirements and to comply
with all of the financial covenants under our debt agreements depends on our
future operating performance and cash flow, which in turn are subject to
prevailing economic conditions and to financial, business and other factors,
some of which are beyond our control. See "Risk Factors."
INFLATION
We do not believe that inflation has had a material impact on our financial
position or results of operations for the periods discussed above. Although
inflationary increases in food, labor or operating costs could adversely affect
operations, we have generally been able to offset increases in costs through
price increases, labor scheduling and other management actions.
SEASONALITY
Our net sales and operating results have varied, and are expected to
continue to vary, from quarter to quarter as a result of factors which include:
o seasonal patterns within the industry;
o the unpredictability in the number, timing and type of new contracts;
o the timing of contract expirations and special events; and
o the level of attendance at facilities which we serve.
Business at the principal types of facilities which we serve is seasonal in
nature. MLB and minor league baseball sales are concentrated in the second and
third quarters, the majority of NFL activity occurs in the fourth quarter and
convention centers and arenas generally host fewer events during the summer
months. Consequently, our results of operations for the first quarter are
typically substantially lower than in other quarters. Results of operations for
any particular quarter may not be indicative of results of operations for future
periods. Seasonal and quarterly fluctuations may have a material adverse effect
on our business, financial condition or results of operations. See "Risk
Factors--Dependence on Attendance at Client Facilities."
YEAR 2000
The year 2000 ("Y2K") problem stems from computer programs written in a way
that differentiates calendar years by using two rather than four digits. As a
result, many information systems may be unable to properly recognize and process
date sensitive information beyond December 31, 1999.
50
<PAGE>
We have been addressing the "Y2K" situation since 1996. In 1996, we
replaced our primary information systems with systems that are certified "Y2K"
compliant. As of March 30, 1999, we had replaced other peripheral equipment that
connects with our primary information system. As a result of these two
initiatives, we believe that our primary information system, and all accounting
systems at our headquarters location, are ready for "Y2K" transactions.
We have developed a plan outline to assess, remediate and test other
non-critical information technology systems, such as communication, security,
and point of sale systems. We initiated a survey and assessment of secondary
information systems and other equipment on May 10, 1999. An independent
consultant has been retained to assist us in performing the survey and
assessment. The equipment survey is approximately 90% complete and the
assessment will be completed during July 1999. We have, through normal operating
requirements, been upgrading secondary information systems on an as required
basis.
We have identified key suppliers and are determining potential exposure due
to their failure to remediate their own "Y2K" issues. Product warranties and
certification are being sought from vendors and suppliers. We have obtained
product "Year 2000 Statements" from national vendors, including Lawson, Sysco,
Tangent, IBM, Microsoft, Coke, Pepsi, Budweiser, and Miller.
Risks. We acquired our primary network, financial accounting, purchasing
and payroll processing systems in 1996. The systems were "Y2K" certified at the
time we acquired them. Management believes, based on the information currently
available to it, that scenarios which could adversely affect us and which could
be caused by technology failures relating to "Y2K" include:
o legal risks, over failure to deliver contracted services.
o increased operational costs, due to manual processing, data corruption or
disaster recovery; and
o cancellation of events at venues we serve.
Contingency Plans. We maintain contingency plans for computer failures,
power outages, and natural disasters. "Y2K" contingency plans for critical
systems will be developed and integrated with the existing contingency plans
where appropriate by December 1999.
Costs. Based on the current status of projected plans, we believe that the
costs associated with modifying our computer and other automated systems, and
"Y2K" events caused by our operational systems, would not have a material
adverse impact on our operations or financial condition. The aggregate
incremental costs associated with Y2K compliance are expected to be less than
$100,000. However, we cannot assure you that these estimates will be achieved
and actual results could differ materially from those anticipated.
NEW ACCOUNTING STANDARDS
Adoption of New Accounting Standards. We adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, in 1998.
SFAS No. 130 specifies that components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is included in the accompanying
statements of operations and comprehensive loss. Prior year disclosures have
been reclassified to conform to the SFAS No. 130 requirements.
We also adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, in 1998. SFAS No. 131 establishes standards for
reporting selected information about operating segments determined using
quantitative thresholds and a "management approach", which reflects how the
chief operating decision maker evaluates segment performance and allocates
resources. The combined operations of our contracts comprise one operating
segment and, as such, adoption of SFAS No. 131 has not changed our disclosures.
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New Accounting Standards. In April 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities, which provides additional guidance on the
financial reporting of start-up costs, requiring costs of start-up activities to
be expensed as incurred. As a result, we wrote off our unamortized preopening
costs of $253,000 (net of tax) as of December 31, 1998 as a cumulative effect of
a change in accounting principle.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measures
those instruments at fair value. The accounting for changes in the fair value of
a derivative (that is, gains and losses) depends on the intended use of the
derivative. The statement is effective for our fiscal year 2001 financial
statements and may not be applied retroactively. We have not yet completed our
analysis of the effects of this new standard on our results of operations or
financial position.
INTEREST RATE SENSITIVITY
We are exposed to interest rate volatility with regard to existing
issuances of variable rate debt. We use interest rate swaps to reduce interest
rate volatility and to achieve a desired proportion of variable versus fixed
rate debt, based on current and projected market conditions. The table below
provides information about our derivative financial instruments and other
financial instruments that are sensitive to changes in interest rates, including
interest rate swaps and debt obligations. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. For interest rate swaps, the table presents notional
amounts and weighted average interest rates by expected (contractual) maturity
dates. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates are based on
implied forward rates in the yield curve at the reporting date.
<TABLE>
<CAPTION>
FAIR VALUE
EXPECTED MATURITY DATE ------------
------------------------------------- DECEMBER 29,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1998
----- ----- ----- ----- ----- ---------- ----- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
Variable rate................................ $ 4.2 $ 5.2 $ 6.2 $ 8.2 $ 8.2 $128.0 $ 160 $ 160
Average interest rate........................ 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
Interest rate swap
Variable to fixed............................ $ 80 $ 80 $ 0.4
Average pay rate............................. 5.0%
Average receive rate......................... 8.8%
</TABLE>
<TABLE>
<CAPTION>
FAIR VALUE
EXPECTED MATURITY DATE ------------
------------------------------------- MARCH 30,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1999
----- ----- ----- ----- ----- ---------- ----- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
Variable rate................................ $ 1.2 $ 1.2 $ 1.2 $ 1.2 $ 1.2 $108.7 $114.7 $114.7
Average interest rate........................ 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
Fixed rate................................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 100 $ 100 $ 100
Average interest rate........................ 11.25% 11.25% 11.25% 11.25% 11.25% 11.25%
Interest rate swap
Variable to fixed............................ $ 80 $ 80 $ 0.2
Average pay rate............................. 5.0%
Average receive rate......................... 8.8%
</TABLE>
52
<PAGE>
BUSINESS
OVERVIEW
We are a leading provider of food and beverage concession, high-end
catering and merchandise services for sports facilities, convention centers and
other entertainment facilities throughout the United States. We represent the
combination in August 1998 of Volume Services, one of the leading providers of
food and beverage services to sports facilities in the United States, with
Service America, one of the leading providers of food and beverage services to
convention centers in the United States. As a result of this combination, based
on the number of facilities served, we are the largest provider of food and
beverage services to:
o facilities which are home to NFL teams;
o minor league baseball and spring training facilities in the United
States; and
o major convention centers (defined for the purposes of this prospectus as
those with at least 300,000 square feet of exhibition space) in the
United States.
We are also the third largest provider of food and beverage services to
facilities which are home to MLB teams.
Major accounts across our client categories include:
o Yankee Stadium in New York;
o Qualcomm Stadium in San Diego;
o the Jacob K. Javits Center in New York;
o the Cobb-Galleria Center in Atlanta; and
o the Los Angeles Zoo.
We currently provide services at 119 client facilities, typically pursuant
to long-term contracts which grant us the exclusive right to provide certain
food and beverage (and, under certain contracts, merchandise) products and
services within the facility. As of March 30, 1999 our contracts had an average
remaining life of approximately 8.2 years weighted by Contract EBITDA for the
preceding fifty-two week period. The breakdown of facilities which we serve by
primary client category is as follows: 55 sports facilities, 30 convention
centers and 34 other entertainment facilities, representing approximately 64%,
27% and 9%, respectively, of Contract EBITDA for the fifty-two week period ended
March 30, 1999. Our pro forma net sales and pro forma Adjusted EBITDA were 404.2
million and 46.8 million, respectively, for the fifty-two week period ended
March 30, 1999.
We have built strong relationships with many of our clients, as evidenced
by our retention of approximately 85% of the total Contract EBITDA up for
renewal for the period from 1993 through 1998. This percentage is calculated by
reference to the amount of Contract EBITDA generated by each of our contracts in
the last full year prior to their expiration, and is referred to in this
prospectus as our "Retention Rate". Excluded from this calculation are seven
contracts which we terminated by mutual agreement with the client, and 11
contracts for which we did not submit a final bid because we determined that
such contracts would not meet our internal rate of return criteria. These
contracts accounted in the aggregate for approximately $3.9 million of Contract
EBITDA in their last full fiscal year of operation.
Management believes that our combination of market leadership,
long-standing relationships with clients, reputation as an innovative operator
and experienced management team has enabled us to achieve our high Retention
Rate and to secure attractive new contracts. We have recently been awarded the
contract to provide food and beverage services to the following facilities:
o the Louisiana Superdome (home of the New Orleans Saints NFL team);
o the Tennessee Titans' new NFL stadium (scheduled to open in 1999);
53
<PAGE>
o the Seattle Mariners' Northwest Baseball Park (scheduled to open in
1999);
o the San Francisco Giants' Pacific Bell Ballpark (scheduled to open in
2000); and
o the Cleveland Convention Center.
Our contracts are generally structured so that we receive either:
o all of the revenues and bear all of the expenses from the provision of
our services at a facility, pursuant to a P&L Contract;
o a percentage of any profits earned from the provision of our services at
a facility after deducting expenses, plus, in some cases, a fixed fee,
pursuant to a Profit Sharing Contract; or
o a management fee, which is typically calculated as a fixed dollar amount
and/or a fixed or variable percentage of various categories of sales
plus, in some cases, an additional incentive fee based on our performance
under the contract, pursuant to a Management Fee Contract.
For purposes of the above calculations, expenses include the payment of
commissions to the client. These commissions are typically calculated as a fixed
or variable percentage of various categories of sales.
Under Profit Sharing Contracts and Management Fee Contracts, we are also
reimbursed by the client for the on-site expenses which we incur in providing
services under the contract. In contrast to P&L Contracts, we are therefore
generally not responsible for any losses incurred under Profit Sharing or
Management Fee Contracts. While each of our contracts fall into one of these
three categories, any particular contract may contain elements of either of the
other types of contracts as well as other factors specific to that contract. See
"--Contracts".
When we enter into new contracts, or extend or renew existing contracts
(particularly for sports facilities), we are often required to make some form of
up-front or committed future capital investment to help finance facility
construction or renovation. This expenditure typically takes the form of
investment in:
o leasehold improvements;
o food service equipment; and/or
o grants to owners or operators of facilities.
Commission and management fee rates vary significantly among contracts, based
primarily upon:
o the amount of capital which we invest;
o the type of facility involved;
o the term of the contract; and
o the services provided.
In general, within each client category, the level of capital investment
and commission paid are related, such that the greater the capital investment
which we make, the lower the commission we pay to the client. In structuring our
bid for a particular facility contract, we analyze the contract opportunity by
calculating projected internal rates of return based on varying up-front capital
investment levels, commission structures, attendance assumptions, cost
structures and estimated per capita spending rates. See "--Contracts".
INDUSTRY
The recreational food service industry primarily consists of the supply of
food and beverage services to a range of recreational facilities in a variety of
formats, service levels and price points. For the purposes of our business,
these facilities fall into three main categories:
o sports facilities (consisting of stadiums and arenas);
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<PAGE>
o convention centers; and
o other entertainment facilities (which include horse racing tracks, music
amphitheaters, motor speedways, national and state parks, skiing
facilities, theme parks and zoos).
Management estimates that annual sales in these categories of the North
American recreational food service industry, whether generated by the owner of
the facility or outsourced to an organization like us, are currently more than
$4.0 billion.
The primary source of growth in the sports facilities category of the
industry has been the increased level of per capita spending on food, beverages
and merchandise by attendees of events held at newly constructed or refurbished
sports facilities. According to an independently produced 1997 report by a
national firm of consultants, concession sales per attendee at professional
sports facilities were approximately 70% higher for facilities built in the last
ten years than for older facilities. Management believes that the sports
facilities category of the industry will continue to benefit from the
construction of new, and the refurbishment of existing, sports facilities.
According to Street & Smith's SportsBusiness Journal, as of December 1998, 22
new stadiums and arenas were under development or being planned. This number
does not include existing stadiums and arenas which may be undergoing
refurbishment.
Management believes that one of the primary reasons for growth in the
convention center category of the industry has been the level of attendance at
trade shows, conventions and exhibitions, which is in part dependent upon the
amount of exhibit space available. According to Tradeshow Week's 1998 Major
Exhibit Hall Directory, the square footage of exhibit space used by trade shows
at convention centers grew 6.8% in 1997. According to the same source, an
additional 11 million square feet of exhibit space is planned for development
during the period between the second half of 1998 and the end of 2003,
representing an increase of approximately 17% in total industry capacity.
Management believes that the convention center category of the industry will
benefit from the construction of new, and the expansion of existing, convention
centers.
COMPETITIVE STRENGTHS
Leading Market Position. Based on the number of facilities served, we are
the largest provider of food and beverage services to facilities which are home
to NFL teams, to minor league baseball and spring training facilities in the
United States, and to major convention centers in the United States. We are also
the third largest provider of food and beverage services to facilities which are
home to MLB teams. Management believes that our position as a market leader
increases the likelihood that we will be invited to bid for new contracts to
supply food and beverage services to recreational facilities. Furthermore,
relative to smaller competitors, we benefit from our ability to make significant
capital investments in clients' facilities, which has become an important
competitive factor in the bidding process for contracts to serve certain
facilities, particularly sports facilities.
Diversified Client Base with Long-Term Contracts. We serve a diverse group
of clients pursuant to contracts to provide services at 119 facilities. These
contracts had an average remaining life of approximately 8.2 years as of
March 30, 1999 (weighted by Contract EBITDA for the preceding fifty-two week
period). The breakdown of facilities which we serve by primary client category
is as follows: 55 sports facilities, 30 convention centers and 34 other
entertainment facilities, representing approximately 64%, 27% and 9%,
respectively, of Contract EBITDA for the fifty-two week period ended March 30,
1999. Within sports facilities, our client base is further diversified, and
includes contracts to provide services at nine NFL facilities, seven MLB
facilities, and 21 minor league baseball and spring training facilities. As of
March 30, 1999, the approximate average remaining life for contracts within each
of our three major client categories was 11.3, 2.6, and 3.9 years (weighted by
Contract EBITDA for the preceding fifty-two week period) for sports facilities,
convention centers and other entertainment facilities, respectively.
Exclusive Service Contracts with High Retention Rate. We typically
provides services to our clients' facilities pursuant to long-term contracts
which grant us the exclusive right to provide certain
55
<PAGE>
food and beverage (and, under certain contracts, merchandise) products and
services within the facility. Contracts are typically renegotiated for extension
several months and, in some cases, years prior to their expiration. Our
Retention Rate was approximately 85% during the period from 1993 through 1998.
As of March 30, 1999 we had been providing services to our clients' facilities
for an average of 14.3 years (weighted by Contract EBITDA for the preceding
fifty-two week period), with three of our top clients--Yankee Stadium in New
York City, Qualcomm Stadium in San Diego and the Truman Sports Complex in Kansas
City--having been clients for more than 25 years. Management believes that our
market leadership position as well as our broad, high-quality product offerings
and reliable client service have enabled us to achieve our high Retention Rate
and maintain long-standing relationships with many of our clients.
High Quality, Full Service Capabilities. We believe that our expertise in
high-end catering and concession sales, coupled with our reputation for
high-quality food and beverage products and services, provide a competitive
advantage when we bid for contracts. Our full service capability is particularly
important given the trend in new sports facilities toward providing more premium
seating and luxury suites that require high-end catering services. We also
believe that our expertise in designing and assisting in the planning of
appealing and efficient food service facilities, including food courts, kitchens
and permanent and portable concession stands, increases revenues and enhances
our ability to obtain and retain clients. For example, we believe that our
extensive redesign and improvement of the food court and retail areas of the
Jacob K. Javits Center in New York City was an important factor in obtaining an
extension of that contract in 1997.
Experienced Management Team. Our management team, comprised of members
from both Volume Services and Service America, intends to draw upon each
company's industry expertise to maintain and expand our leading position in the
recreational food service industry. The members of our senior management team
have an average of approximately 20 years of experience in the recreational food
service industry and our facility general managers have an average of
approximately 10 years of experience in the industry. Our Chairman and Chief
Executive Officer, John T. Dee, previously held several senior management
positions at ARAMARK, serving with ARAMARK for more than 22 years before joining
Service America in 1993.
BUSINESS STRATEGY
Our strategy is to maintain and strengthen our position as an industry
leader by selectively retaining existing contracts and adding new contracts
through the following initiatives:
Leverage Complementary Strengths. Management intends to leverage the
experience, contacts and industry know-how which Volume Services and Service
America have developed in their respective areas of expertise to market Volume
Services America as a full-service provider of both concession and high-end
catering services. While both companies were represented in many sectors of the
industry prior to the acquisition, Volume Services and Service America focused
on different aspects of the recreational food service business. Volume Services
traditionally had a strong presence in sports facilities and consequently
provided concession services to a wide range of clients within this category,
while Service America focused more on the provision of high-end catering
services at convention centers and other entertainment facilities. Management
therefore believes that Volume Services America is well-positioned to capitalize
on growth opportunities across the recreational food service industry. An
example of the successful implementation of this strategy is our bid to provide
both concession and high-end catering services at the Louisiana Superdome (home
of NFL's New Orleans Saints) which was recently accepted. In leveraging the
complementary strengths of Volume Services and Service America, management
intends to identify areas of operation which are common to both companies and
apply the best practices of each to Volume Services America.
Exploit National Presence. Management intends to capitalize on our
existing infrastructure and contacts in many of the large metropolitan areas in
which we currently have food service operations to add additional contracts.
Management believes that we can eliminate many duplicative costs which would
otherwise be associated with the operation of two or more separate facilities in
one geographic
56
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area by carrying out many administrative tasks on a regional or localized basis.
By exploiting our substantial presence in cities such as Kansas City, New York,
San Diego, San Francisco and Tampa, we intend to add contracts from which we may
derive additional revenues without a commensurate increase in overhead. The
fragmented nature of the recreational food service industry may also provide us
with the opportunity to acquire smaller or regional operators.
Develop Innovative Contract Structures. We intend to continue our
innovative approach to structuring client contracts. We seek to use our
knowledge of the recreational food service industry to structure attractive
contracts which provide us and our clients with the opportunity to realize
increasing cash flows. Examples of innovative contract features that we employ
include:
o step-scale commissions, in which our commission payment to a client
varies according to sales performance;
o minimum attendance caps, in which a client will refund a portion of the
commissions which it receives from us if a minimum attendance level is
not reached at the facility; and
o merchandise inventory guarantees, under which we return certain unsold
inventory to the client without charge to us.
These structures represent our efforts to tailor our contracts to best suit
a particular client opportunity, and reflect our experience with comparable
facilities, sensitivity analyses of economic assumptions, competitor analyses
and general market research.
Capitalize on Ability to Provide High Quality, Reliable and Innovative
Service. We intend to continue providing our clients with high quality,
reliable service and an innovative approach to meeting their needs. We have
successfully introduced several new concepts, such as the cigar bar at the
Washington Redskins' Jack Kent Cooke Stadium, and branded food service, such as
the "Taste of Tampa" at Tropicana Field, where popular local restaurants provide
their products under a subcontracting agreement. We intend to seek new
opportunities to employ similar client-specific concepts in the future.
Management believes that, in a number of instances, we have retained existing
contracts or won new contracts because of our ability to creatively operate the
facility's various food and merchandise services. Management intends to continue
to employ these skills to both procure new business opportunities and increase
returns from our existing contract base.
SERVICES AND CLIENT CATEGORIES
Overview
We are a leading provider of food and beverage concession, high-end
catering and merchandise services for sports facilities, convention centers and
other entertainment facilities throughout the United States. While the type of
food service provided varies depending upon the facility, examples of the
services which we provide include:
o food and beverage catering and concession services at sports facilities;
o small- to large-scale banquet catering and food court operations at
convention centers; and
o in-facility restaurants and catering across the range of facilities which
we serve.
We also provide merchandise and program management services at many of the
sports facilities which we serve. We are responsible for satisfying all
personnel, inventory control, purchasing and food preparation requirements in
connection with the provision of these services.
In addition to providing the services described above, we often work
closely with clients in designing or renovating the food, beverage and
merchandising features of the facilities at which we provide our services. By
using our in-house capabilities in conjunction with outside consultants, we have
designed state-of-the-art concessions and restaurant facilities in, among other
facilities, Jack Kent Cooke Stadium (home of the Washington Redskins) and
Tropicana Field (home of the Tampa Bay Devil Rays) and in the
soon-to-be-completed stadiums of the NFL's Tennessee Titans and MLB's San
57
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Francisco Giants and Seattle Mariners. Similarly, we believe that our extensive
redesign and improvement of the food court and retail areas of the Jacob K.
Javits Center in New York City was an important factor in obtaining an extension
of that contract in 1997.
We seek to assist certain of our clients in marketing their facilities, as
our revenues are directly affected by the number and quality of events attracted
to these facilities. We also seek to build relationships with event sponsors in
order to facilitate referrals of recurring events, such as annual trade shows,
to facilities at which we provide our services.
Sports Facilities
We are a leading provider of food and beverage services to sports
facilities throughout the United States. We currently have contracts to provide
services, including food and beverage concessions, at 55 such facilities. At
certain of these facilities, we also provide high-end catering services for
premium seating, luxury suites and in-stadium restaurants. Sports facilities
include stadiums and arenas where there is an anchor sports team tenant. The
stadiums at which we provide our services seat from 21,000 to 102,000 persons
and typically host sporting events such as NFL and college football games and
MLB or minor league baseball games, as well as concerts and other large civic
events. The arenas at which we provide our services seat from 7,500 to 21,000
persons and host events such as:
o NBA and college basketball games;
o minor league hockey games;
o concerts;
o ice shows; and
o circuses.
These facilities may also host conventions, trade shows and meetings.
For the fifty-two week period ended March 30, 1999 sports facility
contracts accounted for approximately 55.6% and 64.0% of our pro forma net sales
and Contract EBITDA, respectively.
Concession-style sales of food and beverages represent the majority of our
business at sports facilities. High-end catering for premium seating, luxury
suites and in-stadium restaurants is responsible for a significantly smaller
portion of net sales at sports facilities. However, high-end catering is a
service upon which our clients place great importance because of the significant
revenues generated by purchasers of luxury seats and suites. Consequently, the
ability to provide high-end catering is an increasingly important factor when
competing for contracts, and we expect it to become more important in the
future.
In addition to the provision of food and beverage catering and concession
services, we sell team-licensed and other merchandise during events at certain
facilities. For example, we provide a wide range of merchandise services,
including in-stadium stores and roving vendors, at all six MLB facilities which
we serve. In providing merchandise services, we purchase team logo apparel and
other novelties and resell such merchandise during events.
Our contracts with sport facilities are typically for terms ranging from
five to twenty years. As of March 30, 1999, our existing sports facility
contracts had an average remaining life of 11.3 years weighted by Contract
EBITDA for the preceding fifty-two week period. In general, stadium and, to a
lesser extent, arena contracts require a larger up-front or committed future
capital investment than contracts for convention centers and other entertainment
facilities, and typically have a longer contract term. In addition, certain
sports facility contracts require greater capital investment than others, and we
typically receive a more favorable commission structure at facilities where we
have made larger capital investments.
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The following chart lists some of our major contracts within the sports
facilities category:
<TABLE>
<CAPTION>
NAME LOCATION SPORTS TEAM TENANT SEATING CAPACITY (SPORT)
- ------------------------ ------------------ --------------------------- ---------------------------------
<S> <C> <C> <C>
ALLTEL Stadium Jacksonville, FL Jacksonville Jaguars 73,000 (NFL)
Florida Citrus Bowl Orlando, FL N/A 70,000 (College Football)
HHH Metrodome Minneapolis, MN Minnesota Vikings, 64,000 (NFL) (College Football),
Minnesota Twins 44,000 (MLB)
Jack Kent Cooke Stadium Landover, MD Washington Redskins 80,000 (NFL)
Palace of Auburn Hills Auburn Hills, MI Detroit Pistons 21,000 (NBA)
Qualcomm Stadium San Diego, CA San Diego Chargers, 71,400 (NFL),
San Diego Padres 60,750 (MLB)
RCA Dome Indianapolis, IN Indianapolis Colts 60,000 (NFL)
Rose Bowl Pasadena, CA N/A 102,000 (College Football)
3Com Park San Francisco, CA San Francisco 49ers, 68,000 (NFL),
San Francisco Giants 52,000 (MLB)
Tropicana Field St. Petersburg, FL Tampa Bay Devil Rays 48,500 (MLB)
Truman Sports Complex Kansas City, MO Kansas City Chiefs, 79,000 (NFL),
Kansas City Royals 40,600 (MLB)
Yankee Stadium New York, NY New York Yankees 55,000 (MLB)
</TABLE>
Convention Centers
Based on the number of facilities served, we are the largest provider of
food and beverage services to major convention centers (defined for the purposes
of this prospectus as those with at least 300,000 square feet of exhibition
space) in the United States. We currently have contracts to provide services
including banquet catering and food court operations to 30 convention centers,
two of which are located in Canada. Convention centers typically host:
o conventions;
o industrial and trade shows;
o company meetings;
o banquets;
o receptions; and
o consumer exhibitions, such as auto, boat or computer shows.
Most of the convention centers at which we provide our services are located
in major metropolitan areas, which provide greater hotel room capacity and
entertainment options, and are therefore more attractive to event planners. The
facilities at which we provide our services generally consist of large exhibit
areas supplemented by a variety of banquet and meeting rooms of various sizes.
For the fifty-two week period ended March 30, 1999, convention center contracts
accounted for approximately 28.3% and 26.9% of our pro forma net sales and
Contract EBITDA, respectively.
The services which we provide at convention centers typically include:
o catering services, including planning, preparing and serving banquets;
o providing food court operations;
o assisting in planning events; and
o marketing clients' facilities.
Catering services consist primarily of providing large-scale banquet
services to functions held in the facilities' ballrooms and banquet halls.
Generally, banquets are held for 300 to 2,000 persons at the facility, though
catered meals at certain facilities can be served for larger groups, when we may
draw,
59
<PAGE>
as needed, on the services of chefs, event managers and other employees
throughout the region in which the facility is located. At trade shows and
consumer exhibitions, we frequently provide smaller-scale catering services,
such as services to meetings, exhibitions and trade show booths. In operating
food courts at convention centers, we typically provide concession sales
services from several different booths, which sell a variety of specialty foods
and beverages, including nationally branded, franchised food and beverage
products.
Our contracts with convention centers are typically for terms ranging from
two to five years. As of March 30, 1999, our existing convention center
contracts had an average remaining life of 2.6 years weighted by Contract EBITDA
for the preceding fifty-two week period. In general, convention center contracts
are for a shorter contract term than contracts for sports facilities, but
typically require less up-front or committed future capital investment. However,
as for contracts for sports facilities, certain convention center contracts
require greater capital investment than others, and we typically receive a more
favorable commission structure at facilities where we have made larger capital
investments.
The following chart lists certain of our major contracts within the
convention center category:
<TABLE>
<CAPTION>
SIZE
NAME LOCATION (APPROX. SQ. FT)(1)
- --------------------------------- ------------------- -------------------
<S> <C> <C>
American Royal Center Kansas City, MO 372,000
Baltimore Convention Center Baltimore, MD 300,000
Cobb Galleria Center Atlanta, GA 280,000
Cleveland Convention Center Cleveland, OH 409,000
Colorado Convention Center Denver, CO 300,000
Cow Palace San Francisco, CA 300,000
Indiana Convention Center Indianapolis, IN 418,000
Jacob K. Javits Center New York, NY 760,000
Kentucky Fair & Expo Center Louisville, KY 1,068,000
Miami Beach Convention Center Miami Beach, FL 503,000
National Trade Center Toronto, ON Canada 1,000,000
San Diego Convention Center San Diego, CA 349,000
Washington, DC Convention Center Washington, DC 381,000
</TABLE>
- ------------------
(1) Source: Tradeshow Week's 1998 Major Exhibit Hall Directory
Other Entertainment Facilities
We have contracts to provide a wide range of services to 34 other
entertainment facilities located throughout the United States. Such facilities
include:
o horse racing tracks;
o music amphitheaters;
o motor speedways;
o national and state parks;
o skiing facilities;
o theme parks; and
o zoos.
While the services which we provide can vary widely depending on the type
of facility concerned, we primarily provide:
o concession services at theme parks, zoos and music amphitheaters;
o high-end concession services at music amphitheaters; and
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<PAGE>
o in-facility restaurants, concession services, food court operations and
high-end catering services at horse racing tracks.
For the fifty-two week period ended March 30, 1999, contracts to serve
these other entertainment facilities accounted for approximately 16.1% and 9.1%
of our pro forma net sales and Contract EBITDA, respectively.
The duration, level of capital investment required and commission or
management fee structure of the contracts for these other entertainment
facilities varies from facility to facility. However, as for contracts relating
to sports facilities and convention centers, we typically receive a more
favorable commission structure at facilities where we have made larger capital
investments. As of March 30, 1999, our existing contracts to serve these other
entertainment facilities had an average remaining life of 3.9 years weighted by
Contract EBITDA for the preceding fifty-two week period.
The following chart lists examples of our contracts within the other
entertainment facilities category:
<TABLE>
<CAPTION>
NAME LOCATION VENUE TYPE
- -------------------------------------- ------------------- --------------------
<S> <C> <C>
Alpine Valley Amphitheater Walworth, WI Music Amphitheater
Belmont, Saratoga and Aqueduct Tracks New York Horse Racing Tracks
Chicago Theater Chicago, IL Theater
Glen Helen Pavilion San Bernardino, CA Music Amphitheater
Irvine Meadows Laguna Hills, CA Music Amphitheater
Lake Perris State Park Perris, CA Marina Operation
Lake Placid Ski Resort Lake Placid, NY Ski Resort
Los Angeles Zoo Los Angeles, CA Zoo
Pine Knob Amphitheater Pontiac, MI Music Amphitheater
Sea Life Park Oahu, HI Theme Park
Walnut Creek Amphitheater Raleigh, NC Music Amphitheater
</TABLE>
CONTRACTS
We typically enter into one of three types of contract with our clients:
o P&L Contracts;
o Profit Sharing Contracts; and
o Management Fee Contracts.
Each of our contracts falls into one of these three categories, although
any particular contract may contain elements of any of the other types as well
as other features specific to that contract. These modifications are made in an
effort to meet our needs and the needs of the particular client, and obtain or
retain the right to provide services at the facility.
Profit and Loss Contracts. Under P&L Contracts, we receive all of the
revenues and bear all of the expenses of the provision of our services at a
facility. These expenses include commissions paid to the client, which are
typically calculated as a fixed or variable percentage of various categories of
sales. While we benefit from greater upside potential with P&L Contracts, as we
are entitled to retain all profits from the provision of our services at a
facility after paying expenses (including commissions to the client), we are
responsible for all associated costs and therefore are also responsible for any
losses incurred. We consequently bear greater risk with a P&L Contract than with
a Profit Sharing or Management Fee Contract. In order to achieve our anticipated
level of profitability on a P&L Contract, we must carefully control our
operating expenses and obtain price increases commensurate with our cost
increases. As of March 30, 1999, we served 96 facilities under P&L Contracts.
For the fifty-two week period ended March 30, 1999, P&L Contracts accounted for
86.1% and 90.3% of our pro forma net sales and Contract EBITDA, respectively.
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<PAGE>
Profit Sharing Contracts. Under Profit Sharing Contracts, also commonly
referred to in the industry as incentive bonus contracts, we receive a
percentage of any profits earned from the provision of our services at a
facility after deducting expenses. These expenses include commissions payable to
the client, which are typically calculated as a fixed or variable percentage of
various categories of sales. In addition, under certain Profit Sharing
Contracts, we receive a fixed fee prior to the determination of profits under
the contract. Under Profit Sharing Contracts, we generally do not bear
responsibility for any losses incurred in connection with the provision of our
services as we are reimbursed for our on-site expenses. However, if a loss is
incurred, we typically will receive no payments under the contract other than
reimbursement of our expenses and our fixed fee, if any. As of March 30, 1999 we
served 13 facilities under Profit Sharing Contracts. For the fifty-two week
period ended March 30, 1999, Profit Sharing Contracts accounted for 13.5% and
6.7% of our pro forma net sales and Contract EBITDA, respectively.
Management Fee Contracts. Under Management Fee Contracts, we receive a
management fee, typically calculated as a fixed dollar amount and/or a fixed or
variable percentage of various categories of sales. In addition, certain
Management Fee Contracts entitle us to incentive fees based upon our performance
under the contract, as measured by factors such as revenues or operating costs.
We are reimbursed for all of our on-site expenses under these contracts. The
benefit of this type of contract is that we do not bear the risks associated
with the provision of our services at the facility. However, as a result of this
reduced risk, we also have reduced upside potential, as we are only entitled to
receive a management fee, and any incentive fees provided for in the contract,
and do not share in any profits. As of March 30, 1999, we served 11 facilities
under Management Fee Contracts. For the fifty-two week period ended September
29, 1998, Management Fee Contracts accounted for 0.4% and 3.0% of our pro forma
net sales and Contract EBITDA, respectively.
Although our contracts generally fall within one of the three types
discussed above, we often modify our contracts in a variety of ways to meet our
needs and the needs of a particular client. These modifications include:
o step-scale commissions, in which our commission payment to a client will
vary according to sales performance;
o minimum attendance caps, in which a client will refund a portion of the
commissions which it receives from us if a minimum attendance level is
not reached at the facility; and
o merchandise inventory guarantees, under which we return certain unsold
inventory to the client without charge to us.
These modifications represent our efforts to tailor our contracts to best
suit a particular client opportunity, and reflect our experience with comparable
facilities, sensitivity analyses of economic assumptions, competitor analyses
and general market research.
Some of our P&L Contracts contain minimum guaranteed commissions or
equivalent payments to the client in connection with our right to provide
services within the particular facility, regardless of the level of sales at the
facility or whether a profit is being generated at the facility. These
guaranteed payments are often structured as a fixed dollar amount, frequently
increasing over the life of the contract, or as a fixed per capita amount,
generally on an escalating scale based on event attendance or per capita
spending levels.
In addition, substantially all of our contracts limit our ability to raise
prices on the food, beverages and merchandise we sell within the particular
facility without the client's consent. However, some of the contracts contain
pricing restrictions which allow us to raise our prices without the client's
consent if we are able to demonstrate that prices on similar items at specified
benchmark facilities have increased.
When we enter into new contracts, or extend or renew existing contracts
(particularly for sports facilities), we are often required to make some form of
up-front or committed future capital investment
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to help finance facility construction or renovation. This expenditure typically
takes the form of investment in:
o leasehold improvements;
o food service equipment; and/or
o grants to owners or operators of facilities.
While the amount of capital commitment required can vary significantly, the
ability to make such expenditures is often an essential element of a successful
bid. Commission and management fee rates vary significantly among contracts
based primarily upon:
o the amount of capital which we invest;
o the type of facility involved;
o the term of the contract; and
o the services we provide.
In general, within each client category, the level of capital investment
and commission are related, such that the greater the capital investment which
we make, the lower the commission we pay to the client. Our Profit Sharing
Contracts generally provide that we are reimbursed each year for the
amortization of our capital investments prior to determining the profits under
the contract.
At the end of the contract term, all capital investments which we have made
in leasehold improvements, equipment and grants to facility owners or operators
typically remain the property of the client. We capitalize capital investments
in our clients' facilities and amortize or depreciate them over the lesser of
the useful life of the applicable asset or the remaining life of the contract.
Our contracts generally provide that the client must reimburse us for any
undepreciated or unamortized capital investments made pursuant to the terms of
the contract in the event of early termination of the contract by either party,
other than due to our default.
The length of contracts which we enter into with clients varies depending
on:
o the type of facility;
o the type of contract;
o the services provided; and
o the level of capital investment required by the contract.
Contracts in connection with sports facilities generally require the
highest capital investments but have correspondingly longer terms, typically of
five to twenty years. Convention center contracts generally require lower
capital investments and have average terms of two to five years. Our contracts
are generally terminable in the following circumstances:
o by either party in the event of default or bankruptcy of the other party;
o in the case of sports facility contracts, by either party if the
principal sports team using the facility ceases to do so; and
o by our client in the event of suspension or loss of our liquor license.
However, some of our contracts give the client the right to terminate the
contract with or without cause on little or no notice. See "Risk Factors--Nature
of Contracts."
We generally acquire facility contracts through a competitive bidding
process. In determining whether to bid for a particular facility contract, we
analyze the contract opportunity by calculating projected internal rates of
return based on factors which include:
o varying up-front capital investment levels;
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<PAGE>
o commission structures;
o attendance assumptions;
o cost structures; and
o estimated per capita spending rates.
COMPETITION
The recreational food service industry is highly fragmented and
competitive, with several national food service providers as well as a large
number of smaller independent businesses serving discrete local and regional
markets and/or competing in distinct areas. Those companies that lack a
full-service capability, because, for example, they cannot cater for luxury
suites at stadiums and arenas, often bid for contracts in conjunction with one
of the other national food service companies that can offer such services.
We compete for contracts against a variety of food service providers.
However, our major competitors are other national food service providers,
including ARAMARK, Delaware North Corporation, Ogden Corporation, Fine Host
Corporation and Levy Restaurants. We also face competition from regional and
local service contractors, some of which are better established within a
specific geographic region. Existing or potential clients may also elect to
"self operate" their food services, eliminating the opportunity for us to
compete for the account.
Contracts are generally gained and renewed through a competitive bidding
process. We selectively bid on contracts to provide services at both privately
owned and publicly controlled facilities. The privately negotiated transactions
are generally competitive in nature, with several other large national
competitors submitting proposals. Contracts for publicly controlled facilities
are generally awarded pursuant to a request-for-proposal process. Successful
bidding on contracts for such publicly controlled facilities often requires a
long-term effort focused on building relationships in the community in which the
venue is located.
We compete primarily on the following factors:
o the ability to make capital investments;
o commission or management fee structure;
o service innovation;
o quality and breadth of products and services; and
o reputation within the industry.
Some of our competitors may be prepared to accept less favorable commission
or management fee structures than us when bidding for contracts. A number of our
competitors also have substantially greater financial and other resources than
us. Furthermore, we have more indebtedness than certain of our competitors,
which could place us at a competitive disadvantage. See "Risk
Factors--Substantial Leverage and Debt Service."
SALES AND MARKETING
A Vice President--Sales and Marketing heads our sales and marketing team.
Our Chief Executive Officer, John T. Dee, general managers and regional vice
presidents also typically play an important role in the marketing effort.
Through our own internal tracking system, trade publications and other industry
sources, we gather information regarding both new and expiring contracts in the
recreational food service industry. As a result of their many years of
experience in the industry, management has developed relationships with a wide
variety of participants in the industry, including:
o the general managers of public and private facilities;
o league and team owners;
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<PAGE>
o event sponsors; and
o a network of consultants facility owners often hire to formulate bid
specifications.
Additionally, members of our management team maintain membership in various
industry trade associations. Substantially all of our clients and potential
clients in publicly controlled facilities are members of these trade groups.
PURCHASING
After the acquisition of Service America in 1998, we hired a Director of
Purchasing to analyze each of Volume Services' and Service America's purchasing
arrangements. This analysis was intended to identify any potential cost-saving
opportunities from adopting any particular purchasing practice or expanding any
particular purchasing arrangement throughout Volume Services America. As a
result of this review, we have extended the national distribution contract which
Service America had with SYSCO to cover Volume Services' operations. We also
have a number of national purchasing programs with companies such as Coca-Cola,
Pepsi, Sweetheart and J&J Pretzel which enable our general managers to receive
discounted pricing on certain items. The purchase of other items, the most
significant of which are alcoholic beverages (which must, by law, be purchased
in-state), is handled on a local basis.
In instances where our contract with a particular client requires us to use
a specific branded product for which we do not have a purchasing program or
distribution contract, or which results in us bearing additional costs, the
client will typically cover any excess cost associated with the use of the brand
name product through reduced commission rates for such products.
In order to secure as competitive a pricing structure as possible, we
purchase any equipment that we require directly from the manufacturer, thereby
avoiding the payment of commissions to dealers. We typically obtain several bids
when filling our food service equipment requirements.
CONTROLS
Since a large portion of our business is transacted in cash (principally
food and beverage concessions and food court operation sales), we have stringent
inventory and cash controls in place. We typically record inventory levels
before and after each event to determine if the sales recorded match the decline
in inventory. The process is typically completed within hours of conclusion of
the event and any discrepancy can generally be traced to either specific points
of sale or control processes set up throughout the facility. We also run yield
reports on food supplies on a monthly basis to determine if there is any
significant difference between inventory and sales.
PROPERTIES
We lease our corporate headquarters in Spartanburg, South Carolina
(approximately 19,300 square feet), the headquarters of Service America in
Stamford, Connecticut (approximately 12,600 square feet) and regional offices
in:
o Rosemont, Illinois;
o Fords, New Jersey; and
o Pleasanton, California.
We are currently trying to sublease much of the office space in Stamford.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Integration Plan."
We currently provide our services at 119 client facilities, all of which
are owned or leased by our clients. Our contracts with our clients generally
permit us to use certain areas within the facility to perform our administrative
functions and fulfill our warehousing needs, as well as provide the food and
beverage services.
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<PAGE>
EMPLOYEES
Our operating staff consists of six regional vice presidents for
concessions, who report directly to the Chief Executive Officer, and two
regional vice presidents for convention centers, who report to a senior vice
president for convention centers. Each regional vice president is responsible
for between 11 and 21 accounts, with between approximately $45 million and $60
million in annual revenues. Each facility which we serve is typically managed by
a facility general manager. Our facility general managers, who on average have
approximately 10 years of experience in the recreational food service industry,
have a high level of autonomy with respect to the day-to-day operations of their
respective facilities.
As of March 30, 1999, we had approximately 1,400 full-time employees.
During calendar 1998, approximately 22,600 employees were part-time or hired on
an event-by-event basis. The number of part-time employees at any point in time
varies significantly due to the seasonal nature of the business.
As of March 30, 1999, approximately 40% of our employees (including full
and part-time employees) were covered by collective bargaining agreements with
several different unions. We have not experienced any significant interruptions
or curtailments of operations due to disputes with our employees, and we
consider our labor relations to be good. We have hired, and expect to continue
to hire, a large number of qualified, temporary workers at particular events. At
some locations, local charitable groups raise funds by working at our
concessions operations in exchange for a percentage of gross revenues.
We believe that our training programs are important to our operations. New
management-track recruits participate in extensive on-the-job orientation and
training which exposes them to a broad range of functions at facilities,
including the start-up of new accounts, financial control and planning of
special events. We also have developed training programs which enable us to
train efficiently the large number of part-time employees hired to meet our
seasonal needs at certain facilities. The training programs teach new employees
merchandising techniques, controls, courtesy, company policies and alcohol
awareness. We regularly repeat alcohol awareness programs at all facilities.
INTELLECTUAL PROPERTY
We have the patents, trademarks, trade names and licenses which are
necessary for the operation of our business as we currently conduct it. We do
not consider our patents, trademarks, trade names and licenses to be material to
our business.
INSURANCE
We have customary levels of insurance for a company of our size in our type
of business, subject to customary deductibles and limits. As part of the
implementation of the Integration Plan, we have renegotiated our insurance
arrangements, which we expect to result in annual cost savings of $1.3 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Integration Plan."
GOVERNMENT REGULATION
Our operations are subject to various governmental regulations, such as
those governing:
o the service of food and alcoholic beverages;
o minimum wage regulations;
o employment;
o environmental protection; and
o human health and safety.
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<PAGE>
In addition, our facilities and products are subject to periodic inspection
by federal, state, and local authorities. The cost of regulatory compliance is
subject to additions to or changes in federal or state legislation, or changes
in regulatory implementation. If we fail to comply with applicable laws, we
could be subject to civil remedies, including fines, injunctions, recalls, or
seizures, as well as potential criminal sanctions. See "Risk Factors--Government
Regulation."
The FDA regulates and inspects our kitchens. Every commercial kitchen in
the United States must meet the FDA's minimum standards relating to the
handling, preparation and delivery of food, including requirements relating to
the temperature of food and the cleanliness of the kitchen and the hygiene of
its personnel. We are also subject to certain state, local and federal laws
regarding the disposition of property and leftover foodstuffs. The cost of
compliance with FDA regulations is subject to additions to or changes in FDA
regulations.
We serve alcoholic beverages at many facilities, and are subject to the
"dram-shop" statutes of the states in which we serve alcoholic beverages.
"Dram-shop" statutes generally provide that serving alcohol to an intoxicated or
minor patron is a violation of law. In most states, if one of our employees
sells alcoholic beverages to an intoxicated or minor patron, we may be liable to
third parties for the acts of the patron. We sponsor regular training programs
in cooperation with state authorities to minimize the likelihood of serving
alcoholic beverages to intoxicated or minor patrons, and we maintain general
liability insurance which includes liquor liability coverage. See "Risk
Factors--Government Regulation."
We are also subject to licensing with respect to the sale of alcoholic
beverages in the states in which we serve alcoholic beverages. Failure to
receive or retain, or the suspension of, liquor licenses or permits would
interrupt or terminate our ability to serve alcoholic beverages at those
locations. A few of our contracts require us to pay liquidated damages during
any period in which our liquor license for the relevant facility is suspended
and most contracts are subject to termination in the event that we lose our
liquor license for the relevant facility.
LEGAL PROCEEDINGS
We are from time to time involved in various legal proceedings incidental
to the conduct of our business. In the opinion of management, any liability
arising out of currently pending proceedings will not have a material adverse
effect on our financial condition or results of operations.
On February 22, 1999, a former senior vice president of Service America
filed a lawsuit against Service America and John Dee in the Superior Court of
the State of Connecticut alleging breach of contract and wrongful termination in
retaliation for having opposed allegedly discriminatory employment practices and
certain trade practices. The complaint seeks unspecified damages. We intend
vigorously to defend against this lawsuit and do not believe that it will have a
material adverse effect on our business, results of operations or financial
condition.
INFORMATION SYSTEMS
Each of Volume Services and Service America had its own information
systems, including applications used in sales, financial business systems and
various administrative functions. We spent $350,000 in 1998 to integrate and
develop the respective information systems, and believe that this process is now
substantially complete. See "Risk Factors--Year 2000 Compliance."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of our
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -------------------------------------------------
<S> <C> <C>
John T. Dee............................. 60 Chief Executive Officer and Chairman of the Board
of Directors
Kenneth R. Frick........................ 43 Vice President and Chief Financial Officer
Michael J. Higgins...................... 54 Executive Vice President of Service America
Janet L. Steinmayer..................... 43 Vice President, General Counsel and Secretary
Howard A. Lipson........................ 34 Director
David Blitzer........................... 29 Director, Vice President and Assistant Secretary
Caleb S. Everett........................ 28 Director, Vice President and Assistant Secretary
</TABLE>
John T. Dee, Chief Executive Officer and Chairman of the Board of
Directors. Mr. Dee has served as Chief Executive Officer and Chairman of the
Board of Directors of Volume Services America since August 24, 1998. Mr. Dee has
served as President, Chief Executive Officer and a director of Service America
since January 1993 and as a consultant to Service America from November 1992 to
January 1993. He has been Chairman of the Board of Directors of Service America
since January 1997. From 1989 to 1992, Mr. Dee was President of Top Food
Services, Inc., a company engaged in the food service business. From 1980 to
1989, he was Group President at ARAMARK, with responsibility for ARAMARK's
recreational food service and public restaurant operations. From 1979 to 1980,
he held senior positions, including President, at Sportservice Corporation, and
was responsible for concessions and merchandise operations at airports,
theaters, stadiums, arenas and racetracks. From 1968 to 1979, he held various
positions at ARAMARK, including Vice President--Sales and President of the
Leisure Services Group, a division of ARAMARK engaged in the recreational food
service industry.
Kenneth R. Frick, Vice President and Chief Financial Officer. Mr. Frick
has served as Chief Financial Officer of Volume Services America since August
24, 1998 and as Chief Financial Officer of Volume Services since 1995.
Mr. Frick has seventeen years of experience in the recreational food service
industry, fourteen of them with Volume Services. Prior to becoming Chief
Financial Officer of Volume Services in 1995, Mr. Frick was the Controller for
Volume Services, and for seven years was Assistant Controller and Southeast
Regional Controller of Volume Services. Mr. Frick is a certified public
accountant.
Michael J. Higgins, Executive Vice President of Services America. Mr.
Higgins has served as Executive Vice President of Service America since January
1997 and was Chief Financial Officer of Service America from June 1994 to
January 1999. He served as a director of Service America from January 1997 to
January 1999. From January 1992 to June 1994, Mr. Higgins was Executive Vice
President and Chief Financial Officer of ARAMARK Leisure Services Group. From
1977 to 1992, he held various positions with ARAMARK, including Vice
President--Internal Audit. Prior to that, Mr. Higgins was employed in the audit
division of Arthur Andersen & Co. for more than ten years. Mr. Higgins is a
certified public accountant.
Janet L. Steinmayer, Vice President, General Counsel and Secretary. Janet
L. Steinmayer has been Vice President, General Counsel and Secretary of Volume
Services America since August 24, 1998. Ms. Steinmayer has been Corporate Vice
President, General Counsel and Secretary of Service America since November 1993.
From 1992 to 1993, she was Senior Vice President--External Affairs and General
Counsel of Trans World Airlines, Inc. ("TWA"). From 1990 to 1991, she served as
Vice President--Law, Deputy General Counsel and Corporate Secretary at TWA.
Ms. Steinmayer was a partner at the Connecticut law firm of Levett, Rockwood &
Sanders, P.C. from 1988 to 1990.
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Howard A. Lipson, Director. Mr. Lipson is Senior Managing Director of the
Blackstone Group, which he joined in 1988, and has been a director of both
Volume Services America and Volume Services since December 1995. Prior to
joining the Blackstone Group, Mr. Lipson was a member of the Mergers and
Acquisitions Group of Salomon Brothers Inc. He currently serves on the Board of
Directors of Allied Waste Industries, Inc., AMF Group Inc., Ritvik Holdings
Inc., Prime Succession Inc. and Roses, Inc. and is a member of the Advisory
Committee of Graham Packaging Company.
David Blitzer, Director, Vice President and Assistant Secretary. Mr.
Blitzer is a Managing Director of the Blackstone Group which he joined in 1991,
and has been a director of both Volume Services America and Volume Services
since December 1995. Mr Blitzer is also a director of Haynes International,
Inc., Republic Engineered Steels, Inc., Bar Technologies, Inc. and The Imperial
Home Decor Group Inc.
Caleb S. Everett, Director, Vice President and Assistant Secretary. Mr.
Everett was elected director of both Volume Services America and Volume Services
in August 1998. Mr. Everett has been involved in the Blackstone Group's
principal activities since joining the Blackstone Group in August 1997. From
1995 to 1997 Mr. Everett was employed by Morgan Stanley & Co., where he worked
in the Mergers, Acquisitions and Restructuring department. Prior to 1995, Mr.
Everett attended The Wharton School at the University of Pennsylvania.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors does not have any committees.
EXECUTIVE COMPENSATION
The table below describes certain information concerning the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of Volume Services America based on 1998 salary
and bonuses, Lawrence A. Hatch, former Chairman, Chief Executive Officer and
President of Volume Services and Ronald Skadow, former Vice President, General
Counsel and Secretary of Volume Services, (referred to together as the "Named
Executives"). The principal components of such individuals' current cash
compensation are the annual base salary and other compensation included in the
Summary Compensation Table.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
OTHER ANNUAL ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
---- -------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
John T. Dee(3)
Chief Executive Officer and Chairman of
the Board of Directors.................. 1998 $483,716 $ -- $ 579 $ --
Kenneth R. Frick(4)
Vice President and Chief Financial
Officer................................. 1998 153,175 20,535 4,584 --
Michael J. Higgins(3)
Executive Vice President of Service
America................................. 1998 230,160 -- 2,267 --
Janet L. Steinmayer(3)
Vice President, General Counsel and
Secretary............................... 1998 291,900 150,000 18,300 --
J. Wayne Tolleson(4)
Vice President, Sales and Marketing..... 1998 78,000 -- 89,289 --
Lawrence A. Hatch(4).................... 1998 319,686 25,000 9,458 500,000
Ronald Skadow(4)........................ 1998 118,790 17,310 20,447 290,004
</TABLE>
(Footnotes on next page)
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(Footnotes from previous page)
- ------------------
(1) Other annual compensation includes company car, life insurance, commissions,
401(k) employer matching contributions and reimbursement of interest on
investor notes.
(2) All other compensation includes severance pay and stay bonus.
(3) Compensation paid solely by Service America.
(4) Compensation paid solely by Volume Services.
DIRECTOR COMPENSATION
Directors of Volume Services America do not receive compensation, except in
their capacity as officers or employees.
EMPLOYMENT AND SEVERANCE AGREEMENTS
We have entered into the following arrangements with our directors and
executive officers:
On August 24, 1998, Volume Holdings entered into an employment agreement
with Mr. Dee. The agreement provides that Mr. Dee will be employed by Volume
Holdings at an annual base salary of $465,000 for a term of five years, subject
to earlier termination by Volume Holdings for or without Cause, or by Mr. Dee
for Good Reason (each as defined in the agreement). Mr. Dee is entitled to a
bonus at the discretion of the Board of Directors of Volume Holdings and to
participate in any executive bonus plan and all employee benefit plans
maintained by Volume Holdings. The agreement provides for severance pay in the
case of a termination by Volume Holdings without Cause or by Mr. Dee for Good
Reason in an amount equal to Mr. Dee's annual base salary for the balance of the
term of employment and ancillary benefits. During and for two years after Mr.
Dee's employment, Mr. Dee has agreed that, without the written consent of Volume
Holdings, he will not:
o be engaged, in any capacity, in any business that competes with Volume
Holdings' business; or
o solicit any person who was employed by Volume Holdings during the 12
months preceding such solicitation.
On November 17, 1995, Volume Services entered into an employment agreement
with Mr. Frick. The agreement provides that Mr. Frick will be employed by Volume
Services until he resigns or is dismissed by Volume Services for or without
Cause (as defined in the agreement). Mr. Frick's base salary under the contract
is $195,000 subject to annual review. Mr. Frick is also entitled to receive an
annual bonus pursuant to any management incentive compensation plan established
by Volume Services. In the case of termination of employment due to resignation,
Mr. Frick will receive his salary up to the 30th day following his resignation
and any accrued but unpaid bonus. In the case of termination without Cause by
Volume Services, Mr. Frick will receive a one-time payment of two times his base
annual salary plus any accrued but unpaid bonus. During and for two years after
his employment, Mr. Frick has agreed not to:
o solicit employees of Volume Services to cease such employment without the
written consent of Volume Services; or
o have any involvement in any capacity in any contract concessions business
similar to that of Volume Services in those states in the United States
in which Volume Services does business and over which Mr. Frick has had
supervisory responsibility.
On August 24, 1998, Service America entered into an employment agreement
with Mr. Higgins. The agreement provides that Mr. Higgins will be employed by
Service America for an initial period of one year at an annual base salary of
$218,400. The term of the agreement will automatically be extended for
successive six-month periods unless and until terminated by Service America for
or without Cause, or by Mr. Higgins for Good Reason (each as defined in the
agreement). Mr. Higgins is entitled to a bonus at the discretion of Service
America's Board of Directors and to participate in any executive bonus plan and
all employee benefit plans maintained by Service America. The agreement
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provides for severance pay in the case of a termination by Service America
without Cause or by Mr. Higgins for Good Reason in an amount equal to Mr.
Higgins' salary for the balance of the term plusthe equivalent of his annual
salary and ancillary benefits. During and for one year after Mr. Higgins'
employment, Mr. Higgins has agreed that without the written consent of Service
America he will not:
o be engaged, in any capacity, in any business that competes with Service
America's business; or
o solicit any person who was employed by Service America or its affiliates
during the 12 months preceding such solicitation.
Under a letter agreement dated July 27, 1998, GE Capital and Service
America agreed that GE Capital will be responsible for that portion of Mr.
Higgins' salary that relates to the time that Mr. Higgins devotes to the affairs
of GE Capital in the first year of the agreement, and for all payments
thereafter, including severance payments, provided that GE Capital has the right
to determine when notice of termination is given.
On September 29, 1998, Volume Holdings entered into an employment agreement
with Ms. Steinmayer. The agreement provides that Ms. Steinmayer will be employed
by Volume Holdings at an annual base salary of $180,000, plus $250 per hour for
each hour that she works in excess of 24 hours per week, until the agreement is
terminated by Volume Holdings for or without Cause, or by Ms. Steinmayer for
Good Reason (each as defined in the agreement). Ms. Steinmayer is entitled to a
bonus at the discretion of the Board of Directors of Volume Holdings and to
participate in any executive bonus plan and all employee benefit plans
maintained by Volume Holdings. The agreement provides for severance pay in the
case of a termination by Volume Holdings without Cause or by Ms. Steinmayer for
Good Reason in an amount equal to two times her compensation in the one year
period prior to the date of termination (annualized in the case of termination
prior to the end of the first year), plus ancillary benefits. During and for two
years after Ms. Steinmayer's employment, she has agreed that she will not,
without the prior written consent of Volume Holdings:
o have any involvement in any enterprise which provides food services (as
defined in the agreement) in any of the states in the United States in
which Volume Holdings operates; or
o solicit any employee of Volume Holdings to leave its employment.
On December 22, 1995, Volume Services entered into an employment agreement
with Lawrence A. Hatch. The agreement provided that Mr. Hatch would be employed
by Volume Services as Chairman, Chief Executive Officer and President until he
resigned or was dismissed by Volume Services for or without Cause (as defined in
the agreement). Mr. Hatch's base salary under the contract was $300,000, subject
to annual review. On October 13, 1998, Volume Services entered into a
termination agreement with Mr. Hatch. Pursuant to the agreement, on October 13,
1998, Mr. Hatch resigned from his position as Chairman, from every executive
officer capacity in which he served and as a director of Volume Services and all
of its affiliates for which he served as a director. In addition, the agreement
provides that Mr. Hatch will resign from all other positions related to his
employment with Volume Services on March 31, 1999, at which time he will receive
$700,000 from Volume Services. Until then, Mr. Hatch will continue to receive
his annual base salary and other ancillary benefits. On October 13, 1998, Mr.
Hatch also signed a waiver and general release, in connection with which Volume
Services paid Mr. Hatch $500,000 and transferred the benefit of a $900,000 term
life insurance policy held by Volume Services to Mr. Hatch. On March 31, 1999
Mr. Hatch resigned from all other positions related to his employment with
Volume Services, and received $700,000.
The agreement contains the grant by Mr. Hatch of an irrevocable option to
Volume Holdings, exercisable at any time within five years from the date of the
agreement, to purchase all of Mr. Hatch's equity interests (referred to as the
"VSI Equity") in VSI Management Direct L.P. (referred to as "VSI Management")
and VSI Management II L.P. for an aggregate purchase price of $1.5 million (plus
interest, if any, which will begin accruing from October 13, 2000). The
agreement also contains the grant by Volume Holdings of an irrevocable option to
Mr. Hatch, exercisable upon the occurrence of a distribution of cash or
marketable securities with an aggregate value of at least $1.5 million by any of
BCP Volume L.P., BCP Offshore Volume L.P. or VSI Management Direct L.P. within
five years from the
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date of the agreement, to sell all of the VSI Equity to Volume Holdings for an
aggregate purchase price of $1.5 million (plus interest, if any, which will
begin accruing from October 13, 2000). On March 9, 1999, Volume Holdings paid
Mr. Hatch $1.5 million for the VSI Equity in accordance with the terms of the
agreement. Mr. Hatch has agreed that, prior to March 31, 2001, he will not,
without the prior written consent of Volume Services, hire any member of
corporate management or any site manager of Volume Holdings or solicit such
employee to leave Volume Holdings, except for employees who have been dismissed
by Volume Holdings or have left Volume Holdings and joined another employer. Mr.
Hatch has also agreed that, prior to March 31, 2001, he will not:
o solicit any third party to sever or alter its relationship with Volume
Holdings; or
o provide Food Services (as defined in the agreement) to any existing
customer of Volume Holdings or any customer who is identified in the
agreement as a person whose business was then being pursued by Volume
Holdings.
SAVINGS PLANS
Volume Services sponsors the Volume Services, Inc. 401(k) Plan, which is a
401(k) plan established for the benefit of employees of Volume Services who have
satisfied certain requirements. These requirements include attainment of age 21
and completion of one month of service. The Volume 401(k) Plan excludes:
o employees covered by a collective bargaining agreement;
o nonresident aliens;
o employees compensated on an hourly basis;
o leased employees; and
o employees of a member of the employer's related group who does not
participate in the Volume 401(k) Plan.
Subject to applicable limits imposed on tax-qualified plans, participants
may elect to make pre-tax contributions of up to 15% of their compensation in
each year. Volume Services makes matching contributions to the Volume 401(k)
Plan equal to 25% of the participant's contributions, up to 6% of the
participant's earnings. The Volume 401(k) Plan also permits Volume Services to
make additional discretionary matching contributions, as well as discretionary
contributions unrelated to participant pre-tax contributions. The participants
in the Volume 401(k) Plan are 100% vested in their account balances at all
times.
Volume Services also sponsors the Volume Services, Inc. Deferred
Compensation Plan (referred to as the "Volume Deferral Plan"), which is a
non-qualified plan established for the benefit of employees of Volume Services
who are:
o members of VSI Management;
o members of a select group of highly compensated or management employees
of Volume Services; or
o selected by an administrative committee appointed by the Board of
Directors of Volume Services.
Participants in the Volume Deferral Plan may elect to make pre-tax
deferrals of a portion of their base salaries and/or bonuses. The administrative
committee may provide for a matching contribution on any amount deferred. Each
participant's deferral will be credited to a bookkeeping account, which will
also be credited with earnings and losses based upon hypothetical investments.
The participants in the Volume Deferral Plan are unsecured general creditors of
Volume Services and are paid their benefits from assets which continue to be
part of the general, unrestricted assets of Volume Services.
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Service America sponsors the Service America Corporation Retirement and
Savings Plan (referred to as the "Service 401(k) Plan"), which is a 401(k) plan
established for the benefit of employees who have attained 21 years of age and
have completed one year of service. The Service 401(k) Plan excludes employees
who are:
o nonresident aliens;
o covered by a collective bargaining agreement which does not provide for
participation in the Service 401(k) Plan; and
o leased employees.
Subject to applicable limits imposed on tax-qualified plans, participants
may elect to make pre-tax contributions of up to 16% of their Compensation (as
defined in the Service 401(k) Plan), but not in excess of $10,000 for 1998. The
Service 401(k) Plan permits discretionary matching contributions on pre-tax
contributions of up to 6% of a participant's Compensation. All participants in
the Service 401(k) Plan are 100% vested in their account balances at all times.
Service America sponsors the Service America Corporation Deferred
Compensation Plan (referred to as the "Service America Deferral Plan"), which is
a non-qualified plan established for the benefit of employees of Service America
who are members of a select group of highly compensated or management employees
of Service America and selected by an administrative committee appointed by the
Board of Directors of Volume Services.
Participants in the Service America Deferral Plan may elect to make pre-tax
deferrals of a portion of their base salaries and/or bonuses. The administrative
committee may provide for a matching contribution on any amount deferred. Each
participant's deferral will be credited to a bookkeeping account, which will
also be credited with earnings and losses based upon hypothetical investments.
The participants in the Service America Deferral Plan are unsecured general
creditors of Service America and are paid their benefits from assets which
continue to be part of the general, unrestricted assets of Service America.
OTHER COMPENSATION PLANS
In January 1998, Volume Services introduced the "Stay Put Severance Policy"
to provide enhanced severance pay to employees terminated pursuant to the
acquisition of Service America. Amounts payable in connection with this policy
are included in the $4.9 million of one-time expenses and charges which we
expect to incur in connection with the implementation of the Integration Plan.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Integration Plan."
In January 1999, Volume Services America introduced a bonus plan for
general managers and senior management personnel. Eligible personnel qualify for
bonus payments in the event that Volume Services America exceeds annual
financial performance targets.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SERVICE AMERICA TRANSACTIONS
Service America Recapitalization. In January 1997, GE Capital and certain
members of Service America's management (referred to as "Management
Stockholders") consummated a recapitalization by merging Service America with
and into Servam Acquisition Corp. (referred to as the "Service America
Recapitalization"). In the merger, the previously outstanding shares of common
stock of Service America, all of which were held by Servam Corporation, were
converted into the right to receive an aggregate of $80.0 million in cash.
Effective upon the merger, Service America was capitalized with:
o term loan debt of $55.0 million and revolving debt of $5.0 million loaned
by GE Capital under a credit facility dated January 17,1997;
o 200,000 shares of Series B preferred stock with a liquidation preference
of $20.0 million in the aggregate and a warrant (referred to as the "GE
Capital Warrant") exercisable for 711,538 shares of Service America
common stock (which represented approximately 70% of the Service America
common stock on a fully diluted basis), which were purchased by GE
Capital for an aggregate of $20.0 million;
o 30,000 shares of Series A preferred stock, which was junior to the
Series B preferred stock, with a liquidation preference of $3.0 million
in the aggregate, purchased by the Management Stockholders for $97,500;
and
o 250,000 shares of Service America common stock, constituting all of the
outstanding Service America common stock (which represented 30% of the
Service America common stock on a fully diluted basis), purchased by the
Management Stockholders for $2,500.
Service America became a wholly owned subsidiary of Volume Services America
in December 1998. See "Prospectus Summary--Acquisition of Service America."
The GE Capital Warrant. The GE Capital Warrant, issued in connection with
the Service America Recapitalization, entitled GE Capital to acquire an
aggregate of 711,538 shares of Service America common stock at an exercise price
of $0.01 per share. The GE Capital Warrant was scheduled to expire in January
2007 and provided for certain customary adjustments in the number of shares for
which it could be exercised and the price at which it could be exercised upon
the occurrence of certain events, including the issuance by Service America of
equity securities at a price below the then-current market price of such
securities. In addition, the GE Capital Warrant provided for cashless exercise.
Volume Holdings acquired the GE Capital Warrant from GE Capital in exchange for
the issue of Volume Holdings common stock to GE Capital as part of the
acquisition of Service America.
Assignment and Assumption Agreement. Pursuant to the assignment and
assumption agreement, Service America assigned the promissory notes and common
stock of Compass Group plc received from the sale to Compass of Service
America's institutional vending and dining business, which were valued by the
parties at $108.4 million, to GE Capital in consideration for:
o the forgiveness of $17.9 million of debt and interest and $3.8 million of
accrued dividends owed by Service America to GE Capital; and
o the assumption by GE Capital of a percentage of certain categories of
liabilities on Service America's balance sheet as of the closing date of
the Compass transaction. These percentages represented an approximation
of the amount of each category of liabilities attributable to all
institutional vending and dining operations sold by Service America on or
prior to September 27, 1996.
Pursuant to the assignment and assumption agreement, Service America serves
as GE Capital's agent for purposes of paying and discharging all of such assumed
liabilities, and these transactions with GE Capital are reflected in Service
America's financial statements. Certain liabilities assumed by
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GE Capital are subject to an aggregate maximum of approximately $16.3 million,
but this amount does not apply to:
o certain anticipated or contingent liabilities (which are assumed 100% by
GE Capital);
o casualty insurance (including worker's compensation);
o medical insurance; and
o certain accrued taxes.
As of December 31, 1998, GE Capital had assumed accrued liabilities of
$16.1 million subject to the limit. We do not believe that outstanding
liabilities subject to the limit will exceed the $0.2 million which remains
available, but we cannot assure you that this will be the case. If such
liabilities do exceed the limit, we will be liable for them. As of
December 31,1998, approximately $2.2 million of liabilities not subject to the
limit were outstanding. GE Capital is solely responsible for these liabilities
until February 2000. In February 2000, GE Capital will pay us a sum equal to
125% of the total liabilities which we agree with GE Capital to be then
outstanding. After payment of this sum, we will be responsible for the entire
actual amount of these liabilities.
The actual amount of the liabilities may exceed the sum which is paid to us
in February 2000. See note 4 to the consolidated financial statements of Service
America for the fifty-two week period ended December 27, 1997, the thirty-nine
week period ended December 28, 1996 and the fifty-three week period ended
March 30, 1996, included elsewhere in this prospectus.
Tax Indemnity Agreement. Service America ceased being a member of the
General Electric Company consolidated group (referred to as the "GE Consolidated
Group") for federal income tax purposes by reason of the Service America
Recapitalization. Accordingly, Service America and GE Capital in January 1997
entered into a tax indemnity agreement. Under this agreement:
o GE Capital agreed to indemnify Service America for (and became entitled
to any refund of) all consolidated or combined federal, state and local
income taxes payable while Service America was a member of the GE
Consolidated Group; and
o as authorized by the consolidated return Treasury Regulations, the GE
Consolidated Group became entitled to re-attribute to itself the portion
of Service America's net operating losses that did not exceed the amount
of "disallowed losses" (as defined in those regulations) which GE Capital
realized on the Service America Recapitalization.
Repayment of Credit Facilities. On December 3, 1998, we used $69.1 million
of the borrowings under the senior credit facilities to repay GE Capital in full
for credit facilities which GE Capital had previously provided to Service
America.
The Advisory Agreement. Pursuant to a letter agreement, dated July 1, 1996,
as amended (referred to as the "Advisory Agreement"), Service America retained
Impala Partners LLC as a financial advisor through December 31, 1997. Mr. Paul
Street, a director of Service America from January 1997 to January 1999, is a
general partner of Impala. Pursuant to a letter agreement dated December 8,
1997, Impala provided financial advisory services to Service America in
connection with the Service America Recapitalization and the acquisition of
Service America by Volume Holdings.
Pursuant to the Advisory Agreement, Service America paid financial advisory
fees to Impala of $1.6 million in connection with the acquisition of Service
America. In addition, Service America has reimbursed Impala for all
out-of-pocket expenses incurred in connection with its advisory services.
Letters of Credit. Upon entering into the senior credit facilities in
December 1998, the Issuer obtained two letters of credit in favor of GE Capital
for $1.1 million (which has subsequently been cancelled) and $6.8 million (which
has subsequently been reduced to $0.3 million), respectively. These letters of
credit were obtained to reimburse GE Capital for any liability which it may
incur pursuant to its guarantee of certain letters of credit provided to support
obligations of Service America prior to its acquisition by Volume Holdings and
which are still outstanding.
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Letter of Support. On July 10, 1998, Service America received a letter from
GE Capital confirming that GE Capital would provide financial support to Service
America. This letter was replaced after consummation of the credit agreement by
a letter from Volume Holdings to the same effect.
VOLUME SERVICES TRANSACTIONS
The Blackstone Advisory Agreement. Pursuant to a letter agreement, dated
May 1, 1998, Volume Services retained the Blackstone Group as its exclusive
financial advisor in connection with the acquisition of Service America. Volume
Services paid a retainer fee of $125,000 to the Blackstone Group in July 1998,
and a transaction fee of $2,275,000 in December 1998.
The Monitoring Agreement. Certain administrative and management functions
are provided to Volume Services by the Blackstone Group. Volume Services paid
Blackstone Management Partners II L.P. approximately $250,000 during fiscal year
1998.
AMENDED STOCKHOLDERS' AGREEMENT
On December 21, 1995, VSI Management, BCP Volume L.P. and BCP Offshore
Volume L.P. (together referred to as the "VSI Holders") and Volume Holdings
entered into a stockholders' agreement. Pursuant to the exchange agreement, on
August 24, 1998, the VSI Holders, Volume Holdings, GE Capital and Recreational
Services entered into an amended and restated stockholders' agreement. Certain
provisions of the amended stockholders' agreement are set out below.
Management; Board of Directors. The Board of Volume Holdings will be
comprised of a Chairman, one director appointed by VSI Management (provided that
the Chairman is not a partner of VSI Management and that VSI Management consults
with Blackstone prior to the appointment) and three directors appointed by
Blackstone (provided that Blackstone is the sole Controlling Shareholder (as
defined in the agreement)). If Blackstone ceases to be the sole Controlling
Shareholder, GE Capital will have the right to appoint two directors. Until GE
Capital is entitled to appoint a director, it is entitled to appoint an Observer
(as defined in the agreement) who is not entitled to vote on any Board matters.
Transfers of Shares. No transfers of the shares of Volume Holdings' common
stock (referred to as the "Shares") may be made by any stockholder (as defined
in the agreement) within one year from the date of the amended stockholders'
agreement other than:
o to a defined category of persons affiliated with or successors in title
to existing stockholders, each of whom agrees to be bound by the terms of
the amended stockholders' agreement (each referred to as a "Permitted
Transferee");
o pursuant to a public offering of the Shares; or
o in accordance with the exercise of the drag-along or tag-along rights
discussed below.
If either of Blackstone or Recreational Services (for these purposes,
referred to as the "Transferring Stockholder") intends to transfer its Shares
while the amended stockholders' agreement is in effect (other than by way of a
public offering or pursuant to Rule 144 of the Securities Act or to a Permitted
Transferee) and the Transferring Stockholder still beneficially owns at least
one-third of the number of Shares on a fully diluted basis that it held at the
date of the amended stockholders' agreement, then each other stockholder will
have the right to require the purchaser of such Transferring Stockholder's
Shares to purchase the same proportion of the Shares which such stockholder
owns, on the same terms as those offered to the Transferring Stockholder
(referred to as the "tag-along right").
If all of the Controlling Stockholders accept an offer by a party other
than a stockholder (referred to as a "Third Party") to purchase all of the
Shares owned by the stockholders (and the Controlling Stockholder to whom the
offer was made still owns at least one-third of the Shares owned by it at the
date of the amended stockholders' agreement), then each stockholder is obliged
to transfer its Shares to the Third Party on the same terms as those accepted by
the Controlling Stockholders (referred to as the "drag-along right").
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After one year from the date of the amended stockholders' agreement, a
stockholder may also transfer Shares:
o pursuant to a transfer which is exempt from the registration requirements
of the Securities Act; or
o if such stockholder is not a Controlling Stockholder, after offering the
Shares first to Volume Holdings and then to each of Blackstone and
Recreational Services in proportion to their respective holdings of
Shares.
Unless a stockholder transfers Shares pursuant to a public offering, Rule
144 under the Securities Act or the drag-along right, all transferees are
required to become bound by the terms of the amended stockholders' agreement.
Restrictions on Corporate Action. For so long as Recreational Services owns
at least 20% of the Shares, we may not take certain fundamental corporate
actions without the consent of each of Recreational Services and Blackstone,
including the amendment of the certificate of incorporation or by-laws of Volume
Holdings or the modification of any stock option, bonus or benefit plan.
Similarly, Volume Holdings may not enter into any transaction with Blackstone
(or its affiliates) without the consent of Recreational Services, except for:
o transactions provided for or contemplated by the Transactions;
o the payment of regular fees or expenses to its directors;
o transactions which are reasonable in the light of industry practice and
which are of a value not greater than $500,000 individually and
$1,000,000 in the aggregate in any one year;
o the payment of the monitoring fee discussed below; or
o transaction fees up to 1% of the value of a company being acquired by
Volume Holdings, as long as GE Capital also receives a proportional fee
based on Recreational Services' Share ownership relative to Blackstone's
Share ownership.
Annual Fees. The amended stockholders' agreement permits the payment of
annual monitoring fees by Volume Holdings of $250,000 to Blackstone and $167,000
to GE Capital.
Registration Rights. Blackstone has the right to demand registration of the
Shares by Volume Holdings under the Securities Act at any time, subject to a
maximum of three such registrations. Recreational Services has the right to
demand such registration on one occasion only, at any time on or after the third
anniversary of the date of the amended stockholders' agreement.
Financings. The amended stockholders' agreement also obliges Volume
Holdings to use its reasonable best efforts to consummate a financing by August
24, 1999. The proceeds of the financing are to be applied to pay related fees
and expenses, to repay debt of Volume Holdings and to repurchase Shares from the
holders in accordance with a formula set out in the exchange agreement. Volume
Holdings satisfied this requirement by consummation of the Financings.
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SECURITY OWNERSHIP
The Issuer is a wholly owned subsidiary of Volume Holdings. The following
table and accompanying footnotes set forth certain information concerning the
approximate beneficial ownership of all of the Volume Holdings common stock.
None of the directors or executive officers of the Issuer beneficially owns more
than 1% of Volume Holdings common stock. The Issuer has not made any equity plan
or options to purchase Volume Holdings common stock available to its directors
or executive officers. Except as indicated in the footnotes to this table, the
Issuer believes that the persons named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OWNED PERCENTAGE OWNED
- ------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
BCP Volume L.P.(1)
345 Park Avenue
New York, NY 10154 157.0 47.1%
BCP Offshore Volume L.P.(1)
345 Park Avenue
New York, NY 10154 40.7 12.3%
Recreational Services LLC(2)
201 High Ridge Road
Stamford, Connecticut 06927 120.8 36.4%
VSI Management Direct L.P.(3)
c/o Volume Services, Inc.
201 East Broad Street
Spartanburg, South Carolina 29306 14.1 4.2%
</TABLE>
(1) BCP Volume L.P. and BCP Offshore Volume L.P. are controlled by, and 85% of
their partnership interests are collectively owned by, BCP II, Blackstone
Family Investment Partnership II L.P. and Blackstone Offshore Capital
Partners II L.P. (collectively, the "Blackstone Partnerships"). Blackstone
Management Associates II L.P. is the general partner of each of the
Blackstone Partnerships and as such exercises voting and dispositive power
with respect to such shares. Messrs. Peter G. Petersen, Stephen A.
Schwarzman and Howard A. Lipson are members of BMA II, which has investment
and voting control over the shares held or controlled by the Blackstone
Partnerships. Each person disclaims beneficial ownership of such shares. The
address of each of them is 345 Park Avenue, New York, NY 10154. The
remaining 15% partnership interests of BCP Volume L.P. and BCP Offshore
Volume L.P. are owned by VSI Management II L.P. VSI Management II L.P. is a
limited partnership, the general partner of which is VSI Management I LLC.
The limited partners of VSI Management II L.P. are current and former
members of Volume Services' management team.
(2) Recreational Services is a limited liability company, the managing member of
which is GE Capital. Recreational Services has three classes of membership
interests: Class A interests, Class B interests and Class C interests. GE
Capital owns all of the Class A interests and Class B interests. The Class A
interests and Class B interests entitle the holders thereof to a
preferential dividend. Upon payment in full of this preferential dividend,
all distributions by Recreational Services will be made pro rata to the
holders of Class C interests. GE Capital owns 63.8% of the Class C interests
and certain current members of Service America's management team own the
remaining 36.2% of the Class C interests.
(3) VSI Management Direct L.P. is a limited partnership, the general partner of
which is VSI Management I LLC, a limited liability company. The managing
members of VSI Management I LLC are Kenneth R. Frick, our Vice President and
Chief Financial Officer, and BMA II. The limited partners of VSI Management
Direct L.P., who own 99% of its partnership interests, and the non-managing
members of VSI Management I LLC are current and former members of Volume
Services' management team. Current members of Volume Services' management
team own approximately 60.1% of the limited partnership interests of VSI
Management Direct L.P., and former members of Volume Services' management
team own the remaining approximately 39.9%. The general partner of VSI
Management Direct L.P. owns the remaining 1% of the partnership interests.
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DESCRIPTION OF THE SENIOR CREDIT FACILITIES
The following is a summary of the senior credit facilities. It is not
complete and is qualified by reference to all the provisions of the credit
agreement which governs the senior credit facilities. A copy of this credit
agreement is available upon request from the Issuer.
GENERAL
On December 3, 1998, the Issuer and Volume Holdings entered into a credit
agreement with:
o Goldman Sachs Credit Partners L.P., as joint lead arranger and
syndication agent;
o The Chase Manhattan Bank (referred to as "Chase"), as joint lead
arranger, swingline lender and administrative agent;
o Chase Manhattan Bank Delaware, as the fronting bank; and
o the other lenders.
The senior credit facilities governed by this credit agreement consisted of
a revolving credit facility in an aggregate principal amount of up to $75.0
million and term loans in an aggregate principal amount of $160.0 million. We
used $45.0 million of the net proceeds of the offering of the outstanding Notes
to repay all of term loan A and $5.0 million of term loan B. The following is a
summary of certain principal terms of the credit agreement. The summary is
qualified by reference to the actual terms of the agreement.
All obligations of the Issuer under the credit agreement are guaranteed by
Volume Holdings and by the Issuer's existing and future domestic wholly-owned
subsidiaries. Indebtedness under the senior credit facilities is secured by a
first priority security interest in:
o 65% of the issued and outstanding capital stock of each foreign
subsidiary of the Issuer and 100% of the issued and outstanding capital
stock of Volume Holdings, the Issuer and its domestic wholly-owned
subsidiaries; and
o substantially all other tangible and intangible assets owned or acquired
in the future by Volume Holdings, the Issuer and its domestic
wholly-owned subsidiaries.
REVOLVING CREDIT FACILITY
The revolving credit facility allows the Issuer to borrow up to $75.0
million. The revolving credit facility includes a sublimit of $35.0 million for
letters of credit and a sub-limit of $5.0 million for swingline loans. This
facility matures on December 3, 2004.
TERM LOANS
The senior credit facilities currently consist of a term loan in an
aggregate principal amount of $115.0. The term loan will mature on December 3,
2006. Installments of the term loans are due in consecutive quarterly
installments on each Installment Date, commencing March 30, 1999, with 25% of
the annual amounts due on each Installment Date. Annual payments for the term
loan total $1.2 million in each year from 1999 through 2005, and $106.7 million
in 2006.
USE OF PROCEEDS
Proceeds of the term loans were used to repay in full all outstanding
indebtedness of Volume Services and Service America under their existing credit
facilities and to pay fees and expenses related to the acquisition of Service
America and the credit agreement. The commitments under the revolving credit
facility are available to fund our capital investment requirements, working
capital, general corporate and other cash needs.
INTEREST RATES
The Issuer may elect that the revolving loans bear interest at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin or the
Adjusted LIBO Rate plus the Applicable Margin, and swingline loans will bear
interest based upon the Alternate Base Rate. The Issuer may elect that
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term loan B bears interest at a rate per annum equal to the Alternate Base Rate
plus 2.75% or the Adjusted LIBO Rate plus 3.75%.
The Alternate Base Rate refers to the higher of:
o Chase's prime rate of interest; and
o the federal funds rate plus 0.5%.
Interest on each Alternate Base Rate borrowing will be computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days when
determined by reference to the prime rate and over a year of 360 days at all
other times.
The Adjusted LIBO Rate refers to the rate (adjusted for statutory reserve
requirements for eurocurrency liabilities) at which eurodollar deposits for one,
two, three or six months (as the Issuer selects) are offered in the interbank
eurodollar market. Interest on each Eurodollar borrowing will be computed on the
basis of the actual number of days elapsed over a year of 360 days.
The Applicable Margin for any revolving loan that bears interest at a rate
determined by reference to the Alternate Base Rate and for swingline loans will
be 2.00% per annum until the date of delivery of financial statements for the
period ending June 29, 1999. The Applicable Margin for these loans after such
date will fluctuate, depending on a calculation of the Issuer's leverage ratio,
between 1.25% and 2.00%. The Applicable Margin for any revolving loan that bears
interest at a rate determined by reference to the Adjusted LIBO Rate will be
3.00% per annum until the date of delivery of financial statements for the
period ending June 29, 1999. The Applicable Margin for these loans after such
date will fluctuate, depending on the Issuer's leverage ratio, between 2.25% and
3.00%.
FEES
The Issuer has agreed to pay customary fees with respect to the senior
credit facilities, including:
o commitment fees on the unused portion of the revolving credit facility;
o letter of credit participation fees;
o fronting bank fees; and
o fees to the syndication agent and the administrative agent.
MANDATORY AND OPTIONAL PREPAYMENT
The term loans will be prepaid, subject to certain conditions and
exceptions, with
o 100% of the net cash proceeds received by Volume Holdings, the Issuer or
any of its subsidiaries from any loss, damage, destruction or
condemnation of, or any sale, transfer or other disposition to any person
of any assets;
o 100% of the net proceeds from the incurrence of any indebtedness by
Volume Holdings, the Issuer or any of its subsidiaries (other than the
Notes);
o 50% of the net proceeds of any sale or issuance of equity by Volume
Holdings; and
o 100% of cash flow in excess of certain expenditures, costs and payments.
These mandatory prepayments will be applied as follows:
o first, pro rata to reduce outstanding term loans (and after the term
loans have been paid in full, to prepay revolving loans), so long as, at
the election of holders of term loan B, the portion of proceeds otherwise
allocable to term loan B may be allocated to repay term loan A; and
o second, to the prepayment of the amounts outstanding under the revolving
credit facility.
Mandatory prepayments of amounts outstanding under the revolving credit
facility will not reduce the commitments of the lenders to make loans under the
revolving credit facility. The credit agreement provides that the Issuer may
voluntarily prepay loans in whole or in part without penalty, subject to minimum
prepayments.
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COVENANTS
The credit agreement contains covenants that, subject to certain
exceptions, restrict the ability of Volume Holdings, the Issuer and its
subsidiaries to, among other things:
o incur indebtedness and guarantees;
o incur liens;
o make loans and investments;
o engage in mergers, consolidations, acquisitions and asset sales;
o pay dividends and make distributions on, or repurchase or redeem, capital
stock;
o enter into transactions with affiliates and sale leaseback transactions;
o make changes in their line of business;
o amend certain material agreements; and
o sell capital stock of the Issuer's subsidiaries.
The Issuer will also be required to comply with certain financial
covenants, including a maximum net leverage ratio, an interest coverage ratio
and a minimum consolidated cash net worth test. The credit agreement contains
affirmative covenants, including entry by Volume Holdings, the Issuer and its
subsidiaries into interest rate protection agreements, and customary
representations and warranties.
EVENTS OF DEFAULT
The credit agreement contains certain customary events of default
including:
o non-payment of principal;
o non-payment of interest or fees (with a customary grace period);
o violation of covenants contained in the credit agreement;
o inaccuracy of representations and warranties in any material respect;
o cross-default to certain other indebtedness;
o bankruptcy and insolvency events;
o material judgments;
o violations of the Employee Retirement Income Security Act of 1974, as
amended;
o change of control transactions;
o failure to maintain security interests;
o invalidity or asserted invalidity of credit documents entered into
pursuant to the credit agreement, including guarantees; and
o failure of the obligations contained in the credit agreement and the
guarantees to be senior in right of payment to other indebtedness.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Issuer has entered into an exchange and registration rights agreement
with the initial purchasers of the outstanding Notes in which it agreed, under
certain circumstances, to file a registration statement relating to an offer to
exchange the outstanding Notes for Exchange Notes. The Issuer also agreed to use
its reasonable best efforts to cause such offer to be consummated within 210
days following the original issue of the outstanding Notes. The exchange Notes
will have terms substantially identical to the outstanding Notes except that the
exchange Notes will not contain terms with respect to transfer restrictions,
registration rights and liquidated damages for failure to observe certain
obligations in the exchange and registration rights agreement. The outstanding
Notes were issued on March 4, 1999.
Under the circumstances set forth below, the Issuer will use its reasonable
best efforts to cause the Commission to declare effective a shelf registration
statement with respect to the resale of the outstanding Notes and keep the
statement effective for up to two years after the effective date of the shelf
registration statement. These circumstances include:
o if any changes in law, Commission rules or regulations or applicable
interpretations thereof by the staff of the Commission do not permit the
Issuer to effect the exchange offer as contemplated by the exchange and
registration rights agreement;
o if any outstanding Notes validly tendered in the exchange offer are not
exchanged for exchange Notes within 210 days after the original issue of
the outstanding Notes;
o if any initial purchaser of the outstanding Notes so requests (but only
with respect to any outstanding Notes not eligible to be exchanged for
exchange Notes in the exchange offer); or
o if any holder of the outstanding Notes notifies the Issuer that it is not
permitted to participate in the exchange offer or would not receive fully
tradable exchange Notes pursuant to the exchange offer.
If the Issuer fails to comply with certain obligations under the exchange
and registration rights agreement, it will be required to pay liquidated damages
to holders of the outstanding Notes. Please read the section captioned "Exchange
and Registration Rights Agreement" for more details regarding the exchange and
registration rights agreement.
Each holder of outstanding Notes that wishes to exchange such outstanding
Notes for transferable exchange Notes in the exchange offer will be required to
make the following representations:
o any exchange Notes will be acquired in the ordinary course of its
business;
o such holder has no arrangement with any person to participate in the
distribution of the exchange Notes; and
o such holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Issuer or if it is an affiliate, that it will
comply with applicable registration and prospectus delivery requirements
of the Securities Act.
RESALE OF EXCHANGE NOTES
Based on interpretations of the Commission staff set forth in no action
letters issued to unrelated third parties, the Issuer believes that exchange
Notes issued under the exchange offer in exchange for outstanding Notes may be
offered for resale, resold and otherwise transferred by any exchange Note
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holder without compliance with the registration and prospectus delivery
provisions of the Securities Act, if:
o such holder is not an "affiliate" of the Issuer within the meaning of
Rule 405 under the Securities Act;
o such exchange Notes are acquired in the ordinary course of the holder's
business; and
o the holder does not intend to participate in the distribution of such
exchange Notes.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange Notes:
o cannot rely on the position of the staff of the Commission enunciated in
"Exxon Capital Holdings Corporation" or similar interpretive letters; and
o must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
This prospectus may be used for an offer to resell, for the resale or for
other retransfer of exchange Notes only as specifically set forth in this
prospectus. With regard to broker-dealers, only broker-dealers that acquired the
outstanding Notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives exchange Notes for its own account in exchange for outstanding Notes,
where such outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange Notes.
Please read the section captioned "Plan of Distribution" for more details
regarding the transfer of exchange Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, the Issuer will accept for exchange any
outstanding Notes properly tendered and not withdrawn prior to the expiration
date. The Issuer will issue $1,000 principal amount of exchange Notes in
exchange for each $1,000 principal amount of outstanding Notes surrendered under
the exchange offer. Outstanding Notes may be tendered only in integral multiples
of $1,000.
The form and terms of the exchange Notes will be substantially identical to
the form and terms of the outstanding Notes except the exchange Notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any liquidated damages upon failure of the
Issuer to fulfill its obligations under the exchange and registration rights
agreement to file, and cause to be effective, a registration statement. The
exchange Notes will evidence the same debt as the outstanding Notes. The
exchange Notes will be issued under and entitled to the benefits of the same
indenture that authorized the issuance of the outstanding Notes. Consequently,
both series will be treated as a single class of debt securities under that
indenture. For a description of the indenture, see "Description of the Notes"
below.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding Notes being tendered for exchange.
As of the date of this prospectus, $100 million aggregate principal amount
of the outstanding Notes are outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of outstanding Notes. There
will be no fixed record date for determining registered holders of outstanding
Notes entitled to participate in the exchange offer.
The Issuer intends to conduct the exchange offer in accordance with the
provisions of the exchange and registration rights agreement, the applicable
requirements of the Securities Act and the Securities Exchange Act of 1934 and
the rules and regulations of the Commission. Outstanding Notes that are not
tendered for exchange in the exchange offer will remain outstanding and continue
to
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accrue interest and will be entitled to the rights and benefits such holders
have under the indenture relating to the outstanding Notes.
The Issuer will be deemed to have accepted for exchange properly tendered
outstanding Notes when it has given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange Notes from the Issuer and
delivering exchange Notes to such holders. Subject to the terms of the exchange
and registration rights agreement, the Issuer expressly reserves the right to
amend or terminate the exchange offer, and not to accept for exchange any
outstanding Notes not previously accepted for exchange, upon the occurrence of
any of the conditions specified below under the caption "--Certain Conditions to
the Exchange Offer."
Holders who tender outstanding Notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding Notes. The Issuer will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the exchange offer.
It is important that you read the section labeled "--Fees and Expenses" below
for more details regarding fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless in its sole discretion, the Issuer extends it.
In order to extend the exchange offer, the Issuer will notify the exchange
agent orally or in writing of any extension. The Issuer will notify the
registered holders of outstanding Notes of the extension no later than 9:00
a.m., New York City time, on the business day after the previously scheduled
expiration date.
The Issuer reserves the right, in its sole discretion:
o to delay accepting for exchange any outstanding Notes;
o to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding Notes not previously accepted if any of the
conditions set forth below under "--Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
o subject to the terms of the exchange and registration rights agreement,
to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding Notes. If the Issuer amends the exchange offer
in a manner that it determines to constitute a material change, it will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of outstanding Notes of such amendment.
Without limiting the manner in which it may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, the Issuer shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
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CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, the Issuer will not be
required to accept for exchange, or exchange any exchange Notes for, any
outstanding Notes, and it may terminate the exchange offer as provided in this
prospectus before accepting any outstanding Notes for exchange if in its
reasonable judgment:
o the exchange Notes to be received will not be tradable by the holder,
without restriction under the Securities Act, the Securities Exchange Act
of 1934 and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States;
o the exchange offer, or the making of any exchange by a holder of
outstanding Notes, would violate applicable law or any applicable
interpretation of the staff of the Commission; or
o any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in the Issuer's judgment, would reasonably be expected to
impair the ability of the Issuer to proceed with the exchange offer.
In addition, the Issuer will not be obligated to accept for exchange the
outstanding Notes of any holder that has not made to the Issuer:
o the representations described under "--Purpose and Effect of the Exchange
Offer," "--Procedures for Tendering" and "Plan of Distribution"; and
o such other representations as may be reasonably necessary under
applicable Commission rules, regulations or interpretations to make
available to it an appropriate form for registration of the exchange
Notes under the Securities Act.
The Issuer expressly reserves the right, at any time or at various times,
to extend the period of time during which the exchange offer is open.
Consequently, the Issuer may delay acceptance of any outstanding Notes by giving
oral or written notice of such extension to their holders. During any such
extensions, all outstanding Notes previously tendered will remain subject to the
exchange offer, and the Issuer may accept them for exchange. The Issuer will
return any outstanding Notes that it does not accept for exchange for any reason
without expense to their tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
The Issuer expressly reserves the right to amend or terminate the exchange
offer, and to reject for exchange any outstanding Notes not previously accepted
for exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. The Issuer will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding Notes
as promptly as practicable. In the case of any extension, such notice will be
issued no later than 9:00 a.m., New York City time, on the business day after
the previously scheduled expiration date.
These conditions are for the sole benefit of the Issuer and the Issuer may
assert them regardless of the circumstances that may give rise to them or waive
them in whole or in part at any or at various times in its sole discretion. If
the Issuer fails at any time to exercise any of the foregoing rights, this
failure will not constitute a waiver of such right. Each such right will be
deemed an ongoing right that the Issuer may assert at any time or at various
times.
In addition, the Issuer will not accept for exchange any outstanding Notes
tendered, and will not issue exchange Notes in exchange for any such outstanding
Notes, if at such time any stop order will be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of
1939.
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PROCEDURES FOR TENDERING
Only a holder of outstanding Notes may tender such outstanding Notes in the
exchange offer. To tender in the exchange offer, a holder must:
o complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile to the exchange agent prior to
the expiration date; or
o comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
o the exchange agent must receive outstanding Notes along with the letter
of transmittal; or
o the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding Notes into the
exchange agent's account at DTC according to the procedures for
book-entry transfer described below or a properly transmitted agent's
message; or
o the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between such holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
The method of delivery of outstanding Notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, the Issuer recommends that holders use
an overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding Notes to
the Issuer. Holders may request their respective brokers, dealers, commercial
banks, trust companies or other nominees to effect the above transactions for
them.
Any beneficial owner whose outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If such beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the letter of transmittal
and delivering its outstanding Notes; either:
o make appropriate arrangements to register ownership of the outstanding
Notes in such owner's name; or
o obtain a properly completed bond power from the registered holder of
outstanding Notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Exchange Act, unless the outstanding Notes tendered pursuant thereto
are tendered:
o by a registered holder who has not competed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
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o for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding Notes listed on the outstanding Notes, such
outstanding Notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding Notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by the
Issuer, they should also submit evidence satisfactory to the Issuer of their
authority to deliver the letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding Notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, to the effect that:
o DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding Notes that
are the subject of such book-entry confirmation;
o such participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery); and
o the agreement may be enforced against such participant.
The Issuer will determine in its sole discretion all questions as to the
validity, form, eligibility (including time of receipt), acceptance of tendered
outstanding Notes and withdrawal of tendered outstanding Notes. The Issuer's
determination will be final and binding. The Issuer reserves the absolute right
to reject any outstanding Notes not properly tendered or any outstanding Notes
the acceptance of which would, in the opinion of the Issuer's counsel, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular outstanding Notes. The
Issuer's interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding Notes must be cured within such time as
the Issuer shall determine. Although the Issuer intends to notify holders of
defects or irregularities with respect to tenders of outstanding Notes, neither
the Issuer, the exchange agent nor any other person will incur any liability for
failure to give such notification. Tenders of outstanding Notes will not be
deemed made until such defects or irregularities have been cured or waived. Any
outstanding Notes received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned to the exchange agent without cost to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In all cases, the Issuer will issue exchange Notes for outstanding Notes
that it has accepted for exchange under the exchange offer only after the
exchange agent timely receives:
o outstanding Notes or a timely book-entry confirmation of such outstanding
Notes into the exchange agent's account at DTC; and
o a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
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By signing the letter of transmittal, each tendering holder of outstanding
Notes will represent to the Issuer that, among other things:
o any exchange Notes that the holder receives will be acquired in the
ordinary course of its business;
o the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange Notes;
o if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange Notes;
o if the holder is a broker-dealer that will receive exchange Notes for its
own account in exchange for outstanding Notes that were acquired as a
result of market-making activities, that it will deliver a prospectus, as
required by law, in connection with any resale of such exchange Notes;
and
o the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Issuer or, if the holder is an affiliate, it will
comply with any applicable registration and prospectus delivery
requirements of the Securities Act.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding Notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus; and any financial institution participating
in DTC's system may make book-entry delivery of outstanding Notes by causing DTC
to transfer such outstanding Notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. Holders of outstanding Notes who
are unable to deliver confirmation of the book-entry tender of their outstanding
Notes into the exchange agent's account at DTC or all other documents required
by the letter of transmittal to the exchange agent on or prior to the expiration
date must tender their outstanding Notes according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding Notes but whose outstanding
Notes are not immediately available or who cannot deliver their outstanding
Notes, the letter of transmittal or any other required documents to the exchange
agent or comply with the applicable procedures under DTC's Automated Tender
Offer Program prior to the expiration date may tender if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed notice
of guaranteed delivery (by facsimile transmission, mail or hand delivery)
or a properly transmitted agent's message and notice of guaranteed
delivery:
o setting forth the name and address of the holder, the registered
number(s) of such outstanding Notes and the principal amount of
outstanding Notes tendered;
o stating that the tender is being made thereby; and
o guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the outstanding Notes or a
book-entry confirmation, and any other documents required by the
letter of transmittal will be deposited by the eligible institution
with the exchange agent; and
o the exchange agent receives such properly completed and executed letter
of transmittal (or facsimile thereof), as well as all tendered
outstanding Notes in proper form for transfer or a
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book-entry confirmation, and all other documents required by the letter
of transmittal, within three (3) New York State Exchange trading days
after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
Notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
o the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one
of the addresses set forth below under "--Exchange Agent", or
o holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any such notice of withdrawal must:
o specify the name of the person who tendered the outstanding Notes to be
withdrawn
o identify the outstanding Notes to be withdrawn (including the principal
amount of such outstanding Notes); and
o where certificates for outstanding Notes have been transmitted, specify
the name in which such outstanding Notes were registered, if different
from that of the withdrawing holder.
If certificates for outstanding Notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
o the serial numbers of the particular certificates to be withdrawn; and
o a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution.
If outstanding Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding Notes and otherwise comply with the procedures of such facility. The
Issuer will determine all questions as to the validity, form and eligibility
(including time of receipt) of such notices, and our determination shall be
final and binding on all parties. The Issuer will deem any outstanding Notes so
withdrawn not to have validity tendered for exchange for purposes of the
exchange offer. Any outstanding Notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder (or, in the case of outstanding Notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the procedures
described above, such outstanding Notes will be credited to an account
maintained with DTC for outstanding Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.
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EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as exchange
agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent addressed as follows:
<TABLE>
<S> <C>
For Delivery by Registered or Certified Mail: For Overnight Delivery Only or by Hand:
Norwest Bank Minnesota, NA Norwest Bank Minnesota, NA
Sixth Street and Marquette Avenue 608 Second Avenue
Minneapolis, MN 55479-0069 NorStar East Building
Attention: Corporate Trust Department 12th Floor
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
</TABLE>
By Facsimile Transmission (for eligible institutions only):
(612) 667-9825
Attention: Corporate Trust Department
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Issuer will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, the Issuer may make additional
solicitations by telegraph, telephone or in person by its officers and regular
employees and those of our affiliates.
The Issuer has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers or others
soliciting acceptances of the exchange offer. The Issuer will, however, pay the
exchange agent reasonable and customary fees for its services and reimburse it
for its related reasonable out-of-pocket expenses.
The Issuer will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
$600,000. They include:
o Commission registration fees;
o fees and expenses of the exchange agent and trustee;
o accounting and legal fees and printing costs; and
o related fees and expenses.
TRANSFER TAXES
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of outstanding Notes under the exchange offer. The tendering holder, however,
will be required to pay any transfer taxes (whether imposed on the registered
holder or any other person) if:
o certificates representing outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding Notes tendered;
o tendered outstanding Notes are registered in the name of any person other
than the person signing the letter of transmittal; or
o a transfer tax is imposed for any reason other than the exchange of
outstanding Notes under the exchange offer.
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If satisfactory evidence of payment of such taxes is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed to that
tendering holder.
Holders who tender their outstanding Notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct the Issuer to
register exchange Notes in the name of, or request that outstanding Notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be required to pay any applicable
transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding Notes who do not exchange their outstanding Notes
for exchange Notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding Notes:
o as set forth in the legend printed on the Notes as a consequence of the
issuance of the outstanding Notes pursuant to the exemptions from, or in
transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws; and
o otherwise as set forth in the offering memorandum distributed in
connection with the private offering of the outstanding Notes.
In general, you may not offer or sell the outstanding Notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the exchange and registration rights agreement, the Issuer
does not intend to register resales of the outstanding Notes under the
Securities Act. Based on interpretations of the Commission staff, exchange Notes
issued pursuant to the exchange offer may be offered for resale, resold or
otherwise transferred by their holders (other than any such holder that is our
"affiliate" within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holders acquired the exchange Notes in the
ordinary course of the holders' business and the holders have no arrangement or
understanding with respect to the distribution of the exchange Notes to be
acquired in the exchange offer. Any holder who tenders in the exchange offer for
the purpose of participating in a distribution of the exchange Notes:
o could not rely on the applicable interpretations of the Commission; and
o must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
The Issuer will record the exchange Notes in its accounting records at the
same carrying value as the outstanding Notes, which is the aggregate principal
amount, as reflected in our accounting records on the date of exchange.
Accordingly, the Issuer will not recognize any gain or loss for accounting
purposes in connection with the exchange offer. The Issuer will record the
expenses of the exchange offer as incurred.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
The Issuer may in the future seek to acquire untendered outstanding Notes
in open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plans to acquire any outstanding
Notes that are not tendered in the exchange offer or to file a registration
statement to permit resales of any untendered outstanding Notes.
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DESCRIPTION OF THE NOTES
GENERAL
The outstanding Notes were issued and the exchange Notes will be issued
under an indenture, dated as of March 4, 1999, among the Issuer, the Guarantors
and Norwest Bank Minnesota, National Association as trustee, a copy of which is
filed as an exhibit to the Registration Statement of which this prospectus is a
part.
The following summary of certain provisions of the indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
TIA. The definition of certain terms used in this summary are set forth below in
the section "--Certain Definitions." For the purposes of this summary, "Volume
Holdings" refers only to Volume Services America Holdings, Inc. and not any of
its subsidiaries.
The indenture provides for the issuance of up to $100.0 million aggregate
principal amount of additional Notes having identical terms and conditions to
the Notes offered hereby (referred to as the "Additional Notes"), subject to
compliance with the covenants contained in the indenture. Any Additional Notes
will be part of the same issue as the outstanding Notes and will vote on all
matters with the outstanding Notes.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Issuer in the Borough of Manhattan, The City of New York (which initially shall
be the office of the Trustee maintained for such purpose at The Depository Trust
Company, 55 Water Street, New York, NY 10041), except that, at the option of the
Issuer, payment of interest may be made by check mailed to the Holders at their
registered addresses.
The outstanding Notes were issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of
Notes, but the Issuer may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
TERMS OF THE NOTES
The outstanding Notes are and the exchange Notes will be unsecured senior
subordinated obligations of the Issuer and will mature on March 1, 2009. Each
Note bears interest at a rate per annum shown on the front cover of this
prospectus from March 4, 1999 or from the most recent date to which interest has
been paid or provided for, payable semiannually to Holders of record at the
close of business on the February 15 or August 15 immediately preceding the
interest payment date on March 1, and September 1, of each year, commencing
September 1, 1999.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuer prior to March 1, 2004. Thereafter, the
Notes will be redeemable, at the Issuer's option, in whole or in part upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
as a percentage of principal amount), plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on March 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ---------------------------------------------------------------------- ----------
<S> <C>
2004.................................................................. 105.625%
2005.................................................................. 103.750
2006.................................................................. 101.875
2007 and thereafter................................................... 100.000
</TABLE>
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In addition, at any time and from time to time prior to March 1, 2002, the
Issuer may redeem in the aggregate up to 35% of the original aggregate principal
amount of the Notes (calculated after giving effect to any issuance of
Additional Notes) with the net cash proceeds of one or more Equity Offerings:
o by the Issuer or;
o by Volume Holdings to the extent the net cash proceeds thereof are
contributed to the Issuer or used to purchase from the Issuer Capital
Stock (other than Disqualified Stock) of the Issuer,
at a redemption price (expressed as a percentage of principal amount thereof) of
111.25% plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Notes (calculated after giving effect to any issuance of Additional
Notes) must remain outstanding after each such redemption and provided further
that such redemption shall occur within 90 days after the date on which any such
Equity Offering is consummated upon not less than 30 nor more than 60 days'
notice mailed to each holder of Notes being redeemed and otherwise in accordance
with the procedures set forth in the indenture.
At any time on or prior to March 1, 2004, the Notes may be redeemed as a
whole but not in part at the option of the Issuer upon the occurrence of a
Change of Control (as defined), upon not less than 30 or more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued but
unpaid interest and liquidated damages, if any, to, the redemption date, subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date.
"Applicable Premium" means with respect to a Note at any redemption date,
the greater of:
(i) 1.0% of the principal amount of such Note or;
(ii) the excess of
(A) the present value of
(1) the redemption price of such Note at March 1, 2004 (such
redemption price being set forth in the tables above); plus
(2) all required interest payments due on such Note through
March 1, 2004, computed using a discount rate equal to the Treasury
Rate plus 50 basis points, over
(B) the then-outstanding principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to March 1, 2004; provided, however, that if the
period from the redemption date to March 1, 2004 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the redemption date to March 1, 2004 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
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SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which such Notes are
listed, or if such Notes are not so listed, on a pro rata basis, by lot or by
such other method as the Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); provided that no Notes
of $1,000 or less shall be redeemed in part. If any Note is to be redeemed in
part only, the notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption so long as the Issuer has deposited with the Paying Agent
funds sufficient to pay the principal of, plus accrued and unpaid interest and
liquidated damages (if any) on, the Notes to be redeemed.
RANKING
The indebtedness evidenced by the outstanding Notes is and the exchange
Notes will be unsecured senior subordinated indebtedness of the Issuer, will be
subordinated in right of payment, as set forth in the indenture, to all existing
and future Senior Indebtedness of the Issuer, will rank pari passu in right of
payment with all existing and future Pari Passu Indebtedness of the Issuer and
will be senior in right of payment to all existing and future Subordinated
Indebtedness of the Issuer. The outstanding Notes are and the exchange Notes
will be also effectively subordinated to any Secured Indebtedness of the Issuer
to the extent of the value of the assets securing such Indebtedness. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "--Defeasance" below is not subordinated to
any Senior Indebtedness or subject to the restrictions described herein.
The indebtedness evidenced by the Guarantees is unsecured senior
subordinated indebtedness of the applicable Guarantor, is subordinated in right
of payment, as set forth in the indenture, to all existing and future Senior
Indebtedness of such Guarantor, ranks pari passu in right of payment with all
existing and future Pari Passu Indebtedness of such Guarantor and is senior in
right of payment to all existing and future Subordinated Indebtedness of such
Guarantor. The Guarantees are also effectively subordinated to any Secured
Indebtedness of the applicable Guarantor to the extent of the value of the
assets securing such Indebtedness.
As of March 30, 1999:
(i) the Issuer had $119.2 million aggregate principal amount of Senior
Indebtedness outstanding (excluding unused commitments), all of which was
Secured Indebtedness;
(ii) the Issuer had no Pari Passu Indebtedness outstanding other than
the Notes and no indebtedness that is subordinate or junior in right of
payment to the Notes;
(iii) the Guarantors had $0.8 million aggregate principal amount of
Senior Indebtedness outstanding (exclusive of guarantees of the senior
credit facilities);
(iv) the Guarantors had no Pari Passu Indebtedness outstanding
(exclusive of the Guarantees) and no indebtedness that is subordinate or
junior in right of payment to the Guarantees and total liabilities
(excluding indebtedness and liabilities owed to Volume Holdings, the Issuer
or any of its Subsidiaries) of $274.4 million; and
(v) the Non-Guarantor Subsidiaries had total liabilities (excluding
liabilities owed to Volume Holdings, the Issuer or any of its Subsidiaries)
of $1.2 million.
Although the indenture contains limitations on the amount of additional
Indebtedness which the Issuer, the Guarantors and the Non-Guarantor Subsidiaries
may Incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be
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Senior Indebtedness. See "--Certain Covenants--Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock" below.
As a holding company, the Issuer has no operations and, therefore, is
dependent on the cash flow of its subsidiaries and other entities to meet its
own obligations, including the payment of interest and principal obligations on
the Notes when due. As of March 30, 1999, on a pro forma basis the total
liabilities of the Issuer's subsidiaries were approximately $275.6 million,
including trade payables. Although the indenture limits the Incurrence of
Indebtedness by and the issuance of Preferred Stock of certain of the Issuer's
subsidiaries, such limitation is subject to a number of significant
qualifications.
"Senior Indebtedness" with respect to the Issuer or any Guarantor means all
Indebtedness of the Issuer or such Guarantor, including interest thereon
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer or any Subsidiary of the
Issuer whether or not a claim for post-filing interest is allowed in such
proceeding) and other amounts (including fees, expenses, reimbursement
obligations under letters of credit and indemnities) owing in respect thereof,
whether outstanding on the Issue Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are not superior in right of
payment to the Notes or such Guarantor's Guarantee, as applicable; provided,
however, that Senior Indebtedness shall not include, as applicable,
(i) any obligation of the Issuer to any Subsidiary of the Issuer, of
such Guarantor to the Issuer or any other Subsidiary of the Issuer;
(ii) any liability for Federal, state, local or other taxes owed or
owing by the Issuer or such Guarantor;
(iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(iv) any Indebtedness or obligation of the Issuer or such Guarantor
which is subordinate or junior in any respect to any other Indebtedness or
obligation of the Issuer or such Guarantor, as applicable, including any
Pari Passu Indebtedness and any Subordinated Indebtedness;
(v) any obligations with respect to any Capital Stock; or
(vi) any Indebtedness Incurred in violation of the indenture.
Only Indebtedness of the Issuer or a Guarantor that is Senior Indebtedness
will rank senior to the Notes or the relevant Guarantee in accordance with the
provisions of the indenture. The Notes and each Guarantee in all respects rank
pari passu with all other Pari Passu Indebtedness of the Issuer and the relevant
Guarantor, respectively.
The Issuer may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"--Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes (except that Holders may receive and retain (a) Permitted Junior
Securities and (b) payments made from the trust described under "--Defeasance"
below) (collectively, "pay the Notes") if:
(i) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Indebtedness occurs and is continuing or
any other amount owing in respect of any Designated Senior Indebtedness is
not paid when due; or
(ii) any other default on Designated Senior Indebtedness occurs and
the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms,
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Indebtedness has been
paid in full. However, the Issuer may pay the Notes without regard to the
foregoing if the Issuer and the Trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or
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(ii) of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Issuer may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Issuer) of
written notice (a "Blockage Notice") of such default from the Representative of
the Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated:
(i) by written notice to the Trustee and the Issuer from the Person or
Persons who gave such Blockage Notice;
(ii) by repayment in full of such Designated Senior Indebtedness; or
(iii) because the default giving rise to such Blockage Notice is no
longer continuing).
Notwithstanding the provisions described in the immediately preceding
sentence (but subject to the provisions contained in the first sentence of this
paragraph and in the succeeding paragraph), unless the holders of such
Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Issuer may
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period. However, if any Blockage Notice within such
360-day period is given by or on behalf of any holders of Designated Senior
Indebtedness other than the Bank Indebtedness, the Representative of the Bank
Indebtedness may give one additional Blockage Notice within such period. In no
event, however, may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section, no default or event of
default that existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
Upon any payment or distribution of the assets of the Issuer upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Issuer or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of the Senior Indebtedness before the
Noteholders are entitled to receive any payment and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled but for the subordination provisions of the indenture will be
made to holders of the Senior Indebtedness as their interests may appear (except
that Holders of Notes may receive and retain (i) Permitted Junior Securities;
and (ii) payments made from the trust described under "--Defeasance" so long as,
on the date or dates the respective amounts were paid into the trust, such
payments were made with respect to the Notes without violating the subordination
provisions described herein). If a distribution is made to Noteholders that due
to the subordination provisions of the indenture should not have been made to
them, such Noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Issuer or the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representative) of the acceleration. If any Designated
Senior Indebtedness is outstanding, the Issuer may not pay the Notes until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Notes only if the subordination provisions of the indenture otherwise permit
payment at that time.
By reason of such subordination provisions contained in the indenture, in
the event of insolvency, creditors of the Issuer who are holders of Senior
Indebtedness may recover more, ratably, than the
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Noteholders, and creditors of the Issuer who are not holders of Senior
Indebtedness or of Pari Passu Indebtedness (including the Notes) may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the holders of Pari Passu Indebtedness.
The indenture contains substantially similar subordination provisions
relating to each Guarantor's obligations under its Guarantee.
GUARANTEES
Volume Holdings, each of the Issuer's direct and indirect Wholly Owned
Subsidiaries organized under the laws of any state of the United States of
America on the Issue Date and certain future Subsidiaries of the Issuer (as
described below), as primary obligors and not merely as sureties, have jointly
and severally irrevocably and unconditionally guaranteed on an unsecured senior
subordinated basis the performance and punctual payment when due, whether at
Stated Maturity, by acceleration or otherwise, of all obligations of the Issuer
under the indenture and the Notes, whether for payment of principal of, premium,
if any, or interest or liquidated damages on the Notes, expenses,
indemnification or otherwise (all such obligations guaranteed by such Guarantors
being herein called the "Guaranteed Obligations"). Such Guarantors have agreed
to pay, in addition to the amount stated above, any and all expenses (including
reasonable counsel fees and expenses) Incurred by the Trustee or the Holders in
enforcing any rights under the Guarantees. Each Guarantee is limited in amount
to an amount not to exceed the maximum amount that can be guaranteed by the
applicable Guarantor without rendering the Guarantee, as it relates to such
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
Since the Issue Date, the Issuer has and will continue to cause each Restricted
Subsidiary organized under the laws of the United States of America or any state
or territory thereof that Incurs Indebtedness or issues shares of Disqualified
Stock or Preferred Stock to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Restricted Subsidiary will guarantee payment of
the Notes. See "--Certain Covenants--Future Guarantors" below.
Each Guarantee is a continuing guarantee and shall
(i) remain in full force and effect until payment in full of all the
Guaranteed Obligations;
(ii) be binding upon each such Guarantor and its successors; and
(iii) inure to the benefit of and be enforceable by the Trustee, the
Holders and their successors, transferees and assigns.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each, a "Change of
Control"), each Holder will have the right to require the Issuer to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all the assets of the Issuer and its
Subsidiaries, taken as a whole, to a Person other than the Permitted
Holders;
(ii)(A) the Issuer becomes aware (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) of the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of
Rule 13d-5(b)(1) under the Exchange Act), other than the Permitted Holders,
in a single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act, or any successor provision), of 35% or more of the total voting power
of the Voting Stock of the Issuer or Volume Holdings; and
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(B) the Permitted Holders beneficially own (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Issuer or Volume Holdings, as
applicable, than such other Person or group and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any one year period, individuals who at the beginning of
such period constituted the board of directors of the Issuer or Volume
Holdings (together with any new directors whose election by such board of
directors or whose nomination for election by the shareholders of the
Issuer or Volume Holdings, as applicable, was approved by a vote of a
majority of the directors of the Issuer or Volume Holdings, as applicable,
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of the Issuer or Volume Holdings, as applicable, then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control, the Issuer shall:
(i) repay in full all Bank Indebtedness or offer to repay in full all
Bank Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer; or
(ii) obtain the requisite consent under the agreements governing the
Bank Indebtedness to permit the repurchase of the Notes as provided for in
the immediately following paragraph.
Within 30 days following any Change of Control, unless the Issuer has
exercised its right to redeem the Notes as described under "--Optional
Redemption", the Issuer shall mail a notice (a "Change of Control Offer") to
each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Issuer to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this
covenant, that a Holder must follow in order to have its Notes purchased.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer or if the Issuer exercises its option to redeem the Notes upon a
Change of Control as described under "--Optional Redemption."
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Issuer will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
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The Change of Control purchase feature is a result of negotiations between
the Issuer and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Issuer would decide to do so in the future. Subject to the limitations
discussed below, the Issuer could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Issuer's capital structure or credit ratings.
The occurrence of events which would constitute a Change of Control would
constitute a default under the Credit Agreement. Future Senior Indebtedness of
the Issuer may contain prohibitions on certain events which would constitute a
Change of Control or require such Senior Indebtedness to be repurchased upon a
Change of Control. Moreover, the exercise by the Holders of their right to
require the Issuer to repurchase the Notes could cause a default under such
Senior Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Issuer. Finally, the Issuer's ability
to pay cash to the Holders upon a repurchase may be limited by the Issuer's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" the assets of the Issuer and its
Subsidiaries taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Issuer to repurchase such Notes as a result of a
sale, lease or transfer of less than all of the assets of the Issuer and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
CERTAIN COVENANTS
The indenture contains covenants including, among others, the following:
Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock. The indenture provides that
(i) the Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) or issue any shares of Disqualified Stock; and
(ii) the Issuer will not permit any of its Restricted Subsidiaries to
issue any shares of Preferred Stock;
provided, however, that the Issuer and any Guarantor may Incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and any
Guarantor may issue shares of Preferred Stock if the Fixed Charge Coverage Ratio
of the Issuer for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is Incurred or such Disqualified Stock or
Preferred Stock is issued would have been at least 2.00 to 1.00 determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been Incurred, or the
Disqualified Stock or Preferred Stock had been issued, as the case may be, and
the application of proceeds therefrom had occurred at the beginning of such
four-quarter period.
The foregoing limitations will not apply to:
(a) the Incurrence by the Issuer or its Restricted Subsidiaries of
Indebtedness under the Credit Agreement and the issuance and creation of
letters of credit and bankers' acceptances thereunder (with letters of
credit and bankers' acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount of
$230.0 million outstanding at any one time;
(b) the Incurrence by the Issuer and the Guarantors of Indebtedness
represented by the Notes (not including any Additional Notes) and the
Guarantees, as applicable;
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(c) Indebtedness existing on the Issue Date (other than Indebtedness
described in clauses (a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations) Incurred by
the Issuer or any of its Restricted Subsidiaries, to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then outstanding and
Incurred pursuant to this clause (d) and all Refinancing Indebtedness (as
defined below) Incurred to refund, refinance or replace any Indebtedness
Incurred pursuant to this clause (d), does not exceed the greater of 7.5%
of Total Assets at the time of Incurrence or $10.0 million;
(e) Indebtedness Incurred by the Issuer or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims,
health, disability or other employee benefits or property, casualty or
liability insurance or self-insurance, or with respect to agreements to
provide services, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit, such obligations are reimbursed
within 30 days following such drawing;
(f) Indebtedness arising from agreements of the Issuer or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, Incurred in connection with the
disposition of any business, assets or a Subsidiary of the Issuer in
accordance with the terms of the indenture, other than guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such
acquisition;
(g) Indebtedness of the Issuer to a Restricted Subsidiary of the
Issuer; provided that any such Indebtedness is subordinated in right of
payment to the Notes; provided further that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Issuer
or any other subsequent transfer of any such Indebtedness (except to the
Issuer or another Restricted Subsidiary) shall be deemed, in each case to
be an Incurrence of such Indebtedness;
(h) shares of Preferred Stock of a Restricted Subsidiary issued to the
Issuer or another Restricted Subsidiary of the Issuer; provided that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such shares of Preferred
Stock (except to the Issuer or another Restricted Subsidiary of the Issuer)
shall be deemed, in each case, to be an issuance of shares of Preferred
Stock;
(i) Indebtedness of a Restricted Subsidiary to the Issuer or another
Restricted Subsidiary of the Issuer; provided that:
(1) any such Indebtedness is made pursuant to an intercompany note;
and
(2) if a Guarantor incurs such Indebtedness to a Restricted
Subsidiary that is not a Guarantor such Indebtedness is subordinated in
right of payment to the Guarantee of such Guarantor; provided further
that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any Restricted Subsidiary lending such
Indebtedness ceasing to be a Restricted Subsidiary or any other
subsequent transfer of any such Indebtedness (except to the Issuer or
another Restricted Subsidiary of the Issuer) shall be deemed, in each
case, to be an Incurrence of such Indebtedness;
(j) Hedging Obligations that are Incurred in the ordinary course of
business
(1) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the
indenture to be outstanding;
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(2) for the purpose of fixing or hedging currency exchange rate
risk with respect to any currency exchanges; or
(3) for the purpose of fixing or hedging commodity price risk with
respect to any commodity purchases;
(k) obligations in respect of performance, bid and surety bonds and
completion guarantees provided by the Issuer or any Restricted Subsidiary
in the ordinary course of business;
(l) Indebtedness or Disqualified Stock of the Issuer and any
Restricted Subsidiary not otherwise permitted hereunder in an aggregate
principal amount, which when aggregated with the principal amount or
liquidation preference of all other Indebtedness and Disqualified Stock
then outstanding and Incurred pursuant to this clause (l), does not exceed
$25.0 million at any one time outstanding; provided, however, that
Indebtedness of Foreign Subsidiaries, which when aggregated with the
principal amount of all other Indebtedness of Foreign Subsidiaries then
outstanding and Incurred pursuant to this clause (l), does not exceed $10.0
million (or the equivalent thereof in any other currency) at any one time
outstanding (it being understood that any Indebtedness Incurred under this
clause (l) shall cease to be deemed Incurred or outstanding for purposes of
this clause (l) but shall be deemed to be Incurred for purposes of the
first paragraph of this covenant from and after the first date on which the
Issuer could have Incurred such Indebtedness under the first paragraph of
this covenant without reliance upon this clause (l));
(m) any guarantee by the Issuer or a Guarantor of Indebtedness or
other obligations of the Issuer or any of its Restricted Subsidiaries so
long as the Incurrence of such Indebtedness Incurred by the Issuer or such
Restricted Subsidiary is permitted under the terms of the indenture;
provided that if such Indebtedness is by its express terms subordinated in
right of payment to the Notes or the Guarantee of such Restricted
Subsidiary, as applicable, any such guarantee of such Guarantor with
respect to such Indebtedness shall be subordinated in right of payment to
such Guarantor's Guarantee with respect to the Notes substantially to the
same extent as such Indebtedness is subordinated to the Notes or the
Guarantee of such Restricted Subsidiary, as applicable;
(n) the Incurrence by the Issuer or any of its Restricted Subsidiaries
of Indebtedness which serves to refund or refinance any Indebtedness
Incurred as permitted under the first paragraph of this covenant and
clauses (b) and (c) above, or any Indebtedness issued to so refund or
refinance such Indebtedness (subject to the following proviso, "Refinancing
Indebtedness") prior to its respective maturity; provided, however, that
such Refinancing Indebtedness
(i) has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is Incurred which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness being
refunded or refinanced;
(ii) has a Stated Maturity which is no earlier than the Stated
Maturity of the Indebtedness being refunded or refinanced;
(iii) to the extent such Refinancing Indebtedness refinances
Indebtedness pari passu with the Notes or the Guarantee of such
Restricted Subsidiary, as applicable, is pari passu with the Notes or
the Guarantee of such Restricted Subsidiary, as applicable;
(iv) is Incurred in an aggregate principal amount (or if issued
with original issue discount, an aggregate issue price) that is equal to
or less than the aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced plus premium and fees Incurred in
connection with such refinancing; and
(v) shall not include
(x) Indebtedness of the Issuer or a Restricted Subsidiary that
is not a Guarantor that refinances Indebtedness of the Issuer; or
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(y) Indebtedness of the Issuer or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary;
and provided further that subclauses (i) and (ii) of this clause
(n) will not apply to any refunding or refinancing of any Senior
Indebtedness;
(o) Indebtedness or Disqualified Stock of Persons that are acquired by
the Issuer or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of the indenture;
provided, however, that such Indebtedness or Disqualified Stock is not
Incurred in contemplation of such acquisition or merger or to provide all
or a portion of the funds or credit support required to consummate such
acquisition or merger; provided further, however, that after giving effect
to such acquisition and the Incurrence of such Indebtedness either
(i) the Issuer would be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first sentence of this covenant; or
(ii) the Fixed Charge Coverage Ratio would be greater than
immediately prior to such acquisition; and
(p) Contribution Indebtedness.
Notwithstanding the foregoing, neither the Issuer nor any Guarantor may
Incur any Indebtedness pursuant to the immediately preceding paragraph if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Indebtedness unless such
Indebtedness will be subordinated to the Notes or such Guarantor's Guarantee, as
applicable, to at least the same extent as such Subordinated Indebtedness. For
purposes of determining compliance with this covenant, in the event that an item
of Indebtedness meets the criteria of more than one of the categories of
permitted Indebtedness described in clauses (a) through (p) above or is entitled
to be Incurred pursuant to the first paragraph of this covenant, the Issuer
shall, in its sole discretion, classify or reclassify such item of Indebtedness
in any manner that complies with this covenant and such item of Indebtedness
will be treated as having been Incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes
of this covenant.
Limitation on Restricted Payments. The indenture provides that the Issuer
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:
(i) declare or pay any dividend or make any distribution on account of
Volume Holdings', the Issuer's or any of its Restricted Subsidiaries'
Equity Interests, including any payment made in connection with any merger
or consolidation involving the Issuer (other than:
(A) dividends or distributions by the Issuer payable solely in
Equity Interests (other than Disqualified Stock) of the Issuer; or
(B) dividends or distributions by a Restricted Subsidiary so long
as, in the case of any dividend or distribution payable on or in respect
of any class or series of securities issued by a Restricted Subsidiary
other than a Wholly Owned Restricted Subsidiary, the Issuer or a
Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such
class or series of securities);
(ii) purchase or otherwise acquire or retire for value any Equity
Interests of Volume Holdings or the Issuer;
(iii) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, in each case prior to any scheduled
repayment or scheduled maturity, any Subordinated Indebtedness (other than
the payment, redemption, repurchase, defeasance, acquisition or retirement
of
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(A) Subordinated Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such payment, redemption,
repurchase, defeasance, acquisition or retirement; and
(B) Indebtedness permitted under clauses (g) and (i) of the second
paragraph of the covenant described under "--Limitations on Incurrence
of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock"); or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) immediately after giving effect to such transaction on a pro
forma basis, the Issuer could Incur $1.00 of additional Indebtedness
under the provisions of the first paragraph of "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock and
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after the Issue Date (including Restricted Payments
permitted by clauses (i), (v), (vi), and (viii) of the next succeeding
paragraph, but excluding all other Restricted Payments permitted by the
next succeeding paragraph), is less than the sum of, without
duplication,
(i) 50% of the Consolidated Net Income of the Issuer for the
period (taken as one accounting period) from the fiscal quarter that
first begins after the Issue Date to the end of the Issuer's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, in the case
such Consolidated Net Income for such period is a deficit, minus 100%
of such deficit), plus
(ii) 100% of the aggregate net proceeds, including cash and the
Fair Market Value (as determined in accordance with the next
succeeding sentence) of property other than cash, received by the
Issuer since the Issue Date from the issue or sale of Equity
Interests of the Issuer (excluding Refunding Capital Stock (as
defined below), Designated Preferred Stock, Excluded Contributions
and Disqualified Stock), including Equity Interests issued upon
conversion of Indebtedness or upon exercise of warrants or options
(other than an issuance or sale to a Subsidiary of the Issuer or an
employee stock ownership plan or trust established by the Issuer or
any of its Subsidiaries), plus
(iii) 100% of the aggregate amount of contributions to the
capital of the Issuer received in cash and the Fair Market Value (as
determined in accordance with the next succeeding sentence) of
property other than cash since the Issue Date (other than Excluded
Contributions, Refunding Capital Stock, Designated Preferred Stock
and Disqualified Stock), plus
(iv) 100% of the aggregate amount received in cash and the Fair
Market Value (as determined in accordance with the next succeeding
sentence) of property other than cash received from:
(A) the sale or other disposition (other than to the Issuer
or a Restricted Subsidiary) of Restricted Investments made by the
Issuer and its Restricted Subsidiaries and from repurchases and
redemptions of such Restricted Investments from the Issuer and
its Restricted Subsidiaries by any Person (other than the Issuer
or any of its Subsidiaries) and from repayments of loans or
advances which constituted Restricted Investments;
(B) the sale (other than to the Issuer or a Subsidiary) of
the Capital Stock of an Unrestricted Subsidiary; or
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(C) a distribution or dividend from an Unrestricted
Subsidiary; plus
(v) in the event any Unrestricted Subsidiary has been
redesignated as a Restricted Subsidiary or has been merged,
consolidated or amalgamated with or into, or transfers or conveys its
assets to, or is liquidated into, the Issuer or a Restricted
Subsidiary, the Fair Market Value (as determined in good faith by the
Board of Directors) of the Investment of the Issuer in such
Unrestricted Subsidiary at the time of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as
applicable), after deducting any Indebtedness associated with the
Unrestricted Subsidiary so designated or combined or any Indebtedness
associated with the assets so transferred or conveyed, not to exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Issuer or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the calculation
of the amount of Restricted Payments, less
(vi) the amount of all Specified Cash Contributions.
The Fair Market Value of property other than cash covered by clauses (ii),
(iii), (iv) and (v) above shall be determined in good faith by the Issuer and:
(A) in the event of property with a Fair Market Value in excess of
$2.5 million, shall be set forth in an Officers' Certificate; or
(B) in the event of property with a Fair Market Value in excess of
$10.0 million, shall be set forth in a resolution approved by at least a
majority of the Board of Directors.
The foregoing provisions will not prohibit:
(i) the payment of any dividend or distribution within 60 days after
the date of declaration thereof, if at the date of declaration such payment
would have complied with the provisions of the indenture;
(ii) (a) the repurchase, retirement or other acquisition of any Equity
Interests ("Retired Capital Stock") or Subordinated Indebtedness of the
Issuer in exchange for, or out of the proceeds of the substantially
concurrent sale of, Equity Interests of the Issuer or contributions to the
equity capital of the Issuer (other than any Disqualified Stock or any
Equity Interests sold to a Subsidiary of the Issuer or to an employee stock
ownership plan or any trust established by the Issuer or any of its
Subsidiaries) (collectively, including any such contributions, "Refunding
Capital Stock") and
(b) the declaration and payment of accrued dividends on the Retired
Capital Stock out of the proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Issuer or to an employee stock ownership
plan or any trust established by the Issuer or any of its Subsidiaries) of
Refunding Capital Stock;
(iii) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Issuer made by exchange for, or out of the
proceeds of the substantially concurrent sale of, new Indebtedness of the
Issuer which is Incurred in accordance with the covenant described under
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock" so long as:
(A) the principal amount of such new Indebtedness does not exceed
the principal amount of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired for value (plus the amount of any
premium required to be paid under the terms of the instrument governing
the Subordinated Indebtedness being so redeemed, repurchased, acquired
or retired);
(B) such Indebtedness is subordinated to Senior Indebtedness and
the Notes at least to the same extent as such Subordinated Indebtedness
so purchased, exchanged, redeemed, repurchased, acquired or retired for
value;
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(C) such Indebtedness has a final scheduled maturity date equal to
or later than the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired; and
(D) such Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the remaining Weighted Average Life to Maturity of
the Subordinated Indebtedness being so redeemed, repurchased, acquired
or retired;
(iv) the repurchase, retirement or other acquisition (or dividends to
Volume Holdings to finance any such repurchase, retirement or other
acquisition) for value of Equity Interests of the Issuer or Volume Holdings
held, directly or indirectly, by any future, present or former employee,
director or consultant of the Issuer or any Subsidiary of the Issuer or any
entity in which any of the foregoing has a beneficial or economic ownership
interest pursuant to any management equity plan or stock option plan or any
other management or employee benefit plan or agreement or any other
agreement pursuant to which stock is held for the benefit of such persons;
provided, however, that the aggregate amounts paid under this clause (iv)
do not exceed $3.5 million in any calendar year (with unused amounts in any
calendar year being permitted to be carried over for the two succeeding
calendar years); provided further, however, that such amount in any
calendar year may be increased by an amount not to exceed:
(I) the cash proceeds received by the Issuer or any of its
Restricted Subsidiaries from the sale of Equity Interests of the Issuer
(other than Disqualified Stock) to members of management, directors or
consultants of the Issuer and its Restricted Subsidiaries that occurs
after the Issue Date (provided that the amount of such cash proceeds
utilized for any such repurchase, retirement, other acquisition or
dividend will not increase the amount available for Restricted Payments
under clause (c) of the immediately preceding paragraph), plus
(II) the cash proceeds of key man life insurance policies received
by the Issuer and its Restricted Subsidiaries after the Issue Date
(provided that the Issuer may elect to apply all or any portion of the
aggregate increase contemplated by clauses (I) and (II) above in any
single calendar year);
(v) the declaration and payment of dividends or distributions to
holders of any class or series of Disqualified Stock of the Issuer or any
of its Restricted Subsidiaries issued or incurred in accordance with the
covenant entitled "--Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock and Preferred Stock";
(vi) the declaration and payment of dividends or distributions to
holders of any class or series of Designated Preferred Stock issued after
the Issue Date; provided, however, that:
(A) for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date of issuance of such Designated Preferred Stock, after giving effect
to such issuance (and the payment of dividends or distributions) on a
pro forma basis, the Issuer would have had a Fixed Charge Coverage Ratio
of at least 2.25 to 1.00; and
(B) the aggregate amount of dividends declared and paid pursuant to
this clause (vi) does not exceed the net cash proceeds received by the
Issuer from the sale of Designated Preferred Stock issued after the
Issue Date;
(vii) Investments in Unrestricted Subsidiaries having an aggregate
Fair Market Value, taken together with all other Investments made pursuant
to this clause (vii) that are at that time outstanding, not to exceed $10.0
million (with the Fair Market Value of each Investment being measured at
the time made and without giving effect to subsequent changes in value);
(viii) the payment of dividends on the Issuer's Common Stock (or the
payment of dividends to Volume Holdings to fund the payment by Volume
Holdings of dividends on Volume Holdings' common stock) following the first
public offering of common stock of the Issuer or Volume
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Holdings, as the case may be, after the Issue Date, of up to 6% per annum
of the net proceeds received by the Issuer or contributed to the Issuer by
Volume Holdings from such public offering;
(ix) Investments that are made with Excluded Contributions;
(x) other Restricted Payments in an aggregate amount not to exceed
$7.5 million;
(xi) the payment of dividends, other distributions or other amounts by
the Issuer for the purposes set forth in clauses (A) and (B) below:
(A) to Volume Holdings in amounts equal to the amounts required for
Volume Holdings to pay fees and expenses required to maintain its
corporate existence and other operating costs in an aggregate amount of
up to $1.0 million per fiscal year; or
(B) to Volume Holdings in amounts equal to amounts required for
Volume Holdings to pay franchise taxes and Federal, state and local
income taxes to the extent such income taxes are attributable to the
income of the Issuer and its Restricted Subsidiaries (and, to the extent
of amounts actually received from its Unrestricted Subsidiaries, in
amounts required to pay such taxes to the extent attributable to the
income of such Unrestricted Subsidiaries);
(xii) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(xiii) the transfer to Volume Holdings of trademarks and servicemarks
and the payment of license fees to Volume Holdings in respect of such
trademarks and servicemarks; provided, however, that all such license fees
are immediately contributed by Volume Holdings to the Issuer or used to
repay or service existing Indebtedness of Volume Holdings to the Issuer
(provided that the amount of such contributions or repayments will not
increase the amount available for Restricted Payments under clause (c) of
the immediately preceding paragraph); and
(xiv) dividends to Volume Holdings in an amount not to exceed
$50.0 million as contemplated by the "Use of Proceeds" section of the
Offering Memorandum;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (v), (vi), (vii), (viii) and (x), no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof; provided further, however, that for purposes of
determining the aggregate amount expended for Restricted Payments in accordance
with clause (c) of the immediately preceding paragraph, only the amounts
expended under clauses (i), (v), (vi) and (viii) shall be included.
As of the Issue Date, all of the Issuer's Subsidiaries were Restricted
Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the definition of "Unrestricted
Subsidiary." For purposes of designating any Restricted Subsidiary as an
Unrestricted Subsidiary, all outstanding Investments by the Issuer and its
Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so
designated will be deemed to be Restricted Payments in an amount determined as
set forth in the last sentence of the definition of "Investments." Such
designation will only be permitted if a Restricted Payment in such amount would
be permitted at such time (whether pursuant to the first paragraph of this
covenant or under clause (vii), (ix) or (x)) and if such Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
indenture provides that the Issuer will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Issuer or
any of its Restricted Subsidiaries:
(1) on its Capital Stock; or
(2) with respect to any other interest or participation in, or
measured by, its profits; or
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(ii) pay any Indebtedness owed to the Issuer or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Issuer or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Issuer or any of its Restricted Subsidiaries, except in each case for such
encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Issue Date, including pursuant to the Credit Agreement and the other
Senior Credit Documents;
(2) the indenture and the Notes;
(3) applicable law or any applicable rule, regulation or order;
(4) any agreement or other instrument relating to Indebtedness
of a Person acquired by the Issuer or any Restricted Subsidiary which
was in existence at the time of such acquisition (but not created in
contemplation thereof or to provide all or any portion of the funds
or credit support utilized to consummate such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition;
(6) Secured Indebtedness otherwise permitted to be Incurred
pursuant to the covenants described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock and
Preferred Stock" and "--Liens" that limit the right of the debtor to
dispose of the assets securing such Indebtedness;
(7) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business;
(8) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(9) customary provisions contained in leases, agreements to
provide services and other similar agreements entered into in the
ordinary course of business that impose restrictions of the type
described in clause (c) above;
(10) other Indebtedness of Restricted Subsidiaries permitted to
be Incurred subsequent to the Issue Date pursuant to clause (l) of
the second paragraph of the covenant described under "--Limitations
on Incurrence of Indebtedness and Issuance of Disqualified Stock and
Preferred Stock"; or
(11) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) above imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (1) through
(10) above; provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the
Board of Directors, no more restrictive with respect to such dividend
and other payment restrictions than those contained in the dividend
or other payment restrictions prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
Asset Sales. The indenture provides that the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, cause or make an Asset Sale,
unless:
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(x) the Issuer, or its Restricted Subsidiaries, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value (as determined in good faith by the Issuer) of the assets
sold or otherwise disposed of; and
(y) except in the case of a Permitted Asset Swap, at least 75% of the
consideration therefor received by the Issuer, or such Restricted
Subsidiary, as the case may be, is in the form of Cash Equivalents;
provided that the amount of:
(a) any liabilities (as shown on the Issuer's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the
Issuer or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the
transferee of any such assets;
(b) any notes or other obligations or other securities received by
the Issuer or such Restricted Subsidiary from such transferee that are
converted by the Issuer or such Restricted Subsidiary into cash within
180 days of the receipt thereof (to the extent of the cash received);
and
(c) any Designated Noncash Consideration received by the Issuer or
any of its Restricted Subsidiaries in such Asset Sale having an
aggregate Fair Market Value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (c) that is at
that time outstanding, not to exceed the greater of 7.5% of Total Assets
or $10.0 million (with the Fair Market Value of each item of Designated
Noncash Consideration being measured at the time received and without
giving effect to subsequent changes in value)
shall be deemed to be Cash Equivalents for the purposes of this
provision.
Within 365 days after the Issuer's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option:
(i) to permanently reduce Obligations under the Credit Agreement (and,
in the case of revolving Obligations, to correspondingly reduce commitments
with respect thereto) or other Senior Indebtedness or Pari Passu
Indebtedness (provided that if the Issuer shall so reduce Obligations under
Pari Passu Indebtedness, it will equally and ratably reduce Obligations
under the Notes by making an offer (in accordance with the procedures set
forth below for an Asset Sale Offer) to all Holders to purchase at a
purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, the pro rata principal
amount of Notes) or Indebtedness of a Restricted Subsidiary, in each case
other than Indebtedness owed to the Issuer or an Affiliate of the Issuer;
(ii) to an investment in any one or more businesses, capital
expenditures or acquisitions of other assets in each case used or useful in
a Similar Business; and/or
(iii) to make an investment in properties or assets that replace the
properties and assets that are the subject of such Asset Sale.
Pending the final application of any such Net Proceeds, the Issuer or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities. The indenture provides that any Net
Proceeds from any Asset Sale that are not applied as provided and within the
time period set forth in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Issuer shall make an offer to all Holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes, that
is an integral multiple of $1,000, that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and liquidated damages, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the indenture. The Issuer will commence an Asset Sale
Offer with respect to
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Excess Proceeds within ten Business Days after the date that Excess Proceeds
exceeds $15.0 million by mailing the notice required pursuant to the terms of
the indenture, with a copy to the Trustee. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased in the manner described below. Upon completion of any such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws or regulations are applicable in connection with the repurchase of the
Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the indenture,
the Issuer will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in the indenture
by virtue thereof.
If more Notes are tendered pursuant to an Asset Sale Offer than the Issuer
is required to purchase, selection of such Notes for purchase will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed, or if such Notes
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements); provided that no Notes of $1,000 or less shall
be purchased in part.
Notices of an Asset Sale Offer shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the purchase date to each
Holder of Notes at such Holder's registered address. If any Note is to be
purchased in part only, any notice of purchase that relates to such Note shall
state the portion of the principal amount thereof that has been or is to be
purchased.
A new Note in principal amount equal to the unpurchased portion of any Note
purchased in part will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the purchase date unless the
Issuer defaults in payment of the purchase price, interest shall cease to accrue
on Notes or portions thereof purchased.
Transactions with Affiliates. The indenture provides that the Issuer will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:
o make any payment to;
o sell, lease, transfer or otherwise dispose of any of its properties or
assets to;
o purchase any property or assets from; or
o enter into or make or amend any transaction or series of transactions,
contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate of the Issuer (each of the foregoing,
an "Affiliate Transaction") involving aggregate consideration in excess
of $2.5 million,
unless:
(a) such Affiliate Transaction is on terms that are not materially
less favorable to the Issuer or the relevant Restricted Subsidiary than
those that could have been obtained in a comparable transaction by the
Issuer or such Restricted Subsidiary with an unrelated Person; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, the Issuer delivers to the Trustee a resolution adopted by the
majority of the Board of Directors of the Issuer, approving such Affiliate
Transaction and set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (a) above.
The foregoing provisions will not apply to the following:
(i) transactions between or among the Issuer and/or any of its
Restricted Subsidiaries;
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(ii) Permitted Investments and Restricted Payments permitted by the
provisions of the indenture described above under the covenant
"--Limitation on Restricted Payments";
(iii) the payment of annual management, consulting, monitoring and
advisory fees to Blackstone or GE Capital in an amount not to exceed
$1.5 million in any calendar year and any related out-of-pocket expenses;
(iv) the payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors, employees or
consultants of the Issuer or any Restricted Subsidiary;
(v) payments by the Issuer or any of its Restricted Subsidiaries to
Blackstone or GE Capital, made for any financial advisory, financing,
underwriting or placement services or in respect of other investment
banking activities, including, without limitation, in connection with
acquisitions or divestitures, which payments are approved by a majority of
the Board of Directors of the Issuer in good faith;
(vi) transactions in which the Issuer or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Issuer or such Restricted Subsidiary from a financial point of view or
meets the requirements of clause (a) of the preceding paragraph;
(vii) payments or loans to employees or consultants in the ordinary
course of business which are approved by a majority of the Board of
Directors of the Issuer in good faith;
(viii) any agreement as in effect as of the Issue Date or any
amendment thereto (so long as any such amendment is not disadvantageous to
the holders of the Notes in any material respect) or any transaction
contemplated thereby;
(ix) the existence of, or the performance by the Issuer or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the Issue
Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Issuer
or any of its Restricted Subsidiaries of its obligations under any future
amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause
(ix) to the extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Holders of the Notes in any
material respect;
(x) the payment of all fees and expenses related to the Transactions,
including fees to Blackstone, which are described in the Offering
Memorandum;
(xi) transactions with customers, clients, suppliers or purchasers or
sellers of goods or services, in each case in the ordinary course of
business and otherwise in compliance with the terms of the indenture, which
are fair to the Issuer and its Restricted Subsidiaries in the reasonable
determination of the Board of Directors or the senior management of the
Issuer, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party; and
(xii) the issuance of Capital Stock (other than Disqualified Stock) of
the Issuer or Volume Holdings to any Permitted Holder.
Liens. The indenture provides that the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
Incur or suffer to exist any Lien on any asset or property of the Issuer or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, that secures any obligations of the
Issuer or any of its Subsidiaries (other than Senior Indebtedness) unless the
Notes are equally and ratably secured with (or on a senior basis to, in the case
of obligations subordinated in right of payment to the Notes) the obligations so
secured or until such time as such obligations are no longer secured by a Lien.
The preceding sentence will not require the Issuer or any Restricted Subsidiary
to secure the Notes if the Lien consists of a Permitted Lien.
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The indenture provides that no Guarantor will directly or indirectly
create, Incur or suffer to exist any Lien on any asset or property of such
Guarantor or any income or profits therefrom, or assign or convey any right to
receive income therefrom, that secures any obligation of such Guarantor (other
than Senior Indebtedness of such Guarantor) unless the Guarantee of such
Guarantor is equally and ratably secured with (or on a senior basis to, in the
case of obligations subordinated on right of payment to such Guarantor's
Guarantee) the obligations so secured or until such time as such obligations are
no longer secured by a Lien. The preceding sentence will not require any
Guarantor to secure its Guarantee if the Lien consists of a Permitted Lien.
Limitation on Other Pari Passu Indebtedness. The indenture provides that
the Issuer will not, and will not permit any Guarantor to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Issuer or any
Indebtedness of any Guarantor, as the case may be, unless such Indebtedness is
either:
(i) pari passu in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be, or
(ii) subordinate in right of payment to the Notes or such Guarantor's
Guarantee, as the case may be.
Reports and Other Information. The indenture provides that notwithstanding
that the Issuer may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Issuer will file with the SEC
(and provide the Trustee and Holders with copies thereof, without cost to each
Holder, within 15 days after it files them with the SEC):
(i) within 90 days after the end of each fiscal year, annual reports
on Form 10-K (or any successor or comparable form) containing the
information required to be contained therein (or required in such successor
or comparable form);
(ii) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 10-Q (or any successor or
comparable form);
(iii) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 8-K (or any
successor or comparable form); and
(iv) any other information, documents and other reports which the
Issuer would be required to file with the SEC if it were subject to
Section 13 or 15(d) of the Exchange Act;
provided, however, the Issuer shall not be so obligated to file such reports
with the SEC if the SEC does not permit such filing, in which event the Issuer
will make available such information to prospective purchasers of Notes, in
addition to providing such information to the Trustee and the Holders, in each
case within 15 days after the time the Issuer would be required to file such
information with the SEC if it were subject to Section 13 or 15(d) of the
Exchange Act. Notwithstanding the foregoing, such requirements shall be deemed
satisfied prior to the earlier of
(i) 90 days after the Issue Date; and
(ii) the filing with the SEC of the Exchange Offer Registration
Statement (as defined) and/or Shelf Registration Statement,
by the filing with the SEC of the Exchange Offer Registration Statement and/or
Shelf Registration Statement, with such financial information that satisfies
Regulation S-X of the Securities Act, provided, however, that in order for the
provisions of clause (i) above to be deemed satisfied with respect to the year
ended December 29, 1998, such Exchange Offer Registration Statement or Shelf
Registration Statement must include audited financial statements for the year
ended December 29, 1998.
Future Guarantors. The indenture provides that the Issuer will cause each
Restricted Subsidiary organized under the laws of the United States of America
or any state or territory thereof that Incurs Indebtedness or issues shares of
Disqualified Stock or Preferred Stock to execute and deliver to the
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Trustee a supplemental indenture pursuant to which such Subsidiary will
guarantee payment of the Notes. Each Guarantee will be limited to an amount not
to exceed the maximum amount that can be guaranteed by that Subsidiary without
rendering the Guarantee, as it relates to such Subsidiary, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS
The indenture provides that the Issuer may not consolidate or merge with or
into or wind up into (whether or not the Issuer is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless:
(i) the Issuer is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation, partnership or limited
liability company organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory
thereof (the Issuer or such Person, as the case may be, being herein called
the "Successor Company");
(ii) the Successor Company (if other than the Issuer) expressly
assumes all the obligations of the Issuer under the indenture and the Notes
pursuant to a supplemental indenture or other documents or instruments in
form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any of its Restricted Subsidiaries as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction) no Default or Event
of Default shall have occurred and be continuing;
(iv) immediately after giving pro forma effect to such transaction, as
if such transaction had occurred at the beginning of the applicable
four-quarter period, either:
(A) the Successor Company would be permitted to Incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first sentence of the covenant described
under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock"; or
(B) the Fixed Charge Coverage Ratio for the Successor Company and
its Restricted Subsidiaries would be greater than such ratio for the
Issuer and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, unless it is the other party to the transactions
described above, shall have by supplemental indenture confirmed that its
Guarantee shall apply to such Person's obligations under the indenture and
the Notes; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture.
The Successor Company will succeed to, and be substituted for, the Issuer under
the indenture and the Notes. Notwithstanding the foregoing clauses (iii) and
(iv):
(a) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Issuer or to
another Restricted Subsidiary; and
(b) the Issuer may merge with an Affiliate incorporated solely for the
purpose of reincorporating the Issuer in another state of the United States
so long as the amount of Indebtedness of the Issuer and its Restricted
Subsidiaries is not increased thereby.
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The indenture further provides that, subject to certain limitations
described in the indenture governing release of a Guarantee upon the sale or
disposition of a Guarantor, each Guarantor will not, and the Issuer will not
permit a Guarantor to, consolidate or merge with or into or wind up into
(whether or not such Guarantor is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, any Person unless:
(i) such Guarantor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than such
Guarantor) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made is a corporation, partnership or
limited liability company organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any
territory thereof (such Guarantor or such Person, as the case may be, being
herein called the "Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor) expressly
assumes all the obligations of such Guarantor under the indenture and such
Guarantors's Guarantee pursuant to a supplemental indenture or other
documents or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Guarantor or any of its Subsidiaries as a result of such transaction as
having been Incurred by the Successor Guarantor or such Subsidiary at the
time of such transaction) no Default or Event of Default shall have
occurred and be continuing; and
(iv) the Guarantor shall have delivered or caused to be delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the indenture.
Subject to certain limitations described in the indenture, the Successor
Guarantor will succeed to, and be substituted for, such Guarantor under the
indenture and such Guarantor's Guarantee. Notwithstanding the foregoing clause
(iii), a Guarantor may merge with an Affiliate incorporated solely for the
purpose of reincorporating such Guarantor in another state of the United States
so long as the amount of Indebtedness of the Guarantor is not increased thereby.
DEFAULTS
An Event of Default is defined in the indenture as:
(i) a default in any payment of interest on any Note when due, whether
or not prohibited by the provisions described under "--Ranking" above,
continued for 30 days;
(ii) a default in the payment of principal or premium, if any, of any
Note when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon declaration or otherwise, whether or not such
payment is prohibited by the provisions described under "--Ranking" above;
(iii) the failure by the Issuer to comply with its obligations under
the covenant described under "--Merger, Consolidation or Sale of All or
Substantially All Assets" above;
(iv) the failure by the Issuer to comply for 30 days after notice with
any of its obligations under the covenants described under "--Change of
Control" or "--Certain Covenants" above (in each case, other than a failure
to purchase Notes);
(v) the failure by the Issuer to comply for 60 days after notice with
its other agreements contained in the Notes or the indenture;
(vi) the failure by the Issuer or any Significant Subsidiary to pay
any Indebtedness (other than Indebtedness owing to the Issuer or a
Restricted Subsidiary) within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $15.0 million or its foreign currency
equivalent (the "cross acceleration provision");
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(vii) certain events of bankruptcy, insolvency or reorganization of
the Issuer or a Significant Subsidiary (the "bankruptcy provisions");
(viii) the rendering of any judgment or decree for the payment of
money (other than judgments which are covered by enforceable insurance
policies issued by solvent carriers) in excess of $15.0 million or its
foreign currency equivalent against the Issuer or a Significant Subsidiary
if:
(A) an enforcement proceeding thereon is commenced; or
(B) such judgment or decree remains outstanding for a period of 60
days following such judgment and is not discharged, waived or stayed
(the "judgment default provision"); or
(ix) any Guarantee ceases to be in full force and effect (except as
contemplated by the terms thereof) or any Guarantor denies or disaffirms
its obligations under the indenture or any Guarantee and such Default
continues for 10 days.
The foregoing constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Issuer of the default and the Issuer does not cure
such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes by notice to the Issuer may declare the principal of,
premium, if any, and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of,
premium, if any, and interest on all the Notes will become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect
to the Notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the indenture or the Notes unless:
(i) such Holder has previously given the Trustee notice that an Event
of Default is continuing;
(ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy;
(iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity;
and
(v) the Holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the
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Trustee determines is unduly prejudicial to the rights of any other Holder or
that would involve the Trustee in personal liability. Prior to taking any action
under the indenture, the Trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
The indenture provides that if a Default occurs and is continuing and is
actually known to the Trustee, the Trustee must mail to each Holder notice of
the Default within the earlier of 90 days after it occurs or 30 days after it is
actually known to a Trust Officer or written notice of it is received by the
Trustee. Except in the case of a Default in the payment of principal of, premium
(if any) or interest on any Note, the Trustee may withhold notice if and so long
as a committee of its Trust Officers in good faith determines that withholding
notice is in the interests of the Noteholders. In addition, the Issuer is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Issuer also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Issuer is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each Holder of an outstanding
Note affected, no amendment may, among other things:
(i) reduce the amount of Notes whose Holders must consent to an
amendment;
(ii) reduce the rate of or extend the time for payment of interest on
any Note;
(iii) reduce the principal of or extend the Stated Maturity of any
Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under
"Optional Redemption" above;
(v) make any Note payable in money other than that stated in the Note;
(vi) make any change to the subordination provisions of the indenture
that adversely affects the rights of any Holder;
(vii) impair the right of any Holder to receive payment of principal
of, premium, if any, and interest on such Holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such Holder's Notes;
(viii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions; or
(ix) modify the Guarantees in any manner adverse to the Holders.
Without the consent of any Holder, the Issuer and Trustee may amend the
indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation, partnership or limited liability
company of the obligations of the Issuer under the indenture, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided
that the uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated Notes
are described in Section 163(f)(2)(B) of the Code), to add Guarantees with
respect to the Notes, to secure the Notes, to add to the covenants of the Issuer
for the benefit of the Holders or to surrender any right or power conferred upon
the Issuer, to make any change that does not adversely affect the rights of any
Holder, to comply with any requirement of the SEC in connection with the
qualification of the indenture under the TIA or to make certain changes to the
indenture to provide for the issuance of Additional Notes. However, no amendment
may be made to the subordination provisions of the indenture that adversely
affects the rights of any holder of Senior
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Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
The consent of the Noteholders is not necessary under the indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, the Issuer is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Issuer may require a Noteholder to pay any taxes
required by law or permitted by the indenture. The Issuer is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to a selection of Notes to be redeemed.
The outstanding Notes have been and the exchange Notes will be issued in
registered form and the registered Holder of a Note will be treated as the owner
of such Note for all purposes.
DEFEASANCE
The Issuer at any time may terminate all its obligations under the Notes
and the indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuer at any time may terminate its obligations under the covenants
described under "Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Subsidiaries and the
judgment default provision described under "--Defaults" above and the
limitations contained in clause (iv) of the first paragraph under "Merger,
Consolidation or Sale of All or Substantially All Assets" above ("covenant
defeasance"). If the Issuer exercises its legal defeasance option or its
covenant defeasance option, each Guarantor will be released from all of its
obligations with respect to its Guarantee.
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Issuer exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) with respect only to
Significant Subsidiaries, (viii) with respect only to Significant Subsidiaries
or (ix) under "--Defaults" above or because of the failure of the Issuer to
comply with clause (iv) of the first paragraph under "--Merger, Consolidation or
Sale of All or Substantially All Assets" above.
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
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CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee under the
indenture and Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person, in each case, other than Indebtedness Incurred as
consideration in, in contemplation of, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by such Person, or
such asset was acquired by such person, as applicable.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. For purposes of the
provisions described under "--Certain Covenants--Transactions with Affiliates"
and "--Certain Covenants--Asset Sales" only, "Affiliate" shall also mean any
beneficial owner of shares representing 10% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Issuer or Volume Holdings or
of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Sale" means:
(i) the sale, conveyance, transfer or other disposition (whether in a
single transaction or a series of related transactions) of property or
assets (including by way of a Sale/Leaseback Transaction) of the Issuer or
any Restricted Subsidiary (each referred to in this definition as a
"disposition"); or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary (other than to the Issuer or another Restricted Subsidiary)
(whether in a single transaction or a series of related transactions), in
each case other than:
(a) a disposition of Cash Equivalents or Investment Grade
Securities or obsolete or worn out equipment in the ordinary course of
business;
(b) the disposition of all or substantially all of the assets of
the Issuer in a manner permitted pursuant to the provisions described
above under "--Merger, Consolidation or Sale of All or Substantially All
Assets" or any disposition that constitutes a Change of Control;
(c) any Restricted Payment or Permitted Investment that is
permitted to be made, and is made, under the covenant described above
under "--Limitation on Restricted Payments";
(d) any disposition of assets with an aggregate Fair Market Value
of less than $2.0 million;
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(e) any disposition of property or assets by a Restricted
Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to
a Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar
Business;
(g) sales of assets received by the Issuer upon the foreclosure on
a Lien;
(h) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary; and
(i) sales of inventory in the ordinary course of business
consistent with past practices and sales of equipment upon termination
of a contract with a client entered into in the ordinary course of
business pursuant to the terms of such contract.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement, the other Senior Credit Documents and any Refinancing
Indebtedness with respect thereto, as amended from time to time, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Issuer whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Blackstone" means Blackstone Capital Partners II Merchant Banking Fund
L.P. and its Affiliates.
"Board of Directors" means the Board of Directors of the Issuer or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capitalized Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(i) U.S. dollars and foreign currency exchanged into U.S. dollars
within 180 days;
(ii) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof;
(iii) certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight
bank deposits, in each case with any commercial bank having capital and
surplus in excess of $500.0 million and whose long-term debt is rated "A"
or the equivalent thereof by Moody's or S&P;
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(iv) repurchase obligations for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above;
(v) commercial paper issued by a corporation (other than an Affiliate
of the Issuer) rated at least "A-2" or the equivalent thereof by Moody's or
S&P and in each case maturing within one year after the date of
acquisition;
(vi) investment funds investing at least 95% of their assets in
securities of the types described in clauses (i) through (v) above;
(vii) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of
the two highest rating categories obtainable from either Moody's or S&P;
and
(viii) Indebtedness or preferred stock issued by Persons (other than
Blackstone, GE Capital or their Affiliates) with a rating of "A" or higher
from S&P or "A-2" or higher from Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense (excluding amortization of deferred financing fees) of such Person and
its Restricted Subsidiaries for such period on a consolidated basis and
otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of:
(i) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, to the extent such expense was deducted in
computing Consolidated Net Income (including amortization of original issue
discount, the interest component of Capitalized Lease Obligations (or any
financing lease which has substantially the same economic effect as a
Capitalized Lease Obligation) and net payments and receipts (if any)
pursuant to Hedging Obligations and excluding amortization of deferred
financing fees);
(ii) consolidated capitalized interest of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued; and
(iii) the earned discount or yield with respect to the sale of
receivables.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis; provided, however, that:
(i) any net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto) shall be excluded;
(ii) any increase in amortization or depreciation resulting from
purchase accounting in relation to any acquisition that is consummated
after the Issue Date, net of taxes, shall be excluded;
(iii) the Net Income for such period shall not include the cumulative
effect of a change in accounting principles during such period;
(iv) any net after-tax income or loss from discontinued operations and
any net after-tax gains or losses on disposal of discontinued operations
shall be excluded;
(v) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions other than in the
ordinary course of business (as determined in good faith by the Board of
Directors) shall be excluded;
(vi) the Net Income for such period of any Person that is not a
Subsidiary of such Person, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be
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included only to the extent of the amount of dividends or distributions or
other payments paid in cash (or to the extent converted into cash) to the
referent Person or a Restricted Subsidiary thereof in respect of such
period;
(vii) the Net Income of any Person acquired in a pooling of interests
transaction shall not be included for any period prior to the date of such
acquisition; and
(viii) the Net Income for such period of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or
indirectly, by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders,
unless such restrictions with respect to the payment of dividends or in
similar distributions have been legally waived; provided that the net loss
of any such Restricted Subsidiary shall be included.
Notwithstanding the foregoing, for the purpose of the covenant described under
"--Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Issuer or a Restricted
Subsidiary to the extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under such covenant pursuant to clauses
(c)(iv) and (v) of the first paragraph thereof.
"Contribution Indebtedness" means Indebtedness of the Issuer in an
aggregate principal amount not greater than the amount of all Specified Cash
Contributions, provided that such Contribution Indebtedness:
(i) has a Stated Maturity later than the Stated Maturity of the Notes;
(ii) is Incurred substantially concurrently with such Specified Cash
Contributions; and
(iii) is so designated as Contribution Indebtedness pursuant to an
Officers' Certificate on the Incurrence date thereof.
"Credit Agreement" means the credit agreement dated as of December 3, 1998,
as amended, restated, supplemented, waived, replaced, restructured, repaid,
refunded, refinanced or otherwise modified from time to time, including any
agreement extending the maturity thereof or otherwise restructuring all or any
portion of the Indebtedness under such agreement (except to the extent that any
such amendment, restatement, supplement, waiver, replacement, refunding,
refinancing or other modification thereto would be prohibited by the terms of
the indenture, unless otherwise agreed to by the Holders of at least a majority
in aggregate principal amount of Notes at the time outstanding), among the
Issuer, Volume Holdings, the financial institutions named therein and The Chase
Manhattan Bank, as Administrative Agent.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means the Fair Market Value of noncash
consideration received by the Issuer or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, less the amount of Cash Equivalents received in connection with
a subsequent sale of such Designated Noncash Consideration.
"Designated Preferred Stock" means Preferred Stock of the Issuer (other
than Disqualified Stock) that is issued for cash (other than to a Subsidiary of
the Issuer or an employee stock ownership plan or trust established by the
Issuer or any of its Subsidiaries) and is so designated as Designated Preferred
Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in clause (c)
of the covenant described under "--Limitation on Restricted Payments."
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"Designated Senior Indebtedness" means, with respect to the Issuer or a
Guarantor:
(i) the Bank Indebtedness and;
(ii) any other Senior Indebtedness of the Issuer or such Guarantor
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof, are committed to lend up to, at least $15.0 million and is
specifically designated by the Issuer or such Guarantor in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is redeemable or exchangeable), or upon the
happening of any event:
(i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise;
(ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock; or
(iii) is redeemable at the option of the holder thereof, in whole or
in part, in each case prior to the first anniversary of the maturity date
of the Notes;
provided, however, that only the portion of Capital Stock which so matures or is
mandatorily redeemable, is so convertible or exchangeable or is so redeemable at
the option of the holder thereof prior to such first anniversary shall be deemed
to be Disqualified Stock; provided further, however, that if such Capital Stock
is issued to any employee or to any plan for the benefit of employees of the
Issuer or its Subsidiaries or by any such plan to such employees, such Capital
Stock shall not constitute Disqualified Stock solely because it may be required
to be repurchased by the Issuer in order to satisfy applicable statutory or
regulatory obligations or as a result of such employee's termination, death or
disability.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus, without duplication:
(i) provision for taxes based on income or profits of such Person for
such period deducted in computing Consolidated Net Income; plus
(ii) Consolidated Interest Expense of such Person for such period to
the extent the same was deducted in computing Consolidated Net Income; plus
(iii) Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent such Consolidated Depreciation and
Amortization Expense was deducted in computing Consolidated Net Income;
plus
(iv) any non-recurring fees, expenses or charges related to any Equity
Offering, Permitted Investment, acquisition or Indebtedness permitted to be
Incurred by the indenture (in each case, whether or not successful),
including any such fees, expenses or charges related to the Transactions
(including fees to Blackstone), deducted in such period in computing
Consolidated Net Income; plus
(v) the amount of any nonrecurring charges related to client contract
terminations, one-time severance costs related to the acquisition of
Service America or one-time severance costs incurred in connection with
acquisitions consummated after the Issue Date deducted in such period in
computing Consolidated Net Income; plus
(vi) any other noncash charges reducing Consolidated Net Income for
such period (excluding any such charge which consists of or requires an
accrual of, or cash reserve for, anticipated cash charges for any future
period); plus
(vii) the amount of annual management, monitoring, consulting and
advisory fees and related expenses paid to Blackstone and GE Capital
deducted in such period in computing Consolidated Net Income in an amount
not to exceed $1.5 million during any fiscal year,
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less, without duplication,
(viii) noncash items increasing Consolidated Net Income of such Person
for such period (excluding any items which represent the reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior
period).
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the Issuer
shall be added to Consolidated Net Income to compute EBITDA only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Issuer by such
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale of common stock or
Preferred Stock of the Issuer or Volume Holdings (other than Disqualified
Stock), other than:
(i) public offerings with respect to the Issuer's common stock
registered on Form S-8; and
(ii) any such public or private sale that constitutes an Excluded
Contribution or a Specified Cash Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Excluded Contributions" means the net cash proceeds (other than Specified
Cash Contributions) received by the Issuer after the Issue Date from:
(i) contributions to its common equity capital; and
(ii) the sale (other than to a Subsidiary of the Issuer or to any
Issuer or Subsidiary management equity plan or stock option plan or any
other management or employee benefit plan or agreement) of Capital Stock
(other than Disqualified Stock and Designated Preferred Stock) of the
Issuer,
in each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by an Officer of the Issuer, the cash proceeds of which are
excluded from the calculation set forth in clause (c) of the "--Limitation on
Restricted Payments" covenant.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Issuer or any of its
Restricted Subsidiaries Incurs or redeems any Indebtedness (other than in the
case of revolving credit borrowings, in which case interest expense shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period) or issues or redeems Preferred Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such Incurrence or
redemption of Indebtedness, or such issuance or redemption of Preferred Stock,
as if the same had occurred at the beginning of the applicable four-quarter
period.
For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with
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GAAP), in each case with respect to an operating unit of a business, that have
been made by the Issuer or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Calculation Date shall be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
discontinued operations, mergers and consolidations (and the reduction of any
associated fixed charge obligations and the change in EBITDA resulting
therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Issuer or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, discontinued operation, merger or consolidation, in
each case with respect to an operating unit of a business, that would have
required adjustment pursuant to this definition, then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect thereto for such period as if
such Investment, acquisition, disposition, discontinued operation, merger or
consolidation had occurred at the beginning of the applicable four-quarter
period. For purposes of this definition, whenever pro forma effect is to be
given to any transaction, the pro forma calculations shall be made in good faith
by a responsible financial or accounting officer of the Issuer. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligation has a remaining term in excess of 12
months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by a responsible financial or accounting
officer of the Issuer to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP.
For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Issuer may designate. Any such pro forma calculation may
include adjustments appropriate, in the reasonable determination of the Issuer
as set forth in an Officers' Certificate, to reflect operating expense
reductions reasonably expected to result from any acquisition or merger.
"Fixed Charges" means, with respect to any Person for any period, the sum
of:
(i) Consolidated Interest Expense of such Person for such period; and
(ii) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Preferred Stock or Disqualified Stock of
such Person and its Subsidiaries.
"Foreign Subsidiary" means a Restricted Subsidiary not organized or
existing under the laws of the United States of America or any state or
territory thereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date. For the purposes of the
indenture, the term "consolidated" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary, but the interest of such Person in an Unrestricted
Subsidiary will be accounted for as an Investment.
"GE Capital" means General Electric Capital Corporation and its Affiliates.
"Government Securities" means securities that are:
(i) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged; or
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(ii) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America,
which, in each case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to
any such Government Securities or a specific payment of principal of or interest
on any such Government Securities held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Securities or the specific payment of
principal of or interest on the Government Securities evidenced by such
depository receipt.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"Guarantee" means any guarantee of the obligations of the Issuer under the
indenture and the Notes by any Person in accordance with the provisions of the
indenture.
"Guarantor" means any Person that Incurs a Guarantee; provided that upon
the release or discharge of such Person from its Guarantee in accordance with
the indenture, such Person ceases to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(i) currency exchange, interest rate or commodity swap agreements,
currency exchange, interest rate or commodity cap agreements and currency
exchange, interest rate or commodity collar agreements; and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity
prices.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
person at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person:
(i) the principal and premium (if any) of any indebtedness of such
Person, whether or not contingent:
(a) in respect of borrowed money;
(b) evidenced by bonds, notes, debentures or similar instruments or
letters of credit or bankers' acceptances (or, without duplication,
reimbursement agreements in respect thereof);
(c) representing the deferred and unpaid purchase price of any
property, except any such balance that constitutes a trade payable or
similar obligation to a trade creditor due within six months from the
date on which it is Incurred, in each case Incurred in the ordinary
course of business, which purchase price is due more than six months
after the date of placing the property in service or taking delivery and
title thereto;
(d) in respect of Capitalized Lease Obligations; or
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(e) representing any Hedging Obligations, if and to the extent that
any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability on a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance
with GAAP;
(ii) to the extent not otherwise included, any obligation of such
Person to be liable for, or to pay, as obligor, guarantor or otherwise, on
the Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), and
(iii) to the extent not otherwise included, Indebtedness of another
Person secured by a Lien on any asset owned by such Person (whether or not
such Indebtedness is assumed by such Person);
provided, however, that the amount of such Indebtedness will be the
lesser of:
(a) the Fair Market Value of such asset at such date of
determination; and
(b) the amount of such Indebtedness of such other Person;
provided, further, that any obligation of the Issuer or any Restricted
Subsidiary in respect of:
(i) minimum guaranteed commissions, or other similar payments, to
clients; or
(ii) indemnification obligations to clients,
in each case pursuant to contracts to provide services to clients entered into
in the ordinary course of business shall be deemed not to constitute
Indebtedness.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm or consultant to Persons engaged in a Similar Business,
in each case of nationally recognized standing that is, in the good faith
determination of the Issuer, qualified to perform the task for which it has been
engaged.
"Initial Purchasers" means Chase Securities Inc. and Goldman, Sachs & Co.
"Investment Grade Securities" means:
(i) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(other than Cash Equivalents);
(ii) debt securities or debt instruments (other than those issued by
Blackstone, GE Capital or any of their Affiliates) with a rating of BBB-or
higher by S&P or Baa3 or higher by Moody's or the equivalent of such rating
by such rating organization, or if no rating of S&P or Moody's then exists,
the equivalent of such rating by any other nationally recognized securities
rating agency, but excluding any debt securities or instruments
constituting loans or advances among the Issuer and its Subsidiaries; and
(iii) investments in any fund that invests exclusively in investments
of the type described in clauses (i) and (ii) which fund may also hold
immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit and advances to customers and commission, travel and similar
advances to officers, employees and consultants made in the ordinary course of
business), purchases or other acquisitions for consideration (including
agreements providing for the adjustment of purchase price) of Indebtedness,
Equity Interests or other securities issued by any other Person and investments
that are required by GAAP to be classified on the balance sheet of the Issuer in
the same manner as the other investments included in this definition to the
extent such transactions involve the transfer of cash or other property.
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For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "--Limitation on Restricted Payments:"
(i) "Investments" shall include the portion (proportionate to the Issuer's
equity interest in such Subsidiary) of the Fair Market Value of the net assets
of a Subsidiary of the Issuer at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to:
(x) the Issuer's "Investment" in such Subsidiary at the time of such
redesignation; less
(y) the portion (proportionate to the Issuer's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of such Subsidiary
at the time of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its Fair Market Value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"Issue Date" means March 4, 1999.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
"Management Group" means the group consisting of the directors, executive
officers and other personnel of the Issuer and Volume Holdings on the Issue
Date.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends.
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received in respect of or upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale
and any cash payments received by way of deferred payment of principal pursuant
to a note or installment receivable or otherwise, but only as and when received,
but excluding the assumption by the acquiring person of Indebtedness relating to
the disposed assets or other considerations received in any other noncash form),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
and any relocation expenses Incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than pursuant to the second paragraph of the
covenant described under "--Asset Sales") to be paid as a result of such
transaction, and any deduction of appropriate amounts to be provided by the
Issuer as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by the Issuer after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and bankers' acceptances), damages
and other liabilities payable under the documentation governing any
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Indebtedness; provided that Obligations with respect to the Notes shall not
include fees or indemnifications in favor of the Trustee and other third parties
other than the Holders of the Notes.
"Offering Memorandum" means the Offering Memorandum dated February 25,
1999, issued by the Issuer in connection with the issue of the outstanding
Notes.
"Officer" means the Chairman of the Board, the President, any Executive
Vice President, Senior Vice President or Vice President, the Treasurer or the
Secretary of the Issuer.
"Officers' Certificate" means a certificate signed on behalf of the Issuer
by two Officers of the Issuer, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Issuer that meets the requirements set forth in the
indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Trustee.
"Pari Passu Indebtedness" means:
(i) with respect to the Issuer, the Notes and any Indebtedness which
ranks pari passu in right of payment to the Notes and;
(ii) with respect to any Guarantor, its Guarantee and any Indebtedness
which ranks pari passu in right of payment to such Guarantor's Guarantee.
"Permitted Asset Swap" means any one or more transactions in which the
Issuer or any Restricted Subsidiary exchanges assets for consideration
consisting of:
(i) assets used or useful in a Similar Business; and
(ii) any cash or Cash Equivalents, provided that such cash or Cash
Equivalents will be considered Net Proceeds from an Asset Sale.
"Permitted Holders" means Blackstone, GE Capital and the Management Group.
"Permitted Investments" means:
(i) any Investment in the Issuer or any Restricted Subsidiary;
(ii) any Investment in Cash Equivalents or Investment Grade
Securities;
(iii) any Investment by the Issuer or any Restricted Subsidiary of the
Issuer in a Person that is primarily engaged in a Similar Business if as a
result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Restricted Subsidiary:
(iv) any Investment in securities or other assets not constituting
Cash Equivalents and received in connection with an Asset Sale made
pursuant to the provisions of "--Asset Sales" or any other disposition of
assets not constituting an Asset Sale;
(v) any Investment existing on the Issue Date;
(vi) advances to employees not in excess of $5.0 million outstanding
at any one time in the aggregate;
(vii) any Investment acquired by the Issuer or any of its Restricted
Subsidiaries:
(a) in exchange for any other Investment or accounts receivable
held by the Issuer or any such Restricted Subsidiary in connection with
or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts
receivable; or
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(b) as a result of a foreclosure by the Issuer or any of its
Restricted Subsidiaries with respect to any secured Investment or other
transfer of title with respect to any secured Investment in default;
(viii) Hedging Obligations permitted under clause (j) of the
"--Limitations of Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock" covenant;
(ix) additional Investments having an aggregate Fair Market Value,
taken together with all other Investments made pursuant to this clause (ix)
that are at that time outstanding, not to exceed the greater of 7.5% of
Total Assets or $10.0 million at the time of such Investment (with the Fair
Market Value of each Investment being measured at the time made and without
giving effect to subsequent changes in value);
(x) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
expenses, in each case Incurred in the ordinary course of business;
(xi) Investments the payment for which consists of Equity Interests of
the Issuer (other than Disqualified Stock); provided, however, that such
Equity Interests will not increase the amount available for Restricted
Payments under clause (c) of the "--Limitation on Restricted Payments"
covenant;
(xii) any transaction to the extent it constitutes an Investment that
is permitted by and made in accordance with the provisions of the second
paragraph of the covenant described under "--Transactions with Affiliates"
(except transactions described in clauses (ii), (vi) and (vii) of such
paragraph);
(xiii) Investments consisting of the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons;
(xiv) Guarantees issued in accordance with the "--Limitations of
Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock" covenant;
(xv) any Investment by Restricted Subsidiaries in other Restricted
Subsidiaries and Investments by Subsidiaries that are not Restricted
Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries;
(xvi) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or purchases of contract
rights or licenses or leases of intellectual property, in each case in the
ordinary course of business;
(xvii) loans and advances to Volume Holdings not to exceed $20.0
million in aggregate principal amount at any time outstanding provided that
any cash proceeds thereof shall be immediately contributed by Volume
Holdings to the Issuer or used to repay or service existing Indebtedness of
Volume Holdings to the Issuer (provided that the amount of such
contributions or repayments will not increase the amount available for
Restricted Payments under clause (c) of the covenant described under
"--Limitation on Restricted Payments");
(xviii) loans and advances to VSI Management Direct L.P. and/or
Recreational Services, L.L.C. and/or current or former management personnel
of the Issuer not to exceed $7.5 million in aggregate principal amount at
any time outstanding, the proceeds of which will be used to purchase or
redeem, directly or indirectly, shares of Capital Stock of the Issuer or
Volume Holdings or to purchase limited partnership interests in VSI
Management Direct L.P. or Recreational Services, L.L.C., and
(xix) loans to clients made in connection with entering into contracts
to provide services not to exceed $15.0 million in any fiscal year or $30.0
million in aggregate amount at any time outstanding.
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"Permitted Junior Securities" shall mean debt or equity securities of the
Issuer or any successor corporation issued pursuant to a plan of reorganization
or readjustment of the Issuer that are subordinated to the payment of all
then-outstanding Senior Indebtedness of the Issuer at least to the same extent
that the Notes are subordinated to the payment of all Senior Indebtedness of the
Issuer on the Issue Date, so long as to the extent that any Senior Indebtedness
of the Issuer outstanding on the date of consummation of any such plan of
reorganization or readjustment is not paid in full in cash on such date, either:
(a) the holders of any such Senior Indebtedness not so paid in full in
cash have consented to the terms of such plan of reorganization or
readjustment; or
(b) such holders receive securities which constitute Senior
Indebtedness and which have been determined by the relevant court to
constitute satisfaction in full in cash of any Senior Indebtedness not paid
in full in cash.
"Permitted Liens" means, with respect to any Person:
(a) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review;
(c) Liens for taxes, assessments or other governmental charges not yet
due or payable or subject to penalties for nonpayment or which are being
contested in good faith by appropriate proceedings;
(d) Liens in favor of issuers of performance and surety bonds or bid
bonds or completion guarantees or with respect to other regulatory
requirements or letters of credit issued pursuant to the request of and for
the account of such Person in the ordinary course of its business;
(e) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the
operation of the business of such Person;
(f) Liens securing Indebtedness permitted to be incurred pursuant to
clause (d) of the second paragraph of the covenant described under
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock";
(g) Liens to secure Indebtedness permitted pursuant to clause (a) of
the second paragraph of the covenant described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock";
(h) Liens existing on the Issue Date;
(i) Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; provided, however, that such Liens are not
created or Incurred in connection with, or in contemplation of, such other
Person becoming such a Subsidiary; provided further, however,
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that such Liens may not extend to any other property owned by the Issuer or
any Restricted Subsidiary;
(j) Liens on property at the time the Issuer or a Restricted
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Issuer or any Restricted
Subsidiary; provided, however, that such Liens are not created or Incurred
in connection with, or in contemplation of, such acquisition; provided
further, however, that the Liens may not extend to any other property owned
by the Issuer or any Restricted Subsidiary;
(k) Liens securing Indebtedness or other obligations of a Restricted
Subsidiary owing to the Issuer or another Restricted Subsidiary permitted
to be incurred in accordance with the covenant described under
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock";
(l) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the indenture, secured by a
Lien on the same property securing such Hedging Obligations;
(m) Liens on specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(n) leases and subleases of real property which do not materially
interfere with the ordinary conduct of the business of the Issuer or any of
its Restricted Subsidiaries;
(o) Liens arising from Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Issuer and its
Restricted Subsidiaries in the ordinary course of business;
(p) Liens in favor of the Issuer;
(q) Liens on equipment of the Issuer granted in the ordinary course of
business to the Issuer's client at which such equipment is located;
(r) Liens encumbering deposits made in the ordinary course of business
to secure obligations arising from statutory, regulatory, contractual or
warranty requirements, including rights of offset and set-off;
(s) Liens on the Equity Interests of Unrestricted Subsidiaries
securing obligations of Unrestricted Subsidiaries not otherwise prohibited
by the indenture;
(t) Liens to secure Indebtedness permitted by clause (l) of the second
paragraph of the covenant described under "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; and
(u) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals
or replacements) as a whole, or in part, of any Indebtedness secured by any
Lien referred to in the foregoing clauses (f), (g), (h), (i), (j), (k),
(l) and (t);
provided, however, that
(x) such new Lien shall be limited to all or part of the same property that
secured the original Lien (plus improvements on such property); and
(y) the Indebtedness secured by such Lien at such time is not increased to
any amount greater than the sum of:
(A) the outstanding principal amount or, if greater, committed amount
of the Indebtedness described under clauses (f), (g), (h), (i), (j), (k),
(l) or (t) at the time the original Lien became a Permitted Lien under the
indenture; and
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(B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Issuer or a Restricted Subsidiary whereby the
Issuer or a Restricted Subsidiary transfers such property to a Person and the
Issuer or such Restricted Subsidiary leases it from such Person, other than
leases between the Issuer and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Credit Documents" means the collective reference to the Credit
Agreement, the notes issued pursuant thereto and the guarantees thereof, and the
collateral documents relating thereto.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Similar Business" means a business, the majority of whose revenues are
derived from the provision of food, beverage, catering, merchandise, management
or other services at stadiums, convention centers, ball parks, concert halls,
theaters, seaports, airports, golf courses, arenas, racetracks, parks, malls,
zoos, bandstands, or other recreational venues, or the activities of the Issuer
and its Subsidiaries as of the Issue Date or any business or activity that is
reasonably similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"Specified Cash Contributions" means the aggregate amount of cash
contributions (other than Excluded Contributions) made to the capital of the
Issuer which are designated as "Specified Cash Contributions" pursuant to an
Officers' Certificate.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Indebtedness" means:
(a) with respect to the Issuer, any Indebtedness of the Issuer which
is by its terms subordinated in right of payment to the Notes; and
(b) with respect to any Guarantor, any Indebtedness of such Guarantor
which is by its terms subordinated in right of payment to its Guarantee.
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"Subsidiary" means, with respect to any Person:
(i) any corporation, association or other business entity (other than
a partnership, joint venture or limited liability company) of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, by such Person
or one or more of the other Subsidiaries of that Person or a combination
thereof; and
(ii) any partnership, joint venture or limited liability company of
which:
(x) more than 50% of the capital accounts, distribution rights,
total equity and voting interests or general and limited partnership
interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of
that Person or a combination thereof, whether in the form of membership,
general, special or limited partnership interests or otherwise; and
(y) such Person or any Wholly Owned Restricted Subsidiary of such
Person is a controlling general partner or otherwise controls such
entity.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the indenture.
"Total Assets" means the total consolidated assets of the Issuer and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Issuer.
"Trustee" means the party named as such in the indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means:
(i) any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Trustee who customarily performs functions similar to those performed by
the Persons who at the time shall be such officers, respectively, or to
whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject; and
(ii) who shall have direct responsibility for the administration of
the indenture.
"Unrestricted Subsidiary" means:
(i) any Subsidiary of the Issuer that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and
(ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Issuer (including any
newly acquired or newly formed Subsidiary of the Issuer) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests or Indebtedness of, or owns or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that the Subsidiary to be so
designated and its Subsidiaries do not at the time of designation have and do
not thereafter Incur any Indebtedness pursuant to which the lender has recourse
to any of the assets of the Issuer or any of its Restricted Subsidiaries;
provided further, however, that either:
(a) the Subsidiary to be so designated has total consolidated assets of
$1,000 or less; or
(b) if such Subsidiary has consolidated assets greater than $1,000, then
such designation would be permitted under the covenant entitled "--Limitation on
Restricted Payments."
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The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation:
(x) (1) the Issuer could Incur $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock"; or
(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted
Subsidiaries would be greater than such ratio for the Issuer and its Restricted
Subsidiaries immediately prior to such designation, in each case on a pro forma
basis taking into account such designation; and
(y) no Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing:
(i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Disqualified Stock multiplied by the amount of such payment, by
(ii) the sum of all such payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The Issuer, the initial purchasers in connection with the issuance of the
outstanding Notes and the guarantors entered into an exchange and registration
rights agreement on March 4, 1999. Pursuant to the exchange and registration
rights agreement, the Issuer and the guarantors agreed to:
o file with the Commission on or prior to 90 days after the date of
issuance of the outstanding Notes a registration statement on an
appropriate form under the Securities Act relating to a registered
exchange offer for the outstanding Notes under the Securities Act; and
o use their reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
within 180 days after the issuance of the outstanding Notes.
As soon as practicable after the effectiveness of the exchange offer
registration statement, the Issuer will offer to the holders of Transfer
Restricted Securities (as defined below) who are not prohibited by any law or
policy of the Commission from participating in the Exchange Offer the
opportunity to exchange their Transfer Restricted Securities for an issue of a
second series of notes that are identical in all material respects to the
outstanding Notes (except that the exchange Notes will not contain terms with
respect to transfer restrictions) and that would be registered under the
Securities Act. The Issuer and the guarantors will keep the exchange offer open
for not less than 20 business days (or longer, if required by applicable law)
after the date on which notice of the Exchange offer is mailed to the holders of
the Notes.
If:
o because of any change in law or applicable interpretations thereof by the
staff of the Commission, the Issuer is not permitted to effect the
exchange offer as contemplated hereby;
o any outstanding Notes validly tendered pursuant to the exchange offer are
not exchanged for exchange Notes within 210 days after the Issue Date;
o the initial purchasers so request with respect to outstanding Notes not
eligible to be exchanged for exchange Notes in the exchange offer;
o any applicable law or interpretations do not permit any holder of
outstanding Notes to participate in the exchange offer;
o any holder of outstanding Notes that participates in the exchange offer
does not receive freely transferable exchange Notes in exchange for
tendered outstanding Notes; or
o the Issuer so elects,
then the Issuer and the guarantors will file with the Commission a shelf
registration statement to cover resales of Transfer Restricted Securities by
such holders who satisfy certain conditions relating to the provision of
information in connection with the shelf registration statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each outstanding Note
until:
o the date on which such outstanding Note has been exchanged for a freely
transferable exchange Note in the exchange offer;
o the date on which such outstanding Note has been effectively registered
under the Securities Act and disposed of in accordance with the shelf
registration statement; or
o the date on which such outstanding Note is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to
Rule 144(k) under the Securities Act.
The Issuer and each of the guarantors will use their reasonable best
efforts to have the exchange offer registration statement or, if applicable, the
shelf registration statement declared effective by the Commission as promptly as
practicable after the filing thereof. Unless the exchange offer would not be
permitted by a policy of the Commission, the Issuer will commence the exchange
offer and will use its reasonable best efforts to consummate the exchange offer
as promptly as practicable, but in any event
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prior to 210 days after the issuance of the outstanding Notes. If applicable,
the Issuer and each of the guarantors will their reasonable best efforts to keep
the shelf registration statement effective for a period of two years after the
issuance of the outstanding Notes or such shorter period when all outstanding
Notes covered by the shelf registration statement have been sold in the manner
set forth and as contemplated in the shelf registration statement, or when the
outstanding Notes become eligible for resale pursuant to Rule 144A under the
Securities Act without volume restrictions, if any.
If:
o the applicable registration statement is not filed with the Commission on
or prior to 90 days after the issuance of the outstanding Notes (or in
the case of a shelf registration statement required to be filed in
response to a change in law or applicable interpretations of the
Commission's staff, if later, within 60 days after publication of the
change in law or interpretations, but in no event before 90 days after
the issuance of the outstanding Notes);
o the exchange offer registration statement or the shelf registration
statement, as the case may be, is not declared effective within 180 days
after the issuance of the outstanding Notes (or in the case of a shelf
registration statement required to be filed in response to a change in
law or applicable interpretations of the Commission's staff, if later,
within 60 days after publication of the change in law or interpretations,
but in no event before 180 days after the issuance of the outstanding
Notes);
o the exchange offer is not consummated on or prior to 210 days after the
issuance of the outstanding Notes (other than in the event the Issuer
files a shelf registration statement); or
o the shelf registration statement is filed and declared effective within
180 days after the issuance of the outstanding Notes (or in the case of a
shelf registration statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later,
within 60 days after publication of the change in law or interpretations,
but in no event before 180 days after the issuance of the outstanding
Notes) but will thereafter cease to be effective (at any time that the
Issuer and the guarantors are obligated to maintain the effectiveness
thereof) without being succeeded within 90 days by an additional
registration statement filed and declared effective;
(each such event referred to above, a "Registration Default"), the Issuer and
the guarantors will be obligated to pay liquidated damages to each holder of
Transfer Restricted Securities, during the period of one or more such
Registration Defaults, in an amount equal to $0.192 per week per $1,000
principal amount of the outstanding Notes constituting Transfer Restricted
Securities held by such holders until the applicable registration statement is
filed, the exchange offer registration statement is declared effective and the
exchange offer is consummated or the shelf registration statement is declared
effective or again becomes effective, as the case may be. All accrued liquidated
damages will be paid to holders in the same manner as interest payments on the
outstanding Notes on semi-annual payment dates which correspond to interest
payment dates for the outstanding Notes. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
Notwithstanding the foregoing, the Issuer and the guarantors may issue a
notice that the shelf registration statement is unusable pending the
announcement of a material corporate transaction and may issue any notice
suspending use of the shelf registration statement required under applicable
securities laws to be issued and, in the event that the aggregate number of days
in any consecutive twelve-month period for which all notices are issued and
effective exceeds 60 days in the aggregate, then the Issuer will be obligated to
pay liquidated damages to each holder of Transfer Restricted Securities in an
amount equal to $0.192 per week per $1,000 principal amount of securities
constituting Transfer Restricted Securities held by such holder. Upon the Issuer
declaring that the shelf registration statement is usable after the period of
time described in the preceding sentence, accrual of liquidated damages shall
cease; provided, however, that if after any such cessation of the accrual of
liquidated damages the shelf registration statement again ceases to be usable
beyond the period permitted above, liquidated damages will again accrue.
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The exchange and registration rights agreement also provides that the
Issuer and the guarantors:
o shall make available for a period of 180 days after the consummation of
the exchange offer a prospectus meeting the requirements of the
Securities Act to any broker-dealer for use in connection with any resale
of any such exchange Notes; and
o shall pay all expenses incident to the exchange offer (including the
expense of one counsel to the holders of the Notes) and will jointly and
severally indemnify certain holders of the Notes (including any
broker-dealer) against certain liabilities, including liabilities under
the Securities Act.
A broker-dealer which delivers such a prospectus to purchasers in
connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
exchange and registration rights agreement (including certain indemnification
rights and obligations).
Each holder of outstanding Notes who wishes to exchange such Notes for
exchange Notes in the exchange offer will be required to make certain
representations, including representations that:
o any exchange Notes to be received by it will be acquired in the ordinary
course of its business;
o it has no arrangement or understanding with any person to participate in
the distribution of the exchange Notes; and
o it is not an "affiliate" (as defined in Rule 405 under the Securities
Act) of the Issuer, or if it is an affiliate, that it will comply with
the registration and prospectus delivery requirements of the Securities
Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
exchange Notes. If the holder is a broker-dealer that will receive exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such exchange Notes.
Holders of outstanding Notes will be required to make certain
representations to the Issuer (as described above) in order to participate in
the exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement in order to have their
outstanding Notes included in the shelf registration statement and benefit from
the provisions regarding liquidated damages set forth in the preceding
paragraphs. A holder who sells Notes pursuant to the shelf registration
statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the exchange
and registration rights agreement which are applicable to such a holder
(including certain indemnification obligations).
For so long as the Notes are outstanding, the Issuer and the guarantors
will continue to provide to holders of the Notes the information required by
Rule 144A(d)(4) under the Securities Act.
The foregoing description of the exchange and registration rights agreement
is a summary only. It is qualified by reference to all provisions of the
exchange and registration rights agreement. The Issuer will provide a copy of
the exchange and registration rights agreement to holders of outstanding Notes
identified to the Issuer by the initial purchasers upon request.
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BOOK-ENTRY; DELIVERY AND FORM
The exchange Notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest
coupons (referred to as the "Global Notes") that will be deposited with, or on
behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, on
behalf of the acquirors of exchange Notes represented thereby for credit to the
respective accounts of the acquirors (or to such other accounts as they may
direct) at DTC, or Morgan Guaranty Trust Company of New York; Brussels Office,
as operator of the Euroclear System, or Cedel Bank, societe anonyme. See "The
Exchange Offer--Book Entry Transfer."
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, solely to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in physical, certificated form (referred to as "Certificated Notes")
except in the limited circumstances described below.
All interests in the Global Notes, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear of Cedel may also be subject to the procedures
and requirements of such systems.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. Neither
the Issuer nor the initial purchasers take any responsibility for these
operations or procedures, and investors are urged to contact the relevant system
or its participants directly to discuss these matters.
DTC has advised the Issuer that it is:
o a limited purpose trust company organized under the laws of the State of
New York;
o a "banking organization" within the meaning of the New York Banking Law;
o a member of the Federal Reserve System;
o "clearing corporation" within the meaning of the Uniform Commercial Code,
as amended; and
o a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants (collectively
referred to as the "Participants") and facilitates the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical transfer and delivery of certificates. DTC's Participants include
securities brokers and dealers (including the initial purchasers), banks and
trust companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively referred to as the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Investors who are not Participants
may beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Issuer expects that pursuant to procedures established by DTC ownership
of the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the interests
of Participants) and the records of Participants and the Indirect Participants
(with respect to the interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through
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Participants, the ability of a person having an interest in Notes represented by
a Global Note to pledge or transfer such interest to persons or entities that do
not participate in DTC's system, or to otherwise take actions in respect of such
interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Notes under the indenture or
such Global Note. The Issuer understands that under existing industry practice,
in the event that the Issuer requests any action of holders of Notes, or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participants would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Issuer nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, and premium, if any, Liquidated
Damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the Global Note representing such Notes
under the indenture. Under the terms of the indenture, the Issuer and the
Trustee may treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving payment
thereon and for any and all other purposes whatsoever. Accordingly, neither the
Issuer nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to owners of beneficial interests in a Global Note
(including principal, premium, if any, Liquidated Damages, if any, and
interest). Payments by the Participants and the Indirect Participants to the
owners of beneficial interests in a Global Note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may be,
by the counterparty in such system in accordance with the rules and procedures
and within the established deadlines (Brussels time) of such system. Euroclear
or Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Notes in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such
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crediting will be reported to the relevant Euroclear or Cedel participant,
during the securities settlement processing day (which must be a business day
for Euroclear and Cedel) immediately following the settlement date of DTC. Cash
received in Euroclear or Cedel as a result of sales of interest in a Global
Security by or through a Euroclear or Cedel participant to a Participant in DTC
will be received with value on the settlement date of DTC but will be available
in the relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuer nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED NOTES
If:
o the Issuer notifies the Trustee in writing that DTC is no longer willing
or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation;
o the Issuer, at its option, notifies the Trustee in writing that it elects
to cause the issuance of Notes in definitive form under the indenture; or
o upon the occurrence of certain other events as provided in the indenture,
then, upon surrender by DTC of the Global Notes, Certificated Notes will be
issued to each person that DTC identifies as the beneficial owner of the Notes
represented by the Global Notes. Upon any such issuance, the Trustee is required
to register such Certificated Notes in the name of such person or persons (or
the nominee of any thereof) and cause the same to be delivered thereto.
Neither the Issuer nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
YEAR 2000
DTC management is aware that some computer applications, systems, and the
like for processing data (referred to as "Systems") that are dependant upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "year 2000 problems." DTC has informed its Participants and other
members of the financial community (referred to as the "industry") that it has
developed and is implementing a program so that its Systems, as the same relate
to the timely payment of distributions (including principal and income payments)
to securityholders, book-entry deliveries, and settlement of trades within DTC,
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within appropriate
time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
o impress upon them the importance of such services being year 2000
compliant; and
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o determine the extent of their efforts for year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the
process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
EXCHANGE OF NOTES
The exchange of outstanding Notes for exchange Notes in the exchange offer
will not constitute a taxable event to holders. Consequently, no gain or loss
will be recognized by a holder upon receipt of an exchange Note, the holding
period of the exchange Note will include the holding period of the outstanding
Note and the basis of the exchange Note will be the same as the basis of the
outstanding Note immediately before the exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR
EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS
AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
CERTAIN UNITED STATES TAX CONSEQUENCES TO FOREIGN HOLDERS
The following summary describes the material United States federal income
and estate tax consequences of the ownership of Notes as of the date hereof. It
deals only with Notes held as capital assets by Non-United States Holders. As
used herein, the term "Non-United States Holder" means a beneficial owner of a
Note that is not (1) a citizen or resident of the United States, (2) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (3) an estate the income of
which is subject to U.S. federal income taxation regardless of its source and
(4) a trust which is (x) subject to the supervision of a court within the United
States and the control of one or more United States persons as described in
section 7701(a)(30) and (y) that has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person.
THE DISCUSSION SET FORTH BELOW IS BASED UPON THE PROVISIONS OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND REGULATIONS, RULINGS AND
JUDICIAL DECISIONS THEREUNDER AS OF THE DATE HEREOF. SUCH AUTHORITIES MAY BE
REPEALED, REVOKED OR MODIFIED SO AS TO RESULT IN FEDERAL INCOME TAX CONSEQUENCES
DIFFERENT FROM THOSE DISCUSSED BELOW. FURTHERMORE, THIS SUMMARY DOES NOT DISCUSS
ANY ASPECT OF STATE, LOCAL OR FOREIGN TAXATION. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
NON-UNITED STATES HOLDERS
Under present United States federal and estate tax law, and subject to the
discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Issuer or any paying agent of
principal or interest on a Note owned by a Non-United States Holder,
provided (1) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Issuer entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (2) the beneficial owner is not a
controlled foreign corporation that is related to the Issuer through stock
ownership, (3) the beneficial owner is not a bank whose receipt of interest
on a Note is described in section 881(c)(3)(A) of the Code and (4) the
beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder; and
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of a Note;
and
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(c) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Issuer entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Note would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(4) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Issuer with a statement to the effect that the beneficial owner is
not a United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an Internal Revenue Service ("IRS") Form W-8 (or successor form)) or
(2) a financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (a)(4) above may also be satisfied with other
documentary evidence for interest paid after December 31, 1999 with respect to
an offshore account or through certain foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest made
to such Non-United States Holder will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides the Issuer or its paying agent, as the
case may be, with a properly executed (1) IRS Form 1001 (or successor form)
claiming an exemption from or reduction of withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under the Final Regulations, Non-United States Holders will
generally be required to provide IRS Form W-8 in lieu of the IRS Form 1001 and
IRS Form 4224, although alternative documentation may be applicable in certain
situations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Note is effectively connected with the conduct
of such trade or business, the Non-United States Holder, although exempt from
the withholding tax discussed above (provided the Non-United States Holder files
the appropriate certification with the Issuer or its agent), will be subject to
United States federal income tax on such interest on a net income basis in the
same manner as if it were a United States person. In addition, if such holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose interest on a Note will be included in such
foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (1) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder, or (2) in the
case of a Non-United States Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
Special rules may apply to certain Non-United States Holders, such as
controlled foreign corporations, passive foreign investment companies and
foreign personal holding companies, that are subject to special treatment under
the Code. Such entities should consult their own tax advisors to determine the
United States federal, state, local and other tax consequences that may be
relevant to them.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
No information reporting or backup withholding tax (which is a withholding
tax imposed at the rate of 31% on certain payments to persons who fail to
furnish the information required under United States information reporting
requirements) will be required with respect to payments made by the Issuer or
any paying agent to Non-United States Holders if a statement described in
(a)(4) under "Non-United States Holders" has been received and the payor does
not have actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting generally will
not apply if payments of the principal or interest on a Note are paid by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Note, or if a foreign office of a broker (as defined in
applicable Treasury regulations) pays the proceeds of the sale of a Note to the
owner thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a United States person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, or, for taxable years beginning after December 31, 1999, a foreign
partnership, in which one or more United States persons, in the aggregate, own
more than 50% of the income or capital interests in the partnership or which is
engaged in a trade or business in the United States, such payments will not be
subject to backup withholding but will be subject to information reporting,
unless (1) such custodian, nominee, agent or broker has documentary evidence in
its records that the beneficial owner is not a United States Holder and certain
other conditions are met or (2) the beneficial owner otherwise establishes an
exemption.
Payments of principal or interest on a Note paid to the beneficial owner of
a Note by a United States office of a custodian, nominee or agent, or the
payment by the United States office of a broker of the proceeds of sale of a
Note will be subject to both backup withholding and information reporting unless
the beneficial owner provides the statement referred to in (a)(4) above and the
payor does not have actual knowledge that the beneficial owner is a United
States Holder or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
143
<PAGE>
PLAN OF DISTRIBUTION
Until , 1999 (90 days after the date of this prospectus),
all dealers effecting transactions in the exchange Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Each broker-dealer that receives exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange Notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange Notes received in
exchange for outstanding Notes only where such outstanding Notes were acquired
as a result of market-making activities or other trading activities. The Issuer
has agreed that it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale for a
period of 180 days from the date on which the exchange offer is consummated, or
such shorter period as will terminate when all outstanding Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for exchange Notes and such
exchange Notes have been resold by such broker-dealers.
The Issuer will not receive any proceeds from any sale of exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any exchange Notes. Any broker-dealer that
resells exchange Notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such exchange Notes may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any such resale of exchange Notes, and
any commissions or concessions received by any such persons, may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days from the date on which the exchange offer is
consummated, or such shorter period as will terminate when all outstanding Notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities have been exchanged for exchange Notes
and such exchange Notes have been resold by such broker-dealers, the Issuer will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. The Issuer has agreed to pay all expenses incident
to the exchange offer other than commissions or concessions of any brokers or
dealers and the fees of any counsel or other advisors or experts retained by the
holders of outstanding Notes, except as expressly set forth in the exchange and
registration rights agreement, and will indemnify the holders of outstanding
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
144
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes offered
hereby will be passed upon for the Issuer by Simpson Thacher & Bartlett, New
York, New York.
EXPERTS
The consolidated financial statements of Volume Holdings for the fiscal
years ended December 28, 1996, December 27, 1997 and December 29, 1998 included
in this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing elsewhere in this Prospectus, and
are included in reliance upon that report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Service America as of
December 27, 1997 and December 28, 1996, and for the fifty-two week period ended
December 27, 1997 and the thirty-nine week period ended December 28, 1996,
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement of Form S-4
under the Securities Act with respect to the exchange Notes being offered
hereby. This prospectus, which forms a part of the registration statement, does
not contain all of the information set forth in the registration statement. You
should refer to the registration statement for further information. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such statement is
qualified by the provision in such exhibit to which reference is hereby made.
We are not currently subject to the informational requirements of the
Securities Exchange Act of 1934. As a result of this offering of these
securities, we will become subject to the informational requirements of the
Securities Exchange Act of 1934. Accordingly, we will file reports and such
other information with the Commission unless and until we obtain an exemption
from such requirement. The registration statement, such other reports and other
information can be inspected and copied at the Public Reference Section of the
Securities and Exchange Commission located at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional public reference
facilities maintained by the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material, including copies of all or any portion of the registration
statement, can be obtained from the Public Reference Section of the Securities
and Exchange Commission at prescribed rates. Such material may be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
Furthermore, we agree that, even if we are not required to file periodic
reports and information with the Commission, for so long as any exchange Note
remains outstanding we will furnish to you the information that would be
required to be furnished by us under Section 13 of the Securities Exchange Act
of 1934.
145
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
VOLUME SERVICES AMERICA HOLDINGS, INC.
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets--As of December 30, 1997 and December 29, 1998................................ F-3
Consolidated Statements of Operations and Comprehensive Loss--For the years ended December 31, 1996,
December 30, 1997 and December 29, 1998................................................................. F-4
Consolidated Statements of Stockholders' Equity--For the years ended December 31, 1996, December 30, 1997
and December 29, 1998................................................................................... F-5
Consolidated Statements of Cash Flows--For the years ended December 31, 1996, December 30, 1997 and
December 29, 1998....................................................................................... F-6
Notes to Consolidated Financial Statements--For the years ended December 31, 1996, December 30, 1997 and
December 29, 1998....................................................................................... F-8
Consolidating Balance Sheet--December 29, 1998.......................................................... F-22
Consolidating Statement of Operations and Comprehensive Loss--For the year ended
December 29, 1998.................................................................................... F-23
Consolidating Condensed Statement of Cash Flows--For the year ended December 29, 1998................... F-24
Consolidated Balance Sheets (Unaudited)--December 29, 1998 and March 30, 1999........................... F-25
Consolidated Statements of Operations and Comprehensive Losses (Unaudited)--For the thirteen week
periods ended March 31, 1998 and March 30, 1999...................................................... F-26
Consolidated Statements of Stockholders' Equity (Deficit)(Unaudited)--December 29, 1998 and March 30,
1999................................................................................................. F-27
Consolidated Statements of Cash Flows (Unaudited)--For the thirteen week periods ended March 31, 1998
and March 30, 1999................................................................................... F-28
Notes to Consolidated Financial Statements (Unaudited)--For the thirteen week periods ended March 30,
1999 and March 31, 1998.............................................................................. F-29
Consolidating Balance Sheet--As of March 30, 1999....................................................... F-32
Consolidating Condensed Statement of Operations and Comprehensive Loss--For the year ended March 30,
1999................................................................................................. F-33
Consolidating Condensed Statement of Cash Flows--For the year ended March 30, 1999...................... F-34
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
Report of Independent Accountants......................................................................... F-35
Consolidated Balance Sheets--As of December 27, 1997 and December 28, 1996................................ F-36
Consolidated Statements of Operations and Comprehensive (Loss) Income--For the fifty-two week period ended
December 27, 1997 and the thirty-nine week period ended December 28, 1996............................... F-37
Consolidated Statements of Stockholders' Equity (Deficit)--For the fifty-two week period ended
December 27, 1997 and the thirty-nine week period ended December 28, 1996............................... F-38
Consolidated Statements of Cash Flows--For the fifty-two week period ended December 27, 1997 and the
thirty-nine week period ended December 28, 1996......................................................... F-39
Notes to Consolidated Financial Statements................................................................ F-40
Unaudited:
Condensed Consolidated Balance Sheet--As of June 27, 1998............................................... F-66
Condensed Consolidated Statements of Operations and Comprehensive Loss--For the twenty-six week periods
ended June 27, 1998 and June 28, 1997................................................................ F-67
Condensed Consolidated Statements of Cash Flows--For the twenty-six week periods ended June 27, 1998 and
June 28, 1997........................................................................................ F-68
Notes to Condensed Consolidated Financial Statements.................................................... F-69
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Volume Services America Holdings,
Inc.:
We have audited the accompanying consolidated balance sheets of Volume Services
America Holdings, Inc. and subsidiaries (the "Company") as of December 30, 1997
and December 29, 1998, and the related consolidated statements of operations and
comprehensive loss, stockholders' equity, and cash flows for each of the three
years in the period ended December 29, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 30, 1997
and December 29, 1998, and the results of operations and cash flows for each of
the three years in the period ended December 29, 1998, in conformity with
generally accepted accounting principles.
March 18, 1999
F-2
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 29,
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 5,426 $ 8,828
Accounts receivable, less allowance for doubtful accounts of $64 and $963 at
December 30, 1997 and December 29, 1998, respectively......................... 8,229 17,790
Merchandise inventories......................................................... 5,135 9,585
Prepaid expenses................................................................ 1,270 3,975
Deferred tax asset.............................................................. -- 2,082
Assets held for sale............................................................ 11,991 --
-------- --------
Total current assets..................................................... 32,051 42,260
-------- --------
PROPERTY AND EQUIPMENT:
Leasehold improvements.......................................................... 27,380 40,048
Merchandising equipment......................................................... 16,369 37,197
Vehicles and other equipment.................................................... 3,411 5,702
Construction in process......................................................... 5,578 262
-------- --------
Total.................................................................... 52,738 83,209
Less accumulated depreciation and amortization.................................. (10,564) (12,226)
-------- --------
Property and equipment, net.............................................. 42,174 70,983
-------- --------
OTHER ASSETS:
Contract rights, net............................................................ 36,803 72,935
Cost in excess of net assets acquired, net...................................... 8,136 50,585
Deferred financing costs, net................................................... 2,974 7,783
Trademarks, net................................................................. 13,051 19,108
Other........................................................................... 2,619 3,530
-------- --------
Total other assets....................................................... 63,583 153,941
-------- --------
TOTAL ASSETS...................................................................... $137,808 $267,184
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................................ $ 300 $ 4,200
Current maturities of capital lease obligation.................................. -- 189
Accounts payable................................................................ 12,017 16,410
Accrued salaries and vacations.................................................. 4,260 8,336
GE capital note payable......................................................... -- 500
Liability for self-insured claims............................................... 2,130 2,216
Accrued taxes, other than income taxes.......................................... 1,056 3,214
Accrued income taxes............................................................ 293 170
Accrued commissions and royalties............................................... 9,912 8,603
Accrued interest................................................................ 195 1,156
Other........................................................................... 1,378 3,664
-------- --------
Total current liabilities................................................ 31,541 48,658
-------- --------
LONG-TERM DEBT.................................................................... 78,700 155,800
CAPITAL LEASE OBLIGATION.......................................................... -- 622
DEFERRED INCOME TAX............................................................... -- 6,684
LIABILITY FOR SELF-INSURED CLAIMS................................................. 2,302 2,949
OTHER LIABILITIES................................................................. 84 2,594
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value; 1,000 shares authorized; 339 and 526 shares issued
and outstanding at December 30, 1997 and December 29, 1998, respectively)..... -- --
Additional paid-in capital...................................................... 33,857 66,474
Accumulated deficit............................................................. (7,358) (12,595)
Accumulated other comprehensive loss............................................ -- (67)
Investors' notes receivable..................................................... (1,318) (3,935)
-------- --------
Total stockholders' equity............................................... 25,181 49,877
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ $137,808 $267,184
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 29,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales......................................................... $190,417 $196,032 $283,441
-------- -------- --------
Cost of sales..................................................... 155,726 156,965 222,533
Selling, general, and administrative.............................. 19,209 21,379 30,887
Depreciation and amortization..................................... 12,624 12,895 18,197
Transaction fees and expenses..................................... -- -- 3,081
-------- -------- --------
Operating profit.................................................. 2,858 4,793 8,743
Interest expense.................................................. 7,256 7,916 11,322
Other income, net................................................. (530) (336) (359)
-------- -------- --------
Loss before income taxes.......................................... (3,868) (2,787) (2,220)
Income tax provision.............................................. 10 319 1,518
-------- -------- --------
Loss before extraordinary item.................................... (3,878) (3,106) (3,738)
Extraordinary loss on debt extinguishment, net of taxes .......... -- -- 1,499
-------- -------- --------
Net loss.......................................................... (3,878) (3,106) (5,237)
Other comprehensive loss--foreign currency translation
adjustment...................................................... -- -- (67)
-------- -------- --------
Comprehensive loss................................................ $ (3,878) $ (3,106) $ (5,304)
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON COMMON PAID-IN ACCUMULATED COMPREHENSIVE INVESTORS'
SHARES STOCK CAPITAL DEFICIT LOSS RECEIVABLES TOTAL
------ ------ ---------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 2, 1996........... 270 $ 3 $ 26,997 $ (374) $ -- $ (857) $25,769
Net loss.................... -- -- -- (3,878) -- -- (3,878)
---- ---- -------- --------- ----- ------- -------
Balance,
December 31, 1996......... 270 3 26,997 (4,252) -- (857) 21,891
Capital investment.......... 69 -- 6,857 -- -- (457) 6,400
Loan to shareholders........ -- -- -- -- -- (4) (4)
Reverse stock split......... -- (3) 3 -- -- -- --
Net loss.................... -- -- -- (3,106) -- -- (3,106)
---- ---- -------- --------- ----- ------- -------
Balance,
December 30, 1997......... 339 -- 33,857 (7,358) -- (1,318) 25,181
Capital investment.......... 37 -- 3,750 -- -- (250) 3,500
Shares issued in
acquisition............... 150 -- 28,867 -- -- (3,381) 25,486
Payment of investors'
receivables............... -- -- -- -- -- 1,014 1,014
Foreign currency
translation............... -- -- -- -- (67) -- (67)
Net loss.................... -- -- -- (5,237) -- -- (5,237)
---- ---- -------- --------- ----- ------- -------
Balance,
December 29, 1998......... 526 $ -- $ 66,474 $ (12,595) $ (67) $(3,935) $49,877
---- ---- -------- --------- ----- ------- -------
---- ---- -------- --------- ----- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 29,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net loss............................................................. $ (3,878) $ (3,106) $ (5,237)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization...................................... 12,624 12,895 18,197
Amortization of deferred financing costs........................... 478 354 551
Extraordinary item................................................. -- -- 1,499
(Gain) loss on disposition of assets............................... 14 (208) (15)
Loss from termination of contract.................................. -- 2,505 1,423
Deferred tax expense............................................... -- -- 1,159
Other.............................................................. -- -- 242
Changes in assets and liabilities, net of effect of acquisition:
Decrease (increase) in assets:
Accounts and notes receivable................................. 1,664 (1,232) (2,361)
Merchandise inventories....................................... (743) (36) 15
Prepaid expenses.............................................. (9) (423) (470)
Other assets.................................................. (215) (2,009) (2,496)
Increase (decrease) in liabilities:
Accounts payable.............................................. 1,257 3,694 (4,459)
Accrued salaries and vacations................................ 97 1,785 453
Liabilities for self-insurance................................ (176) 718 733
Other liabilities............................................. (137) 411 (7,799)
---------- ---------- ----------
Net cash provided by operating activities.............................. 10,976 15,348 1,435
---------- ---------- ----------
Cash flows used in investing activities:
Decrease in restricted cash.......................................... 7,073 5,939 2
Cash purchased in acquisition of Service America..................... -- -- 1,587
Payment of acquisition costs......................................... -- -- (2,820)
Purchase of minority interest stock of Service America............... -- -- (631)
Purchase of property, plant and equipment............................ (15,616) (25,987) (12,635)
Proceeds from sale of property, plant and equipment.................. 91 639 3,349
Proceeds from assets held for sale................................... -- -- 12,575
Additions to assets held for sale.................................... -- -- (607)
Purchase of contract rights.......................................... (5,034) (11,599) (6,169)
---------- ---------- ----------
Net cash used in investing activities.................................. (13,486) (31,008) (5,349)
---------- ---------- ----------
</TABLE>
F-6
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 29,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by financing activities:
Principal payments on long-term debt................................. $ (300) $ (6,800) $ (154,291)
Net borrowings--revolving loans...................................... -- 16,100 6,897
Proceeds from long-term debt......................................... -- -- 160,000
Payments of financing costs.......................................... -- -- (7,859)
Principal payments on capital lease obligation....................... -- -- (103)
Increase (decrease) in bank overdrafts............................... (89) 185 (1,842)
Net increase (decrease) in investor's notes receivable............... -- (4) 1,014
Capital contribution................................................. -- 6,400 3,500
---------- ---------- ----------
Net cash (used in) provided by financing activities.................... (389) 15,881 7,316
---------- ---------- ----------
Increase (decrease) in cash............................................ (2,899) 221 3,402
Cash and cash equivalents--beginning of period......................... 8,104 5,205 5,426
---------- ---------- ----------
Cash and cash equivalents--end of period............................... $ 5,205 $ 5,426 $ 8,828
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Interest paid........................................................ $ 6,349 $ 6,968 $ 5,892
---------- ---------- ----------
---------- ---------- ----------
Income taxes paid.................................................... $ 10 $ 43 $ 449
---------- ---------- ----------
---------- ---------- ----------
Noncash activities:
Issuance of investors' notes receivable relating to capital
contribution.................................................... $ -- $ 457 $ 250
---------- ---------- ----------
---------- ---------- ----------
Capital lease obligation........................................... $ -- $ -- $ 914
---------- ---------- ----------
---------- ---------- ----------
Purchase of Service America for stock.............................. $ -- $ -- $ 28,867
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
1. GENERAL
Volume Services America Holdings, Inc. ("Volume Holdings," and together
with its subsidiaries, the "Company"), formerly VSI Acquisition II Corporation
and subsidiaries ("VSI"), is a holding company, the principal assets of which
are the capital stock of its subsidiary, Volume Services America, Inc. ("Volume
Services America"). Volume Services America is also a holding company, the
principal assets of which are the capital stock of its subsidiaries, Volume
Services, Inc. ("Volume Services") and Service America Corporation ("Service
America"). The Company is controlled by its senior management, Blackstone
Capital Partners II Merchant Banking Fund, L.P. ("BCP II"), and General Electric
Capital Corporation ("GE Capital"). GE Capital, which as of December 29, 1998
controlled 28.5% of the Company through its controlling interest in Recreational
Services LLC, was the majority stockholder (on a fully diluted basis) of Service
America prior to the acquisition of Service America by Volume Holdings on August
24, 1998. As of December 29, 1998, the remainder of the Company's capital stock
was owned by limited partnerships controlled by BCP Volume L.P. and BCP Offshore
Volume L.P. ("Blackstone") (66.7%) and by current and former management
employees of Volume Services (4.8%).
The accompanying consolidated financial statements as of December 29, 1998
include the balance sheet of the Company and the results of operations of Volume
Services through the thirty-four week period ended August 24, 1998 (date of
acquisition of Service America) and of the Company from August 25, 1998 through
December 29, 1998 (eighteen-week period). The accompanying consolidated balance
sheet as of December 30, 1997 is for VSI. The accompanying statement of
operations, stockholder's equity, and cash flows as of December 31, 1996 and
December 30, 1997 are for VSI for the periods then ended.
At December 29, 1998, the Company had approximately 118 contracts to
provide specified concession services, including catering and novelty
merchandise items at stadiums, sports arenas and convention centers at various
locations in the United States. Contracts to provide these services were
obtained through competitive bids. In most instances, the Company has the rights
to provide these services in a particular location for a period of several
years, with the duration of time often a function of the required investment in
facilities or other financial considerations. The contracts vary in length
generally from one to twenty years. Certain of the contracts contain renewal
clauses.
The Company's contracts include concession agreements to provide food and
beverage service and team merchandise to nine National Football League team
stadiums, six major league baseball stadiums, numerous minor league baseball
parks and spring training facilities along with numerous convention centers and
other entertainment and sports venues. For the fiscal year ended December 30,
1997 and December 29, 1998, the Company had one customer that accounted for
approximately 16.4% and 15.8% of operating revenues, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company, and its wholly owned subsidiaries, Volume Services
and Service America. All significant intercompany transactions have been
eliminated.
FISCAL YEAR--The Company has adopted a 52-53 week period ending on the
Tuesday closest to December 31 as its fiscal year end.
REVENUE RECOGNITION--Sales from food and beverage concessions and catering
contract food services are recognized as the services are provided. If a
specific contract provides the Company with a fixed fee or a fixed fee plus an
incentive fee and the Company bears no profit or loss risk, then only
F-8
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
the amount of the fees received are included in net sales. For all other
contracts, the total revenues received by the Company from the end users of the
products are included in net sales. The total revenue received by the Company
from the end users of the products without regard to the type of contract is
defined as "managed revenues". The Company's total managed revenues for fiscal
1996, 1997 and 1998 were approximately $226,425,000, $234,783,000 and
$315,728,000, respectively.
MERCHANDISE INVENTORIES--Merchandise Inventories consist of food, beverage,
and team and other merchandise, and are valued primarily at the lower of cost,
determined on the first-in, first-out basis, or market.
DEPRECIATION--Property and equipment are depreciated on the straight-line
method over the lesser of the estimated useful life of the asset and the term of
the contract at the site where such property and equipment is located. Following
are the estimated useful lives of the property and equipment:
o Leasehold improvements--estimated useful life limited by the lease term
(contract term)
o Merchandising equipment--five to ten years limited by the contract term
o Vehicles and other equipment--two to ten years limited by the contract
term
CONTRACT RIGHTS--Contract rights, net of accumulated amortization, of
approximately $36,803,000 at December 30, 1997 and $72,935,000 at December 29,
1998 consist primarily of certain directly attributable costs (actual contract
costs and fair value adjustments related to acquisition of Service America)
incurred by the Company in obtaining or renewing contracts with clients. These
costs for the Company are amortized over the contract life of each such
contract, including optional renewal periods where the option to renew rests
solely with the Company. Accumulated amortization was approximately $6,897,000
at December 30, 1997 and $12,947,000 at December 29, 1998. The carrying value of
the asset would be reduced to its estimated fair value if management's best
estimate of future cash flows from related operations, on an undiscounted basis,
will be less than the carrying amount of the asset over the remaining
amortization period.
COST IN EXCESS OF NET ASSETS ACQUIRED--Cost in excess of net assets
acquired (goodwill) is being amortized on the straight-line basis over 30 years.
Amortization was approximately $297,000 in fiscal 1996 and $291,000 in fiscal
1997 and $790,000 in fiscal 1998. Accumulated amortization was approximately
$600,000 at December 30, 1997 and $1,389,000 at December 29, 1998.
TRADEMARKS--Trademarks consist of the net book value of the trademarks of
the Company of $13,051,000 at December 30, 1997 and $19,108,000 at December 29,
1998 and are being amortized on a straight-line basis over 30 years. Accumulated
amortization was approximately $949,000 at December 30, 1997 and $1,492,000 at
December 29, 1998.
DEFERRED FINANCING COSTS--The net book value of deferred financing costs of
$2,974,000 at December 30, 1997 and $7,783,000 at December 29, 1998 are being
amortized as interest expense over the life of the respective debt using the
interest method. Accumulated amortization was approximately $987,000 at
December 30, 1997 and $76,000 at December 29, 1998.
IMPAIRMENT OF LONG-LIVED ASSETS--The Company reviews its long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing a review for recoverability, the Company estimates
the future undiscounted cash flows expected to result from the use of the asset
and its eventual disposition. If the sum of the expected future undiscounted
cash flows is less than the
F-9
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
carrying amount of the asset, an impairment loss is recognized. Measurement of
an impairment loss for long-lived assets and identifiable intangibles is based
on the estimated fair value of the asset. No impairment of long-lived assets
existed at December 29, 1998.
DERIVATIVE FINANCIAL INSTRUMENTS--The Company is party to an interest rate
swap agreement under which it receives or pays an amount every three months
which effectively fixes the interest rate on $80,000,000 of its floating rate
debt (see Note 5). The Company recognizes such income or expense as a component
of interest expense at the settlement date.
PREOPENING COSTS--The Company capitalizes certain direct incremental costs
incurred in conjunction with the opening of new contract locations and such
costs are amortized over 12 months. Preopening costs, net of amortization, were
$820,000 at December 30, 1997 and $426,000 at December 29, 1998 (see NEW
ACCOUNTING STANDARDS).
INSURANCE--The Company is primarily self-insured for general liability,
automobile liability, and workers' compensation risks, supplemented by stop-loss
type insurance policies. The liabilities for estimated incurred losses were
discounted using rates between 5.35% and 5.94% at December 30, 1997 and 4.51%
and 4.68% at December 29, 1998, to their present value based on expected loss
payment patterns determined by experience. The total discounted self-insurance
liability recorded by the Company at December 30, 1997 and December 29, 1998 was
$4,500,000 and $5,390,000, respectively. The related undiscounted amount was
$4,900,000 and $5,803,000, respectively.
CASH OVERDRAFTS--The Company has included in accounts payable on the
accompanying consolidated balance sheets cash overdrafts totaling $5,580,000 and
$3,857,000 at December 30, 1997 and December 29, 1998, respectively.
FOREIGN CURRENCY--The balance sheet and results of operations of the
Company's indirect Canadian subsidiary (a subsidiary of Service America) are
measured using the local currency as the functional currency. Assets and
liabilities have been translated into United States dollars at the rates of
exchange at the balance sheet date. Revenues and expenses are translated into
United States dollars at the average rate during the period. The exchange gains
and losses arising on transactions are charged to income as incurred.
Translation gains and losses arising from the use of differing exchange rates
from year to year are included in accumulated other comprehensive loss.
TRANSACTION FEES AND EXPENSES--Transaction fees and expenses primarily
include severance expense associated with Volume Services America employees
severed as a result of the acquisition of Service America (see Note 4).
INCOME TAXES--The Company recognizes deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities. A valuation
allowance is established for deferred tax assets when it is more likely than not
that the benefits of such assets will not be realized.
RECLASSIFICATIONS--Certain amounts in 1996 and 1997 have been reclassified,
where applicable, to conform to the financial statement presentation used in
1998.
ADOPTION OF NEW ACCOUNTING STANDARDS--The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income,
in 1998. SFAS No. 130 specifies that components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is included in the accompanying
statements of operations and comprehensive loss. Prior year disclosures have
been reclassified to conform to the SFAS No. 130 requirements.
F-10
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Company also adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, in 1998. SFAS No. 131 establishes standards
for reporting selected information about operating segments determined using
quantitative thresholds and a "management approach", which reflects how the
chief operating decision maker evaluates segment performance and allocates
resources. The combined operations of the Company's contracts comprises one
operating segment, as such, adoption of SFAS No. 131 has not changed the
Company's disclosures.
NEW ACCOUNTING STANDARDS--In April 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities, which provides additional guidance on the
financial reporting of start-up costs, requiring costs of start-up activities to
be expensed as incurred. As a result, the Company wrote-off its unamortized
preopening costs of $426,000 as of December 30, 1998 as a cumulative effect of a
change in accounting principle.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measures
those instruments at fair value. The accounting for changes in the fair value of
a derivative (that is, gains and losses) depends on the intended use of the
derivative. The statement is effective for the Company's fiscal year 2000
financial statements and may not be applied retroactively. The Company has not
yet completed its analysis of the effects of this new standard on its results of
operations or financial position.
3. SIGNIFICANT RISKS AND UNCERTAINTIES
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company's most significant financial statement
estimates include the estimate of the allowance for doubtful accounts and the
liability for self-insured claims. Management determines its estimate of the
allowance for doubtful accounts considering a number of factors, including
historical experience, aging of the accounts and the current creditworthiness of
its customers. The Company self-insures, with various insured stop-loss
limitations, its workers' compensation, general liability and automobile
liability. Management determines its estimate of the reserve for self-insurance
considering a number of factors, including historical experience and actuarial
assessment of the liabilities for reported claims and claims incurred but not
reported. Management believes that its estimates provided in the financial
statements, including those for the above-described items, are reasonable and
adequate. However, actual results could differ from those estimates.
CERTAIN RISK CONCENTRATIONS--The Company's contracts include concession
agreements to provide food service and team merchandise to nine National
Football League stadiums, six major league baseball stadiums, and numerous minor
league baseball parks and spring training facilities. The Company's revenues and
earnings are dependent on various factors such as attendance levels and the
number of games played by the professional football and baseball teams which are
tenants at facilities serviced by the Company, which can be favorably impacted
if the teams qualify for post-season play, or adversely affected if the teams
are on strike.
F-11
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
4. ACQUISITION
On August 24, 1998, Volume Holdings, BCP Volume L.P., BCP Offshore Volume
L.P. and VSI Management Direct L.P. ("VSI Management"), together with GE Capital
and certain management shareholders of Service America entered into a Share
Exchange Agreement, pursuant to which the Company agreed to purchase
substantially all of the capital stock of Service America (the "Acquisition").
The consideration paid was (a) $1,000 in cash and 150 newly issued shares of the
Volume Holdings Common Stock representing approximately 28.5% of the outstanding
common stock of Volume Holdings on a fully diluted basis after giving effect to
such issuance and (b) the issuance to GE Capital of a 6.0% per annum senior
subordinated promissory note, due on December 31, 1999, in an aggregate
principal amount of $500,000. By December 1998, the Company had purchased the
remainder of Service America capital stock and contributed all of the Service
America capital stock to Volume Services America. The acquisition was accounted
for using the purchase method of accounting.
The balance sheet effect of this transaction was recorded on August 24,
1998. The purchase price allocation and related purchase accounting adjustments
recorded are as follows (in thousands):
<TABLE>
<CAPTION>
PURCHASE COST
- -------------
<S> <C>
Cash and stock.................................................................... $ 30,000
Estimated fees and expenses....................................................... 2,820
----------
Total purchase cost.......................................................... 32,820
----------
Adjusted book value of net liabilities assumed:
Liability for preferred stock, restricted stock and warrants.................... 28,810
Accumulated deficit of Service America at August 24, 1998....................... (65,640)
----------
Adjusted book value of net liabilities assumed (includes $1,587 of cash
acquired).................................................................... (36,830)
----------
Excess of purchase cost over adjusted book value of net assets acquired........... 69,650
Preliminary allocation of purchase cost:
Increase contract rights to estimated value..................................... 25,683
Increase trademarks to estimated fair value..................................... 6,600
Increase in deferred taxes...................................................... (4,442)
Increase in accrued expenses.................................................... (1,429)
----------
Total preliminary allocation of purchase cost................................ 26,412
----------
Cost in excess of net assets acquired............................................. $ 43,238
----------
----------
</TABLE>
The allocation of the total purchase cost reflected in the Company's
balance sheet is preliminary. The actual purchase accounting adjustment to
reflect the fair value of the assets acquired and liabilities assumed will be
based upon appraisals currently in process. However, based on current
information, Company management does not expect the final allocation of the
purchase price to materially differ from that used in the accompanying balance
sheet. The contract rights are being amortized over a weighted average useful
life of 4.5 years. The trademarks and costs in excess of net assets acquired are
amortized over their useful lives, not to exceed 30 years.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the Service America acquisition had
occurred as of January 1, 1997, after giving effect to certain adjustments,
including amortization of goodwill, interest expense on acquisition debt and
related income tax effects. The pro forma results have been prepared for
comparative
F-12
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
4. ACQUISITION--(CONTINUED)
purposes only and do not purport to be indicative of what would have occurred
had the acquisition been made on that date, nor are they necessarily indicative
of results which may occur in the future.
<TABLE>
<CAPTION>
PRO FORMA
(IN THOUSANDS)
YEAR ENDED
--------------------
1997 1998
-------- --------
<S> <C> <C>
Net sales........................................................... $368,900 $405,900
Loss before extraordinary item...................................... (12,500) (9,500)
Net loss............................................................ (14,300) (11,500)
</TABLE>
5. DEBT
Long-term debt at December 30, 1997 and December 29, 1998 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Term A Borrowings.................................................... $ -- $ 40,000
Term B Borrowings.................................................... 49,572 120,000
Term C Borrowings.................................................... 19,828 --
Revolving Loans--Acquisition Portion................................. 9,600 --
------- --------
79,000 160,000
Less current portion of long-term debt............................... 300 4,200
------- --------
Total long-term debt................................................. $78,700 $155,800
------- --------
------- --------
</TABLE>
On December 3, 1998, Volume Holdings and Volume Services America, Inc. (the
"Borrower") entered into the Credit Agreement, which provides for $160,000,000
in term loans, consisting of $40,000,000 of Tranche A term loans ("Term Loan A")
and $120,000,000 of Tranche B term loans ("Term Loan B" and together with Term
Loan A, the "Term Loans") and a $75,000,000 revolving credit facility (the
"Revolving Credit Facility"). Borrowings under the Term Loans were used to repay
in full all outstanding indebtedness of Volume Services and Service America
under their then existing credit agreements and to pay fees and expenses
incurred in connection with the acquisition of Service America and the Credit
Agreement. The commitments under the Revolving Credit Facility are available to
fund capital investment requirements, working capital and general corporate
needs of the Company.
Installments of Term Loan A are due in consecutive quarterly installments
on the last day of each fiscal quarter beginning on March 30, 1999, with 25% of
the following annual amounts being paid on each installment date: $3,000,000 in
1999, $4,000,000 in 2000, $5,000,000 in 2001, and $7,000,000 in the years 2002
through 2005.
Installments of Term Loan B are due in consecutive quarterly installments
on the last day of each fiscal quarter beginning on March 30, 1999, with 25% of
the following annual amounts being paid on each installment date: $1,200,000 in
each year from 1999 through 2005, and $111,600,000 in 2006.
The Revolving Credit Facility allows the issuer to borrow up to an
additional $75,000,000 and includes a sub-limit of $35,000,000 for letters of
credit which reduce availability under the Revolving Credit Facility and a
sublimit of $5,000,000 for swingline loans. The Revolving Credit Facility will
mature on December 3, 2004. No amounts were outstanding under the Revolving
Credit Facility at December 29, 1998; however, $20,685,000 of letters of credit
were outstanding but undrawn.
F-13
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
5. DEBT--(CONTINUED)
The interest rates for the Term Loans and revolving loans vary depending on
which interest payment method the Borrower elects. The Borrower may elect that
these loans bear interest at a rate equal to the alternate base rate plus the
applicable margin or the adjusted LIBO rate plus the applicable margin. All
swingline loans bear interest based upon the alternate base rates. The alternate
base rate is the higher of the prime rate of interest publicly announced by
Chase Manhattan Bank and the federal funds rate plus 0.5%. The adjusted LIBO
rate is the rate at which Eurodollar deposits for one, two, three or six months
(as selected by the Borrower) are offered in the interbank Eurodollar market.
The applicable margin for Term Loan A and revolving loans that bear
interest at a rate determined by reference to the alternate base rate and for
swingline loans is 2% per annum until the date of delivery of financial
statements for the period ending June 29, 1999, and the applicable margin for
these loans after such date will fluctuate, depending on a calculation of the
Borrower's leverage ratio, between 1.25% and 2%. The applicable margin for
revolving loans and term loan A that bear interest at a rate determined by
reference to the adjusted LIBO rate is 3% per annum until the date of delivery
of financial statements for the period ending June 29, 1999, and the applicable
margin for these loans after such date will fluctuate, depending on the leverage
ratio, between 2.25% and 3%. The issuer may elect that Term Loan B bear interest
at a rate per annum equal to the alternate base rate plus 2.75% or the adjusted
LIBO rate plus 3.75%.
The principal outstanding at December 29, 1998 was $40,000,000 for Term
Loan A and $120,000,000 for Term Loan B. The interest rates at December 29, 1998
were 8.25% for Term Loan A and 9.00% for Term Loan B.
The Credit Agreement calls for mandatory prepayment of the loans under
certain circumstances and optional prepayment without penalty. The Credit
Agreement contains covenants that, subject to certain exceptions, restrict the
ability of Volume Holdings, the Borrower and its subsidiaries to, among other
things, (i) incur indebtedness and guarantees, (ii) incur liens, (iii) make
loans and investments, (iv) engage in mergers, consolidations, acquisitions and
asset sales, (v) pay dividends and make distributions on, or repurchase or
redeem, capital stock (maximum dividend at December 29, 1998 was $49,500,000),
(vi) enter into transactions with affiliates and sale leaseback transactions,
(vii) make changes in their line of business, (viii) amend certain material
agreements and (ix) sell capital stock of Borrower's subsidiaries. The Borrower
will also be required to comply with certain financial covenants, including a
maximum net leverage ratio, an interest coverage ratio and a minimum
consolidated cash net worth test. The Credit Agreement contains affirmative
covenants, including entry by Volume Holdings, the Borrower and its subsidiaries
into interest rate protection agreements, and customary representations and
warranties.
The transaction cost of the Credit Agreement amounted to $7,859,000 and was
capitalized at December 29, 1998. These deferred costs will be amortized over
7 years for Term Loan A, 8 years for Term Loan B and 6 years for the Revolving
Credit Facility. The Borrower recognized an extraordinary loss of $1,499,000,
net of taxes (approximately $999,000) on its statement of operations and
comprehensive losses, for the early extinguishment of its previous debt.
F-14
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
5. DEBT--(CONTINUED)
Aggregate annual maturities of long-term debt are as follows (in
thousands):
<TABLE>
<S> <C>
1999......................................................... $ 4,200
2000......................................................... 5,200
2001......................................................... 6,200
2002......................................................... 8,200
2003......................................................... 8,200
Thereafter................................................... 128,000
--------
Total........................................................ $160,000
--------
--------
</TABLE>
See Note 16 for subsequent information regarding the Company's debt.
6. CAPITAL LEASE OBLIGATION
The Company is obligated to make minimum lease payments under a capital
lease agreement. The following is a schedule of future minimum lease payments
under the capital lease together with the present value of the net minimum lease
payments as of December 29, 1998 (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999............................................................. $ 250
2000............................................................. 250
2001............................................................. 250
2002............................................................. 195
---------
Total minimum lease payments..................................... 945
Less: Amount representing interest............................... (134)
---------
Present value of minimum lease payments.......................... 811
Less current portion of capital lease obligation................. (189)
---------
Total long-term capital lease obligation......................... $ 622
---------
---------
</TABLE>
Under the terms of the lease agreement, certain equipment is pledged to
secure performance as follows (in thousands):
<TABLE>
<S> <C>
Equipment......................................................... $ 914
Accumulated depreciation.......................................... (69)
---------
Total............................................................. $ 845
---------
---------
</TABLE>
F-15
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
7. INCOME TAXES
The components of deferred taxes are (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Deferred tax liabilities:
Intangibles (goodwill, contract rights and trademarks).............. $(2,409) $(13,648)
Other prepaid assets................................................ (215) (1,265)
------- --------
(2,624) (14,913)
------- --------
Deferred tax assets:
Difference between book and tax basis of property................... 3,127 1,764
Bad debt reserves................................................... 27 385
Inventory reserves.................................................. 67 79
Other reserves and accrued liabilities.............................. 2,478 4,617
General business credit carryforwards............................... -- 978
Accrued compensation and vacation................................... 445 781
Net operating loss carryforward..................................... 1,857 1,707
Alternative Minimum Tax ("AMT") Credit carryforward................. 146 --
------- --------
Gross deferred tax assets............................................. 8,147 10,311
------- --------
Valuation allowance................................................... (5,523) --
------- --------
Net deferred tax liabilities.......................................... $ -- $ (4,602)
------- --------
------- --------
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Net deferred tax liability is recognized as follows in the
accompanying 1997 and 1998 consolidated balance sheets:
Current deferred tax asset.......................................... $ -- $ 2,082
Noncurrent deferred tax liability................................... -- (6,684)
------- --------
Net deferred tax liability............................................ $ -- $ (4,602)
------- --------
------- --------
</TABLE>
As of December 29, 1998, the Company had available net operating loss
carryforwards of approximately $22,511,000. The Company's future ability to
utilize the net operating loss carryforward of its subsidiary, Service America,
is limited by section 382 of the Internal Revenue Code of 1986, as amended.
These carryforwards begin to expire in years 2005 through 2012. Of the general
business credit, $900,000 begins to expire in 2005, with the remaining expiring
in year 2017.
For the year ended 1997, the Company recorded a valuation allowance for the
total amount of the gross deferred tax asset because, based on management's
assessment, it was uncertain whether the deferred tax assets would be realized.
As a result of the 1998 acquisition of Service America Corporation, the
Company's valuation allowance was reduced for pre-acquisition tax benefits that
management considers more likely than not to be realized at the date of
acquisition. This valuation allowance reduction was recognized as part of
purchase price adjustments and is not reflected in the tax provision-for the
year.
F-16
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
7. INCOME TAXES--(CONTINUED)
The provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 29,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current expense......................................... $ 10 $ 319 $ 359
------ ------ ------
Deferred provision (benefit):
Changes in temporary differences...................... 1,443 1,125 1,159
Increase (decrease) in valuation allowance............ (1,443) (1,125) --
------ ------ ------
Total deferred provision........................... -- -- 1,159
------ ------ ------
Total provision for income taxes........................ $ 10 $ 319 $1,518
------ ------ ------
------ ------ ------
</TABLE>
The difference between the statutory federal income tax rate and the
effective tax rate on net loss is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 29,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Statutory rate.......................................... (34)% (34)% (34)%
Differences:
State income taxes.................................... -- 4 33
Non-deductible expenses (meals and entertainment)..... -- 1 2
Adjustment to valuation allowance..................... 37 40 58
Goodwill.............................................. -- -- 8
Other................................................. (3) -- 1
------ ------ ------
Total provision for income taxes........................ 0% 11% 68%
------ ------ ------
------ ------ ------
</TABLE>
8. SALE OF STOCK
During 1998, the Company issued 37.5 shares of common stock at $100,000 per
share. A total of $3,500,000 was received by the Company in cash and the
remaining $250,000 was financed by the Company in the form of investors' notes.
9. INTEREST RATE SWAP
On January 26, 1998, the Company entered into an interest rate swap
transaction with a financial institution in order to limit its exposure to
future fluctuations in the LIBOR interest rate related to all debt instruments
discussed in Note 4. The agreement provides for a fixed rate of interest of
5.39% for a period ending January 12, 1999 on a notional amount of $80,000,000.
On December 9, 1998, the Company terminated this transaction effective
January 12, 1999 and entered into a new interest rate swap transaction providing
a fixed interest rate of 5.06% for a two-year period on a nominal amount of
$80,000,000.
On March 15, 1999, the Company terminated the interest rate swap effective
April 12, 1999. The notional amount represents the amount of the underlying debt
to which the swap applies, not future cash requirements. Amounts to be paid or
received under the swap agreement are recognized as interest expense or a
reduction of interest expense in the periods in which they accrue.
F-17
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
9. INTEREST RATE SWAP--(CONTINUED)
The counterparty to the Company's interest rate exchange agreement is a
major financial institution which participates in the Company's bank credit
facilities. Such financial institution is a leading market-maker in the
financial derivatives markets and is expected to fully perform under the terms
of such exchange agreement.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments and related underlying
assumptions are as follows:
LONG-TERM DEBT--The Company estimates that the carrying value at
December 29, 1998 approximates the fair value of debt based upon the floating
rate of interest and the recent origination of the debt related to the Credit
Agreement.
INTEREST RATE SWAP--At December 30, 1997 and December 29, 1998, the fair
value of the interest rate swap agreement was an asset of approximately $252,000
and $431,000, respectively. This represents the estimated amount the Company
would receive to terminate the swap agreement, as quoted by the financial
institution.
11. COMMITMENTS AND CONTINGENCIES
LEASES AND CLIENT CONTRACTS--The Company operates primarily at its clients'
premises pursuant to written contracts. The length of a contract generally
ranges from one to twenty years. Certain of these client contracts provide for
both fixed and variable commissions and royalties. Aggregate commission and
royalty expense under these agreements was $59,989,000 (base of approximately
$2,100,000) for fiscal 1996 and $60,402,000 (base of approximately $4,500,000)
for fiscal 1997 and $86,489,000 (base of approximately $3,634,000) for fiscal
1998.
The Company leases a number of real properties and other equipment under
varying lease terms which are noncancelable and expire at various dates through
1999. Rent expense for all operating leases was approximately $164,000, $255,000
and $1,317,000 in fiscal 1996, fiscal 1997 and fiscal 1998, respectively.
Future minimum commitments for all operating leases and base commissions
and royalties due under client contracts are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1999.......................................................... $ 10,435
2000.......................................................... 9,612
2001.......................................................... 7,843
2002.......................................................... 5,504
2003.......................................................... 4,570
Thereafter.................................................... 29,291
----------
Total......................................................... $ 67,255
----------
----------
</TABLE>
EMPLOYMENT CONTRACTS--The Company has employment agreements and
arrangements with its executive officers and certain management personnel. The
agreements generally continue until terminated by the executive or the Company,
and provide for severance payments under certain circumstances. The agreements
include a covenant against competition with the Company, which extends for a
period of time after termination for any reason. As of December 29, 1998, if all
of the
F-18
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
employees under contract were to be terminated by the Company without good cause
(as defined) under these contracts, the Company's liability would be
approximately $5.6 million.
COMMITMENTS--Pursuant to its contracts with various clients, the Company is
committed to spend approximately $15,300,000 during 1999 and $1,200,000 during
2000 for equipment improvements and location contract rights. In addition, the
Company currently is engaged in negotiations pursuant to which it expects to
enter into three new contracts which will require the Company to fund additional
future capital investments of approximately $10.4 million, all of which would be
invested in 1999. The Company has $8,485,000 of letters of credit
collateralizing the Company's performance and other bonds, and $5,200,000 in
letters of credit collateralizing the self-insurance reserves of the Company,
and $7,000,000 in other letters of credit.
LITIGATION--There are various claims and pending legal actions against or
indirectly involving the Company. It is the opinion of management, after
considering a number of factors, including, but not limited to, the current
status of the litigation (including any settlement discussions), views of
retained counsel, the nature of the litigation, the prior experience of the
Company, and the amounts which the Company has accrued for known contingencies,
that the ultimate disposition of these matters will not materially affect the
financial position or future results of operations of the Company.
12. RELATED PARTY
MANAGEMENT FEES--Certain administrative and management functions were
provided to VSI by the Blackstone Group through a monitoring agreement. VSI paid
Blackstone Management Partners II L.P., an affiliate of Blackstone, management
fees of approximately $250,000 each year for fiscal 1998, 1997 and 1996. Such
amounts are included in selling, general and administrative expenses.
As part of the Acquisition (see Note 4), the Company agreed to pay
management fees to Blackstone and GE Capital of $250,000 and $167,000,
respectively, for consulting, monitoring and financial advisory services
provided to the Company. The fee of $250,000 paid to Blackstone Management
Partners II L.P. is consistent with the amount paid by the Company in previous
years. The Company paid GE Capital management fees of approximately $42,000 for
fiscal 1998. Such amounts are included in selling, general and administrative
expenses.
The Company also paid fees of $125,000 in July 1998 and $2,275,000 in
December 1998 to the Blackstone Group in connection with the Acquisition, in
accordance with the terms of an arrangement entered into in May 1998. Such
amounts were included in the calculation of goodwill.
INVESTORS' NOTES RECEIVABLE--At December 30, 1997 and December 29, 1998,
the Company had approximately $1,318,000 and $3,935,000, respectively, due from
various investors. These nonrecourse notes are due if the Company should undergo
a recapitalization as defined by the note agreements. Because the proceeds of
the notes were used to buy Company stock, the notes have been reflected as a
reduction of stockholders' equity.
MANAGEMENT INCENTIVE AGREEMENT--During 1997, the Company introduced a
discretionary incentive plan whereby general managers and senior management
personnel qualify for incentive payments in the event that the Company has
exceeded certain financial performance targets. The Company has accrued
approximately $750,000 and $373,000 in accrued salaries and vacations in the
accompanying balance sheets at December 30, 1997 and December 29, 1998,
respectively, for such incentives payable to certain general managers and senior
management personnel.
F-19
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
12. RELATED PARTY--(CONTINUED)
GE Capital and its affiliates provide leasing and other financing services
to Service America. Payments to GE Capital and its affiliates for fiscal year
1998 for such services, net of discounts earned, were approximately $1,900,000
and are included in selling, general and administrative expense on the statement
of operations and comprehensive loss.
13. RETIREMENT PLAN
Volume Services has a 40l(k) defined contribution plan which covers
substantially all Volume Services employees. Employees may contribute up to 15%
of their eligible earnings and the Company will match 25% of employee
contributions up to the first 6% of employee compensation. Contributions to the
plan were approximately $49,000 for 1996, $203,000 for fiscal 1997 and $185,000
for fiscal 1998.
Service America has a 401(k) defined contribution plan which covers
substantially all Service America employees. Employees may contribute up to 16%
of their eligible earnings. The Company's contribution is discretionary. No
amounts were contributed to the plan during fiscal 1998 as the Company at its
discretion made no contributions.
MULTI-EMPLOYER PENSION PLANS--Certain of the Company's union employees are
covered by multi-employer defined benefit pension plans administered by unions.
Under the Employee Retirement Income Security Act ("ERISA"), as amended, an
employer upon withdrawal from a multi-employer pension plan is required to
continue funding its proportionate share of the plan's unfunded vested benefits.
The Company may incur a withdrawal liability if a recreational services contract
is terminated or not renewed.
Amounts charged to expense and contributed to the plans were not material
for the periods presented.
14. CONTRACT TERMINATION
In March 1998, the Company terminated a concession contract with one of its
clients. The Company recognized a loss from this termination of approximately
$2,505,000 during fiscal 1997 (included in selling, general and administrative
in the accompanying consolidated statement of operations and comprehensive
loss), which includes a $1,100,000 write-down on assets held for sale to their
estimated realizable value for the year ended December 30, 1997. As part of the
settlement, the Company sold certain assets to the former client. The net book
value of these assets of $11,991,000 were classified as assets held for sale in
the accompanying consolidated balance sheet at December 30, 1997. Net proceeds
of the sale of these assets totaled $12,575,000 in fiscal 1998.
The Company terminated three additional concession contracts in fiscal
1998. The Company recognized a loss of approximately $1,423,000 (included in
selling, general and administrative expenses in the accompanying consolidated
statement of operations and comprehensive income) for the year ended
December 29, 1998, which relates to the write off of assets relating to the
contracts.
15. SEVERANCE AGREEMENT
In October 1998, the Company entered into a severance agreement with an
executive officer of Volume Services. Under the agreement, the executive officer
received $500,000 upon signing the agreement and an additional $700,000 on
March 31, 1999. Until March 31, 1999, the executive officer continued to receive
amounts due under his annual base salary of $300,000. The agreement also
contains a grant by the executive officer of an irrevocable option to the
Company, exercisable at any
F-20
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, DECEMBER 30, 1997 AND DECEMBER 29, 1998
15. SEVERANCE AGREEMENT--(CONTINUED)
time within 5 years from the agreement to purchase and a grant by the Company to
the executive officer of an option exercisable upon the occurrence of certain
events to oblige the Company to purchase all of the executive officer's equity
interest in VSI Management and VSI Management II L.P. ("Management II") for
$1,500,000 plus interest, if any, which will begin accruing from October 13,
2000.
16. SUBSEQUENT EVENTS
Effective February 25, 1999, Volume Service America issued $100 million in
senior subordinated notes at an interest rate of 11 1/4% through a Rule 144A
private placement offering (the "Offering"). The notes will mature on March 1,
2009 and interest on the notes is payable on March 1 and September 1 of each
year, beginning on September 1, 1999. Such notes are unsecured, are subordinated
to all the existing debt and any future debt of Volume Service America, rank
equally with all of the other senior subordinated debt of Volume Service
America, and rank senior to all the Volume Service America's existing and senior
subordinated debt. Furthermore, the debt is guaranteed by the Company and its
wholly owned subsidiaries, Volume Services and Service America.
The proceeds of the Offering were used to (i) repay $45,000,000 of the
outstanding Term Loans, (ii) fund the repurchase by Volume Holdings of Volume
Holdings common stock of $49,500,000 and the repayment by Volume Holdings of the
GE Capital Note of $500,000 and (iii) pay fees and expenses incurred in
connection with the Offering and the consents from lenders to an amendment to
the Credit Agreement.
The Notes contain covenants that restrict among other things (i) the
incurrence of additional indebtedness and the issuance of Disqualified Stock and
Preferred Stock, (ii) the payment of dividends on, and redemptions of, capital
stock and the redemption of indebtedness that is subordinate in right of payment
to the Notes, (iii) certain other restricted payments including, without
limitation to, investments, (iv) certain sales of assets, (v) certain
transactions with affiliates, (vi) the creation of certain liens and
(vii) consolidations, mergers and transfers of all or substantially all of the
Company's assets.
The senior subordinated notes will be fully and unconditionally guaranteed
by the Company and all of the subsidiaries of Volume Service America, except for
certain non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary. The
following table sets forth the condensed consolidated financial statements of
the Parent Company, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. No
information is provided for any period prior to December 29, 1998, as the
non-guarantor subsidiaries are subsidiaries of Service America and were acquired
in the acquisition of Service America.
F-21
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING BALANCE SHEET
DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 8,692 $ 136 $ 8,828
Accounts receivable.................. 16,958 832 17,790
Other current assets................. 23,190 1,217 $ (8,765) 15,642
-------- ------- -------- --------
Total current assets................... 48,840 2,185 (8,765) 42,260
Property, plant and equipment.......... 67,601 3,382 -- 70,983
Contract rights, net................... 69,407 3,528 -- 72,935
Cost in excess of net assets acquired,
net.................................. 50,585 -- -- 50,585
Investment in subsidiaries............. $ 49,877 -- -- (49,877) --
Other assets........................... -- 30,421 -- -- 30,421
-------- -------- ------- -------- --------
Total assets........................... $ 49,877 $266,854 $ 9,095 $(58,642) $267,184
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Intercompany liabilities............. $ 212 $ 8,553 $ (8,765)
Other current liabilities............ 46,991 1,667 -- $ 48,658
-------- ------- -------- --------
Total current liabilities.............. 47,203 10,220 (8,765) 48,658
Long-term debt......................... 155,800 -- -- 155,800
Other liabilities...................... 12,849 -- -- 12,849
-------- ------- -------- --------
Total liabilities...................... 215,852 10,220 (8,765) 217,307
-------- ------- -------- --------
Stockholders' equity (deficit):
Common stock......................... $ -- -- -- -- --
Additional paid-in capital........... 66,474 67,161 (687) (66,474) 66,474
Accumulated deficit.................. (12,595) (12,224) (371) 12,595 (12,595)
Other................................ (4,002) (3,935) (67) 4,002 (4,002)
-------- -------- ------- -------- --------
Total stockholders' equity (deficit)... 49,877 51,002 (1,125) (49,877) 49,877
-------- -------- ------- -------- --------
Total liabilities and stockholders'
equity (deficit)..................... $ 49,877 $266,854 $ 9,095 $(58,642) $267,184
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
YEAR ENDED DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $273,482 $ 9,959 $283,441
-------- ------- --------
Cost of sales........................... 214,776 7,757 222,533
Selling, general and administrative..... 29,178 1,709 30,887
Depreciation and amortization........... 17,333 864 18,197
Transaction fees and expenses........... 3,081 -- 3,081
-------- ------- --------
Operating profit........................ 9,114 (371) 8,743
Interest expense........................ 11,322 -- 11,322
Other income, net....................... (359) -- (359)
-------- ------- --------
Loss before income taxes................ (1,849) (371) (2,220)
Income tax provision.................... 1,518 -- 1,518
-------- ------- --------
Loss before extraordinary item.......... (3,367) (371) (3,738)
Extraordinary loss...................... 1,499 -- 1,499
Equity in earnings of subsidiaries...... $(5,237) -- -- $5,237 --
------- -------- ------- ------ --------
Net loss................................ (5,237) (4,866) (371) 5,237 (5,237)
Other comprehensive loss................ -- -- (67) -- (67)
------- -------- ------- ------ --------
Comprehensive loss...................... $(5,237) $ (4,866) $ (438) $5,237 $ (5,304)
------- -------- ------- ------ --------
------- -------- ------- ------ --------
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 29, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash Flows Provided By (Used In) Operating
Activities............................................. $ (49) $ 1,918 $(434) $ 1,435
------ ---------- ----- --------
Cash Flows Provided by Investing Activities:
Decrease in restricted cash............................ -- 2 -- 2
Cash purchased in acquisition of Service America....... -- 1,587 -- 1,587
Payment of acquisition costs........................... (2,820) -- -- (2,820)
Purchase of minority interest stock of Service
America.............................................. (631) -- -- (631)
Purchase of property, plant and equipment.............. -- (12,313) (322) (12,635)
Proceeds from sale of property, plant and
equipment............................................ -- 3,349 -- 3,349
Proceeds from assets held for sale..................... -- 12,575 -- 12,575
Additions to assets held for sale...................... -- (607) -- (607)
Purchase of contract rights............................ -- (6,164) (5) (6,169)
------ ---------- ----- --------
Net cash used in investing activities........... (3,451) (1,571) (327) (5,349)
------ ---------- ----- --------
Cash Flows Provided by Financing Activities:
Principal payments on long-term debt................... -- (154,291) -- (154,291)
Net borrowings--revolving loans........................ -- 6,897 -- 6,897
Proceeds from long-term debt........................... -- 160,000 -- 160,000
Payments of financing costs............................ -- (7,859) -- (7,859)
Principal payments on capital lease obligations........ -- (103) -- (103)
Decrease in bank overdrafts............................ -- (2,555) 713 (1,842)
Increase in investors' notes receivable................ -- 1,014 -- 1,014
Capital contributions.................................. 3,500 -- -- 3,500
------ ---------- ----- --------
Net cash provided by financing activities....... 3,500 3,103 713 7,316
------ ---------- ----- --------
Increase (decrease) in cash.............................. -- 3,450 (48) 3,402
Cash and cash equivalent--beginning of period............ -- 5,242 184 5,426
------ ---------- ----- --------
Cash and cash equivalents--end of period................. $ -- $ 8,692 $ 136 $ 8,828
------ ---------- ----- --------
------ ---------- ----- --------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 29, MARCH 30,
1998 1999
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 8,828 $ 8,960
Accounts receivable, less allowance for doubtful accounts of $963 and $987 at
December 29, 1998 and March 30, 1999, respectively................................ 17,790 18,682
Merchandise inventories............................................................. 9,585 10,818
Prepaid expenses.................................................................... 3,975 4,456
Deferred tax asset.................................................................. 2,082 2,082
-------- ---------
Total current assets.................................................................. 42,260 44,998
-------- ---------
Property and equipment:
Leasehold improvements.............................................................. 40,048 41,229
Merchandising equipment............................................................. 37,197 38,794
Vehicles and other equipment........................................................ 5,702 5,812
Construction in process............................................................. 262 1,053
-------- ---------
Total................................................................................. 83,209 86,888
Less accumulated depreciation and amortization...................................... (12,226) (16,550)
-------- ---------
Property and equipment, net........................................................... 70,983 70,338
-------- ---------
Other assets:
Contract rights, net................................................................ 72,935 68,348
Cost in excess of net assets acquired, net.......................................... 50,585 50,220
Deferred financing costs, net....................................................... 7,783 11,606
Trademarks, net..................................................................... 19,108 18,937
Other............................................................................... 3,530 4,352
-------- ---------
Total other assets.................................................................... 153,941 153,463
-------- ---------
Total assets.......................................................................... $267,184 $ 268,799
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt................................................ $ 4,200 $ 1,150
Current maturities of capital lease obligation...................................... 189 193
Revolving loans..................................................................... 4,500
Accounts payable.................................................................... 16,410 19,706
Accrued salaries and vacations...................................................... 8,336 7,827
GE Capital Note..................................................................... 500 --
Liability for self-insured claims................................................... 2,216 2,592
Accrued taxes, other than income taxes.............................................. 3,214 3,319
Accrued commissions and royalties................................................... 8,603 9,499
Accrued interest.................................................................... 1,156 2,007
Other............................................................................... 3,834 2,737
-------- ---------
Total current liabilities............................................................. 48,658 53,530
-------- ---------
Long term liabilities:
Long term debt...................................................................... 155,800 213,563
Capital lease obligation............................................................ 622 572
Deferred income tax................................................................. 6,684 3,255
Liability for self-insured claims................................................... 2,949 2,099
Other long term liabilities......................................................... 2,594 2,619
-------- ---------
Total long term liabilities........................................................... 168,649 222,108
-------- ---------
Stockholders' equity (deficit):
Common stock ($.01 par value; 1,000 shares authorized; 526 and 332 shares issued and
outstanding at December 29, 1998 and March 30, 1999, respectively)................ -- --
Additional paid-in capital.......................................................... 66,474 16,974
Accumulated deficit................................................................. (12,595) (20,418)
Accumulated other comprehensive loss................................................ (67) (87)
Investors' notes receivable......................................................... (3,935) (3,308)
-------- ---------
Total stockholders' equity (deficit).................................................. 49,877 (6,839)
-------- ---------
Total liabilities and stockholders' equity (deficit).................................. $267,184 $ 268,799
-------- ---------
-------- ---------
</TABLE>
See notes to consolidated financial statements
F-25
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEK
PERIOD ENDED
----------------------
MARCH 31, MARCH 30,
1998 1999
--------- ---------
<S> <C> <C>
Net sales................................................................................. $27,294 $66,290
------- -------
Cost of sales............................................................................. 22,422 54,314
Selling, general, and administrative...................................................... 4,460 9,444
Depreciation and amortization............................................................. 2,907 6,347
Transaction fees and expenses............................................................. -- 1,018
------- -------
Operating loss............................................................................ (2,495) (4,833)
Interest expense, net..................................................................... 2,287 4,632
Other (income) expense, net............................................................... (33) (101)
------- -------
Loss before income taxes.................................................................. (4,749) (9,364)
Income tax provision (benefit)............................................................ 19 (2,670)
------- -------
Net loss before extraordinary item and cumulative effect of change in accounting
principles.............................................................................. (4,768) (6,694)
Extraordinary item, net--early extinguishment of debt..................................... -- 873
Cumulative effect of change in accounting principles, net................................. -- 256
------- -------
Net loss.................................................................................. (4,768) (7,823)
------- -------
Other comprehensive loss:
Foreign currency translation adjustments.................................................. -- (20)
------- -------
Total other comprehensive loss............................................................ -- (20)
------- -------
Comprehensive loss........................................................................ $(4,768) $(7,843)
------- -------
------- -------
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY DEFICIT
DECEMBER 29, 1998 AND MARCH 30, 1999
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER INVESTORS'
COMMON COMMON PAID-IN ACCUMULATED COMPREHENSIVE NOTES
SHARES STOCK CAPITAL DEFICIT INCOME RECEIVABLE TOTAL
------ ------ ---------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1998........ 526 $ -- $ 66,474 $ (12,595) $ (67) $(3,935) $49,877
Stock redemption................ (194) -- (49,500) -- -- (49,500)
Change in investors' notes
receivable.................... -- -- -- -- 627 627
Foreign currency translation.... -- -- -- (20) -- (20)
Net Loss........................ -- -- -- (7,823) -- -- (7,823)
---- ---- -------- --------- ----- ------- -------
Balance, March 30, 1999........... 332 $ -- $ 16,974 $ (20,418) $ (87) $(3,308) $(6,839)
---- ---- -------- --------- ----- ------- -------
---- ---- -------- --------- ----- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEK
PERIOD ENDED
----------------------
MARCH 31, MARCH 30,
1998 1999
--------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss............................................................................... $(4,768) $ (7,823)
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization....................................................... 2,907 6,347
Amortization of deferred financing costs............................................ 130 304
Gain on asset sales................................................................. (68) --
Extraordinary item.................................................................. -- 873
Cumulative effect of change in accounting principles................................ -- 256
Deferred income tax expense......................................................... -- (2,682)
Changes in assets and liabilities:
Decrease (increase) in assets:
Accounts receivable and notes receivable....................................... 1,306 (892)
Merchandise inventories........................................................ (1,109) (1,233)
Prepaid expenses............................................................... (295) (481)
Other assets................................................................... (948) (583)
Assets held for sale........................................................... (695) --
Increase (decrease) in liabilities: -- --
Accounts payable............................................................... (1,207) 186
Accrued salaries and vacations................................................. (958) (509)
Liability for self-insured claims.............................................. 338 (474)
Other liabilities.............................................................. (3,734) 764
------- ---------
Net cash used in operating activities........................................ (9,101) (5,947)
------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Increase in restricted cash............................................................ (4,862) --
Purchase of property, plant and equipment.............................................. (5,762) (1,224)
Proceeds from sale of property, plant and equipment.................................... 150 --
Proceeds from sale of assets held for sale............................................. 10,000 --
Purchase of contract rights............................................................ -- (25)
------- ---------
Net cash used in investing activities........................................ (474) (1,249)
------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Principal payments on long-term debt................................................... $ (75) $ (45,788)
Redemption of stock.................................................................... -- (49,500)
Deferred financing costs............................................................... -- (5,575)
Net borrowings--revolving loans........................................................ 14,250 4,500
Net increase in investors' notes receivable............................................ 627
Proceeds from long-term debt........................................................... 100,000
Principal payments on capital lease obligations........................................ 663 (46)
Net increase (decrease)bank overdraft.................................................. (2,075) 3,110
Capital contribution................................................................... 3,500 --
------- ---------
Net cash provided by financing activities.................................... 16,263 7,328
------- ---------
INCREASE IN CASH......................................................................... 6,688 132
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD............................................ 5,426 8,828
------- ---------
CASH AND CASH EQUIVALENTS END OF PERIOD.................................................. $12,114 $ 8,960
------- ---------
------- ---------
</TABLE>
See notes to consolidated financial statements
F-28
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEK PERIODS ENDED MARCH 31, 1998 AND MARCH 30, 1999
(UNAUDITED)
1. GENERAL
Volume Services America Holdings, Inc. ("Volume Holdings," and together
with its subsidiaries, the "Company"), formerly VSI Acquisition II Corporation
and Subsidiaries ("VSI"), is a holding company, the principal assets of which
are the capital stock of its subsidiary, Volume Services America, Inc. ("Volume
Services America"). Volume Services America is also a holding company, the
principal assets of which are the capital stock of its subsidiaries, Volume
Services, Inc. ("Volume Services") and Service America Corporation ("Service
America"). The Company is controlled by its senior management, Blackstone
Capital Partners II Merchant Banking Fund, L.P. ("BCP II"), and General Electric
Capital Corporation ("GE Capital"). GE Capital, which as of March 30, 1999
controlled 36.4% of the Company through its controlling interest in Recreational
Services, LLC, was the majority stockholder (on a fully diluted basis) of
Service America prior to the Acquisition of Service America by Volume Holdings
on August 24, 1998. As of March 30, 1999, the remainder of the Company's capital
stock was owned by limited partnerships controlled by BCP Volume L.P., BCP
Offshore Volume L.P. ("Blackstone") (59.4%), and by current and former
management employees of Volume Services (4.2%).
The accompanying financial statements of Volume Holdings have been prepared
pursuant to the rules and regulations of the Security and Exchange Commission
for interim financial reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods.
The results of operations for the thirteen-week period ended March 30, 1999
are not necessarily indicative of the results to be expected for the year ending
December 28, 1999 due to the seasonal aspects of the business. The consolidated
financial statements and notes thereto should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 29,
1998.
2. DEBT
On March 4, 1999, Volume Services America issued $100 million in Senior
Subordinated Notes at an interest rate of 11 1/4% through a private placement
offering (the "Offering"). The Notes (the "Notes") mature on March 1, 2009 and
interest is payable on March 1 and September 1 of each year, beginning on
September 1, 1999. Such Notes are unsecured, are subordinated to all the
existing debt and any future debt of Volume Services America, rank equally with
all of the other Senior Subordinated of Volume Services America, and senior to
all of Volume Services America's existing and Senior Subordinated debt.
Furthermore, the debt is guaranteed by the Company and Volume Service America's
wholly owned subsidiaries, Volume Services and Service America.
The proceeds of the $100 million Offering were used to (i) repay
$40,000,000 of Term A Borrowings and $5,000,000 of Term B Borrowings, (ii) fund
the repurchase by Volume Holdings of 194 shares of Volume Holdings common stock
for $49,500,000 and the repayment by Volume Holdings of a $500,000 note in favor
of GE Capital and (iii) pay fees and expenses incurred in connection with the
Offering and the consent from lenders to an amendment to the Credit Agreement.
In conjunction with the Offering, Volume Services America recognized an
extraordinary loss of $873,000, net of taxes (approximately $577,000) on its
statement of operations for the early extinquishment of $45,000,000 of Term
Loans.
F-29
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
THIRTEEN WEEK PERIODS ENDED MARCH 31, 1998 AND MARCH 30, 1999
(UNAUDITED)
2. DEBT--(CONTINUED)
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 29, MARCH 30,
1998 1999
------------ ---------
<S> <C> <C>
Term A Borrowings...................................... $ 40,000
Term B Borrowings...................................... 120,000 $ 114,713
Revolving Loans........................................ 4,500
Senior Subordinated Notes.............................. 100,000
-------- ---------
160,000 219,213
Less current maturities of long-term debt.............. (4,200) (5,650)
-------- ---------
Total long-term debt................................... $155,800 $ 213,563
-------- ---------
-------- ---------
</TABLE>
Aggregate annual maturities of long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999......................................................... $ 863
2000......................................................... 1,150
2001......................................................... 1,150
2002......................................................... 1,150
2003......................................................... 1,150
Thereafter................................................... 213,750
-----------
Total........................................................ $ 219,213
-----------
-----------
</TABLE>
The notes contain covenants that restrict among other things (i) the
incurrence of additional indebtedness and the issuance of Disqualified Stock and
Preferred Stock, (ii) the payment of dividends on, and redemptions of, capital
stock and the redemption of indebtedness that is subordinate in right of payment
to the Notes, (iii) certain other restricted payments including, without
limitation to, investments, (iv) certain sales of assets, (v) certain
transactions with affiliates, (vi) the creation of certain liens and
(vii) consolidations, mergers and transfer of all or substantially all of the
Company's assets.
3. STOCK REDEMPTION
In conjunction with the Offering, Volume Services America paid a
$50,000,000 dividend to Volume Holdings. Volume Holdings used the proceeds to
redeem 194 shares of its common stock (the "Stock Redemption") and to repay a
$500,000 note in favor of GE Capital.
4. RELATED PARTIES
Management Fees--Certain administrative and management functions were
provided to VSI by the Blackstone Group through a monitoring agreement. Volume
Services paid Blackstone Management Partners II L.P. approximately $62,500 in
each of the thirteen week periods ended March 31, 1998 and March 30, 1999. As
part of the August 24, 1998 acquisition of Service America, the Company agreed
to pay to GE Capital, an annual monitoring fee of $167,000. In the thirteen week
period ended March 30, 1999, $41,750 was paid to GE Capital. Such amounts are
included in selling, general and administrative expenses.
Investors' Notes Receivable--The Company had $3,935,000 and $3,308,000 in
receivables due from various investors at December 29, 1998 and March 30, 1999,
respectively.
F-30
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
THIRTEEN WEEK PERIODS ENDED MARCH 31, 1998 AND MARCH 30, 1999
(UNAUDITED)
5. INTEREST RATE SWAP
On March 15, 1999, the Company terminated an interest rate swap effective
April 12, 1999 and received $180,000 which will be used as a reduction to
interest expense during fiscal year 1999.
6. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1999, the Company adopted the provisions of the
American Institute of Certified Public Accountants Statement of Position 98-5,
Reporting on the Costs of Start-up Activities, which requires that costs of
start-up activities be expensed as incurred. As a result, the Company recorded a
charge of $256,000 net of tax (approximately $170,000) reflecting the effect of
the change in accounting principle.
7. SERVICE AMERICA ACQUISITION
As described in Note 1, Volume Services America, a wholly owned subsidiary
of Volume Holdings, acquired Service America on August 24, 1998. The Service
America Acquisition was accounted for using the purchase method in accordance
with APB No. 16. The results of operations after the acquisition date are
included in Volume Holdings consolidated statements of income. The allocation of
the total purchase price reflected in the Volume Holdings balance sheet is
preliminary. The actual purchase accounting adjustment to reflect the fair value
of the assets acquired and liabilities assumed will be based upon appraisals
currently in process. However, based on current information, management does not
expect the final allocation of the purchase price to materially differ from that
used in the accompanying balance sheet.
The following unaudited pro forma financial presents a summary of
consolidated results of operations as if the Service America Acquisition had
occurred as of December 31, 1997, after giving effect to certain adjustments,
including amortization of goodwill, interest expense on acquisition debt and
related income tax effects. The pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisition been made on that date, nor are they necessarily
indicative of results which may occur in the future.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(IN THOUSANDS)
<S> <C>
Net Sales................................................ $ 68,165
Loss before extraordinary item........................... (6,650)
Net Loss................................................. (8,434)
</TABLE>
8. PAYMENT OF VOLUME SERVICES AMERICA SENIOR SUBORDINATED NOTES
The senior subordinated notes of Volume Services America will be fully and
unconditionally guaranteed by Volume Holdings and all of the subsidiaries of
Volume Services America, except for certain non-wholly owned U.S. subsidiaries
and one non-U.S. subsidiary. The following table sets forth the condensed
consolidating financial statements of the Parent Company, Guarantor Subsidiaries
and Non-Guarantor Subsidiaries as of and for the period ended March 30, 1999. No
information as of March 29, 1998 is provided as the non-guarantor subsidiaries
are subsidiaries of Service America and were acquired in the acquisition of
Service America.
F-31
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING BALANCE SHEET
MARCH 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $ 8,780 $ 180 $ 8,960
Accounts receivable...................... 15,527 3,155 18,682
Other current assets..................... 28,117 1,109 (11,870) 17,356
-------- ------- -------- --------
Total current assets....................... 52,424 4,444 (11,870) 44,998
Property, plant and equipment............ 66,609 3,729 -- 70,338
Contract rights, net..................... 65,164 3,184 -- 68,348
Cost in excess of net assets acquired,
net................................... 50,220 -- -- 50,220
Investment in subsidiaries............... $(6,839) -- -- 6,839 --
Other assets............................... -- 34,867 28 -- 34,895
------- -------- ------- -------- --------
Total Assets............................... $(6,839) $269,284 $11,385 $ (5,031) $268,799
------- -------- ------- -------- --------
------- -------- ------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Intercompany liabilities................. $ $11,870 $(11,870)
Other current liabilities................ 52,332 1,198 -- 53,530
-------- ------- -------- --------
Total current liabilities.................. 52,332 13,068 (11,870) 53,530
Long-term debt........................... 213,563 -- -- 213,563
Other liabilities........................ 8,545 -- -- 8,545
-------- ------- -------- --------
Total liabilities.......................... 274,440 13,068 (11,870) 275,638
-------- ------- -------- --------
Stockholders' equity:
Common stock............................. $
Additional paid-in capital............... 16,974 17,661 (687) (16,974) 16,974
Accumulated deficit...................... (20,418) (19,509) (909) 20,418 (20,418)
Other.................................... (3,395) (3,308) (87) 3,395 (3,395)
------- -------- ------- -------- --------
Total stockholders' equity................. (6,839) (5,156) (1,683) 6,839 (6,839)
------- -------- ------- -------- --------
Total liabilities and stockholders'
equity................................... $(6,839) $269,284 $11,385 $ (5,031) $268,799
------- -------- ------- -------- --------
------- -------- ------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
THIRTEEN WEEK PERIOD ENDED MARCH 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 59,252 $ 7,038 $ 66,290
Cost of sales........................... 48,280 6,034 54,314
Selling, general and administrative..... 8,599 845 9,444
Depreciation and amortization........... 5,687 660 6,347
Transaction fees and expenses........... 1,018 -- 1,018
-------- ------- --------
Operating profit........................ (4,332) (501) (4,833)
Interest expense........................ 4,632 -- 4,632
Other income, net....................... (101) -- (101)
-------- ------- --------
Loss before income taxes................ (8,863) (501) (9,364)
Income tax provision (Benefit).......... (2,670) -- (2,670)
-------- ------- --------
Loss before extraordinary item.......... (6,193) (501) (6,694)
Extraordinary item net.................. 873 -- 873
Cumulative effect on Change in
Accounting Principles................. 256 -- 256
Equity in earnings of subsidiaries...... $(7,823) -- $7,823 --
------- -------- ------- ------ --------
Net loss................................ (7,823) (7,322) (501) 7,823 (7,823)
Other comprehensive loss................ -- -- (20) (20)
------- -------- ------- ------ --------
Comprehensive loss...................... $(7,823) $ (7,322) $ (521) $7,823 $ (7,843)
------- -------- ------- ------ --------
------- -------- ------- ------ --------
</TABLE>
F-33
<PAGE>
VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
THIRTEEN WEEK PERIOD ENDED MARCH 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash Flows Provided By (Used In) Operating Activities.... $ -- $ (7,706) $ 1,759 $ (5,947)
------- -------- ------- --------
Cash Flows Provided by Investing Activities:
Decrease in restricted cash............................ -- -- -- --
Cash purchased in acquisition of Service America....... -- -- -- --
Payment of acquisition costs........................... -- -- -- --
Purchase of minority interest stock of Service
America............................................. -- -- -- --
Purchase of property, plant and equipment.............. -- (813) (411) (1,224)
Proceeds from sale of property, plant and Equipment.... -- -- -- --
Proceeds from assets held for sale..................... -- -- -- --
Additions to assets held for sale...................... -- -- -- --
Purchase of contract rights............................ -- (25) -- (25)
------- -------- ------- --------
Net cash used in investing activities............... -- (838) (411) (1,249)
------- -------- ------- --------
Cash Flows Provided by Financing Activities:
Principal payments on long-term debt................... -- (45,788) -- (45,788)
Net borrowings--revolving loans........................ -- 4,500 -- 4,500
Proceeds from long-term debt........................... -- 100,000 -- 100,000
Payments of financing costs............................ -- (5,575) -- (5,575)
Principal payments on capital lease obligations........ -- (46) -- (46)
Increase in bank overdrafts............................ -- 4,412 (1,302) 3,110
Increase in investors' notes receivable................ -- 627 -- 627
Redemption of Stock.................................... -- (49,500) -- (49,500)
------- -------- ------- --------
Net cash provided by financing activities........... -- 8,630 (1,302) 7,328
------- -------- ------- --------
Increase (decrease) in cash.............................. -- 86 46 132
Cash and cash equivalents--beginning of period -- 8,692 136 8,828
------- -------- ------- --------
Cash and cash equivalents--end of period................. $ -- $ 8,778 $ 182 $ 8,960
------- -------- ------- --------
------- -------- ------- --------
</TABLE>
F-34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
of Service America Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and comprehensive (loss) income,
of cash flows and of changes in stockholders' equity (deficit) present fairly,
in all material respects, the financial position of Service America Corporation
and its subsidiaries at December 27, 1997 and December 28, 1996, and the results
of their operations and their cash flows for the fifty-two weeks ended December
27, 1997 and the thirty-nine weeks ended December 28, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Stamford, Connecticut
June 2, 1998,
except for Notes 3, 8,13, and 14,
as to which the date is July 10, 1998
and Notes 21 and 22 as to which
the date is May 27, 1999
F-35
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS:
Current assets:
Cash at locations...................................................................... $ 1,335 $ 1,272
Accounts receivable (net of allowance for doubtful accounts of $803 and $786).......... 8,263 8,394
Inventories............................................................................ 4,376 3,975
Prepaid expenses and other current assets.............................................. 3,122 4,608
Due from GE Capital.................................................................... 534 34,577
Deferred income taxes.................................................................. -- 1,576
-------- --------
Total current assets............................................................ 17,630 54,402
Property, fixtures and equipment, net.................................................. 24,770 15,585
Other assets........................................................................... 15,084 14,042
Deferred income taxes.................................................................. -- 5,424
-------- --------
Total assets.................................................................... $ 57,484 $ 89,453
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY:
Current liabilities:
Accounts payable....................................................................... $ 11,382 $ 9,674
Accrued expenses and other current liabilities......................................... 10,546 29,065
Income taxes payable................................................................... -- 221
-------- --------
Total current liabilities....................................................... 21,928 38,960
Long-term debt......................................................................... 68,167 14,336
Other liabilities...................................................................... 3,834 4,423
-------- --------
Total liabilities............................................................... 93,929 57,719
-------- --------
Commitments and contingencies (Note 12)
10% Class A Preferred Stock: Series A, $1.00 par value; 40,000 shares
authorized; 30,000 shares issued and outstanding; aggregate liquidation
preference of $3,000 plus any unpaid dividends......................................... 2,549 --
10% Class A Preferred Stock: Series B, $1.00 par value; 260,000 shares
authorized; 200,000 shares issued and outstanding; aggregate liquidation
preference of $20,000 plus any unpaid dividends........................................ 18,601 --
Warrant (exercisable for 711,538 shares of Common Stock, $0.01 par value)................ 6,112 --
Restricted Common Stock: $0.01 par value; 50,607 shares authorized;
46,800 shares issued, net of unearned compensation of $96.............................. 156 --
Stockholders' (deficit) equity:
Redeemable Preferred Stock: Series A through E, $0.01 par value; 200,000
shares of each series authorized, issued and outstanding; aggregate
liquidation preference of $25,000 plus any unpaid dividends.......................... -- 21,132
Common Stock: $0.01 par value, 1,200,000 shares authorized; 250,000 shares
issued and outstanding (1996: 5,000 shares authorized, issued and
outstanding)......................................................................... 3 --
Capital in excess of par value......................................................... 77,276 139,848
Due from GE Capital.................................................................... (4,285) (6,292)
Accumulated deficit.................................................................... (137,078) (122,806)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment.............................................. 221 (148)
-------- --------
Total stockholders' (deficit) equity............................................ (63,863) 31,734
-------- --------
Total liabilities and stockholders' (deficit) equity............................ $ 57,484 $ 89,453
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-TWO WEEK THIRTY-NINE WEEK
PERIOD ENDED PERIOD ENDED
DECEMBER 27, 1997 DECEMBER 28, 1996
----------------- -----------------
<S> <C> <C>
Net sales............................................................... $ 172,859 $ 124,808
Cost of sales........................................................... 136,144 96,941
--------- ---------
Gross profit.......................................................... 36,715 27,867
Depreciation and amortization expense................................... 6,927 7,535
Selling, general and administrative expense............................. 24,711 17,355
Compensation expense.................................................... 3,730 --
Transaction fees and costs.............................................. 2,642 722
Impairment of long-lived assets......................................... 192 1,745
--------- ---------
(Loss) income from continuing operations before interest expense and
income taxes....................................................... (1,487) 510
Interest expense........................................................ 5,483 459
--------- ---------
(Loss) income from continuing operations before income taxes.......... (6,970) 51
Income tax (provision) benefit.......................................... (7,302) 164
--------- ---------
(Loss) income from continuing operations.............................. (14,272) 215
Income from discontinued operations, net................................ -- 9,030
--------- ---------
Net (loss) income..................................................... (14,272) 9,245
--------- ---------
Other comprehensive income:
Foreign currency translation adjustment............................... 369 3
--------- ---------
Total other comprehensive income........................................ 369 3
--------- ---------
Comprehensive (loss) income............................................. $ (13,903) $ 9,248
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
REDEEMABLE ACCUMULATED
PREFERRED STOCK COMMON STOCK CAPITAL IN OTHER
--------------------- ------------------ EXCESS OF DUE FROM ACCUMULATED COMPREHENSIVE
SHARES PAR VALUE SHARES PAR VALUE PAR VALUE GE CAPITAL DEFICIT (LOSS) INCOME
---------- --------- ------- --------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 30, 1996... 1,000,000 $ 21,132 5,000 $ -- $ 188,950 $ -- $(132,051) $(151)
Dividends declared........ -- -- -- -- (1,551) -- -- --
Assignment of proceeds
from the sale of the
remaining assets of the
institutional vending
and dining businesses... -- -- -- -- (108,354) -- -- --
Assumption of certain
assets and liabilities
by GE Capital........... -- -- -- -- 39,114 -- -- --
Contribution of debt,
accrued interest and
dividends to capital by
GE Capital -- -- -- -- 21,689 -- -- --
Due from GE Capital for
liabilities assumed..... -- -- -- -- -- (6,292) -- --
Net income................ -- -- -- -- -- -- 9,245 --
Foreign currency
translation
adjustment.............. -- -- -- -- -- -- -- 3
---------- --------- ------- ----- ---------- -------- --------- -----
Balance, December 28,
1996.................... 1,000,000 21,132 5,000 -- 139,848 (6,292) (122,806) (148)
Cancellation of existing
share capital at time of
recapitalization ....... (1,000,000) (21,132) (5,000) -- 21,132 -- -- --
Dividends declared........ -- -- -- -- (82,582) -- -- --
Accretion of Preferred
Stock................... -- -- -- -- (385) -- -- --
Dividends accrued on
Preferred Stock......... -- -- -- -- (2,165) -- -- --
New Common Stock issued... -- -- 250,000 3 1,428 -- -- --
Change in amount due from
GE Capital.............. -- -- -- -- -- 2,007 -- --
Net loss.................. -- -- -- -- -- -- (14,272) --
Foreign currency
translation
adjustment.............. -- -- -- -- -- -- -- 369
---------- --------- ------- ----- ---------- -------- --------- -----
Balance, December 27,
1997.................... -- $ -- 250,000 $ 3 $ 77,276 $ (4,285) $(137,078) $ 221
---------- --------- ------- ----- ---------- -------- --------- -----
---------- --------- ------- ----- ---------- -------- --------- -----
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-TWO THIRTY-NINE
WEEK PERIOD WEEK PERIOD
ENDED ENDED
DECEMBER 27, DECEMBER 28,
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income..................................................... $ (14,272) $ 9,245
Adjustments to reconcile net (loss) income to cash used in operating
activities:
Depreciation........................................................ 3,754 13,917
Amortization of intangibles and other assets........................ 3,365 6,479
Compensation expense................................................ 3,730 --
Loss (gain) on sales of net assets.................................. 72 (20,324)
Gain on settlement of insurance and other liabilities............... -- (6,271)
Deferred income taxes............................................... 7,000 1,600
Bad debt expense.................................................... 139 262
Other............................................................... 101 450
Changes in operating assets and liabilities:
Increase in trade accounts receivable............................... (8) (2,375)
(Increase) decrease in inventories.................................. (401) 309
Decrease in prepaid expenses and other current assets............... 1,486 942
Decrease in other assets............................................ 101 202
Increase (decrease) in accounts payable............................. 1,553 (558)
Decrease in accrued expenses and other current liabilities.......... (18,519) (9,376)
Decrease in income taxes payable.................................... (221) (160)
(Decrease) Increase in other liabilities............................ (589) 483
--------- ---------
Net cash used in operating activities............................. (12,709) (5,175)
--------- ---------
Cash flows from investing activities:
Purchases of property, fixtures and equipment and investments in
contracts........................................................... (17,564) (7,206)
Net proceeds from sales of net assets................................. 200 8,233
--------- ---------
Net cash (used in) provided by investing activities............... (17,364) 1,027
--------- ---------
Cash flows from financing activities:
Proceeds from the new term loan....................................... 55,000 --
Proceeds from the assumption of certain liabilities by GE Capital..... 36,050 --
Proceeds from the sale of common and preferred stock and warrant to
purchase common stock............................................... 20,100 --
Dividend to shareholder as part of recapitalization................... (80,000) --
Repayments of debt.................................................... -- (25)
(Repayments) borrowings on revolving credit facility, net............. (1,169) 3,660
Increase (decrease) in book overdrafts................................ 155 (5,753)
--------- ---------
Net cash provided by (used in) financing activities............... 30,136 (2,118)
--------- ---------
Increase (decrease) in cash at locations.......................... 63 (6,266)
Cash at locations at beginning of period................................ 1,272 7,538
--------- ---------
Cash at locations at end of period................................ $ 1,335 $ 1,272
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................................ $ 5,019 $ 1,689
Income taxes........................................................ $ 226 $ 397
Noncash investing and financing activities (Note 20)
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND THE COMPANY
Service America Corporation and Subsidiaries (the "Company") is a provider
of food services to recreational facilities, primarily convention centers,
stadiums and arenas. The Company was a wholly-owned subsidiary of Servam
Corporation ("Servam") until January 17, 1997. Servam, a holding company with no
operations of its own, was a wholly-owned subsidiary of General Electric Capital
Corporation ("GE Capital") (see below). The Company currently operates in
approximately 20 states and in Canada, where it generally holds multi-year
contracts to provide concession sales of food and beverages, merchandise,
catering and other services. Many of the Company's contracts allow it to act as
the exclusive food service provider at these facilities.
In December 1987, all of the outstanding common stock of the Company was
acquired by Servam (the "Acquisition"). On June 27, 1993, in connection with the
Company's emergence from bankruptcy (the "Reorganization"), the Company adopted
the "Fresh Start" provisions of Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), issued by
the American Institute of Certified Public Accountants. Upon Servam's and the
Company's emergence from bankruptcy, GE Capital, which was the Company's senior
lender in the Acquisition, controlled 70% of the voting power of Servam. On
March 26, 1994, the Company was in default under certain financial covenants of
its loan agreement with GE Capital and determined that the amount available
under the loan agreement was insufficient to fund its operations, capital
expenditures and debt service. As a result, a restructuring was completed on
June 24, 1994 under which Servam became 100% owned by GE Capital.
Prior to September 27, 1996, the Company provided contract food service
through its institutional vending and dining businesses, in addition to its
recreational food service operations, at business, industrial, and other
locations throughout the United States and in Canada. Effective September 27,
1996, the Company sold the remaining assets of its institutional vending and
dining businesses (the "Sale of Vending and Dining") to Compass Group PLC
("Compass") for cash, promissory notes, and Compass common stock totaling
approximately $120.1 million, plus the assumption of certain liabilities
amounting to approximately $27.6 million. The promissory notes and Compass
common stock were assigned to GE Capital (see Note 3).
On January 17, 1997, the Company was merged with Servam Acquisition
Corporation, a corporation controlled by GE Capital and four members of senior
management (the "Management Stockholders"), with the Company being the surviving
entity. Further details of this transaction, which has been accounted for as a
recapitalization, are provided in Note 14. In summary, the capital structure of
Servam Acquisition Corporation became the new capital structure of the Company
as the surviving entity and the capital structure of the Company as of
December 28, 1996 ceased to exist after the merger with Servam Acquisition
Corporation was consummated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. The results of operations of
the institutional vending and dining businesses have been accounted for as
discontinued operations (see Note 4) in the consolidated statement of operations
for the 39-week period ended December 28, 1996. Unless otherwise stated,
disclosures related to this consolidated statement of operations in the
accompanying notes are presented for continuing operations only.
Effective March 31, 1996, the Company changed its fiscal year end from the
last Saturday in March to the last Saturday in December. The first three
quarters of each fiscal year consist of
F-40
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
consecutive thirteen week periods with the fourth quarter ending on the last
Saturday of the respective month.
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 and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Revenue Recognition and Cost of Sales
The Company enters into two types of arrangements: profit and loss
contracts and incentive bonus contracts.
Under profit and loss contracts, the Company recognizes all food and
beverage revenues and expenses, including commissions to the clients, in the
statement of operations. Food and beverage revenues are recognized as they are
sold to the ultimate customer. The Company bears all the risks associated with
providing food and beverage services under profit and loss contracts. The
Company's business consists primarily of profit and loss contracts.
Under incentive bonus contracts, the Company retains a fee with an
incentive bonus for its role in managing the food service operation at the
client facility. The Company recognizes incentive bonus contract income on a
monthly basis as earned. Under this type of contract, the Company records all
food and beverage revenues generated at the facility in net sales and all costs
in their respective statement of operations accounts. In addition, and unlike
profit and loss contracts, profit payments are made to clients, which are
included in cost of sales. For the fifty-two weeks ended December 27, 1997 and
the thirty-nine weeks ended December 28, 1996, the Company recorded in net
sales, revenues of $19.1 million and $13.4 million, respectively and recognized
pre-tax fee income of $1.1 million and $0.8 million, respectively, from
management fee contracts. The risks associated with providing food and beverage
operations under incentive bonus contracts are generally not borne by the
Company.
Foreign Currency
The balance sheet and results of operations of the Company's Canadian
subsidiary are measured using the local currency as the functional currency.
Assets and liabilities have been translated into United States dollars at the
rates of exchange at the balance sheet date. Revenues and expenses are
translated into United States dollars at the average rate during the period.
Translation gains and losses arising from the use of differing exchange rates
from year to year are included in the cumulative translation adjustment on the
balance sheet.
Income Taxes
In the period ended December 28, 1996 and prior years, the Company was
included in the consolidated federal income tax return of General Electric
Company ("GE"), the parent company of GE Capital. The Company prepared its tax
provision on a stand alone basis as required under Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes". Effective
January 17, 1997 (see Note 14), the Company prepares income tax returns on a
stand-alone basis.
F-41
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Under the liability method of accounting for income taxes, the Company
recognizes deferred tax assets and deferred tax liabilities which are determined
based on the difference between the financial statement and tax basis of assets
and liabilities, using the enacted tax rate in effect for the year in which the
differences are expected to reverse.
In accordance with SOP 90-7, income tax benefits recognized from
pre-bankruptcy net operating loss carryforwards and other tax assets are used
first to reduce the Reorganization value in excess of amounts allocable to
identifiable assets and other intangibles established at the Reorganization date
until reduced to zero and then to increase capital in excess of par value.
A valuation allowance against deferred tax assets is required if, based on
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Cash and Cash at Locations
The Company maintains a zero-based cash management system for its U.S.
operations under which all daily collections are applied to the outstanding
balance of the Revolving Credit Facility (see Note 8) and amounts required to
fund the Company's disbursement accounts are drawn down on the Revolving Credit
Facility. At December 27, 1997 and December 28, 1996, net book overdrafts of
$1.5 million and $1.3 million, respectively, are included in accounts payable.
The Company maintains minimum cash balances at recreational services
locations to meet operating requirements. As cash balances at these locations
exceed the minimum balances, funds are deposited into the cash management
system.
Inventories
Substantially all inventories are finished goods and are stated at the
lower of cost or market. Cost is determined using the first-in, first out
method.
Property, Fixtures and Equipment
Property, fixtures and equipment were stated at fair market value as of the
Reorganization date. Additions and major replacements or improvements subsequent
to June 26, 1993 are stated at cost. Depreciation is provided for using the
straight-line method over the estimated useful lives of the respective assets.
When assets are sold or retired, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is included in the
statement of operations. Leasehold improvements are amortized over the terms of
the respective leases or the service lives of the assets, whichever is shorter.
The Company invests in fixtures and equipment at various recreational
services facilities. If a contract is terminated prior to its expiration date
for any reason other than default by the Company, the client is typically
contractually obligated to purchase the Company's fixtures and equipment at
their net carrying value.
Recreational Services Contract Rights
Recreational services contract rights represent fair values assigned to
such contracts at the Reorganization date and are amortized on a straight-line
basis over the lives of the respective contracts, ranging from one to twenty
years.
F-42
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Investments in Contracts
Investments in contracts, primarily direct payments to clients, are used by
the facility owner to construct and install food service fixtures and equipment,
make leasehold improvements and for certain other types of expenditures. These
costs are amortized on a straight line basis over the life of the related
contract, ranging from one to twenty years, without consideration for future
renewals. If a contract is terminated prior to its expiration date for any
reason other than default by the Company, the client is typically contractually
obligated to reimburse the Company for the unamortized portion of the
investment.
Long-Lived Assets
In accordance with SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" the Company
reviews its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing a review for
recoverability, the Company estimates the future cash flows expected to result
from the use of the asset and its eventual disposition. If the sum of the
expected future undiscounted cash flows is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement of an impairment loss for
long-lived assets and identifiable intangibles is based on the estimated fair
value of the asset.
For the periods ended December 27, 1997 and December 28, 1996, the Company
recorded impairment losses of approximately $0.2 million and $1.7 million,
respectively, related to recreational services contract rights, fixtures and
equipment, and investment in contracts. In measuring the impairment loss, fair
value was determined using the present value of estimated future cash flows from
the respective underlying recreational services contracts.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk are cash and accounts receivable. The Company
maintains its cash and cash at locations with various high quality banks. The
Company's accounts receivable balances are from various groups who hold
industrial and trade shows, company meetings, banquets, receptions, and consumer
exhibitions at the facilities serviced by the Company. To reduce credit risk,
the Company performs ongoing credit reviews and evaluations of its customers'
financial condition and in certain circumstances requires advance payments.
Fair Value of Financial Instruments
As of December 27, 1997, and December 28, 1996, the carrying value of the
Company's debt obligations approximated fair value based on quoted market prices
for the same or similar debt instruments.
3. SALE OF VENDING AND DINING BUSINESSES AND ASSIGNMENT AND ASSUMPTION AGREEMENT
On September 27, 1996 (the "Closing Date"), the Company sold the remaining
assets of its institutional vending and dining businesses to Compass for
approximately $120.1 million, plus the assumption of certain liabilities
aggregating approximately $27.6 million. The proceeds from the Sale of Vending
and Dining included cash, a share delivery agreement (the "Share Agreement"), a
supplemental share delivery agreement (the "Supplemental Share Agreement"), and
two promissory notes.
F-43
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SALE OF VENDING AND DINING BUSINESSES AND ASSIGNMENT AND ASSUMPTION
AGREEMENT--(CONTINUED)
The Share Agreement and the Supplemental Share Agreement required Compass
to deliver to the Company, or its designees, certificates representing
12,025,920 Compass shares in four consecutive semi-annual installments of
3,006,480 shares each, beginning on March 31, 1997. In conjunction with the
Share Agreement and the Supplemental Share Agreement, Compass issued to the
Company four irrevocable letters of credit aggregating $117.1 million supporting
the performance of the Share Agreement and Supplemental Share Agreement.
An independent valuation was obtained to value the Share Agreement and the
Supplemental Share Agreement as of the Closing Date, since the shares had not
been delivered and were therefore not readily tradable. The fair market value of
the shares was determined to be $88.4 million.
The Company received two promissory notes each with a principal amount of
$10 million. One promissory note was payable one year and one day after the
Closing Date (September 28, 1997) and a second promissory note is payable two
years and one day after the Closing Date (September 28, 1998). The promissory
notes bear interest at a rate of 6.5% until maturity, payable at maturity.
The Company received cash proceeds of approximately $11.7 million for the
remainder of the purchase price and a payment of $0.7 million for a one year
sublease of office space. The cash proceeds were used to make a partial
repayment on the Company's Revolving Credit Facility with GE Capital.
On October 1, 1996, the Company entered into an Assignment and Assumption
Agreement (the "Assignment and Assumption Agreement") with GE Capital. Pursuant
to the Assignment and Assumption Agreement, the Company assigned its rights to
the Share Agreement, the Supplemental Share Agreement, and the promissory notes
to GE Capital. The assignment of $108.4 million was accounted for as a reduction
of capital in excess of par value in the statement of stockholder's equity.
As part of the Assignment and Assumption Agreement, certain designated net
liabilities of the institutional vending and dining businesses and a percentage
of certain categories of liabilities recorded on the Company's corporate balance
sheet as of September 27, 1996, were assumed by GE Capital. The percentages used
for the corporate liabilities principally represent an approximation of the
amount of each liability attributable to the institutional vending and dining
businesses.
GE Capital appointed the Company as its agent for the purposes of
collecting the remaining assigned assets and for paying and discharging all of
the assumed liabilities. As of December 28, 1996, the Company recorded a
receivable from GE Capital for $40.9 million, including $11.0 million owed as a
result of the Insurance Settlement (see Note 12) with a corresponding
contribution of $39.1 million to capital in excess of par value for the net
liabilities assumed.
During the fifty-two week period ended December 27, 1997, GE Capital
reimbursed the Company $36.1 million in respect of liabilities settled by the
Company on behalf of GE Capital. As of December 27, 1997, the Company has
recorded a receivable of $4.8 million which represents the remaining net
liabilities assumed. Of the receivable from GE Capital, $4.3 million and
$6.3 million was reclassified to stockholder's equity, as of December 27, 1997
and December 28, 1996, respectively, representing the amount of the assumed
liabilities which remained unpaid as of July 10, 1998 and June 28, 1997,
respectively. The receivable from GE Capital is non-interest bearing.
Certain of the above liabilities that GE Capital agreed to pay and
discharge are subject to an aggregate maximum of $16.3 million (the "Aggregate
Amount"), without regard to the individual amount of such liabilities. As of
December 27, 1997, GE Capital has assumed accrued liabilities of $15.6 million
for liabilities subject to the Aggregate Amount and $25.3 million for
liabilities not subject
F-44
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SALE OF VENDING AND DINING BUSINESSES AND ASSIGNMENT AND ASSUMPTION
AGREEMENT--(CONTINUED)
to the Aggregate Amount. Management does not believe that the liabilities
subject to the Aggregate Amount will exceed such limit.
Contingent liabilities which are asserted or arise after the balance sheet
date which are determined to have arisen from the operation of the institutional
vending and dining businesses will be recorded as an expense to the Company in
the period the liability is probable of assertion and is estimable. The
contingent liability will be assumed and discharged by GE Capital and recorded
as a contribution to capital in excess of par value at that time.
The Assignment and Assumption Agreement was due to terminate on October 1,
1997, except for certain taxes, for which GE Capital's assumption of such
liability will remain in effect until the statue of limitation expires in the
applicable state. GE Capital has subsequently agreed to extend the Assignment
and Assumption Agreement on three occasions and it is now due to terminate on
August 31, 1998 (the "Termination Date"). On the Termination Date, the Company
shall provide to GE Capital a list of claims that remain unpaid as of the
Termination Date and are expected to be paid in the future. If within 30 days
following the delivery of such list, GE Capital has not given the Company notice
of its objection thereto, the list shall be conclusive and binding and GE
Capital will be responsible to pay all the liabilities as listed. Liabilities
incurred in excess of amounts listed or liabilities incurred but not included on
such list, if any, will be the responsibility of the Company.
Also, as part of the Assignment and Assumption Agreement, GE Capital
forgave $17.9 million of debt and accrued interest owed under the Revolving
Credit Facility and forgave $3.8 million in accrued dividends due on the Old
Redeemable Preferred Stock (see Note 9). The forgiveness of these amounts was
accounted for as a contribution of $21.7 million to capital in excess of par
value in the consolidated statement of stockholder's equity.
4. DISCONTINUED OPERATIONS
In connection with the Sale of Vending and Dining, the results of
operations of the institutional vending and dining businesses were reclassified
to identify them as discontinued operations on the consolidated statement of
operations for the thirty-nine weeks ended December 28, 1996. The summarized
data for the institutional vending and dining businesses for the thirty-nine
weeks ended December 28, 1996 was as follows:
<TABLE>
<S> <C>
Results of discontinued operations:
Net sales.................................................. $240,282
--------
Loss from operations:
Loss before income taxes................................ (5,853)
Income tax benefit...................................... 2,372
--------
Loss from operations....................................... (3,481)
--------
Gain on disposal of operations:
Gain on disposal........................................ 15,625
Income tax expense...................................... (3,114)
--------
Gain on disposal, net...................................... 12,511
--------
Income from discontinued operations, net................... $ 9,030
--------
--------
</TABLE>
Included in the gain on disposal of the remaining institutional vending and
dining businesses of $15.6 million in the thirty-nine weeks ended December 28,
1996 were transaction costs of approximately $5.1 million and other asset sales
which resulted in a loss of $0.4 million.
F-45
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. DISCONTINUED OPERATIONS--(CONTINUED)
Recorded in loss from operations before income taxes, for the thirty-nine
weeks ended December 28, 1996, was interest expense of $1.2 million. Interest
expense was allocated to discontinued operations based on the ratio of net
assets sold to the sum of total consolidated net assets plus consolidated debt.
5. PROPERTY, FIXTURES AND EQUIPMENT
Property, fixtures and equipment consist of the following at December 27,
1997 and December 28, 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Food service equipment............................................... $ 18,601 $ 13,051
Other equipment...................................................... 25,335 15,683
-------- --------
43,936 28,734
Less, Accumulated depreciation and amortization.................... (19,166) (13,149)
-------- --------
Property, fixtures and equipment, net................................ $ 24,770 $ 15,585
-------- --------
-------- --------
</TABLE>
6. OTHER ASSETS
Other assets consist of the following at December 27, 1997 and December 28,
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Recreational services contract rights................................ $ 24,022 $ 24,022
Investment in contracts.............................................. 26,545 21,288
Other................................................................ 657 176
-------- --------
51,244 45,486
Less, Accumulated amortization..................................... (36,140) (31,444)
-------- --------
Other assets, net.................................................... $ 15,084 $ 14,042
-------- --------
-------- --------
</TABLE>
On December 28, 1996, the Company recognized $8.6 million of deferred tax
assets relating to certain pre-bankruptcy net operating losses resulting in a
corresponding increase in accumulated amortization related to recreational
services contract rights (see Note 11).
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following at
December 27, 1997 and December 28, 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Salaries and wages................................................... $ 1,535 $ 1,734
Commissions.......................................................... 1,141 1,043
Insurance............................................................ 549 15,071
Taxes other than income.............................................. 4,070 5,561
Other................................................................ 3,251 5,656
-------- --------
$ 10,546 $ 29,065
-------- --------
-------- --------
</TABLE>
As of December 27, 1997 and December 28, 1996, included in accrued expenses
and other current liabilities are $2.3 million and $20.0 million of liabilities,
respectively, assumed by GE Capital, but unpaid by the Company as of the balance
sheet date (see Note 3).
F-46
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT
Long-term debt consists of the following at December 27, 1997 and December
28, 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Term loan............................................................ $ 55,000 $ --
Revolving credit facility............................................ 13,167 14,336
-------- --------
Long-term debt..................................................... $ 68,167 $ 14,336
-------- --------
-------- --------
</TABLE>
On July 30, 1993, the Company entered into the Second Amended and Restated
Loan Agreement with GE Capital (the "Old Loan Agreement"). The Old Loan
Agreement provided for (i) a term loan (the "Old Term Loan") in an aggregate
principal amount of $151 million and (ii) a $70 million Revolving Credit
Facility (the "Old Revolving Credit Facility"). Amounts outstanding under the
facility were collateralized by substantially all of the Company's assets. The
Old Term Loan and the Old Revolving Credit Facility bore interest at a per annum
rate equal to, at the Company's option, 1.75% plus the average month-end prime
(or equivalent) rates of four major New York banks or LIBOR plus 4.50%. The
Company was required to make monthly interest payments in cash on the Old Term
Loan and the amounts outstanding under the Old Revolving Credit Facility.
Amounts outstanding under the Old Revolving Credit Facility were due in
2000. The Old Loan Agreement contained covenants which, among other things,
required the Company to maintain certain amounts of operating income (as
defined), as well as certain financial ratios, and generally restricted or
limited the Company with respect to capital expenditures, dispositions of
assets, incurrence of debt, mergers and the making of investments. The Company
also could not declare, pay or set aside dividends with respect to its common
stock.
Certain of the Company's recreational services contracts require that
performance bonds or letters of credit be executed in favor of the client to
ensure that the Company abides by the provisions of the contract. These
performance bonds and letters of credit, which are issued by a surety company
and GE Capital, respectively, generally provide that the client be reimbursed
for losses it may incur should the Company not comply with the food service
contract up to the amount of the bond or the letter of credit. The surety
Company will only issue such performance bonds if it is indemnified by a third
party for any loses it may sustain. The Company has arrangements with GE Capital
and with another third party to provide such indemnification. To the extent that
GE Capital provided such indemnification, the amount available to be borrowed
under the Old Revolving Credit Facility was reduced on a dollar for dollar
basis. The amount available under the Old Revolving Credit Facility was also
reduced by the principal amount of any outstanding letters of credit which GE
Capital had guaranteed for the Company.
On March 25, 1995, GE Capital contributed to capital all debt outstanding;
$143.6 million under the Term Loan, $15.0 million under the Revolving Credit
Facility (without cancellation of the facility or reduction of the available
credit granted previously under the facility) and $13.8 million of accrued but
unpaid interest. This contribution resulted in a credit of $172.4 million to
capital in excess of par value. In addition, GE Capital changed the calculation
of the amount by which availability is reduced for outstanding performance bonds
and letters of credit to 67% of the amounts indemnified or guaranteed rather
than 100%.
In October 1996, as stated in Note 3, GE Capital contributed to capital
$21.7 million of debt and accrued interest outstanding under the Old Revolving
Credit Facility (without cancellation or modification of the facility or
reduction of the available credit granted previously under the facility). The
forgiveness of these liabilities was recorded as a contribution to capital in
excess of par value in stockholder's equity as of December 28, 1996.
F-47
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT--(CONTINUED)
The Company, acting as the agent of GE Capital, in accordance with the
terms of the Assignment and Assumption Agreement, borrowed under the Old
Revolving Credit Facility to pay certain of the liabilities assumed by GE
Capital as they came due. The Company was not assessed interest on the
borrowings made on GE Capital's behalf between October 1, 1996 and December 28,
1996. As of December 28, 1996, the principal amount of the loan outstanding
under the facility was $14.3 million. Additionally, letters of credit
aggregating approximately $12.1 million and bond indemnifications aggregating
approximately $3.3 million had been obtained. Including the aforementioned 67%
of bonds and letters of credit, the Company had $30.3 million available for
borrowings at December 28, 1996.
On January 17, 1997, the Company repaid the outstanding balance owed under
the Old Revolving Credit Facility and entered into a new loan agreement (the
"New Loan Agreement') with GE Capital which provided the Company with a new term
loan (the "New Term Loan") with a principal amount of $55.0 million and a new
revolving credit facility (the "New Revolving Credit Facility") of
$20.0 million. The New Loan Agreement also gives the Company the right to
request GE Capital to incur, or purchase participations in letter of credit
obligations and bond indemnification obligations, in respect of the Company, up
to a maximum of $13.0 million, (the "Letter of Credit and Performance Bond
Indemnification Facility"), reduced by $1.0 million beginning January 17, 1999,
and each year thereafter. Outstanding letters of credit are subject to a
sub-limit of $5.0 million and reduce availability under the New Revolving Credit
Facility on a dollar for dollar basis. Outstanding performance bonds do not
reduce availability under the New Revolving Credit Facility.
As of December 27, 1997, the Company had outstanding letter of credit and
performance bond obligations of $8.3 million and $9.2 million, respectively. The
Company received a waiver from GE Capital which deems letter of credit
obligations to be zero until June 30, 1998 and thereafter to be 25% of the
aggregate face amounts of outstanding letters of credit, which will be applied
against the New Revolving Credit Facility. Accordingly, there is still
$3.8 million of the Letter of Credit and Bond Indemnification Facility
available. In addition, the Company also has $6.8 million available for
borrowings under the New Revolving Credit Facility at December 27, 1997.
The proceeds of the New Term Loan and the New Revolving Credit Facility
were used to finance the Recapitalization (see Note 14). Borrowings under the
New Revolving Credit Facility subsequent to January 17, 1997 have been used to
provide working capital financing. Indebtedness under the New Loan Agreement is
collateralized by substantially all of the assets of the Company. The Management
Stockholders have agreed to guarantee, on a limited recourse basis, all
indebtedness under the New Loan Agreement and have pledged their Common Stock as
collateral under the New Loan Agreement.
Both the New Term Loan and the New Revolving Credit Facility become due on
January 17, 2002. The Company is required to repay the principal on the New Term
Loan in eleven consecutive quarterly payments of $1.4 million commencing
April 1, 1999, with the final payment of $39.9 million due on January 17, 2002.
Any prepayments made under the New Loan Agreement are applied to the New Term
Loan in inverse order of maturity and then to the New Revolving Credit Facility.
Borrowings under the New Term Loan and the New Revolving Credit Facility
bear interest at a per annum rate equal to, at the Company's option, the Index
Rate plus 1.50% or LIBOR plus 3.375%. The Index Rate is defined as the greater
of the Federal funds rate plus 0.50% or the prime rate. The Company also pays
certain fees under the New Loan Agreement for unused loan availability,
outstanding letters of credit and performance bond obligations.
As of December 27, 1997, the interest rate on the outstanding indebtedness
under the New Term Loan and the New Revolving Credit Facility were 9.4% and
10.0%, respectively.
F-48
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT--(CONTINUED)
The New Loan Agreement contains covenants which, among other things,
require the Company to maintain certain amounts of earnings before interest and
income taxes, depreciation and amortization (as defined) as well as certain
financial ratios. The agreement also restricts or limits the Company with
respect to the payment of dividends, capital expenditures, disposition of
assets, incurrence of debt, mergers and the making of investments. As of
December 27, 1997, the Company was not in compliance with certain financial
covenants. GE Capital unconditionally waived existing defaults under the New
Loan Agreement and provided the Company with an unconditional waiver in respect
of projected future covenant violations based on management's forecast of the
Company's operating performance in the coming year.
9. OLD REDEEMABLE PREFERRED STOCK
On March 25, 1995, Servam authorized and issued Redeemable Preferred Stock
Series A through E, 200,000 shares of each series, to GE Capital (the "Old
Redeemable Preferred Stock") in exchange for the Increasing Rate Redeemable
Preferred Stock, previously issued to GE Capital in the Reorganization. The Old
Redeemable Preferred Stock, which was recorded at its fair value of
$21.1 million, had a par value of $0.01 and a liquidation value of $25 per share
plus any unpaid dividends. Servam could at its option have redeemed at any time
all or a portion of the shares of preferred stock then outstanding at the
optional redemption price of $25 per share plus for each share an amount equal
to dividends unpaid and accrued thereon, whether or not declared. Dividends were
paid at the index rate defined as the average of the month-end prime rate of
interest in effect at March 26, 1995 (and announced from time to time
thereafter) of four major banks. Holders of the Old Redeemable Preferred Stock
were entitled to receive dividends when, and if declared by the Board of
Directors, each day from and after March 26, 1995 payable quarterly on the first
day of each July, October, January and April, commencing July 1, 1995. Each
quarterly dividend began to accrue (whether or not declared) and was fully
cumulative from the first day of the quarter end of which such dividend was
payable.
The Old Redeemable Preferred Stock, which was the obligation of Servam, was
reflected in the financial statements of the Company, since Servam was dependent
on the Company's cash flows to service the principal amount of the Old
Redeemable Preferred Stock and any dividends.
On January 17, 1997, GE Capital and the Management Stockholders consummated
a recapitalization of the Company and Servam was subsequently liquidated and the
Old Redeemable Preferred Stock was canceled (see Note 14).
10. EMPLOYEE BENEFITS
Defined Contribution Plan
The Company maintains a defined contribution plan (the "401(k) plan") which
covers substantially all salaried employees. The 401(k) plan provides for
employees to contribute a specified percentage of their compensation to the
plan.
Effective with the Sale of Vending and Dining, those employees working in
the institutional vending and dining businesses who were transferred to Compass
(the "Transferred Employees"), became fully vested in their 401(k) plan account
balances as of September 27, 1996. On January 12, 1997, the 401(k) plan account
balances of the Transferred Employees were transferred by a designated trustee
to a qualified plan maintained by Compass.
No amounts were charged to expense for the fifty-two weeks ended December
27, 1997 and the thirty-nine weeks ended December 28, 1996, as the Company at
its discretion made no contributions.
F-49
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFITS--(CONTINUED)
Multi-Employer Pension Plans
Certain of the Company's union employees are covered by multi-employer
defined benefit pension plans administered by unions. Under the Employee
Retirement Income Security Act ("ERISA"), as amended, an employer upon
withdrawal from a multi-employer pension plan is required to continue funding
its proportionate share of the plan's unfunded vested benefits. The Company may
incur a withdrawal liability if a recreational services contract is terminated
or not renewed.
The Sale of Vending and Dining did not result in a complete or partial
withdrawal from any of the multi-employer plans relating to the institutional
vending and dining facilities sold to Compass, as Compass will continue to
contribute to such plans. If Compass withdraws from any of the multi-employer
plans, with respect to any such operations, before the end of five plan year
periods, the Company may be secondarily liable for any withdrawal liability if
Compass fails to pay such liability.
Amounts charged to expense and contributed to the plans were not material
for the periods presented.
11. INCOME TAXES
Income tax (provision) benefit from continuing operations for the fifty-two
weeks ended December 27, 1997 and the thirty-nine weeks ended December 28, 1996
consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- -----
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal................................................................. $ (650) $(275)
State................................................................... (137) (33)
Foreign................................................................. 485 (14)
------- -----
(302) (322)
Deferred.................................................................. (7,000) 486
------- -----
$(7,302) $ 164
------- -----
------- -----
</TABLE>
Deferred tax assets and liabilities are comprised of the following at
December 27, 1997 and December 28, 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Expenses deductible for financial reporting before tax............. $ 2,882 $ 3,705
Net operating losses and credits................................... 6,030 14,300
-------- --------
Total deferred tax assets..................................... 8,912 18,005
-------- --------
Deferred tax liabilities:
Basis differences in:
Land, buildings and equipment................................... (333) (683)
Recreational services contract rights........................... (199) (291)
Other........................................................... (744) (822)
-------- --------
Total deferred tax liabilities................................ (1,276) (1,796)
-------- --------
Valuation allowance.................................................. (7,636) (9,209)
-------- --------
Net deferred tax assets....................................... $ -- $ 7,000
-------- --------
-------- --------
</TABLE>
As of December 28, 1996, the Company increased the valuation allowance
related to certain tax assets by $4.6 million. The increase reflected the
Company's revision of its estimate of the amount of
F-50
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES--(CONTINUED)
net operating losses available to it and its belief that it was more likely than
not that there were sufficient future reversals of existing deferred tax
liabilities and projected future taxable income to allow the recognition of
deferred tax assets including the utilization of pre-bankruptcy net operating
loss carryforwards. In accordance with SOP 90-7, income tax benefits recognized
from pre-bankruptcy net operating loss carryforwards and other tax assets are
used first to reduce the reorganization value in excess of amounts allocable to
identifiable assets and other intangibles established at the reorganization date
until reduced to zero and then to increase capital in excess of par value. As of
December 28, 1996, the Company recognized $8.6 million in deferred tax assets
associated with pre-bankruptcy net operating losses totaling approximately
$22.0 million, resulting in a $8.6 million reduction in recreational services
contract rights (see Note 6). Approximately $4.0 million of net operating losses
or $1.6 million of deferred tax assets were utilized by the Company in the GE
1996 consolidated federal income tax return to offset taxable income related to
the gain on the sale of the remaining institutional vending and dining
businesses.
As of December 27, 1997, the Company decreased the valuation allowance
related to certain tax assets by $1.6 million. The decrease reflects the
reversal of temporary differences and a reduction of the deferred tax asset for
net operating losses. The reduction in net operating losses reflects a change in
estimate of the amount of losses reattributed to GE Capital and the Company's
belief that it is more likely than not that there will not be sufficient future
reversals of existing deferred tax liabilities and projected future taxable
income to allow the recognition of all of the Company's deferred tax assets,
including pre-bankruptcy net operating loss carryforwards. The Company has
revised its estimate of net operating losses available to it primarily because
the amount of losses reattributed to GE Capital (see Note 14) was $81.3 million
rather than $58.0 million as originally estimated.
The Company has regular and alternative minimum tax net operating loss
carryforwards of approximately $11.3 million and $11.8 million, respectively,
and credits of $0.9 million which expire through the year 2005 and which may be
subject to an annual limitation. Under Section 382 of the Internal Revenue Code
of 1986, as amended ("Section 382"), certain changes in stock ownership result
in a limitation of the amount of net operating loss carryforwards that can be
utilized each year after a change in ownership. The Company has been advised by
legal counsel that the determination of whether it underwent an ownership change
upon emergence from bankruptcy or subsequent thereto involves the resolution of
certain technical tax issues which are not fully determinable at this time. In
particular, the regulations under Section 382 are complex and in many instances
there is a lack of administrative guidance or case law interpreting these
provisions.
The determination of the ultimate amount of pre-bankruptcy tax net
operating losses is dependent upon a variety of factors including the potential
examination by the Internal Revenue Service of the loss carryforwards in the tax
years in which those losses are utilized.
The actual tax (provision) benefit from continuing operations for each
period is different from the amount that would have been determined by applying
the statutory 35% federal income tax rate to the
F-51
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES--(CONTINUED)
loss (income) before income taxes. The reconciliation of these differences for
the fifty-two weeks ended December 27, 1997 and the thirty-nine weeks ended
December 28, 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -----
(IN THOUSANDS)
<S> <C> <C>
Expected tax benefit (provision).......................................... $ 2,440 $ (18)
State income taxes, net of federal income tax effect...................... (50) (21)
Compensation expense...................................................... (1,306) --
Adjustment of deferred tax asset and valuation allowance.................. (7,000) --
(Increase) decrease in reserves for tax audits............................ (648) 248
Effect of limitations on utilization of operating losses.................. -- 576
Nondeductible expenses.................................................... (738) (621)
------- -----
Actual tax (provision) benefit............................................ $(7,302) $ 164
------- -----
------- -----
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
Commitments
Future minimum rental commitments as of December 27, 1997 for all
noncancelable operating leases, relating principally to computer and other
office equipment, are as follows:
<TABLE>
<CAPTION>
YEAR 1997
- ---- ----
(IN THOUSANDS)
<S> <C>
1998...................................................... $1,550
1999...................................................... 501
2000...................................................... 450
2001...................................................... 379
2002...................................................... 329
------
$3,209
------
------
</TABLE>
The Company has entered into several agreements whereby certain equipment
under the above leases was transferred to third parties for which the Company
will receive reimbursement aggregating $1.0 million in 1998.
Total rent expense included in continuing operations was $2.3 million and
$1.2 million for the fifty-two weeks ended December 27, 1997, and the
thirty-nine weeks ended December 28, 1996, respectively.
Pursuant to its recreational services contracts, the Company is committed
to spend certain amounts at its clients' facilities. The commitment amount is
generally used by the Company or the facility owner to construct and install
food service fixtures and equipment, make leasehold improvements and for certain
other agreed upon expenditures. As of December 27, 1997, the Company has
commitments to spend approximately $18.9 million through 2000. Subsequent to the
balance sheet date, the Company renewed existing contracts and entered into new
contracts which contain additional commitments to spend $1.5 million through
2000. The contracts generally require the Company to obtain performance bonds or
letters of credit to ensure performance under these commitments (see Note 8).
F-52
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Contingencies
Prior to September 27, 1996, the Company maintained self-insurance programs
for workers' compensation, liability and group medical insurance costs. Claims
incurred above limits retained by the Company were covered by indemnity
insurance. Self-insurance costs were accrued based upon the aggregate of the
estimated liability for reported claims and an actuarially determined estimated
liability for claims incurred but not reported.
The Company entered into an agreement (the "Insurance Agreement") as of
December 28, 1996, with two insurance carriers to settle all self-insured claims
(excluding group medical insurance claims), including those incurred but not
reported, between December 31, 1989 and September 27, 1996, up to a cap of
$37.5 million, for a payment of $24.8 million (including $12.0 million in
premium deposits held by the insurance carrier). GE Capital agreed to provide
the Company with approximately $11.0 million of the above payment. Management
believes that the cap of $37.5 million is sufficient to cover liabilities
incurred during such time periods. As of December 28, 1996, the Company recorded
a receivable from GE Capital and corresponding contribution to capital in excess
of par value of $11.0 million. In January 1997, the Company made the final
payment to the insurance carrier and was reimbursed by GE Capital. Stand-by
letters of credit in the amount of $11.0 million were canceled when the final
payment under the Insurance Agreement was made in January 1997.
As a result of the Insurance Agreement, the Company recorded a gain of
$5.6 million in the thirty-nine weeks ended December 28, 1996 in settlement of
the above self-insurance claims liabilities. Of this amount, $1.2 million was
recorded as a reduction of cost of sales from continuing operations and $4.4
million as a component of income from discontinued operations.
Subsequent to September 27, 1996, the Company is no longer self-insured
under any of its insurance programs, except for workers' compensation coverage,
which is self-insured up to a maximum of approximately $1.0 million per year.
The Company is party to legal proceedings that are considered to be
ordinary and routine litigation incidental to its business. Management does not
believe that the outcome of these lawsuits will have a material adverse effect
on the Company's financial position or results of operations.
13. RELATED PARTY TRANSACTIONS
GE Capital and its affiliates provide leasing and other financing services
to the Company. Payments to GE Capital and its affiliates during the fifty-two
weeks ended December 27, 1997 and the thirty-nine weeks ended December 28, 1996,
for such services, net of discounts earned, were approximately $5.1 million and
$1.7 million, respectively. The related amount due to GE Capital and its
affiliates at December 27, 1997 was $0.5 million. Effective September 27, 1996,
the Company's responsibilities under certain of these leases and agreements were
transferred to Compass.
In July 1996, the Company entered into a long-term financial advisory
agreement with a financial consulting firm for a fee of $0.8 million, payable in
installments, of which $0.4 million (1996: $0.4 million) was expensed in the
fifty-two weeks ended December 27, 1997. Effective with the Recapitalization
(see Note 14), a principal of the financial consulting firm became a member of
the Company's board of directors.
During the thirty-nine weeks ended December 28, 1996, the Company, through
its discontinued institutional vending and dining businesses, recorded revenues
of $6.2 million, from providing institutional vending and dining food service at
the corporate offices and other locations of GE Capital and its affiliates. As
of December 28, 1996, all trade accounts receivable due to the Company from GE
Capital had been collected.
F-53
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. RELATED PARTY TRANSACTIONS--(CONTINUED)
The Company has received a letter from GE Capital confirming that they will
provide financial support to the Company.
14. RECAPITALIZATION
On January 17, 1997, the Company was merged with Servam Acquisition
Corporation, a corporation controlled by GE Capital and the Management
Stockholders with the Company being the surviving entity. The transaction has
been accounted for as a recapitalization (the "Recapitalization") of the
Company.
The capital structure of Servam Acquisition Corporation became the new
capital structure of the Company, as the surviving entity. The capital structure
of the Company as of December 28, 1996 ceased to exist after the merger with
Servam Acquisition Corporation was consummated. Legal and consulting fees of
approximately $0.7 million were incurred as a result of the Recapitalization of
the Company.
The Company's new capital structure (the "New Capital Structure") includes
the following: (i) senior term loan debt of $55.0 million (the "New Term Loan")
and revolving debt of $5.0 million (the "New Revolving Credit Facility") loaned
by GE Capital under a new credit facility dated January 17, 1997 (see Note 8),
(ii) 200,000 shares of 10% Class A Preferred Stock Series B (the "Series B
Preferred Stock") (see Note 15), with a liquidation preference of $20 million in
the aggregate, and a warrant issued to GE Capital (the "GE Warrant") (see
Note 16), exercisable for 711,538 shares of Common Stock or approximately 70% of
the Common Stock of the Company on a fully diluted basis, for an exercise price
of $0.01 per share, both purchased by GE Capital for an aggregate of
$20.0 million, and (iii) 30,000 shares of 10% Class A Preferred Stock Series A
("Series A Preferred Stock") (see Note 15), with a liquidation preference of
$3.0 million in the aggregate, which is junior to the Series B Preferred Stock,
and 250,000 shares of Common Stock, constituting all of the outstanding Common
Stock of the Company (30% on a fully diluted basis), both purchased by the
Management Stockholders for $0.1 million.
In order to determine the fair value of each component of the New Capital
Structure, the Company obtained an independent valuation (the "Valuation") as of
January 17, 1997. The fair value of the New Capital Structure was determined to
be $86.1 million. The fair value of the individual components of the New Capital
Structure were determined to be the following: (i) the New Term Loan and New
Revolving Credit Facility were issued at fair value, approximately
$60.0 million; (ii) the Series B Preferred Stock was valued at $16.4 million;
(iii) the GE Warrant was valued at $6.1 million; (iv) the Series A Preferred
Stock was valued at $2.2 million; and (v) the Common Stock purchased by the
Management Stockholders was valued at $1.4 million.
Compensation expense of approximately $3.5 million was recorded as of
January 17, 1997, calculated as the difference between the fair value of the
250,000 shares of Common Stock and the Series A Preferred Stock issued to the
Management Stockholders and the $0.1 million paid to the Company by the
Management Stockholders.
A dividend to GE Capital was recorded equal to the fair value of the
components of the New Capital Structure issued to GE Capital, which aggregated
approximately $82.5 million. This dividend was recorded as a reduction to
capital in excess of par value as of January 17, 1997.
In connection with the Recapitalization of the Company, on January 17,
1997, the Company received $16.9 million from GE Capital as partial payment for
the liabilities assumed pursuant to the Assignment and Assumption Agreement (see
Note 3). Contemporaneously with this receipt, the Company repaid the outstanding
balance of $16.9 million due under the Revolving Credit Facility.
F-54
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. RECAPITALIZATION--(CONTINUED)
The Company also entered into a tax indemnity agreement (the "Agreement")
with GE Capital. The Agreement provides that GE Capital and its successors shall
indemnify and hold harmless the Company and its successors from and against all
liabilities for federal income taxes attributable to taxable periods ending on
or before the effective date of the Recapitalization and state and local income
taxes where the Company filed on a combined or unitary basis with GE Capital. In
addition, in accordance with Treasury Regulations governing the filing of
consolidated federal income tax returns under the Agreement, the Company has
agreed to re-attribute to GE, $81.3 million of its net operating loss
carryforwards incurred prior to January 17, 1997.
15. SERIES A AND SERIES B PREFERRED STOCK
On January 17, 1997, Servam Acquisition Corporation established two series
of authorized, cumulative preferred stock, par value $1.00 per share, designated
as 10% Class A Senior Preferred, Series A, 40,000 authorized shares and 10%
Class A Senior Preferred Stock, Series B, 260,000 authorized shares
(collectively referred to as the "Preferred Stock"). The Series A Preferred
Stock ranks subordinate to the Series B Preferred Stock.
In connection with the Recapitalization (see Note 14), Servam Acquisition
Corporation issued 30,000 shares of the Series A Preferred Stock, liquidation
preference $3.0 million, purchased by the Management Stockholders and 200,000
shares of the Series B Preferred Stock, liquidation preference $20.0 million,
issued to GE Capital contemporaneously with the issuance of the GE Warrant
exercisable for 711,538 shares of Common Stock (see Note 16).
Dividends are payable at the rate of 10% per annum of the liquidation
preference for each respective series of Preferred Stock, payable in arrears
beginning January 1, 1998 and March 31, 1997 and quarterly thereafter for the
Series A Preferred Stock and the Series B Preferred Stock, respectively.
Dividends accrued prior to December 31, 1997 may be settled in shares of
preferred stock. Dividends paid subsequent to that date are payable solely in
cash. Dividends accrued as of December 27, 1997 on the Series A Preferred Stock
and the Series B Preferred Stock aggregated $0.3 million and $1.9 million,
respectively.
The Company is required to redeem all shares of the respective series of
Preferred Stock upon the occurrence of certain events, as defined. The Company
has the option to redeem the Series A Preferred Stock at any time, however, only
after such time that the Series B Preferred Stock is redeemed and amounts
outstanding under the loan agreement with GE Capital are repaid (see Note 8). In
any event, the Series B Preferred Stock is subject to a mandatory redemption
requirement by the Company on January 21, 2007, at its liquidation preference of
$20.0 million plus all accrued and unpaid dividends. As a result of this
redemption provision, the Company has classified the Preferred Stock outside of
Stockholders' Equity. The Series A Preferred Stock is also redeemable for the
liquidation preference plus all accrued and unpaid dividends at such time.
Holders of the Preferred Stock are not entitled to any voting rights except
upon the occurrence of certain events as defined.
On January 17, 1997, the Preferred Stock was recorded at its fair value
based on the Valuation. The Company has recorded a charge to accrete each series
of Preferred Stock to its redemption value over a ten-year period amounting to
$0.1 million and $0.3 million for the period from January 17, 1997 through
December 27, 1997 for the Series A Preferred Stock and the Series B Preferred
Stock, respectively. The accretion charge is recorded as an increase to the
carrying value of the Preferred Stock and a reduction to capital in excess of
par value.
F-55
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. GE WARRANT
The GE Warrant, issued contemporaneously with the issuance of the Series B
Preferred Stock, entitles GE Capital to acquire an aggregate of 711,538 shares
of Common Stock at an exercise price of $0.01 per share.
The Company is obligated to repurchase the GE Warrant (the "Put Feature")
at any time upon the occurrence of certain events, as defined, but no later than
January 21, 2002, for an amount equal to the fair, or appraised, value of the
Company's Common Stock, less the warrant exercise price. Because the Put Feature
of the GE Warrant is outside the control of the Company, the GE warrant is
classified outside of Stockholders' Equity.
GE Capital may exercise the GE Warrant for all or a portion of the shares
under the warrant. The fair value of the GE Warrant, approximating $6.1 million
as of January 17, 1997, is adjusted to its fair value at each measurement date,
and such changes in fair value would be recorded as an increase in the carrying
value of the GE Warrant and a reduction to capital in excess of par value. As of
December 27, 1997, there was no change in the carrying value of the warrants and
no warrants were exercised.
17. RESTRICTED STOCK PLAN
Effective March 17, 1997, the Company adopted the Service America
Corporation 1997 Stock Plan (the "Plan"). Under the Plan, the Company may issue
to eligible employees, excluding Management Stockholders, authorized but
unissued Common Stock or treasury stock of the Company. Up to 50,607 shares of
Common Stock are authorized for issuance, of which no more than 5,000 shares of
Common Stock may be awarded as restricted stock to any eligible employee during
the term of the Plan.
The Company granted 37,600 shares of restricted stock to certain employees
on March 17, 1997, which vest as follows: 16,200 shares vested immediately upon
grant, 10,700 shares vest one year after grant and 10,700 shares vest two years
after grant. On June 16, 1997, the Company granted an additional 7,200 shares,
which vest as follows: 2,398 shares vested immediately upon grant, 2,403 shares
vest one year after grant and 2,399 shares vest two years after grant. On
August 8, 1997, the Company granted an additional 2,000 shares, which vest as
follows: 667 shares vested immediately upon grant, 666 shares vest one year
after grant and 667 shares vest two years after grant. Shares available for
grant at December 27, 1997 were 3,807.
Under the provisions of the Plan, an employee is required to sell to the
Company vested shares at fair value, within one year after such employee's
services are terminated. Common Stock under the Plan which has not yet vested is
subject to forfeiture. As a result of such provision, the Plan is a variable
plan, which requires the Company to revalue the restricted stock at each
measurement date for changes in the fair value of the Company's Common Stock.
Compensation expense for the fifty-two weeks ended December 27, 1997 was
$0.2 million. At December 27, 1997, there was no change in the carrying value of
the restricted stock.
18. COMMON STOCK
The Management Stockholders purchased 250,000 shares of the Company's
1,200,000 shares of authorized Common Stock, par value $0.01 per share, in
connection with the Recapitalization (see note 14). Compensation expense was
recorded by the Company in the amount of $1.4 million, the fair value of the
Common Stock as of January 17, 1997, in connection with issuing these shares to
the Management Stockholders.
Upon the occurence of certain events, as defined, the Corporation has the
right to purchase all of the shares held by the Management Stockholders, at fair
value. As a result of such provision, there
F-56
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. COMMON STOCK--(CONTINUED)
would be an adjustment to compensation expense at each measurement date for
changes in the fair value of the Common Stock. As of December 27, 1997, there
was no change in the carrying value of the Common Stock.
19. CONCENTRATION OF REVENUES AND OTHER COSTS
The Company is dependent to a significant extent on contract revenue from
key client facilities. The Company's largest contract accounted for
approximately 11.2% and 15.9% of the Company's net sales from continuing
operations for the fifty-two weeks ended December 27, 1997 and the thirty-nine
weeks ended December 28, 1996, respectively. Contract terms vary depending on
the type of facility and financial investment required. Contracts representing
approximately 15.3% of net sales from continuing operations for the fifty-two
weeks ended December 27, 1997, are currently scheduled to expire in 1998 or
1999.
The Company generally seeks to extend the terms of a desirable contract
several months, and in some cases years, prior to the scheduled expiration date.
In some instances, a governmental authority is required by law to put contracts
out for bid prior to entering into a renewal with the Company. The Company
expects to continue to be dependent upon the revenue from key clients, and the
loss of one or more contracts could have a material adverse effect on the
Company's business, results of operations and financial condition.
During the fifty-two weeks ended December 27, 1997, the Company incurred
transaction fees and costs of approximately $2.6 million related to certain
financing transactions which did not proceed.
20. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ITEMS
On September 27, 1996, as partial consideration for the Sale of Vending and
Dining, the Company received from Compass noncash proceeds of $108.4 million
consisting of the Share Agreement, the Supplemental Share Agreement and
promissory notes. The Company recorded a distribution of $108.4 million from
capital in excess of par value for the assignment of its rights to the proceeds
to GE Capital.
The Company recorded a receivable of $40.9 million upon the assumption of
certain liabilities of the Company by GE Capital and distributed certain
assigned assets aggregating $1.8 million to GE Capital. The Company recorded a
corresponding net contribution to capital in excess of par value of
$39.1 million.
During the thirty-nine weeks ended December 28, 1996, the Company declared,
but did not pay, dividends of approximately $1.6 million on the Old Redeemable
Preferred Stock Series A through E.
Under the Assignment and Assumption Agreement, GE Capital contributed to
capital in excess of par value $17.9 million of debt and accrued interest and
$3.8 million in accrued dividends on the Redeemable Preferred Stock Series A
through E, in the thirty-nine weeks ended December 28, 1996.
Prior to the Closing Date in 1996, the Company sold, in several
transactions, certain institutional vending and dining assets for approximately
$2.5 million and a long-term note of $0.5 million.
During the fifty-two weeks ended December 27, 1997, the Company recorded a
noncash dividend of approximately $2.6 million to GE Capital as part of the
Recapitalization. The dividend represents the excess of the fair value of Series
B Preferred Stock and the GE Warrant over the proceeds received.
In addition, as part of the Recapitalization, the Company canceled the Old
Redeemable Preferred Stock which resulted in an increase of $21.1 million to
capital in excess of par value.
F-57
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ITEMS--(CONTINUED)
The Company recorded accretion of approximately $0.4 million and declared,
but did not pay, dividends of approximately $2.2 million on the Series A and B
Preferred Stock. The accretion and dividends were recorded as increases in the
carrying value of the Preferred Stock and a corresponding reduction to capital
in excess of par value.
21. COMPREHENSIVE INCOME (LOSS)
During fiscal 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in the financial statements.
Comprehensive income is comprised of net income and other comprehensive income
items such as revenues, expenses, gains and losses that under generally accepted
accounting principles are excluded from net income and reflected as a component
of equity. As a result of the adoption of this statement, the Company reported
"other comprehensive income" of $369,000 and $3,000 in the consolidated
statement of operations and comprehensive (loss) income for the fifty-two week
period ended December 27, 1997 and the thirty-nine week period ended
December 28, 1996, respectively. In addition, the Company has reclassified,
within its stockholders' equity, a cumulative foreign currency translation gain
(loss) of $221,000 and $(148,000) to "accumulated other comprehensive income
(loss)" as of December 27, 1997 and December 28, 1996, respectively.
22. SUBSEQUENT EVENTS
On August 24, 1998, GE Capital and the Management Stockholders (the
"Sellers"), together with Volume Services America Holdings, Inc. ("Volume
Holdings"), BCP Volume L.P., BCP Offshore L.P. and VSI Management Direct L.P.,
entered into a Share Exchange Agreement (the "Share Exchange Agreement"),
pursuant to which Volume Holdings agreed to purchase all of the capital stock of
the Company owned by the Sellers (approximately 99% of the Company's capital
stock). By December 1998, Volume Holdings had purchased the remainder of the
Company's capital stock and contributed all of the capital stock to Volume
Services America, Inc. ("Volume Services America"), thereby making the Company a
wholly owned subsidiary of Volume Services America.
On December 3, 1998, Volume Services America entered into a credit
agreement (the "Volume Services America Credit Agreement") among Volume
Holdings, Volume Services America, Goldman Sachs Credit Partners L.P., as joint
lead arranger and syndication agent, The Chase Manhattan Bank, as joint lead
arranger, swingline agent and administrative agent, Chase Manhattan Bank
Delaware, as the fronting bank, and the other financial institutions named
therein as lenders. The Volume Services America Credit Agreement provides for a
$75.0 million revolving credit facility, which includes a sublimit of
$35.0 million for letters of credit and a sublimit of $5.0 million for swingline
loans, and $160.0 million in term loans (the "Volume Services America Term
Loans").
The Volume Services America Term Loans were borrowed in full on December 3,
1998 and a portion of the proceeds was lent to the Company by Volume Services
America. The Company used the proceeds of this loan to repay in full its
outstanding indebtedness to GE Capital (see Note 8 for further details).
Effective February 25, 1999, Volume Services America issued $100 million in
senior subordinated notes (the "Volume Services America Subordinated Notes") at
an interest rate of 11 1/4% through a Rule 144A offering (the "Offering"). The
proceeds of the Offering were used to (i) repay $45,000,000 of the Volume
Services America Term Loans, (ii) fund the repurchase by Volume Holdings of
Volume Holdings common stock of $49,5000,000 and the repayment by Volume
Holdings of a $500,000 promissory note issued to GE Capital pursuant to the
Share Exchange Agreement, and (iii) pay fees
F-58
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
22. SUBSEQUENT EVENTS--(CONTINUED)
and expenses incurred in connection with the Offering and the consents from
lenders to an amendment to the Volume Services America Credit Agreement.
In light of the above, the Company has obtained a letter from Volume
Holdings confirming that it will provide financial support to the Company.
Concurrent with the reissuance of these financial statements, Volume
Services America is in the process of exchanging the Volume Services America
Subordinated Notes for $100 million of 11 1/4% senior subordinated notes, which
will be registered under the Securities Act of 1933 (the "New Volume Services
America Subordinated Notes"). The New Volume Services America Subordinated Notes
will be fully and unconditionally guaranteed by Volume Holdings and all of the
subsidiaries of Volume Services America, except for the Company's non-wholly
owned interests and one non-U.S. subsidiary (the "Non-Guarantor Subsidiaries").
Volume Services America conducts all of its business through and derives
virtually all of its income from its subsidiaries. Therefore Volume Services
America's ability to make required payments with respect to its indebtedness
(including the New Volume Services America Subordinated Notes) and other
obligations depends on the financial results and condition of its subsidiaries
and its ability to receive funds from its subsidiaries. There are no
restrictions on the ability of the Company, or any of its subsidiaries, to
transfer funds to Volume Services America, except as provided by appropriate
law.
Pursuant to Rule 3-10 of Regulations S-X, the following summarized
consolidating information is for the Company excluding the Non-Guarantor
Subsidiaries (the "Parent Company and Combined Guarantor Subsidiaries"), and the
Non-Guarantor Subsidiaries with respect to the New Volume Services America
Subordinated Notes. This summarized information has been prepared from the books
and records maintained by the Company. The summarized financial information may
not necessarily be indicative of results of operations or financial position had
the Parent Company and Combined Guarantor Subsidiaries or the combined
Non-Guarantor Subsidiaries operated as independent entities.
F-59
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 27, 1997
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash at locations....................... $ 1,143 $ 192 $ 1,335
Accounts receivable.............................. 6,096 2,167 8,263
Inventories...................................... 3,607 769 4,376
Prepaid expenses and other current assets........ 2,853 269 3,122
Due from GE Capital.............................. 534 -- 534
Intercompany receivables......................... 1,911 4,313 (6,224) --
---------- ------- --------- ----------
Total current assets...................... 16,144 7,710 (6,224) 17,630
Property, fixtures and equipment, net.............. 22,834 1,936 24,770
Other assets....................................... 13,881 1,203 15,084
Investment in non-guarantor subsidiaries........... 7,490 -- (7,490) --
---------- ------- --------- ----------
Total assets.............................. 60,349 10,849 (13,714) 57,484
---------- ------- --------- ----------
---------- ------- --------- ----------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY:
Current liabilities:
Accounts payable................................. 11,191 191 11,382
Accrued expenses and other current liabilities... 9,510 1,036 10,546
Intercompany payables............................ 4,313 1,911 (6,224) --
---------- ------- --------- ----------
Total current liabilities................. 25,014 3,138 (6,224) 21,928
Long-term debt..................................... 68,167 -- 68,167
Other liabilities.................................. 3,834 -- 3,834
---------- ------- --------- ----------
Total liabilities......................... 97,015 3,138 (6,224) 93,929
---------- ------- --------- ----------
10% Class A Preferred Stock: Series A, $1.00 par
value; 40,000 shares authorized; 30,000 shares
issues and outstanding; aggregate liquidation
preference of $3,000 plus any unpaid dividends... 2,549 -- 2,549
10% Class B Preferred Stock: Series A, $1.00 par
value; 260,000 shares authorized; 200,000 shares
issues and outstanding; aggregate liquidation
preference of $20,000 plus any unpaid
dividends........................................ 18,601 -- 18,601
Warrant (exercisable for 711,538 shares of Common
Stock, $0.01 par value).......................... 6,112 -- 6,112
Restricted Stock: $0.01par value; 50,607 shares
authorized; 46,800 shares issued, net of unearned
compensation of $96.............................. 156 -- 156
Stockholders' (Deficit) Equity
Common Stock: $0.01 par value; 1,200,000 shares
authorized; 250,000 shares issued and
outstanding.................................... 3 -- 3
Common Stock: No par value; 1,000 shares
authorized, 850 shares issued and
outstanding.................................... -- -- -- --
Preferred Stock: $100.00 par value; 950 shares
authorized; 136 shares issued and
outstanding.................................... -- 14 (14) --
Capital in excess of par value................... 77,276 114 (114) 77,276
Due from GE Capital.............................. (4,285) -- (4,285)
Accumulated (deficit) earnings................... (137,078) 7,362 (7,362) (137,078)
Accumulated other comprehensive income:
Foreign currency translation adjustment........ -- 221 221
---------- ------- --------- ----------
Total stockholders' (deficit) equity...... (64,084) 7,711 (7,490) (63,863)
---------- ------- --------- ----------
Total liabilities and stockholders'
(deficit) equity........................ $ 60,349 $10,849 $ (13,714) $ 57,484
---------- ------- --------- ----------
---------- ------- --------- ----------
</TABLE>
F-60
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash at locations....................... $ 1,133 $ 139 $ 1,272
Accounts receivable.............................. 6,073 2,321 8,394
Inventories...................................... 3,675 300 3,975
Prepaid expenses and other current assets........ 4,567 41 4,608
Due from GE Capital.............................. 34,577 -- 34,577
Intercompany receivables......................... 2,356 6,467 (8,823) --
Deferred income taxes............................ 1,576 -- 1,576
---------- ------- --------- ----------
Total current assets...................... 53,957 9,268 (8,823) 54,402
Property, fixtures and equipment, net.............. 15,450 135 15,585
Other assets....................................... 13,155 887 14,042
Investment in non-guarantor subsidiaries........... 6,929 -- (6,929) --
Deferred income taxes.............................. 5,424 -- 5,424
---------- ------- --------- ----------
Total assets.............................. 94,915 10,290 (15,752) 89,453
---------- ------- --------- ----------
---------- ------- --------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable................................. 9,100 574 9,674
Accrued expenses and other current liabilities... 28,486 579 29,065
Income taxes payable............................. 221 -- 221
Intercompany payables............................ 6,467 2,356 (8,823) --
---------- ------- --------- ----------
Total current liabilities................. 44,274 3,509 (8,823) 38,960
Long-term debt..................................... 14,336 -- 14,336
Other liabilities.................................. 4,423 -- 4,423
---------- ------- --------- ----------
Total liabilities......................... 63,033 3,509 (8,823) 57,719
---------- ------- --------- ----------
Stockholders' Equity
Redeemable Preferred Stock: Series A through E,
$0.01 par value; 200,000 shares of each series
authorized, issued and outstanding; aggregate
liquidation preference of $25,000 plus any
unpaid dividends............................... 21,132 -- 21,132
Common Stock: $0.01 par value, 5,000 shares
authorized, issued and outstanding............. -- -- --
Common Stock: No par value; 1,000 shares
authorized, 850 shares issued and outstanding.. -- -- -- --
Preferred Stock: $100.00 par value; 950 shares
authorized; 136 shares issued and
outstanding.................................... -- 14 (14) --
Capital in excess of par value................... 139,848 114 (114) 139,848
Due from GE Capital.............................. (6,292) -- (6,292)
Accumulated (deficit) earnings................... (122,806) 6,801 (6,801) (122,806)
Accumulated other comprehensive loss:
Foreign currency translation adjustment........ -- (148) (148)
---------- ------- --------- ----------
Total stockholders' equity................ 31,882 6,781 (6,929) 31,734
---------- ------- --------- ----------
Total liabilities and stockholders'
equity.................................. $ 94,915 $10,290 $ (15,752) $ 89,453
---------- ------- --------- ----------
---------- ------- --------- ----------
</TABLE>
F-61
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FIFTY-TWO WEEK PERIOD ENDED DECEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales............................................. $151,454 $21,405 $172,859
Cost of sales......................................... 119,573 16,571 136,144
-------- ------- --------
Gross profit........................................ 31,881 4,834 36,715
Depreciation and amortization......................... 6,029 898 6,927
Selling, general and administrative expense........... 21,319 3,392 24,711
Compensation expense.................................. 3,730 -- 3,730
Transaction fees and costs............................ 2,642 -- 2,642
Impairment of long-lived assets....................... 192 -- 192
-------- ------- --------
(Loss) income from operations before interest
expense and income taxes......................... (2,031) 544 (1,487)
Interest expense...................................... 5,483 -- 5,483
-------- ------- --------
(Loss) income from operations before income taxes... (7,514) 544 (6,970)
Income tax provision.................................. (7,302) -- (7,302)
-------- ------- --------
(14,816) 544 (14,272)
Equity in earnings of non-guarantor subsidiaries...... 544 -- (544) --
-------- ------- --------- --------
Net (loss) income................................... $(14,272) $ 544 $ (544) $(14,272)
-------- ------- --------- --------
-------- ------- --------- --------
</TABLE>
F-62
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
THIRTY-NINE WEEK PERIOD ENDED DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.......................................... $113,127 $11,681 $124,808
Cost of sales...................................... 88,094 8,847 96,941
-------- ------- --------
Gross profit..................................... 25,033 2,834 27,867
Depreciation and amortization...................... 6,675 860 7,535
Selling, general and administrative expense........ 15,559 1,796 17,355
Transaction fees and costs......................... 722 -- 722
Impairment of long-lived assets.................... 1,745 -- 1,745
-------- ------- --------
Income from continuing operations before interest
expense and income taxes...................... 332 178 510
Interest expense................................... 459 -- 459
-------- ------- --------
(Loss) income from continuing operations before
income taxes.................................. (127) 178 51
Income tax provision............................... 164 -- 164
-------- ------- --------
Income from continuing operations................ 37 178 215
Income from discontinued operations................ 9,030 -- 9,030
Equity in earnings of non-guarantor subsidiaries... 178 -- (178) --
-------- ------- --------- --------
Net income....................................... $ 9,245 $ 178 $ (178) $ 9,245
-------- ------- --------- --------
-------- ------- --------- --------
</TABLE>
F-63
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FIFTY-TWO WEEK PERIOD ENDED DECEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net (loss) income.................................. $(14,272) $ 544 $ (544) $(14,272)
Adjustments to reconcile net income to cash (used
in) provided by operating activities:
Equity in earnings of non-guarantor
subsidiaries................................... (544) -- 544 --
Depreciation..................................... 3,639 115 3,754
Amortization of intangibles and other assets..... 2,561 804 3,365
Compensation expense............................. 3,730 -- 3,730
Loss on sale of net assets....................... 72 -- 72
Deferred income taxes............................ 7,000 -- 7,000
Bad debt expense................................. 139 -- 139
Other............................................ (305) 406 101
Change in operating assets and liabilities:
(Increase) decrease in trade accounts
receivable..................................... (108) 100 (8)
Decrease (increase) in inventories............... 67 (468) (401)
Decrease (increase) in prepaid expenses and
other.......................................... 1,715 (229) 1,486
Decrease in intercompany receivables............. 445 2,173 (2,618) --
Decrease in other assets......................... 101 -- 101
Increase in accounts payable..................... 1,470 83 1,553
(Decrease) increase in accrued expenses and other
current liabilities............................ (18,976) 457 (18,519)
Decrease in income taxes payable................. (221) -- (221)
Decrease in intercompany payables................ (2,173) (445) 2,618 --
Decrease in other liabilities.................... (589) -- (589)
-------- ------- ------- --------
Net cash (used in) provided by operating
activities.................................. (16,249) 3,540 -- (12,709)
-------- ------- ------- --------
Cash flows from investing activities:
Purchases of property fixtures and equipment and
investments in contracts....................... (14,543) (3,021) (17,564)
Net proceeds from sales of net assets............ 200 -- 200
-------- ------- --------
Net cash used in investing activities.......... (14,343) (3,021) (17,364)
-------- ------- --------
Cash flows from financing activities:
Proceeds from new term loan...................... 55,000 -- 55,000
Proceeds from the assumption of certain
liabilities by GE Capital...................... 36,050 -- 36,050
Proceeds from the sale of common and preferred
stock and warrant to purchase common stock..... 20,100 -- 20,100
Dividend to shareholder as part of
recapitalization............................... (80,000) -- (80,000)
Repayments on revolving credit facility, net..... (1,169) -- (1,169)
Increase (decrease) in book overdrafts........... 621 (466) 155
-------- ------- --------
Net cash provided by (used in) financing
activities.................................. 30,602 (466) 30,136
-------- ------- ------- --------
Increase in cash at locations.................. 10 53 -- 63
Cash at locations at the beginning of the period... 1,133 139 1,272
-------- ------- ------- --------
Cash at locations at the end of the period..... $ 1,143 $ 192 $ -- $ 1,335
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
F-64
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEK PERIOD ENDED DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net income......................................... $ 9,245 $ 178 $ (178) $ 9,245
Adjustments to reconcile net income to cash (used
in) provided by operating activities:
Equity in earnings of non-guarantor
subsidiaries................................... (178) -- $ (178) --
Depreciation..................................... 13,761 156 13,917
Amortization of intangibles and other assets..... 5,831 648 6,479
Gain on sale of net assets....................... (20,324) -- (20,324)
Gain on settlement of insurance and other
liabilities.................................... (6,271) -- (6,271)
Deferred income taxes............................ 1,600 -- 1,600
Bad debt expense................................. 262 -- 262
Other............................................ 717 (267) 450
Change in operating assets and liabilities:
Increase in trade accounts receivable............ (2,246) (129) (2,375)
Decrease (increase) in inventories............... 398 (89) 309
Decrease in prepaid expenses and other........... 900 42 942
Increase in intercompany receivables............. (799) (320) 1,119 --
Decrease in other assets......................... 202 -- 202
(Decrease) increase in accounts payable.......... (645) 87 (558)
Decrease in accrued expenses and other current
liabilities.................................... (8,384) (992) (9,376)
Decrease in income taxes payable................. (160) -- (160)
Increase in intercompany payables................ 320 799 (1,119) --
Increase in other liabilities.................... 483 -- 483
-------- ----- ------- --------
Net cash (used in) provided by operating
activities.................................. (5,288) 113 -- (5,175)
-------- ----- ------- --------
Cash flows from investing activities:
Purchases of property fixtures and equipment and
investments in contracts....................... (7,109) (97) (7,206)
Net proceeds from sales of net assets............ 8,233 -- 8,233
-------- ----- --------
Net cash provided by (used in) investing
activities.................................. 1,124 (97) 1,027
-------- ----- --------
Cash flows from financing activities:
Repayments of debt............................... (25) -- (25)
Borrowings on revolving credit facility, net..... 3,660 -- 3,660
(Decrease) increase in book overdrafts........... (5,817) 64 (5,753)
-------- ----- --------
Net cash (used in) provided by financing
activities.................................. (2,182) 64 (2,118)
-------- ----- ------- --------
(Decrease) increase in cash at locations....... (6,346) 80 -- (6,266)
Cash at locations at the beginning of the period... 7,479 59 7,538
-------- ----- ------- --------
Cash at locations at the end of the period..... $ 1,133 $ 139 $ -- $ 1,272
-------- ----- ------- --------
-------- ----- ------- --------
</TABLE>
F-65
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 27,
1998
---------
<S> <C>
ASSETS
Current assets:
Cash and cash at locations........................................................................ $ 1,765
Accounts receivable (net of allowance for doubtful accounts of $736).............................. 7,012
Inventories....................................................................................... 4,267
Prepaid expenses and other current assets......................................................... 3,778
Due from GE Capital............................................................................... 188
---------
Total current assets......................................................................... 17,010
Property, fixtures and equipment, net............................................................... 26,594
Other assets........................................................................................ 14,431
---------
Total assets................................................................................. $ 58,035
---------
---------
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable.................................................................................. $ 10,667
Accrued expenses and other current liabilities.................................................... 11,983
---------
Total current liabilities.................................................................... 22,650
Long-term debt...................................................................................... 71,257
Other liabilities................................................................................... 3,004
---------
Total liabilities............................................................................ 96,911
---------
Contingencies (Note 4)
10% Class A Preferred Stock--Series A, $1.00 par value; 40,000 shares authorized, 30,000 shares
issued and outstanding; aggregate liquidation preference of $3,000 plus any unpaid dividends...... 2,735
10% Class A Preferred Stock--Series B, $1.00 par value; 260,000 shares authorized, 200,000 shares
issued and outstanding; aggregate liquidation preference of $20,000 plus any unpaid dividends..... 19,769
Warrant (exercisable for 711,538 shares of Common Stock, $0.01 par value)........................... 6,112
Restricted common stock: $0.01 par value; 50,607 shares authorized; 43,600 shares issued, net of
unearned compensation of $55...................................................................... 210
Stockholders' deficit:
Common stock, $0.01 par value, 1,200,000 shares authorized, 250,000 shares issued and
outstanding.................................................................................... 3
Capital in excess of par value.................................................................... 75,922
Due from GE Capital............................................................................... (4,056)
Accumulated deficit............................................................................... (139,095)
Less: Treasury stock at cost (2,500 shares of common stock)....................................... (16)
Accumulated other comprehensive loss:
Foreign currency translation adjustment........................................................ (460)
---------
Total stockholders' deficit.................................................................. (67,702)
---------
Total liabilities and stockholders' deficit.................................................. $ 58,035
---------
---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-66
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX
WEEKS ENDED WEEKS ENDED
JUNE 27, 1998 JUNE 28, 1997
----------------- -----------------
<S> <C> <C>
Net sales.............................................................. $88,115 $77,827
Cost of sales.......................................................... 70,241 59,908
------- -------
Gross profit......................................................... 17,874 17,919
Depreciation and amortization expense.................................. 4,213 3,131
Selling, general and administrative expense............................ 12,182 11,995
Compensation expense on stock issuance................................. 38 3,634
------- -------
Income (loss) from operations before interest expense................ 1,441 (841)
Interest expense....................................................... 3,408 2,471
------- -------
Loss from operations before income taxes............................. (1,967) (3,312)
Income tax provision................................................... (50) (75)
------- -------
Net loss............................................................. (2,017) (3,387)
------- -------
Other comprehensive loss:
Foreign currency translation adjustment.............................. (681) (18)
------- -------
Total other comprehensive loss......................................... (681) (18)
------- -------
Comprehensive loss..................................................... $(2,698) $(3,405)
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-67
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX
WEEKS ENDED WEEKS ENDED
JUNE 27, 1998 JUNE 28, 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net cash flow provided by (used in) operating activities........................ $ 1,822 $ (15,826)
------- ---------
Cash flows from investing activities:
Purchases of property, fixtures and equipment and investment in contracts....... (5,310) (9,575)
Proceeds from sales of net assets............................................... -- 148
------- ---------
Net cash (used in) investing activities...................................... (5,310) (9,427)
------- ---------
Cash flows from financing activities:
Borrowings (repayments) on revolving credit facilities, net..................... 3,565 (5,793)
Proceeds from the new term loan................................................. -- 55,000
(Decrease) Increase in book overdrafts.......................................... (222) 2,006
Proceeds from the assumption of certain liabilities by GE Capital............... 575 34,041
Proceeds from the sale of common and preferred stock and warrant to purchase
common stock................................................................. -- 20,100
Dividend to shareholder as part of Recapitalization............................. -- (80,000)
------- ---------
Net cash provided by financing activities.................................... 3,918 25,354
------- ---------
Increase in cash at locations..................................................... 430 101
Cash at locations at beginning of period.......................................... 1,335 1,272
------- ---------
Cash at locations at end of period................................................ $ 1,765 $ 1,373
------- ---------
------- ---------
Supplemental disclosures of cash flow information:
Noncash investing and financing activities: (Note 6)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-68
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
Service America Corporation and Subsidiaries (the "Company") is a provider
of food services to recreational facilities, primarily convention centers,
stadiums and arenas. The Company currently operates in approximately 20 states
and in Canada, where it generally holds multi-year contracts to provide
concession sales of food and beverages, merchandise, catering and other
services. Many of the Company's contracts allow it to act as the exclusive food
service provider at these facilities.
The accompanying unaudited condensed consolidated financial statements as
of June 27, 1998, and for the twenty-six weeks ended June 28, 1997 and for the
twenty-six weeks ended June 27, 1998 have been prepared by management from the
books and records of the Company. Accordingly, the unaudited condensed
consolidated financial statements as of June 27, 1998, and for the twenty-six
weeks ended June 28, 1997 and for the twenty-six weeks June 27, 1998 do not
include all of the information and footnotes required in accordance with
generally accepted accounting principles. The unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements of the Company and notes thereto as of December 27, 1997,
and for the fifty-two weeks ended December 27, 1997. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments
(except for entries relating to the Recapitalization), necessary for a fair
presentation of the consolidated financial position and the consolidated results
of their operations and their cash flows for the periods noted above have been
included. The results of operations for the twenty-six weeks ended June 28, 1997
and the twenty-six weeks ended June 27, 1998 are not necessarily indicative of
the results for the entire year.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accouting Standards Board issued Statement No.
131 ("SFAS No. 131"), "Disclosure about the Segments of an Enterprise and
Related Information." SFAS 131 establishes standards for the way in which public
companies report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes the standards for related disclosure about products and services,
geographic areas and major customers. SFAS 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. The Company does
not expect the implementation of this standard to have a material effect on the
disclosures included in its financial statements.
3. INCOME TAXES
The provision for income taxes for the twenty-six weeks ended June 28,
1997, is principally comprised of state and local taxes based on minimum income
and franchise taxes due.
For the twenty-six weeks ended June 27, 1998, based on expected results,
the Company does not anticipate recording a current Federal Income tax
provision, and will record a state provision- based on minimum income and
franchise taxes due.
4. CONTINGENCIES
The Company is party to legal proceedings that are considered to be
ordinary and routine litigation incidental to its business. Management does not
believe that the outcome of these lawsuits will have a material adverse effect
on the Company's financial position or results of operations.
F-69
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
5. ASSIGNMENT AND ASSUMPTION AGREEMENT
The Assignment and Assumption Agreement was due to terminate on August 31,
1998. However, pursuant to the Share Exchange Agreement (see note 7), the
Assignment and Assumption Agreement has been amended and the termination date is
now 18 months from the closing date of the Share Exchange Agreement.
6. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ITEMS
During the twenty-six weeks ended June 27, 1998 the Company recorded
accretion of approximately $0.2 million and declared, but did not pay, dividends
of approximately $1.2 million on the Series A and B Preferred Stock. The
accretion and dividends were recorded as increases in the carrying value of the
Preferred Stock.
7. SUBSEQUENT EVENTS
On August 24, 1998, GE Capital and the Management Stockholders (the
"Sellers"), together with Volume Services America Holdings, Inc. ("Volume
Holdings"), BCP Volume L.P., BCP Offshore L.P. and VSI Management Direct L.P.,
entered into a Share Exchange Agreement (the "Share Exchange Agreement"),
pursuant to which Volume Holdings agreed to purchase all of the capital stock of
the Company owned by the Sellers (approximately 99% of the Company's capital
stock). By December 1998, Volume Holdings had purchased the remainder of the
Company's capital stock and contributed all of the capital stock to Volume
Services America, Inc. ("Volume Services America"), thereby making the Company a
wholly owned subsidiary of Volume Services America.
Concurrent with the reissuance of these financial statements, Volume
Services America is in the process of exchanging the Volume Services America
Subordinated Notes for $100 million of 11 1/4% senior subordinated notes, which
will be registered under the Securities Act of 1933 (the "New Volume Services
America Subordinated Notes"). The New Volume Services America Subordinated Notes
will be fully and unconditionally guaranteed by Volume Holdings and all of the
subsidiaries of Volume Services America, except for the Company's non-wholly
owned interests and one non-U.S. subsidiary (the "Non-Guarantor Subsidiaries").
Volume Services America conducts all of its business through and derives
virtually all of its income from its subsidiaries. Therefore Volume Services
America's ability to make required payments with respect to its indebtedness
(including the New Volume Services America Subordinated Notes) and other
obligations depends on the financial results and condition of its subsidiaries
and its ability to receive funds from its subsidiaries. There are no
restrictions on the ability of the Company, or any of its subsidiaries, to
transfer funds to Volume Services America, except as provided by appropriate
law.
Pursuant to Rule 3-10 of Regulations S-X, the following summarized
consolidating information is for the Company excluding the Non-Guarantor
Subsidiaries (the "Parent Company and Combined Guarantor Subsidiaries"), and the
Non-Guarantor Subsidiaries with respect to the New Volume Services America
Subordinated Notes. This summarized information has been prepared from the books
and records maintained by the Company. The summarized financial information may
not necessarily be indicative of results of operations or financial position had
the Parent Company and Combined Guarantor Subidiaries or the combined
Non-Guarantor Subsidiaries operated as independent entities.
F-70
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 27, 1998
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash at locations..................... $ 1,523 $ 242 $ 1,765
Accounts receivable............................ 5,624 1,388 7,012
Inventories.................................... 3,566 701 4,267
Prepaid expenses and other current assets...... 3,410 368 3,778
Due from GE Capital............................ 188 -- 188
Intercompany receivables....................... 2,076 3,652 (5,728) --
-------- -------- -------- ---------
Total current assets..................... 16,387 6,351 (5,728) 17,010
Property, fixtures and equipment, net............ 23,209 3,385 26,594
Other assets..................................... 13,003 1,428 14,431
Investment in non-guarantor subsidiaries......... 7,658 -- (7,658) --
-------- -------- -------- ---------
Total assets............................. 60,257 11,164 (13,386) 58,035
-------- -------- -------- ---------
-------- -------- -------- ---------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY:
Current liabilities:
Accounts payable............................... 9,795 872 10,667
Accrued expenses and other current
liabilities.................................. 10,965 1,018 11,983
Intercompany payables.......................... 3,652 2,076 (5,728) --
-------- -------- -------- ---------
Total current liabilities................ 24,412 3,966 (5,728) 22,650
Long-term debt................................... 71,257 -- 71,257
Other liabilities................................ 3,004 -- 3,004
-------- -------- -------- ---------
Total liabilities........................ 98,673 3,966 (5,728) 96,911
-------- -------- -------- ---------
10% Class A Preferred Stock: Series A, $1.00 par
value; 40,000 shares authorized; 30,000 shares
issues and outstanding; aggregate liquidation
preference of $3,000 plus any unpaid
dividends...................................... 2,735 -- 2,735
10% Class B Preferred Stock: Series A, $1.00 par
value; 260,000 shares authorized; 200,000
shares issues and outstanding; aggregate
liquidation preference of $20,000 plus any
unpaid dividends............................... 19,769 -- 19,769
Warrant (exercisable for 711,538 shares of Common
Stock, $0.01 par value)........................ 6,112 -- 6,112
Restricted Stock: $0.01par value; 50,607 shares
authorized; 46,800 shares issued, net of
unearned compensation of Stockholders'
(Deficit) Equity:.............................. 210 -- 210
Common Stock: $0.01 par value; 1,200,000 shares
authorized; 250,000 shares issued
and outstanding.............................. 3 -- 3
Common Stock: No par value; 1,000 shares
authorized; 850 shares issued and
outstanding.................................. -- -- -- --
Preferred Stock: $100.00 par value; 950 shares
authorized; 136 shares issued and
outstanding.................................. -- 14 (14) --
Capital in excess of par value................. 75,922 114 (114) 75,922
Due from GE Capital............................ (4,056) -- (4,056)
Accumulated (deficit) earnings................. (139,095) 7,530 (7,530) (139,095)
Less: Treasury stock at cost (2,500 shares of
common stock)................................ (16) -- (16)
Accumulated other comprehensive loss:
Foreign currency translation adjustment...... -- (460) (460)
-------- -------- -------- ---------
Total stockholders'
(deficit) equity....................... (67,242) 7,198 (7,658) (67,702)
-------- -------- -------- ---------
Total liabilities and stockholders'
(deficit) equity....................... $ 60,257 $ 11,164 $(13,386) $ 58,035
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
F-71
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
TWENTY-SIX WEEK PERIOD ENDED JUNE 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.......................................... $ 73,672 $ 14,443 $ 88,115
Cost of sales...................................... 58,507 11,734 70,241
-------- --------- --------
Gross profit..................................... 15,165 2,709 17,874
Depreciation and amortization...................... 3,443 770 4,213
Selling, general and administrative expense........ 10,428 1,754 12,182
Compensation expense............................... 38 -- 38
-------- --------- --------
Income from operations before interest expense
and income taxes.............................. 1,256 185 1,441
Interest expense................................... 3,408 -- 3,408
-------- --------- --------
(Loss) income from operations before income
taxes......................................... (2,152) 185 (1,967)
Income tax provision............................... (50) -- (50)
-------- --------- --------
(2,202) 185 (2,017)
Equity in earnings of non-guarantor subsidiaries... 185 -- (185) --
-------- --------- --------- --------
Net (loss) income................................ $ (2,017) $ 185 $ (185) $ (2,017)
-------- --------- --------- --------
-------- --------- --------- --------
</TABLE>
F-72
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
TWENTY-SIX WEEK PERIOD ENDED JUNE 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.......................................... $ 69,124 $ 8,703 $ 77,827
Cost of sales...................................... 53,110 6,798 59,908
-------- --------- --------
Gross profit..................................... 16,014 1,905 17,919
Depreciation and amortization...................... 2,838 293 3,131
Selling, general and administrative expense........ 10,579 1,416 11,995
Compensation expense............................... 3,634 -- 3,634
-------- --------- --------
(Loss) income from operations before interest
expense and income taxes...................... (1,037) 196 (841)
Interest expense................................... 2,471 -- 2,471
-------- --------- --------
(Loss) income from operations before income
taxes......................................... (3,508) 196 (3,312)
Income tax provision............................... (75) -- (75)
-------- --------- --------
(3,583) 196 (3,387)
Equity in earnings of non-guarantor subsidiaries... 196 -- (196) --
-------- --------- ----- --------
Net (loss) income................................ $ (3,387) $ 196 $(196) $ (3,387)
-------- --------- ----- --------
-------- --------- ----- --------
</TABLE>
F-73
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEK PERIOD ENDED JUNE 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities.............. $ 475 $ 1,347 $ 1,822
--------- --------- --------
Cash flows from investing activities:
Purchases of property fixtures and equipment and
investments in contracts............................ (2,870) (2,440) (5,310)
--------- --------- --------
Net cash used in investing activities............... (2,870) (2,440) (5,310)
--------- --------- --------
Cash flows from financing activities:
Borrowings on revolving credit facility, net........... 3,565 -- 3,565
(Decrease) increase in book overdrafts................. (1,365) 1,143 (222)
Proceeds from the assumption of certain liabilities by
GE Capital.......................................... 575 -- 575
--------- --------- --------
Net cash provided by financing activities........... 2,775 1,143 3,918
--------- --------- --------
Increase in cash at locations....................... 380 50 430
Cash at locations at the beginning of the period......... 1,143 192 1,335
--------- --------- --------
Cash at locations at the end of the period............... $ 1,523 $ 242 $ 1,765
--------- --------- --------
--------- --------- --------
</TABLE>
F-74
<PAGE>
SERVICE AMERICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEK PERIOD ENDED JUNE 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT
COMPANY
AND COMBINED COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------ ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash (used in) provided by operating activities............ $(16,568) $ 742 $(15,826)
-------- --------- --------
Cash flows from investing activities:
Purchases of property fixtures and equipment and investments in
contracts................................................... (8,939) (636) (9,575)
Net proceeds from sales of net assets.......................... 148 -- 148
-------- --------- --------
Net cash used in investing activities....................... (8,791) (636) (9,427)
-------- --------- --------
Cash flows from financing activities:
Repayments on revolving credit facility, net................... (5,793) -- (5,793)
Proceeds from new term loan.................................... 55,000 -- 55,000
Increase (decrease) in book overdrafts......................... 2,125 (119) 2,006
Proceeds from the assumption of certain liabilities by
GE Capital.................................................. 34,041 -- 34,041
Proceeds from the sale of common and preferred stock and
warrant to purchase common stock............................ 20,100 -- 20,100
Dividend to shareholder as part of recapitalization............ (80,000) -- (80,000)
-------- --------- --------
Net cash provided by (used in) financing activities......... 25,473 (119) 25,354
-------- --------- --------
Increase (decrease) in cash at locations.................... 114 (13) 101
Cash at locations at the beginning of the period................. 1,133 139 1,272
-------- --------- --------
Cash at locations at the end of the period....................... $ 1,247 $ 126 $ 1,373
-------- --------- --------
-------- --------- --------
</TABLE>
F-75
<PAGE>
$100,000,000 [LOGO]
VOLUME SERVICES AMERICA, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 11 1/4% SENIOR SUBORDINATED
NOTES DUE 2009 FOR 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits
the company's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action (except settlements or judgments in
derivative suits), suit or proceeding in which such person is made a party by
reason of his or her being or having been a director, officer, employee or agent
of the company, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). The statute provides that indemnification pursuant to its provision-s is
not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise.
The company's by-laws provide for the mandatory indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by the DGCL, and the company has entered into agreements with certain of its
officers, directors and key employees implementing such indemnification.
As permitted by sections 102 and 145 of the DGCL the company's certificate
of incorporation eliminates a director's personal liability for monetary damages
to the company and its stockholders arising from a breach of a director's
fiduciary duty, except as otherwise provided under the DGCL.
The directors and officers of the company are covered by insurance policies
indemnifying against certain liabilities, including certain liabilities arising
under the Securities Act which might be incurred by them in such capabilities
and against which they cannot be indemnified by the company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<C> <C> <S>
*1 -- Purchase Agreement, dated February 25, 1999, between Volume Services America, Inc., Chase Securities
Inc. and Goldman, Sachs & Co.
*3.1 -- Restated Certificate of Incorporation of Volume Services America, Inc.
**3.2 -- By-laws of Volume Services America, Inc.
*3.3 -- Restated Certificate of Incorporation of Volume Services America Holdings, Inc.
*3.4 -- By-laws of Volume Services America Holdings, Inc.
*3.5 -- Restated Certificate of Incorporation of Volume Services, Inc.
*3.6 -- By-laws of Volume Services, Inc.
*3.7 -- Restated Certificate of Incorporation of Service America Corporation
*3.8 -- By-laws of Service America Corporation
*3.9 -- Articles of Incorporation of Events Center Catering, Inc.
**3.10 -- Articles of Incorporation of Service America Concessions Corporation
*3.11 -- By-laws of Service America Concessions Corporation
**3.12 -- Articles of Incorporation of Service America Corporation of Wisconsin
*3.13 -- By-laws of Service America Corporation of Wisconsin
**3.14 -- Articles of Incorporation of Servo-Kansas, Inc.
*3.15 -- By-laws of Servo-Kansas, Inc.
**3.16 -- Articles of Incorporation of Servomation Duchess, Inc.
*3.17 -- By-laws of Servomation Duchess, Inc.
**3.18 -- Articles of Incorporation of SVM of Texas, Inc.
*3.19 -- By-laws of SVM of Texas, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<C> <C> <S>
*3.20 -- Certificate of Incorporation of Volume Services, Inc.
*3.21 -- By-laws of Volume Services, Inc.
*4.1 -- Indenture, dated as of March 4, 1999, between Volume Services America, Inc. and Norwest Bank
Minnesota, National Association.
*4.2 -- Exchange and Registration Rights Agreement, dated March 4, 1999, between Volume Services America,
Inc., Chase Securities Inc. and Goldman, Sachs & Co.
**5 -- Opinion of Simpson Thacher & Bartlett
*10.1 -- Share Exchange Agreement, dated as of July 27, 1998, among VSI Acquisition II Corporation, as Buyer,
the Stockholders of the Buyer and the Sellers specified therein
*10.2 -- Amended and Restated Stockholders' Agreement, dated as of August 24, 1998, among VSI Acquisition II
Corporation, BCP Volume L.P., BCP Offshore Volume L.P., VSI Management Direct L.P., General Electric
Capital Corporation and Recreational Services L.L.C.
*10.3 -- Credit Agreement, dated as of December 3, 1998, among Volume Services America, Inc., Volume Services
America Holdings, Inc., Certain Financial Institutions as the Lenders, Goldman Sachs Credit Partners
L.P., Chase Securities Inc., Chase Manhattan Bank Delaware and The Chase Manhattan Bank
*10.4 -- Volume Services, Inc., Deferred Compensation Plan, Enrollment Information and Forms.
*10.5 -- Volume Services America, 1999 Bonus Plan
*10.6 -- Service America Corporation, Deferred Compensation Plan, effective as of February 9, 1999
*10.7 -- Employment Agreement dated as of August 24, 1998, by and between USI Acquisition II Corporation, a
Delaware corporation, and John T. Dee.
*10.8 -- Employment Agreement dated as of November 17, 1998, by and between Volume Services, Inc., a Delaware
corporation, together with its successors and assigns, and Kenneth R. Frick, together with his heirs
and assigns
*10.9 -- Employment Agreement, dated as of August 24, 1998, by and between Service America Corporation, a
Delaware corporation, and Michael J. Higgins
*10.10 -- Employment Agreement, dated as of September 29, 1998, by and between VSI Acquisition Corporation, a
Delaware corporation, and Janet L. Steinmayer
*12 -- Computation of Ratio of Earnings to Fixed Charges
**21 -- List of Subsidiaries
*23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of PricewaterhouseCoopers LLP
**23.3 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5)
*24 -- Powers of Attorney (included on pages II-4 through II-14)
**25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association, as trustee
*27.1 -- Financial Data Schedule for period ending March 29, 1999
*27.2 -- Financial Data Schedule for period ending December 29, 1998
**99.1 -- Form of Letter of Transmittal
**99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------
*Filed herewith
**To be filed by amendment
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" Table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
VOLUME SERVICES AMERICA, INC.
By: /S/ JOHN T. DEE
----------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Volume Services America, Inc.
(the "Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick
and Janet L. Steinmayer, or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President and Chief Financial Officer May 27, 1999
- ------------------------------------------
Kenneth R. Frick
/S/ HOWARD A. LIPSON Director May 27, 1999
- ------------------------------------------
Howard A. Lipson
/S/ DAVID BLITZER Director May 27, 1999
- ------------------------------------------
David Blitzer
/S/ CALEB S. EVERETT Director May 27, 1999
- ------------------------------------------
Caleb S. Everett
</TABLE>
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
VOLUME SERVICES AMERICA HOLDINGS, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Volume Services America
Holdings, Inc. (the "Company"), do hereby constitute and appoint John T. Dee,
Kenneth R. Frick and Janet L. Steinmayer, or any of them, our true and lawful
attorneys and agents, to do any and all acts and things in our name and on our
behalf in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys or agents, or either of them, may deem necessary or advisable to
enable the Company to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names and in
the capacities indicated below, any and all amendments (including post-effective
amendments) hereto and we do hereby ratify and confirm all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President and Chief Financial Officer May 27, 1999
- ------------------------------------------
Kenneth R. Frick
/S/ HOWARD A. LIPSON Director May 27, 1999
- ------------------------------------------
Howard A. Lipson
/S/ DAVID BLITZER Director May 27, 1999
- ------------------------------------------
David Blitzer
/S/ CALEB S. EVERETT Director May 27, 1999
- ------------------------------------------
Caleb S. Everett
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
VOLUME SERVICES, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Volume Services, Inc. (the
"Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick and
Janet L. Steinmayer, or any of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President and Chief Financial Officer May 27, 1999
- ------------------------------------------
Kenneth R. Frick
/S/ HOWARD A. LIPSON Director May 27, 1999
- ------------------------------------------
Howard A. Lipson
/S/ DAVID BLITZER Director May 27, 1999
- ------------------------------------------
David Blitzer
/S/ CALEB S. EVERETT Director May 27, 1999
- ------------------------------------------
Caleb S. Everett
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SERVICE AMERICA CORPORATION
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Service America Corporation
(the "Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick
and Janet L. Steinmayer, or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President and Chief Financial Officer May 27, 1999
- ------------------------------------------
Kenneth R. Frick
/S/ MICHAEL J. HIGGINS Executive Vice President May 27, 1999
- ------------------------------------------
Michael J. Higgins
/S/ HOWARD A. LIPSON Director May 27, 1999
- ------------------------------------------
Howard A. Lipson
/S/ DAVID BLITZER Director May 27, 1999
- ------------------------------------------
David Blitzer
/S/ CALEB S. EVERETT Director May 27, 1999
- ------------------------------------------
Caleb S. Everett
/S/ ROBERT A. PAOLETTI Corporate Vice President and Controller May 27, 1999
- ------------------------------------------
Robert A. Paoletti
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
EVENTS CENTER CATERING, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Events Center Catering, Inc.
(the "Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick
and Janet L. Steinmayer, or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SERVICE AMERICA CONCESSIONS
CORPORATION
By: /S/ JOHN T. DEE
----------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Service America Concessions
Corporation (the "Company"), do hereby constitute and appoint John T. Dee,
Kenneth R. Frick and Janet L. Steinmayer, or any of them, our true and lawful
attorneys and agents, to do any and all acts and things in our name and on our
behalf in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys or agents, or either of them, may deem necessary or advisable to
enable the Company to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names and in
the capacities indicated below, any and all amendments (including post-effective
amendments) hereto and we do hereby ratify and confirm all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SERVICE AMERICA CORPORATION OF
WISCONSIN
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Service America Corporation
of Wisconsin (the "Company"), do hereby constitute and appoint John T. Dee,
Kenneth R. Frick and Janet L. Steinmayer, or any of them, our true and lawful
attorneys and agents, to do any and all acts and things in our name and on our
behalf in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys or agents, or either of them, may deem necessary or advisable to
enable the Company to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names and in
the capacities indicated below, any and all amendments (including post-effective
amendments) hereto and we do hereby ratify and confirm all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SERVO-KANSAS, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Servo-Kansas, Inc. (the
"Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick and
Janet L. Steinmayer, or any of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SERVOMATION DUCHESS, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Servomation Duchess, Inc.
(the "Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick
and Janet L. Steinmayer, or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
SVM OF TEXAS, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of SVM of Texas, Inc. (the
"Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick and
Janet L. Steinmayer, or any of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 27, 1999.
VOLUME SERVICES, INC.
By: /S/ JOHN T. DEE
---------------------------------
John T. Dee
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
We, the undersigned directors and officers of Volume Services, Inc. (the
"Company"), do hereby constitute and appoint John T. Dee, Kenneth R. Frick and
Janet L. Steinmayer, or any of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys or
agents, or either of them, may deem necessary or advisable to enable the Company
to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/S/ JOHN T. DEE Chief Executive Officer and Chairman of the May 27, 1999
- ------------------------------------------ Board of Directors
John T. Dee
/S/ KENNETH R. FRICK Vice President, Chief Financial Officer and May 27, 1999
- ------------------------------------------ Director
Kenneth R. Frick
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
*1 -- Purchase Agreement, dated February 25, 1999, between Volume Services America, Inc., Chase Securities
Inc. and Goldman, Sachs & Co.
*3.1 -- Restated Certificate of Incorporation of Volume Services America, Inc.
**3.2 -- By-laws of Volume Services America, Inc.
*3.3 -- Restated Certificate of Incorporation of Volume Services America Holdings, Inc.
*3.4 -- By-laws of Volume Services America Holdings, Inc.
*3.5 -- Restated Certificate of Incorporation of Volume Services, Inc.
*3.6 -- By-laws of Volume Services, Inc.
*3.7 -- Restated Certificate of Incorporation of Service America Corporation
*3.8 -- By-laws of Service America Corporation
*3.9 -- Articles of Incorporation of Events Center Catering, Inc.
**3.10 -- Articles of Incorporation of Service America Concessions Corporation
*3.11 -- By-laws of Service America Concessions Corporation
**3.12 -- Articles of Incorporation of Service America Corporation of Wisconsin
*3.13 -- By-laws of Service America Corporation of Wisconsin
**3.14 -- Articles of Incorporation of Servo-Kansas, Inc.
*3.15 -- By-laws of Servo-Kansas, Inc.
**3.16 -- Articles of Incorporation of Servomation Duchess, Inc.
*3.17 -- By-laws of Servomation Duchess, Inc.
**3.18 -- Articles of Incorporation of SVM of Texas, Inc.
*3.19 -- By-laws of SVM of Texas, Inc.
*3.20 -- Certificate of Incorporation of Volume Services, Inc.
*3.21 -- By-laws of Volume Services, Inc.
*4.1 -- Indenture, dated as of March 4, 1999, between Volume Services America, Inc. and Norwest Bank
Minnesota, National Association.
*4.2 -- Exchange and Registration Rights Agreement, dated March 4, 1999, between Volume Services America,
Inc., Chase Securities Inc. and Goldman, Sachs & Co.
**5 -- Opinion of Simpson Thacher & Bartlett
*10.1 -- Share Exchange Agreement, dated as of July 27, 1998, among VSI Acquisition II Corporation, as Buyer,
the Stockholders of the Buyer and the Sellers specified therein
*10.2 -- Amended and Restated Stockholders' Agreement, dated as of August 24, 1998, among VSI Acquisition II
Corporation, BCP Volume L.P., BCP Offshore Volume L.P., VSI Management Direct L.P., General Electric
Capital Corporation and Recreational Services L.L.C.
*10.3 -- Credit Agreement, dated as of December 3, 1998, among Volume Services America, Inc., Volume Services
America Holdings, Inc., Certain Financial Institutions as the Lenders, Goldman Sachs Credit Partners
L.P., Chase Securities Inc., Chase Manhattan Bank Delaware and The Chase Manhattan Bank
*10.4 -- Volume Services, Inc., Deferred Compensation Plan, Enrollment Information and Forms.
*10.5 -- Volume Services America, 1999 Bonus Plan
*10.6 -- Service America Corporation, Deferred Compensation Plan, effective as of February 9, 1999
*10.7 -- Employment Agreement dated as of August 24, 1998, by and between USI Acquisition II Corporation, a
Delaware corporation, and John T. Dee.
*10.8 -- Employment Agreement dated as of November 17, 1998, by and between Volume Services, Inc., a Delaware
corporation, together with its successors and assigns, and Kenneth R. Frick, together with his heirs
and assigns
*10.9 -- Employment Agreement, dated as of August 24, 1998, by and between Service America Corporation, a
Delaware corporation, and Michael J. Higgins
*10.10 -- Employment Agreement, dated as of September 29, 1998, by and between VSI Acquisition Corporation, a
Delaware corporation, and Janet L. Steinmayer
*12 -- Computation of Ratio of Earnings to Fixed Charges
**21 -- List of Subsidiaries
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
*23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of PricewaterhouseCoopers LLP
**23.3 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5)
*24 -- Powers of Attorney (included on pages II-4 through II-14)
**25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association, as trustee
*27.1 -- Financial Data Schedule for period ending March 29, 1999
*27.2 -- Financial Data Schedule for period ending December 29, 1998
**99.1 -- Form of Letter of Transmittal
**99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------
*Filed herewith
**To be filed by amendment
<PAGE>
Exhibit 1
EXECUTION COPY
Volume Services America, Inc.
$100,000,000
11 1/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
February 25, 1999
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Volume Services America, Inc., a Delaware corporation (the "Issuer"),
proposes to issue and sell $100,000,000 aggregate principal amount of its
11 1/4% Senior Subordinated Notes due 2009 (the "Securities"). The Securities
will be issued pursuant to an Indenture to be dated as of March 4, 1999 (the
"Indenture"), among the Issuer, Volume Services America Holdings, Inc. ("Volume
Holdings"), each of the subsidiaries of the Issuer listed on Schedule I hereto
(collectively, the "Subsidiary Guarantors" and together with Volume Holdings,
the "Guarantors") and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"). The Securities will be guaranteed on an unsecured senior
subordinated basis by each of the Guarantors. The Issuer hereby confirms its
agreement with Chase Securities Inc. ("CSI") and Goldman, Sachs & Co. (together
with CSI, the "Initial Purchasers") concerning the purchase of the Securities
from the Issuer by the Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Issuer has
prepared a preliminary offering memorandum dated February 11, 1999 (the
"Preliminary Offering Memorandum"), and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning the Issuer, the Guarantors and the Securities. Copies of the
Preliminary Offering Memorandum have been, and copies of the Offering Memorandum
will be, delivered by the Issuer to the Initial Purchasers pursuant to the terms
of this Agreement. Any references herein to the Preliminary Offering Memorandum
and the Offering Memorandum shall be deemed to include all amendments and
supplements thereto, unless otherwise noted. The Issuer hereby confirms that it
has authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights
<PAGE>
2
Agreement, substantially in the form attached hereto as Annex A (the
"Registration Rights Agreement"), pursuant to which the Issuer will agree to
file with the Securities and Exchange Commission (the "Commission") (i) a
registration statement under the Securities Act (the "Exchange Offer
Registration Statement") registering an issue of senior subordinated notes of
the Issuer (the "Exchange Securities") which are identical in all material
respects to the Securities (except that the Exchange Securities will not contain
terms with respect to transfer restrictions) and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements").
The proceeds from the sale of the Securities will be used (i) to repay
a portion of the indebtedness of the Issuer outstanding under the Credit
Agreement dated as of December 3, 1998, among Volume Holdings, the Issuer,
certain financial institutions listed as lenders therein, Goldman Sachs Credit
Partners L.P., Chase Manhattan Bank Delaware and the Chase Manhattan Bank (the
"Credit Agreement"), (ii) to pay a dividend to Volume Holdings to repay the note
issued by Volume Holdings to General Electric Capital Corporation (the "GE
Capital Note"), (iii) to pay a dividend to Volume Holdings to repurchase common
stock of Volume Holdings and (iv) to pay related fees and expenses. In order to
permit the incurrence of the indebtedness represented by the Securities and to
allow a portion of the proceeds from the sale of the Securities to be dividended
to Volume Holdings and used by Volume Holdings to repurchase shares of its
common stock and to repay the GE Capital Note, the Issuer requested and has
received the consent of the lenders under the Credit Agreement to certain
amendments to the Credit Agreement (the "Bank Amendment").
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Issuer and the
Guarantors. The Issuer and the Guarantors jointly and severally represent and
warrant to, and agree with, the several Initial Purchasers on and as of the date
hereof and the Closing Date (as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will not, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading; provided that the Issuer and the Guarantors make
no representation or warranty as to information contained in or omitted
from the Preliminary Offering Memorandum or the Offering Memorandum in
reliance upon and in conformity with written information relating to the
Initial Purchasers furnished to the Issuer or the Guarantors by or on
behalf of any Initial Purchaser specifically for use therein (the "Initial
Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all the information that,
if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
<PAGE>
3
(c) Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or, prior to the
effectiveness of any Registration Statement, to qualify the Indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) Volume Holdings and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires such
qualification, and have all corporate power and authority necessary to own
or hold their respective properties and to conduct the businesses in which
they are engaged, except where the failure to so qualify or have such power
or authority would not, singularly or in the aggregate, have a material
adverse effect on the financial condition, results of operations or
business of Volume Holdings and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Schedule II sets forth a list of all direct and
indirect subsidiaries of the Issuer.
(e) As of the Closing Date and after giving effect to the consummation
of the Financings, Volume Holdings and its subsidiaries had the authorized
capitalization as set forth in the Offering Memorandum under the heading
"Capitalization"; and all the issued and outstanding shares of capital
stock of Volume Holdings and the Issuer have been duly authorized and
validly issued and are fully paid and non-assessable. All of the
outstanding shares of capital stock of each Guarantor (other than Volume
Holdings) have been duly authorized and validly issued, are fully paid and
non-assessable and are owned directly or indirectly by the Issuer, free and
clear of any lien, charge, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party other than those
contained in the Credit Agreement.
(f) The Issuer and each of the Guarantors have the corporate power and
authority to execute and deliver this Agreement, the Indenture, the
Registration Rights Agreement and the Securities (in the case of the Issuer
only) (all the foregoing are collectively referred to herein as the
"Transaction Documents") and to perform their respective obligations
hereunder and thereunder; and all corporate action required to be taken for
the due and proper authorization, execution and delivery of each of the
Transaction Documents and the consummation of the transactions contemplated
thereby have been duly and validly taken by the Issuer and each of the
Guarantors.
(g) This Agreement has been duly authorized, executed and delivered by
the Issuer and each of the Guarantors and constitutes a valid and legally
binding agreement of the Issuer and each of the Guarantors, subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
<PAGE>
4
(h) The Registration Rights Agreement has been duly authorized by the
Issuer and each of the Guarantors and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute a
valid and legally binding agreement of the Issuer and each of the
Guarantors enforceable against the Issuer and each of the Guarantors in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and to general equitable
principles (whether considered in a proceeding in equity or at law).
(i) The Indenture has been duly authorized by the Issuer and each of
the Guarantors and, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and legally
binding agreement of the Issuer and each of the Guarantors enforceable
against the Issuer and each of the Guarantors in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles (whether considered in
a proceeding in equity or at law). On the Closing Date, the Indenture will
conform in all material respects to the requirements of the Trust Indenture
Act and the rules and regulations of the Commission applicable to an
indenture that is qualified thereunder.
(j) The Securities have been duly authorized by the Issuer and each of
the Guarantors and, when duly executed, authenticated, issued and delivered
as provided in the Indenture and paid for as provided herein (assuming due
authorization, execution and delivery of the Indenture by the Trustee and
due authentication of the Securities by the Trustee), will be duly and
validly issued and outstanding and will constitute valid and legally
binding obligations of the Issuer, as issuer, and each of the Guarantors,
as guarantors, entitled to the benefits of the Indenture and enforceable
against the Issuer, as issuer, and each of the Guarantors, as guarantors,
in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and to general
equitable principles (whether considered in a proceeding in equity or at
law).
(k) Each Transaction Document conforms in all material respects to the
description thereof contained in the Offering Memorandum.
(l) The execution, delivery and performance by the Issuer and each of
the Guarantors of the Transaction Documents to which each is a party, the
issuance, authentication, sale and delivery of the Securities and
compliance by the Issuer and each of the Guarantors with the terms thereof
and the consummation of the transactions contemplated by the Transaction
Documents will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets (other than pursuant to the Credit Agreement) of Volume
Holdings or any of its subsidiaries pursuant to, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
Volume Holdings or any of its subsidiaries is a party or by which Volume
Holdings or any of its subsidiaries is bound or to which any of the
property or assets of Volume Holdings or any of its subsidiaries is
subject, except for such conflicts, breaches, violations or defaults,
liens, charges or encumbrances that could not reasonably be
<PAGE>
5
expected to have a Material Adverse Effect, nor will such actions result in
any violation of the provisions of the charter or by-laws of the Issuer or
any Guarantor or any statute or any judgment, order, decree, rule or
regulation of any court or arbitrator or governmental agency or body having
jurisdiction over the Issuer or any Guarantor or any of their properties or
assets, except such violations which would not reasonably be expected to
have a Material Adverse Effect; and no consent, approval, authorization or
order of, or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance by the Issuer and each of the Guarantors of the Transaction
Documents to which each is a party, the issuance, authentication, sale and
delivery of the Securities and compliance by the Issuer and each of the
Guarantors with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents, except for such consents,
approvals, authorizations, filings, registrations or qualifications (i)
which shall have been obtained or made prior to the Closing Date and (ii)
as may be required to be obtained or made under the Securities Act and
applicable state securities laws.
(m)(i) Deloitte & Touche LLP ("D&T") are independent certified public
accountants with respect to Volume Holdings and its subsidiaries and (ii)
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") are independent
certified public accountants with respect to Service America Corporation
and its subsidiaries, in each case, within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants ("AICPA") and its interpretations and rulings thereunder. The
historical financial statements (including the related notes) contained in
the Offering Memorandum comply in all material respects with the
requirements applicable to a registration statement on Form S-1 under the
Securities Act (except that certain (i) supporting schedules, (ii)
financial statements for the period ended December 28, 1998 and (iii)
financial disclosure concerning the subsidiaries of the Issuer that are not
Subsidiary Guarantors, are omitted); such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly
present, in all material respects, the financial position of the entities
purported to be covered thereby at the respective dates indicated and the
results of their operations and their cash flows for the respective periods
indicated, subject in the case of unaudited combined or consolidated
financial statements, to year-end audit adjustments; and the historical
financial information contained in the Offering Memorandum under the
headings "Summary Summary Historical Financial Information of Volume
Holdings", "Summary Summary Historical Financial Information of Service
America", "Capitalization", "Selected Historical Financial Information of
Volume Holdings", "Selected Historical Financial Information of Service
America" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are derived from the accounting records of
Volume Holdings and its subsidiaries or Service America and its
subsidiaries, and fairly present in all material respects the information
purported to be shown thereby. The pro forma financial information
contained in the Offering Memorandum has been prepared on a basis
consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjustments specified
therein), includes all material adjustments to the historical financial
information required by Rule 11-02 of Regulation S-X under the Securities
Act to reflect the Transactions, gives effect to assumptions made on a
reasonable
<PAGE>
6
basis and fairly presents in all material respects the historical and
proposed transactions contemplated by the Offering Memorandum and the
Transaction Documents. The other historical financial and statistical
information and data included in the Offering Memorandum are, in all
material respects, fairly presented.
(n) There are no legal or governmental proceedings pending to which
Volume Holdings or any of its subsidiaries is a party or of which any
property or assets of Volume Holdings or any of its subsidiaries is the
subject which (A) singularly or in the aggregate, if determined adversely
to Volume Holdings or any of its subsidiaries, could reasonably be expected
to have a Material Adverse Effect or (B) question the validity or
enforceability of any of the Transaction Documents or any action taken or
to be taken pursuant thereto; and to the knowledge of the Issuer no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(o) To the knowledge of the Issuer, no action has been taken and no
statute, rule, regulation or order has been enacted, adopted or issued by
any governmental agency or body (other than "Blue Sky" laws, regulations or
orders) that prevents the issuance of the Securities or suspends the sale
of the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any federal or state court of competent jurisdiction
has been issued with respect to the Issuer or any of the Guarantors that
would prevent or suspend the issuance or sale of the Securities or the use
of the Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
knowledge of the Issuer, threatened against or affecting the Issuer or any
of the Guarantors before any court or arbitrator or any governmental
agency, body or official, domestic or foreign, that could reasonably be
expected to restrain, enjoin, interfere with or adversely affect the
transactions contemplated by the Transaction Documents in any material
respect; and the Issuer has complied with any and all requests by any
securities authority in any jurisdiction for additional information to be
included in the Preliminary Offering Memorandum and the Offering
Memorandum.
(p) None of the Issuer or any of the Guarantors is (i) in violation of
its charter or by-laws (or other comparable organizational documents), (ii)
in default in any respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to which
any of its property or assets is subject or (iii) in violation in any
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject, other than, in
the case of clauses (ii) or (iii), such defaults or violations that would
not, singularly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(q) Volume Holdings and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or foreign
regulatory agencies or bodies that are necessary for the ownership of their
respective properties or the conduct of their respective businesses as
described in the Offering Memorandum, except where the failure to possess
or make the same would not, singularly or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and none of Volume
<PAGE>
7
Holdings or any of its subsidiaries has received notification of any
revocation or modification of any such license, certificate, authorization
or permit or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course, except
where the failure to possess the same would not reasonably be expected to
have a Material Adverse Effect.
(r) Volume Holdings and each of its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns required
to be filed through the date hereof or have timely filed requests for
extensions and such extensions have been granted and have not expired and
have paid all taxes due thereon (or have made adequate provision for such
taxes on their respective balance sheets), except for such taxes of which
such failure to pay or so file would not reasonably be expected to have a
Material Adverse Effect, and no tax deficiency has been determined
adversely to Volume Holdings or any of its subsidiaries that has had (nor
does Volume Holdings or any of its subsidiaries have any knowledge of any
tax deficiency that, if determined adversely to Volume Holdings or any of
its subsidiaries, could reasonably be expected to have) a Material Adverse
Effect.
(s) None of the Issuer or any of the Guarantors is an "investment
company" or a company "controlled by" an investment company within the
meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the rules and regulations of the Commission thereunder.
(t) The Issuer and each of the Guarantors maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(u) The Issuer and each of the Guarantors have insurance covering
their respective properties, operations, personnel and businesses, which
insurance is in amounts and insures against such losses and risks as are
customary for similar businesses or is required by law. Neither the Issuer
nor any of the Guarantors has received notice from any insurer or agent of
such insurer that capital improvements or other expenditures are required
or necessary to be made in order to continue such insurance.
(v) Volume Holdings and each of its subsidiaries have good and
marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real and personal property that are material to
the business of Volume Holdings and its subsidiaries taken as a whole, in
each case free and clear of all liens, encumbrances, claims and defects and
imperfections of title except such as (i) do not materially interfere with
the use made and proposed to be made of such property by Volume Holdings
and its subsidiaries, (ii) are contemplated by the Transaction Documents or
the Credit Agreement or (iii) could not reasonably be expected to have a
Material Adverse Effect.
<PAGE>
8
(w) No labor disturbance by or dispute with the employees of Volume
Holdings or any of its subsidiaries exists or, to the knowledge of the
Issuer, is threatened that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
(x) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of Volume Holdings or any of its subsidiaries
which could reasonably be expected to have a Material Adverse Effect; each
such employee benefit plan is in compliance with applicable law, including
ERISA and the Code except where any noncompliance would not reasonably be
expected to have a Material Adverse Effect; the Issuer and each of the
Guarantors have not incurred and do not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from,
any pension plan for which the Issuer or any of the Guarantors would have
any liability; and each such pension plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service.
(y) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission or other release of any kind of
toxic or other wastes or other hazardous substances by, due to or caused by
Volume Holdings or any of its subsidiaries (or, to the knowledge of the
Issuer, any other entity (including any predecessor) for whose acts or
omissions Volume Holdings or any of its subsidiaries is or could reasonably
be expected to be liable) upon any of the property now or previously owned
or leased by Volume Holdings or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule, regulation,
order, judgment, decree or permit or that would, under any statute or any
ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any
violation or liability that could not reasonably be expected to have,
singularly or in the aggregate with all such violations and liabilities, a
Material Adverse Effect; and there has been no disposal, discharge,
emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which Volume Holdings or any of its
subsidiaries has knowledge, except for any such disposal, discharge,
emission or other release of any kind which could not reasonably be
expected to have, singularly or in the aggregate with all such discharges
and other releases, a Material Adverse Effect.
(z) Neither the Issuer nor any of the Guarantors, to the knowledge of
the Issuer, nor any director, officer, agent, employee or other person
associated with or acting on behalf of the Issuer or any of the Guarantors
has (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act
<PAGE>
9
of 1977; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(aa) On and immediately after the Closing Date, the Issuer (after
giving effect to the issuance of the Securities and to the other
transactions related thereto as described in the Offering Memorandum) will
be Solvent. As used in this paragraph, the term "Solvent" means, with
respect to a particular date, that on such date (i) the present fair market
value (or present fair saleable value) of the assets of the Issuer is not
less than the total amount required to pay the probable liabilities of the
Issuer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (ii) the Issuer is able
to realize upon its assets and pay its debts and other liabilities,
contingent obligations and commitments as they mature and become due in the
normal course of business, (iii) assuming the sale of the Securities as
contemplated by this Agreement and the Offering Memorandum, the Issuer is
not incurring debts or liabilities beyond its ability to pay as such debts
and liabilities mature and (iv) the Issuer is not engaged in any business
or transaction, and is not about to engage in any business or transaction,
for which its property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in
which the Issuer is engaged. In computing the amount of such contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
(bb) Except as described in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, calls or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity or other ownership interest in the Issuer
or any of the Guarantors.
(cc) Neither the Issuer nor any of the Guarantor owns any "margin
securities" as that term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), and
none of the proceeds of the sale of the Securities will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the Securities to be considered a
"purpose credit" within the meanings of Regulations T, U or X of the
Federal Reserve Board.
(dd) Other than this Agreement, neither the Issuer nor any of the
Guarantors is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Issuer or any of
the Guarantors or the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of
the Securities.
(ee) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(ff) Neither the Issuer nor any of its affiliates or any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in Regulation S under the Securities Act
("Regulation S")), and all such
<PAGE>
10
persons have complied and will comply with the offering restrictions
requirement of Regulation S to the extent applicable.
(gg) Neither the Issuer nor any of its affiliates has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of the
Securities in a manner that would require registration of the Securities
under the Securities Act.
(hh) Assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 2, neither the Issuer nor any of its
affiliates or any person acting on its or their behalf has engaged, in
connection with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act.
(ii) There are no securities of the Issuer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed
on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system.
(jj) Neither the Issuer nor any of its affiliates has taken or will
take, directly or indirectly, any action prohibited by Regulation M under
the Exchange Act in connection with the offering of the Securities.
(kk) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in
good faith.
(ll) Neither the Issuer nor any of the Guarantors does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Florida Statutes Section 517.075.
(mm) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change or, to the knowledge of the Issuer, any development
involving a prospective material adverse change in the financial condition,
or in the earnings, business affairs or management of the Issuer and the
Guarantors, whether or not arising in the ordinary course of business, (ii)
none of the Issuer or any of the Guarantors has incurred any material
liability or obligation, direct or contingent, other than in the ordinary
course of business, (iii) none of the Issuer or any of the Guarantors has
entered into any material transaction other than in the ordinary course of
business and (iv) there has not been any change in the capital stock or
long-term debt of the Issuer or any of the Guarantors, or any dividend or
distribution of any kind declared, paid or made by the Issuer or any of the
Guarantors on any class of their respective capital stock.
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Issuer agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuer, the principal amount of Securities set forth opposite the name
<PAGE>
11
of such Initial Purchaser on Schedule III hereto at a purchase price equal to
97.0% of the principal amount thereof. The Issuer shall not be obligated to
deliver any of the Securities except upon payment for all of the Securities to
be purchased as provided herein.
(b) The Initial Purchasers have advised the Issuer that they propose to
offer the Securities for resale upon the terms and subject to the conditions set
forth herein and in the Offering Memorandum. Each Initial Purchaser, severally
and not jointly, represents and warrants to and agrees with the Issuer that (i)
it is purchasing the Securities pursuant to a private sale exempt from
registration under the Securities Act, (ii) it has not solicited offers for, or
offered or sold, and will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the Securities Act
("Regulation D") or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act and (iii) it has solicited and will
solicit offers for the Securities only from, and has offered or sold and will
offer, sell or deliver the Securities, as part of their initial offering, only
(A) within the United States to persons whom it reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers"), as defined in
Rule 144A under the Securities Act ("Rule 144A"), or if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and in each case,
in transactions in accordance with Rule 144A and (B) outside the United States
to persons other than U.S. persons in reliance on Regulation S under the
Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in reliance on
Regulation S, each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Issuer that:
(i) the Securities have not been registered under the Securities Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except pursuant to an exemption from,
or in transactions not subject to, the registration requirements of the
Securities Act;
(ii) such Initial Purchaser has offered and sold the Securities, and
will offer and sell the Securities, (A) as part of its distribution at any
time and (B) otherwise until 40 days after the later of the commencement of
the offering of the Securities and the Closing Date, only in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act;
(iii) none of such Initial Purchaser or any of its affiliates or any
other person acting on its or their behalf has engaged or will engage in
any directed selling efforts (as such term is defined in Regulation S) with
respect to the Securities, and all such persons have complied and will
comply with the offering restriction requirements of Regulation S;
(iv) at or prior to the confirmation of sale of any Securities sold in
reliance on Regulation S, it will have sent to each distributor, dealer or
other person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
<PAGE>
12
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of their distribution
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the date of
original issuance of the Securities, except in accordance with
Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act. Terms used above have the
meanings given to them by Regulation S."
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the Issuer;
and
(iv) it has and will comply with all applicable laws and regulations,
in each jurisdiction, in which it acquires, offers, sells or delivers
Securities or has in its possession or distributed the Preliminary Offering
Memorandum or Offering Memorandum at its own expense.
Terms used in this Section 2(c) have the meanings given to them by Regulation S.
(d) Each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Issuer and each of the Guarantors that (i) it
has not offered or sold and prior to the date six months after the Closing Date
will not offer or sell any Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by it
in relation to the Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be issued
or passed on.
(e) Each Initial Purchaser, severally and not jointly, agrees with the
Issuer and each of the Guarantors that, prior to or simultaneously with the
confirmation of sale by such Initial Purchaser to any purchaser of any of the
Securities purchased by such Initial Purchaser from the Issuer pursuant hereto,
such Initial Purchaser shall furnish to that purchaser a copy of the Offering
Memorandum (and any amendment or supplement thereto that the Issuer shall have
furnished to such Initial Purchaser prior to the date of such confirmation of
sale). In addition to the foregoing, each Initial Purchaser acknowledges and
agrees that the Issuer and each of the Guarantors and, for purposes of the
opinions to be delivered to the Initial Purchasers pursuant to Sections 5(d) and
(e), counsel for the Issuer and for the Initial Purchasers, respectively, may
rely upon the accuracy of the representations and warranties of the Initial
Purchasers and their compliance with their agreements contained in this Section
2, and each Initial Purchaser hereby consents to such reliance.
<PAGE>
13
(f) The Issuer and each of the Guarantors acknowledge and agree that
the Initial Purchasers may sell Securities to any affiliate of an Initial
Purchaser and that any such affiliate may sell Securities purchased by it to an
Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Cravath, Swaine &
Moore, New York, New York, or at such other place as shall be agreed upon by the
Initial Purchasers and the Issuer, at 10:00 A.M., New York City time, on March
4, 1999, or at such other time or date, not later than seven full business days
thereafter, as shall be agreed upon by the Initial Purchasers and the Issuer
(such date and time of payment and delivery being referred to herein as the
"Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuer by wire or book-entry transfer of
same-day funds to such account or accounts as the Issuer shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchasers of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery,
the Securities shall be in global form, registered in such names and in such
denominations as CSI on behalf of the Initial Purchasers shall have requested in
writing not less than two full business days prior to the Closing Date. The
Issuer agrees to make one or more global certificates evidencing the Securities
available for inspection by CSI on behalf of the Initial Purchasers in New York,
New York at least 24 hours prior to the Closing Date.
4. Further Agreements of the Issuer and the Guarantors. The Issuer and
each of the Guarantors agree with each of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event during the
period prior to the completion of the resale of the Securities by the
Initial Purchasers which makes any statement of a material fact made in the
Offering Memorandum untrue or which requires the making of any additions to
or changes in the Offering Memorandum (as amended or supplemented from time
to time) in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; to advise the
Initial Purchasers promptly of any order preventing or suspending the use
of the Preliminary Offering Memorandum or the Offering Memorandum, of any
suspension of the qualification of the Securities for offering or sale in
any jurisdiction and of the initiation or threatening of any proceeding for
any such purpose; and to use their reasonable best efforts to prevent the
issuance of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or suspending
any such qualification and, if any such suspension is issued, to use their
reasonable best efforts to obtain the lifting thereof at the earliest
possible time;
(b) to furnish promptly to each of the Initial Purchasers and counsel
for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
<PAGE>
14
(c) prior to making any amendment or supplement to the Offering
Memorandum at any time prior to the completion of the resale of the
Securities by the Initial Purchasers, to furnish a copy thereof to each of
the Initial Purchasers and counsel for the Initial Purchasers and not to
effect any such amendment or supplement to which the Initial Purchasers
shall reasonably object by notice to the Issuer after a reasonable period
to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Issuer, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
to furnish to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, unless the Issuer is then
subject to and in compliance with Section 13 or 15(d) of the Exchange Act
(the foregoing agreement being for the benefit of the holders from time to
time of the Securities and prospective purchasers of the Securities
designated by such holders);
(f) for a period of three years following the Closing Date, to furnish
to the Initial Purchasers copies of any annual reports, quarterly reports
and current reports filed by Volume Holdings or the Issuer with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
be designated by the Commission, and such other documents, reports and
information as shall be furnished by Volume Holdings or the Issuer to the
Trustee or to the holders of the Securities pursuant to the Indenture or
the Exchange Act or any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request to qualify the Securities for offering
and sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may designate and to continue such qualifications in
effect for so long as required for the resale of the Securities; and to
arrange for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchasers
may reasonably request; provided that, Volume Holdings and its subsidiaries
shall not be obligated to qualify as foreign corporations in any
jurisdiction in which they are not so qualified or to file a general
consent to service of process or to subject themselves to taxation in
respect of doing business in any jurisdiction;
<PAGE>
15
(h) to assist the Initial Purchasers in arranging for the Securities
to be designated Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities to
be eligible for clearance and settlement through The Depository Trust
Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as such term is defined in the Securities Act) that could be integrated
with the sale of the Securities in a manner that would require registration
of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may
be, not to, and to cause its affiliates not to, and not to authorize or
knowingly permit any person acting on their behalf to, solicit any offer to
buy or offer to sell the Securities by means of any form of general
solicitation or general advertising within the meaning of Regulation D or
in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act; and not to offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, contract or disposition would cause
the exemption afforded by Section 4(2) of the Securities Act to cease to be
applicable to the offering and sale of the Securities as contemplated by
this Agreement and the Offering Memorandum;
(k) for a period of 90 days from the date of the Offering Memorandum,
not to offer for sale, sell, contract to sell or otherwise dispose of,
directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or other disposition of any debt
securities issued or guaranteed by the Issuer or any of its subsidiaries
(other than the Securities and in respect of borrowings under the Credit
Agreement) without the prior written consent of the Initial Purchasers.
(l) during the period from the Closing Date until two years after the
Closing Date, without the prior written consent of the Initial Purchasers,
not to, and not permit any of its affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Securities that have been
reacquired by them, except for Securities purchased by the Issuer or any of
its affiliates and resold in a transaction registered under the Securities
Act;
(m) not to, until the consummation of the Exchange Offer, be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act, and to not
be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until CSI on
behalf of the Initial Purchasers shall have notified the Issuer of the
completion of the resale of the Securities, not to, and to cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers
has a beneficial interest, any Securities, or attempt to induce any person
to purchase any
<PAGE>
16
Securities; and not to, and to cause its affiliated purchasers not to, make
bids or purchase for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Securities;
(o) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date hereof a
copy of the independent accountants' reports included in the Offering
Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and performed by
it under this Agreement that are within its control prior to, on or after
the Closing Date, and to use its reasonable best efforts to satisfy all
conditions precedent on its part to the delivery of the Securities; and
(r) to apply the net proceeds from the sale of the Securities as set
forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Issuer and the Guarantors contained
herein, to the accuracy of the statements of the Issuer and each of the
Guarantors and their respective officers made in any certificates delivered
pursuant hereto, to the performance by the Issuer and the Guarantors of their
respective obligations hereunder, and to each of the following additional terms
and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers
may agree; and no stop order suspending the sale of the Securities in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(b) None of the Initial Purchasers shall have discovered and disclosed
to the Issuer on or prior to the Closing Date that the Offering Memorandum
or any amendment or supplement thereto contains an untrue statement of a
fact that, in the opinion of counsel for the Initial Purchasers, is
material or omits to state any fact which, in the opinion of such counsel,
is material and is necessary to make the statements made therein not
misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of the Transaction Documents and
the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall be
reasonably satisfactory in all material respects to the Initial Purchasers,
and the Issuer and the Guarantors shall have furnished to the Initial
Purchasers and their counsel all documents and information that they or
their counsel may reasonably request to enable them to pass upon such
matters.
<PAGE>
17
(d) Simpson Thacher & Bartlett and local counsel shall have furnished
to the Initial Purchasers their written opinion, as counsel to the Issuer
and the Guarantors, addressed to the Initial Purchasers and dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers.
(e) The Initial Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers
may reasonably require, and the Issuer shall have furnished to such counsel
such documents and information as they reasonably request for the purpose
of enabling them to pass upon such matters.
(f) The Issuer shall have furnished to the Initial Purchasers a letter
(each, an "Initial Letter") of each of D&T and PricewaterhouseCoopers,
addressed to the Initial Purchasers and dated the date hereof, in form and
substance reasonably satisfactory to the Initial Purchasers, substantially
to the effect set forth in Annex B-1 and B-2, respectively, hereto.
(g) The Issuer shall have furnished to the Initial Purchasers (i) a
letter (the "D&T Bring-Down Letter") of D&T and (ii) a letter (the
"PricewaterhouseCoopers Bring-Down Letter" and, together with the D&T
Bring-Down Letter, the "Bring-Down Letters") of PricewaterhouseCoopers, in
each case, addressed to the Initial Purchasers and dated the Closing Date
confirming that (A) in the case of D&T, they are independent public
accountants with respect to Volume Holdings and its subsidiaries and (B) in
the case of PricewaterhouseCoopers, they are independent public accountants
with respect to Service America Corporation and its subsidiaries, in each
case within the meaning of Rule 101 of the Code of Professional Conduct of
the AICPA and its interpretations and rulings thereunder, (ii) stating, as
of the date of the Bring-Down Letters (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Offering Memorandum, as of
a date not more than three business days prior to the date of the
Bring-Down Letters), that the conclusions and findings of such accountants
with respect to the financial information and other matters covered by the
Initial Letters furnished by D&T or PricewaterhouseCoopers, as the case may
be, are accurate and (iii) confirming in all material respects the
conclusions and findings set forth in such Initial Letter.
(h) Each of the Issuer and the Guarantors shall have furnished to the
Initial Purchasers a certificate, dated the Closing Date, of its chief
executive officer and chief financial officer stating that (A) such
officers have carefully examined the Offering Memorandum, (B) in their
opinion, the Offering Memorandum, as of its date, did not include any
untrue statement of a material fact and did not omit to state a material
fact necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading, and since
the date of the Offering Memorandum, no event has occurred that should have
been set forth in a supplement or amendment to the Offering Memorandum so
that the Offering Memorandum (as so amended or supplemented) would not
include any untrue statement of a material fact and would not omit to state
a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading,
(C) to their knowledge after due inquiry, as of the Closing Date, the
representations and warranties of the Issuer or the particular
<PAGE>
18
Guarantor, as applicable, in this Agreement are true and correct in all
material respects; the Issuer or the particular Guarantor, as applicable,
has complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder on or prior
to the Closing Date and (D) to their knowledge after due inquiry,
subsequent to the date of the most recent financial statements contained in
the Offering Memorandum, except as set forth in the Offering Memorandum
under the heading "Recent Developments", there has been no material adverse
change in the financial position or results of operations of Volume
Holdings and its subsidiaries taken as a whole, or any change, or any
development involving a prospective change, in or affecting the financial
condition, results of operations or business of Volume Holdings and its
subsidiaries taken as a whole.
(i) The Initial Purchasers shall have received a counterpart of the
Registration Rights Agreement which shall have been executed and delivered
by a duly authorized officer of the Issuer and each Guarantor.
(j) The Indenture shall have been duly executed and delivered by the
Issuer, the Guarantors and the Trustee, and the Securities shall have been
duly executed and delivered by the Issuer and duly authenticated by the
Trustee.
(k) The Securities shall have been made eligible for clearance and
settlement through DTC.
(l) If any event shall have occurred that requires the Issuer under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A under
the Securities Act by any court or any withdrawal or proposed withdrawal of
any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
that in the reasonable judgment of the Initial Purchasers would materially
impair the ability of the Initial Purchasers to purchase, hold or effect
resales of the Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital stock or long-term debt or any
change, or any development involving a prospective change, in or affecting
the financial condition, results of operations or business of the Issuer
and the Guarantors taken as a whole, the effect of which, in any such case
described above, is, in the reasonable judgment of the Initial Purchasers,
so material and adverse as to make it impracticable or inadvisable to
proceed with the sale or delivery of the Securities on the terms and in the
manner contemplated by this Agreement and the Offering Memorandum
(exclusive of any amendment or supplement thereto).
<PAGE>
19
(o) No action shall have been taken and no statute, rule, regulation,
injunction, restraining order or order of any other nature shall have been
enacted, adopted or issued by any federal or state court of competent
jurisdiction, or any governmental agency or body, that would, as of the
Closing Date, prevent the issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Securities or
any of the Issuer's other debt securities by any "nationally recognized
statistical rating organization", as such term is defined by the Commission
for purposes of Rule 436(g)(2) of the rules and regulations of the
Commission under the Securities Act and (ii) no such organization shall
have publicly announced that it has under surveillance or review (other
than an announcement with positive implications of a possible upgrading),
its rating of the Securities or any of the Issuer's other debt securities.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or limited, or
minimum prices shall have been established on any such exchange or market
by the Commission, by any such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in any securities of
the Issuer on any exchange or in the over-the-counter market shall have
been suspended or (ii) any moratorium on commercial banking activities
shall have been declared by federal or New York state authorities or (iii)
an outbreak or escalation of hostilities involving the U.S. or a
declaration by the United States of a national emergency or war or (iv) a
material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) the effect of which, in the
case of this clause (iv) is, in the judgment of the Initial Purchasers, so
material and adverse as to make it impracticable or inadvisable to proceed
with the sale or the delivery of the Securities on the terms and in the
manner contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(r) The Bank Amendment providing for amendments to the Credit
Agreement to permit the incurrence of the indebtedness represented by the
Securities and the use of the proceeds from the sale of the Securities as
contemplated in the Offering Memorandum shall have been received.
(s) Each of the Issuer and the Guarantors shall have furnished to the
Initial Purchasers a certificate, dated the Closing Date, of its chief
executive officer and chief financial officer stating that each of the
Company and the Guarantors is not (A) in violation of its Certificate of
Incorporation or By-laws, (B) to their knowledge after due inquiry, in
default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any agreement or instrument set forth in Schedule I attached thereto or
(C) in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree known to such officers to
which the property or assets of the Company or any of the Guarantors may be
subject.
<PAGE>
20
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
in all material respects to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder may
be terminated by the Initial Purchasers, in their absolute discretion, by notice
given to and received by the Issuer prior to delivery of and payment for the
Securities if, prior to that time, any of the events described in Section 5(m),
(n), (o), (p) or (q) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchaser may make arrangements for the
purchase of the Securities (the "Unpurchased Securities") which such defaulting
Initial Purchaser agreed but failed to purchase by other persons satisfactory to
the Issuer and the non-defaulting Initial Purchaser, but if no such arrangements
are made within 36 hours after such default, then (i) if the principal amount of
the Unpurchased Securities does not exceed 10% of the principal amount of
Securities to be purchased on such date, the non-defaulting Initial Purchaser
shall be obligated to purchase the full amount thereof, or (ii) if the principal
amount of the Unpurchased Securities exceeds 10% of the Securities to be
purchased on such date, the Issuer shall be entitled to a further period of 36
hours within which to procure another party or parties reasonably satisfactory
to the non-defaulting Initial Purchaser to purchase such Unpurchased Securities
upon such terms herein set forth. If, however, the Issuer shall not have
completed such arrangements within 72 hours after such default and the principal
amount of Unpurchased Securities exceeds 10% of the principal amount of
Securities to be purchased on such date, then this Agreement shall terminate
without liability on the part of the non-defaulting Initial Purchaser, the
Issuer or the Guarantors, except that the Issuer and the Guarantors will
continue to be liable for the payment of expenses to the extent set forth in
Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not
terminate and shall remain in effect. As used in this Agreement, the term
"Initial Purchasers" includes, for all purposes of this Agreement unless the
context otherwise requires, any party not listed in Schedule II hereto that,
pursuant to this Section 7, purchases Securities which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Issuer, the Guarantors or any
non-defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Securities of a defaulting
Initial Purchaser, either the non-defaulting Initial Purchaser or the Issuer may
postpone the Closing Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Issuer or counsel for the
Initial Purchasers may be necessary in the Offering Memorandum or in any other
document or arrangement, and the Issuer agrees promptly to prepare any amendment
or supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement
shall have been terminated in accordance with Section 6 or 7, (b) the Issuer
shall fail to tender the Securities for delivery to the Initial Purchasers for
any reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Issuer and Guarantors shall reimburse the Initial Purchasers for
such out-of-pocket expenses (including reasonable fees and disbursements of
<PAGE>
21
counsel) as shall have been reasonably incurred by the Initial Purchasers in
connection with this Agreement and the proposed purchase and resale of the
Securities. If this Agreement is terminated pursuant to Section 7 by reason of
the default of one or more of the Initial Purchasers, neither the Issuer nor the
Guarantors shall be obligated to reimburse any defaulting Initial Purchaser on
account of such expenses.
9. Indemnification. (a) The Issuer and each of the Guarantors shall
jointly and severally indemnify and hold harmless each Initial Purchaser, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls any Initial Purchaser within the
meaning of the Securities Act or the Exchange Act (collectively referred to for
purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of the Securities), to which
that Initial Purchaser may become subject, whether commenced or threatened,
under the Securities Act, the Exchange Act, any other federal or state statutory
law or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum or in any amendment
or supplement thereto or in any information provided by the Issuer or any
Guarantor pursuant to Section 4(e) or (ii) the omission or alleged omission to
state therein a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Issuer and the Guarantors shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchasers' Information; and provided, further, that with
respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 9(a)
shall not inure to the benefit of any such Initial Purchaser to the extent that
the sale to the person asserting any such loss, claim, damage, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser results
from the fact that both (A) to the extent required by applicable law, a copy of
the Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum, unless such failure to deliver the
Offering Memorandum was a result of non-compliance by the Issuer and the
Guarantors with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless Volume Holdings, its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls Volume Holdings within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(b) and
Section 10 as Volume Holdings), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which Volume
Holdings may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or
<PAGE>
22
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Initial Purchasers' Information, and
shall reimburse Volume Holdings for any legal or other expenses reasonably
incurred by Volume Holdings in connection with investigating or defending or
preparing to defend against or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing
of the claim or the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have under this Section 9 except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under this Section 9. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of outside counsel to the indemnified party) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based upon advice of outside
counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (4)
the indemnifying party has not in fact employed counsel reasonably satisfactory
to the indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action
<PAGE>
23
or claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
reasonably could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
The obligations of each of the Issuer, the Guarantors and the Initial
Purchasers in this Section 9 and in Section 10 are in addition to any other
liability that the Issuer, the Guarantors or the Initial Purchasers, as the case
may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or 9(b) otherwise than as a result of the limitations therein contained,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Issuer and the Guarantors on the one hand and the Initial
Purchasers on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuer and
the Guarantors on the one hand and the Initial Purchasers on the other with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Issuer and the
Guarantors on the one hand and the Initial Purchasers on the other with respect
to such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by or on behalf of the Issuer and the
Guarantors, on the one hand, and the total discounts and commissions received by
the Initial Purchasers with respect to the Securities purchased under this
Agreement, on the other, bear to the total gross proceeds from the sale of the
Securities under this Agreement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to the Issuer or the Guarantors or information supplied by the Issuer or
the Guarantors, on the one hand or to any Initial Purchasers' Information on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Issuer, the Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section 10
were to be determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 10 shall be deemed to include, for purposes of this
Section 10, any legal or other expenses reasonably incurred by such indemnified
party in
<PAGE>
24
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 10, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
with respect to the Securities purchased by it under this Agreement exceeds the
amount of any damages which such Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute as provided
in this Section 10 are several in proportion to their respective purchase
obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuer,
the Guarantors and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Issuer, the
Guarantors and the Initial Purchasers and in Section 4(e) with respect to
holders and prospective purchasers of the Securities. Nothing in this Agreement
is intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
12. Expenses. The Issuer and each of the Guarantors agree with the
Initial Purchasers to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities to the Initial Purchasers and
any taxes payable in that connection; (b) the costs incident to the preparation,
printing and distribution of the Preliminary Offering Memorandum, the Offering
Memorandum and any amendments or supplements thereto; (c) the costs of
reproducing and distributing each of the Transaction Documents; (d) the costs
incident to the preparation, printing and delivery of the certificates
evidencing the Securities, including stamp duties and transfer taxes, if any,
payable upon issuance of the Securities to the Initial Purchasers; (e) the fees
and expenses of the Issuer's counsel and the independent accountants; (f) the
fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related reasonable fees and expenses
of counsel for the Initial Purchasers) as herein provided; (g) any fees charged
by rating agencies for rating the Securities; (h) the fees and expenses of the
Trustee and any paying agent (including related reasonable fees and expenses of
any counsel to such parties); (i) all expenses and application fees incurred in
connection with the application for the inclusion of the Securities on the
PORTAL Market and the approval of the Securities for book-entry transfer by DTC;
and (j) all other costs and expenses incident to the performance of the
obligations of the Issuer and the Guarantors under this Agreement which are not
otherwise specifically provided for in this Section 12; provided, however, that
except as provided in this Section 12 and Section 8, the Initial Purchasers
shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Issuer, each of the Guarantors
and the Initial Purchasers contained in this Agreement or made by or on behalf
of the Issuer, each of the Guarantors or the Initial Purchasers pursuant to this
Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancelation of this
<PAGE>
25
Agreement or any investigation made by or on behalf of any of them or any of
their respective affiliates, officers, directors, employees, representatives,
agents or controlling persons.
<PAGE>
26
14. Notices, etc.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: Legal Department (telecopier no.: (212)
270-0994); or
(b) if to the Issuer or the Guarantors, shall be delivered or sent by
mail or telecopy transmission to the address of the Issuer set forth in the
Offering Memorandum, Attention: Ms. Janet Steinmayer (telecopier no.: (203)
975-5928 with a copy to Mr. David Blitzer, The Blackstone Group L.P., 345
Park Avenue, New York, New York 10154 (telecopier no.: (212) 754-8710);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Issuer shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
<PAGE>
27
16. Initial Purchasers' Information. The parties hereto acknowledge and
agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: (i) the last two bullet points
on the front cover page concerning the terms of the offering by the Initial
Purchasers and (ii) the statements concerning the Initial Purchasers contained
in the third, fourth, fifth, seventh, ninth, twelfth and thirteenth paragraphs
under the heading "Plan of Distribution".
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
28
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Issuer, the Guarantors and
the several Initial Purchasers in accordance with its terms.
Very truly yours,
VOLUME SERVICES AMERICA,
INC.,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES AMERICA
HOLDINGS, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVICE AMERICA CORPORATION,
as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES, INC. (Kansas), as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
EVENTS CENTER CATERING, INC., as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
<PAGE>
29
SERVICE AMERICA CONCESSIONS
CORPORATION, as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVICE AMERICA CORPORATION OF
WISCONSIN, as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVO-KANSAS, INC. as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVOMATION DUCHESS, INC., as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SVM OF TEXAS, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
<PAGE>
30
Accepted:
CHASE SECURITIES INC.
By /s/ Chase Securities Inc.
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
GOLDMAN, SACHS & CO.,
By /s/ Goldman, Sachs Co
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
32 Old Slip, 9th Floor
New York, NY 10004
Attention: Registration Department
<PAGE>
SCHEDULE I
Subsidiary Guarantors
Volume Services, Inc. (Delaware)
Service America Corporation
Volume Services, Inc. (Kansas)
Events Center Catering, Inc.
Service America Concessions Corporation
Service America Corporation of Wisconsin
Servo-Kansas, Inc.
Servomation Duchess, Inc.
SVM of Texas, Inc.
<PAGE>
SCHEDULE II
Subsidiaries
Service America Corporation
Service America Concessions Corporation
Service America Corporation of Wisconsin
Service America of Texas, Inc.
Servo-Kansas, Inc.
Servomation Duchess, Inc.
Servomation Inc.
SVM of Texas, Inc.
Service America/National Business Services Enterprises
Service America Corporation/Forum Catering
Volume Services, Inc. (Delaware)
Volume Services, Inc. (Kansas)
VSI of Maryland, Inc.
Events Center Catering, Inc.
<PAGE>
SCHEDULE III
Principal Amount
Initial Purchasers of Securities
------------------ ----------------
Chase Securities Inc. $ 50,000,000
Goldman, Sachs & Co. 50,000,000
------------
Total $100,000,000
<PAGE>
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE>
ANNEX B-1
FORM OF D&T COMFORT LETTER
The Issuer shall have furnished to the Initial Purchasers a letter of
Deloitte & Touche LLP, addressed to the Initial Purchasers and dated the date of
the Purchase Agreement, in form and substance satisfactory to the Initial
Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with respect to
Volume Holdings and its subsidiaries within the meaning of Rule 101 of the
Code of Professional Conduct of the AICPA and its interpretations and
rulings;
(ii) in their opinion, the audited financial statements and pro forma
financial information included in the Offering Memorandum and reported on
by them comply in form in all material respects with the accounting
requirements of the Exchange Act and the related published rules and
regulations of the Commission thereunder that would apply to the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 under the Securities Act (except that
certain supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by Volume Holdings and the Issuer, the procedures
of the AICPA for a review of interim financial information as described in
Statement of Auditing Standards No. 71, reading of minutes and inquiries of
certain officials of Volume Holdings and the Issuer who have responsibility
for financial and accounting matters and certain other limited procedures
requested by the Initial Purchasers and described in detail in such letter,
nothing has come to their attention that causes them to believe that (A)
any unaudited financial statements included in the Offering Memorandum do
not comply as to form in all material respects with applicable accounting
requirements, (B) any material modifications should be made to the
unaudited financial statements included in the Offering Memorandum for them
to be in conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited financial
statements included in the Offering Memorandum or (C) the information
included under the headings, "Summary--Summary Historical Financial
Information of Volume Holdings", "Capitalization", "Selected Historical
Financial Information of Volume Holdings", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Management--Executive Compensation" is not in conformity with the
disclosure requirements of Regulation S-K that would apply to the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 under the Securities Act;
(iv) based upon the procedures detailed in such letter with respect to
the period subsequent to the date of the last available balance sheet,
including reading of minutes and inquiries of certain officials of Volume
Holdings and the Issuer who have responsibility for financial and
accounting matters, nothing has come to their attention that causes them to
believe that (A) at a specified date not more than three business days
prior to the date of such letter, there was any change in capital stock,
increase in long-term debt or decrease in net current assets of Volume
Holdings as compared with the amounts shown in the September 29, 1998
unaudited balance sheet included in the Offering Memorandum or (B) for the
period from September 30, 1998, to a specified date not more than three
business days prior to the
<PAGE>
2
date of such letter, there were any decreases, as compared with the
corresponding period in the preceding year, in net sales, income from
operations, EBITDA or net income of Volume Holdings, except in all
instances for changes, increases or decreases that the Offering Memorandum
discloses have occurred or which are set forth in such letter, in which
case the letter shall be accompanied by an explanation by Volume Holdings
as to the significance thereof unless said explanation is not deemed
necessary by the Initial Purchasers;
[(v) based upon the procedures detailed in such letter with respect to
the period subsequent to June 30, 1998, including reading of minutes and
inquiries of certain officials of Service America and its subsidiaries who
have responsibility for financial and accounting matters, nothing has come
to their attention that causes them to believe that (A) at a specified date
not more than three business days prior to the date of such letter, there
was any change in capital stock, increase in long-term debt or decrease in
net current assets of Service America as compared with the amounts shown in
the June 30, 1998 unaudited balance sheet data of Service America included
in the Offering Memorandum or (B) for the period from July 1, 1998 to a
specified date not more than three business days prior to the date of such
letter, there were any decreases, as compared with the corresponding period
in the preceding year, in net sales, income from operations, EBITDA or net
income of Service America, except in all instances for changes, increases
or decreases that the Offering Memorandum discloses have occurred or which
are set forth in such letter, in which case the letter shall be accompanied
by an explanation by Service America as to the significance thereof unless
said explanation is not deemed necessary by the Initial Purchasers;]
(vi) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
Volume Holdings) set forth in the Offering Memorandum agrees with the
accounting records of Volume Holdings, excluding any questions of legal
interpretation; and
(vii) on the basis of a reading of the unaudited pro forma financial
information included in the Offering Memorandum, carrying out certain
specified procedures, reading of minutes and inquiries of certain officials
of Volume Holdings and the Issuer who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the application
of the pro forma adjustments to the historical amounts in the pro forma
financial information, nothing came to their attention which caused them to
believe that the pro forma financial information does not comply in form in
all material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
information.
<PAGE>
ANNEX B-2
FORM OF INITIAL PRICEWATERHOUSECOOPERS COMFORT LETTER
The Issuer shall have furnished to the Initial Purchasers a letter of
PricewaterhouseCoopers LLP, addressed to the Initial Purchasers and dated the
date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with respect to
Service America and its subsidiaries within the meaning of Rule 101 of the
Code of Professional Conduct of the AICPA and its interpretations and
rulings;
(ii) in their opinion, the audited financial statements included in
the Offering Memorandum and reported on by them comply in form in all
material respects with the accounting requirements of the Exchange Act and
the related published rules and regulations of the Commission thereunder
that would apply to the Offering Memorandum if the Offering Memorandum were
a prospectus included in a registration statement on Form S-1 under the
Securities Act (except that certain supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by Service America, the procedures of the AICPA
for a review of interim financial information as described in Statement of
Auditing Standards No. 71, reading of minutes and inquiries of certain
officials of Service America who have responsibility for financial and
accounting matters and certain other limited procedures requested by the
Initial Purchasers and described in detail in such letter, nothing has come
to their attention that causes them to believe that (A) any unaudited
financial statements included in the Offering Memorandum do not comply as
to form in all material respects with applicable accounting requirements,
(B) any material modifications should be made to the unaudited financial
statements included in the Offering Memorandum for them to be in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Offering Memorandum or (C) the information included under
the headings "Summary--Summary Historical Financial Information of Service
America", "Selected Historical Financial Information of Service America",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management--Executive Compensation" is not in conformity
with the disclosure requirements of Regulation S-K that would apply to the
Offering Memorandum if the Offering Memorandum were a prospectus included
in a registration statement on Form S-1 under the Securities Act; and
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
Service America) set forth in the Offering Memorandum agrees with the
accounting records of Service America, excluding any questions of legal
interpretation.
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
VOLUME SERVICES AMERICA, INC.
VOLUME SERVICES AMERICA, INC., a Delaware corporation (the
"Corporation"), hereby certifies as follows:
Pursuant to the provisions of Section 245 of the General Corporation
Law of the State of Delaware, the stockholders of the Corporation have duly
adopted the following Restated Certificate of Incorporation. The Corporation
was originally incorporated under the name "IM Stadium, Inc" and filed its
original Certificate of Incorporation with the Secretary of State of Delaware
on December 21, 1992. The Corporation filed a Certificate of Amendment with the
Secretary of State of Delaware on October 16, 1998. The following constitutes
only a restatement and not an amendment of the Corporation's Certificate of
Incorporation.
FIRST: The name of the Corporation is Volume Services
America, Inc.
SECOND: The address of the Corporation's registered office is
1209 Orange Street in the City of Wilmington, County of New Castle, State of
Delaware, and the name of its registered agent thereat is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is one thousand (1,000) shares of
common stock of the par value of one cent ($.01) per share.
FIFTH: The name and mailing address of the incorporator is
Janet L. Fort, Parker, Poe, Adams & Bernstein, 2600 Charlotte Plaza, Charlotte,
NC 28244.
SIXTH: The Board of Directors is expressly authorized to
make, alter, amend or repeal the Bylaws of the Corporation without the assent
or vote of the stockholders. Election of directors need not be by ballot unless
the Bylaws so provide.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has signed this Restated
Certificate of Incorporation on October 21, 1998.
/s/ Janet L. Steinmayer
---------------------------------------
Name: Janet L. Steinmayer
Title: General Counsel
<PAGE>
Exhibit 3.3
RESTATED
CERTIFICATE OF INCORPORATION
OF
VOLUME SERVICES AMERICA HOLDINGS, INC.
VOLUME SERVICES AMERICA HOLDINGS, INC, a Delaware corporation (the
"Corporation"), hereby certifies as follows:
Pursuant to the provisions of Section 245 of the General Corporation
Law of the State of Delaware, the stockholders of the Corporation have duly
adopted the following Restated Certificate of Incorporation. The Corporation
was originally incorporated under the name "VSI Acquisition II Corporation"
and filed its original Certificate of Incorporation with the Secretary of
State of Delaware on November 21, 1995. The Corporation filed Certificates of
Amendment with the Secretary of State of Delaware on December 20, 1995, April
1, 1997, April 24, 1997 and October 16, 1998. The following constitutes only a
restatement and not an amendment of the Corporation's Certificate of
Incorporation.
FIRST: The name of the Corporation is Volume Services
America Holdings, Inc.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: The total number of shares of stock that the
Corporation is authorized to issue is 1,000 shares of Common Stock, par value
$0.01 each.
FIFTH: The name and address of the incorporator is Jay A.
Shiland, 425 Lexington Avenue, New York City, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation, acting
by majority vote, may alter, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware
General Corporation Law as the same exists or may hereafter be amended, no
director of the Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has signed this Restated
Certificate of Incorporation on October 21, 1998.
/s/ Janet L. Steinmayer
---------------------------------
Name: Janet L. Steinmayer
Title: General Counsel
<PAGE>
Exhibit 3.4
VSI ACQUISITION II CORPORATION
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting and Notice. Meetings of the
stockholders of the Corporation shall be held at such place either within or
without the State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors
and to transact such other business as may properly come before the meeting.
Special meetings of the stockholders may be called by the President for any
purpose and shall be called by the President or Secretary if directed by the
Board of Directors or requested in writing by the holders of not less than 25%
of the capital stock of the Corporation. Each such stockholder request shall
state the purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at
least 10 and not more than 60 days before each meeting of stockholders,
written notice of the time, date and place of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be given to each stockholder.
Section 4. Quorum. At any meeting of stockholders, the
holders of record, present in person or by proxy, of a majority of the
Corporation's issued and outstanding capital stock shall constitute a quorum
for the transaction of business, except as otherwise provided by law. In the
absence of a quorum, any officer entitled to preside at or to act as secretary
of the meeting shall have power to adjourn the meeting from time to time until
a quorum is present.
<PAGE>
2
Section 5. Voting. Except as otherwise provided by law, all
matters submitted to a meeting of stockholders shall be decided by vote of the
holders of record, present in person or by proxy, of a majority of the
Corporation's issued and outstanding capital stock.
<PAGE>
3
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The
number of Directors that shall constitute the Board of Directors shall not be
less than one or more than fifteen. The first Board of Directors shall consist
of four Directors. Thereafter, within the limits specified above, the number
of Directors shall be determined by the Board of Directors or the
stockholders. The Directors shall be elected by stockholders at their annual
meeting. Vacancies and newly created directorships resulting from any increase
in the number of Directors may be filled by a majority of the Directors then
in office, although less than a quorum, or by the sole remaining Director or
by the stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as may from time
to time be fixed by the Board of Directors or as may be specified
in a notice of meeting.
Section 3. Quorum. One-third of the total number of
Directors shall constitute a quorum for the transaction of business. If a
quorum is not present at any meeting of the Board of Directors, the Directors
present may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until such a quorum is present. Except as
otherwise provided by law, the Certificate of Incorporation of the
Corporation, these By-Laws or any contract or agreement to which the
Corporation is a party, the act of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
Section 4. Committee. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
committees, including, without limitation, an Executive Committee, to have and
exercise such power and authority as the Board of Directors shall specify. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
Director to act at the absent or disqualified member.
<PAGE>
4
ARTICLE III
OFFICERS
--------
The officers of the Corporation shall consist of a
President, a Vice President, a Secretary, a Treasurer, an Assistant Secretary
and an Assistant Treasurer, and such other additional officers with such
titles as the Board of Directors shall determine, all of which shall be chosen
by and shall serve at the pleasure of the Board of Directors. Such officers
shall have the usual powers and shall perform all the usual duties incident to
their respective offices. All officers shall be subject to the supervision and
direction of the Board of Directors. The authority, duties or responsibilities
of any officer of the Corporation may be suspended by the President with or
without cause. Any officer elected or appointed by the Board of Directors may
be removed by the Board of Directors with or without cause.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General
Corporation Law, the corporation shall indemnify any current or former
Director or officer of the Corporation and may, at the discretion of the Board
of Directors, indemnify any current or former employee or agent of the
Corporation against all expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding brought by or in
the right of the Corporation or otherwise, to which he was or is a party by
reason of his current or former position with the Corporation or by reason of
the fact that he is or was serving, at the request of the Corporation, as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the
Certificate of Incorporation or these By-Laws require notice to
be given to any Director or stockholder, such notice may be given
in writing by mail, addressed to such Director or stockholder at
<PAGE>
5
his address as it appears in the records of the Corporation, with postage
thereon prepaid. Such notice shall be deemed to have been given when it is
deposited in the United States mail. Notice to Directors may also be given by
telegram.
Section 2. Fiscal Year. The fiscal year of the
Corporation shall be fixed by the Board of Directors.
<PAGE>
Exhibit 3.5
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:30 PM 08/05/1992
722218301 - 792279
RESTATED
CERTIFICATE OF INCORPORATION
OF
VOLUME SERVICES, INC.
The undersigned, for the purpose of amending the Certificate
of Incorporation of Volume Services, Inc., a corporation organized under the
laws of the State of Delaware, and of restating the provisions not being
amended by such amendment, does hereby certify that:
1. The name of the corporation is Volume Services, Inc.
2. The date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of
Delaware was June 14, 1973,
3. Pursuant to Section 242 and Section 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation was
duly adopted by the Board of Directors as of August 5, 1992 and by the sole
stockholder of Volume Services, Inc, as of August 5, 1992.
4. The Certificate of Incorporation of Volume Services, Inc. Is
hereby amended and restated in its entirety as follows:
FIRST: The name of the Corporation is Volume Services,
Inc.
SECOND: The address of the Corporation's registered office
in 1209 Orange Street, City of Wilmington, County of New Castle, State of
Delaware, and the name of its registered agent thereat is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
<PAGE>
2
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is two hundred shares of common stock
of the par value of ten dollars ($10.00) per share.
FIFTH: The Board of Directors in expressly authorized to make,
alter, amend or repeal the bylaws of the Corporation.
SIXTH: Voting at any meeting of the stockholders of the
Corporation need not be by written ballot.
SEVENTH: The stockholders of the Corporation shall have
no preemptive rights.
IN WITNESS WHEREBY, Volume Services, Inc. has caused this
Restated Certificate of Incorporation to be duly executed and the corporate
tool of the corporation affixed hereto this 5th day of August, 1992.
VOLUME SERVICES, INC.
By: /s/ Jerome J. Richardson
-------------------------
Jerome J. Richardson
President
I, Ronald R. Skadow, Secretary of Volume Services, Inc.
do hereby certify that Jerome J. Richardson is the duly elected President of the
Corporation and that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand the 5th day of
August, 1992.
By: /s/ Ronald R. Skadow
----------------------
Ronald R. Skadow
Secretary
<PAGE>
Exhibit 3.6
Exhibit B
VOLUME SERVICE, INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in the City of
Wilmington and the State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in the City of Chicago, State of Illinois, at such place as may
be fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year
1973, shall be held on the second Tuesday in November if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 10:00 A.M.,
at which they
<PAGE>
2
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting
stating the place, day and hour of the meeting shall be delivered not less
than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than
the election of directors may be held at such time and place within or without
the State of Washington as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
<PAGE>
3
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or
<PAGE>
4
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority
of the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power,
shall be entitled to one vote on each matter submitted to a vote at a meeting
of shareholders. A shareholder may vote either in person or by proxy executed
in writing by the shareholder or by his duly authorized attorney-in-fact.
In all elections for directors every shareholder entitled to vote
shall have the right to vote, in person or by proxy, the number of shares of
stock owned by him, for as many persons as there are directors to be elected,
or to cumulate the vote of said shares, and give one candidate as many votes
as the number of directors multiplied by the number of his shares of stock
shall equal, or to distribute the votes on the same principle among as many
candidates as he may see fit.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a
<PAGE>
5
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be three. Directors need not
be residents of the State of Delaware nor shareholders of the corporation. The
directors shall be elected at the annual meeting of the shareholders, and each
director elected shall serve until the next succeeding annual meeting and until
his successor shall have been elected and qualified.
Section 2. Any vacancy occurring in the board of directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the board of directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
Any directorship to be filled by reason of an increase in the number
of directors may be filled by the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present. A director elected
to fill a newly created directorship shall serve until the next succeeding
annual meeting of shareholders.
<PAGE>
6
Section 3. The business affairs of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the articles
of incorporation or by these by-laws directed or required to be
exercised or done by the shareholders.
Section 4. The directors may keep the books of the corporation,
except such as are required by law to be kept within the state, outside of the
State of Washington, at such place or places as they may from time to time
determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special,
may be held either within or without the State of Washington.
Section 2. The first meeting of each newly elected board of directors
shall be hold at such time and place as shall
<PAGE>
7
be fixed by the vote of the shareholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present, or it may convene
at such place and time as shall be fixed by the consent in writing of all the
directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall
from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the president on two days' notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
<PAGE>
8
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by
the articles of incorporation. The act of a majority of the directors present
at the meeting at which a quorum is present shall be the act of the board of
directors, unless the act of a greater number is required by statute or by the
articles of incorporation. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Any action required or permitted to be taken at a meeting
of the directors may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors
entitled to vote with respect to the subject matter thereof.
<PAGE>
9
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority
of the number of directors fixed by the by-laws or otherwise, may designate
two or more directors to constitute an executive committee, which committee,
to the extent provided in such resolution, shall have and exercise all of the
authority of the board of directors in the management of the corporation,
except as otherwise required by law. Vacancies in the membership of the
committee shall be filled by the board of directors at a regular or special
meeting of the board of directors. The executive committee shall keep regular
minutes of its proceedings and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by-laws, notice is required to be given
to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid; and such notice shall be deemed to
be given at the time when the same shall be
<PAGE>
10
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice whatever is required to be given under
the provisions of the statutes or under the provisions of the articles of
incorporation or these by-laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after each
annual meeting of shareholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers
<PAGE>
11
and perform such duties as shall be determined from time to time by the board of
directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board
of directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
<PAGE>
12
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the board of directors, shall,
in the absence or disability of the president, perform the duties and exercise
the powers of president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholder and record all the proceedings of
the meetings or the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to
<PAGE>
13
affix the seal of the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors,
shall, in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors,
at its regular meetings, or when the board of directors so requires, an
account of all his transactions as treasurer and of the financial condition of
the corporation.
<PAGE>
14
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the corporation.
Section 14. The assistant treasurer, or, if there shall be more than
one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president or a vice-president and the secretary or
an assistant secretary of the corporation, and may be sealed with the seal of
the corporation or a facsimile thereof.
<PAGE>
15
When the corporation is authorized to issue shares of more than one
class there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the
same have been fixed and determined and the authority of the board of directors
to fix and determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
<PAGE>
16
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as
it deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with
respect to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence or succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto,
and the old certificate cancelled and the transaction recorded upon the books
of the corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholder, or any adjournment thereof
or entitled to receive payment of any
<PAGE>
17
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may provide that the stock transfer books
shall be closed for a stated period but not to exceed, in any case, fifty days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the board of directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
<PAGE>
18
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part or any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Washington.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books
for shares shall make, at least ten days before each meeting of shareholders,
a complete list of the shareholders entitled to vote at such meeting, arranged
in alphabetical order, with the address of each and the number of shares held
by each, which list, for a period of ten days prior to such meeting, shall be
kept on file at the registered office of the corporation and shall be subject
to inspection by any shareholder at any time during usual business hours. Such
list shall also be produced
<PAGE>
19
and kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
share ledger or transfer book, or a duplicate thereof, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger or transfer book or to vote at any meeting or the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors
at an regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to any provisions
of the articles or incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as
a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest or
<PAGE>
20
the corporation, and the directors may modify or, abolish any such reserve in
the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall end on the last
Sunday of June in each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed or new
by-laws may be adopted by the affirmative vote or
<PAGE>
a majority of the board of directors at any regular or special meeting of the
board.
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted at any regular or special meeting of shareholders at
which a quorum is present or represented, by the affirmative vote of a majority
of the stock entitled to vote, provided notice of the proposed alteration,
amendment or repeal be contained in the notice of such meeting.
<PAGE>
Exhibit 3.7
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SERVICE AMERICA CORPORATION
FIRST: The name of the corporation (the "Corporation") is SERVICE
AMERICA CORPORATION.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805-1297.
The name of the registered agent of the Corporation in the State of
Delaware at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the GCL.
FOURTH: A. The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 1,200,000 shares of
common stock, $.01 par value per share (the "Common Stock"), 40,000 shares
of 10% Class A Preferred Stock - Series A, par value $1.00 per share and
260,000 shares of 10% Class A Senior Preferred Stock - Series B, par value $1.00
per share (collectively, the "Preferred Stock"). The Board of Directors of the
Corporation shall have the authority, subject to the limitations prescribed by
law, to issue in one or more series any number of shares of Preferred Stock, and
by filing a certificate of designation pursuant to Section 151 of the GCL, to
establish the number of shares to be included in each series of Preferred Stock,
and to fix the powers, designations, relative rights, qualifications,
preferences and limitations of all shares of any such series of Preferred Stock.
B. Each holder of Common Stock shall be entitled to
one vote for each share of Common Stock held in all matters as to which holders
of the Common Stock shall be entitled to vote. In any election of directors, no
holder of Common Stock shall be entitled to cumulate his or her votes by giving
the candidate more than one vote per share.
FIFTH: The business and affairs of the Corporation shall be managed
by the Board of Directors. The number of directors of the Corporation shall
be such as from time to time shall be fixed in the manner provided in the
Bylaws of the Corporation and the directors need not be elected by written
ballot unless the Bylaws of the Corporation shall so provide. Meetings of the
Stockholders of the Corporation may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Delaware statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation.
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SIXTH: The Corporation shall indemnify and advance expenses to,
to the fullest extent permitted by Section 145 of the GCL, as amended from
time to time, each person made or threatened to be made a party of
an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the corporation or serves or served any other enterprise as a
director or officer at the request of the Corporation, and the heirs, executors
and administrators of each such person. Any expenses (including attorneys' fees)
incurred by each such person, and the heirs, executors and administrators of
such person, in connection with defending any such proceeding in advance of its
final disposition shall be paid by the Corporation; provided, however, that if
the GCL requires, an advancement of expenses incurred by an indemnitee in his or
her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such indemnitee to repay all
amounts so advanced, if it shall ultimately be determined that such indemnitee
is not entitled to be indemnified for such expenses under this Article or
otherwise.
SEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the GCL or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the GCL order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any such reorganization of this
Corporation as a consequence of such compromise or arrangement, the same
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application had been made, be binding on all the
creditors or class of creditors and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
EIGHTH: The Board of Directors of the Corporation shall have the power
to adopt, amend and repeal the bylaws of the Corporation.
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Exhibit 3.8
BY-LAWS
OF
SERVAM ACQUISITION CORP.
(hereinafter called the "Corporation')
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the
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meeting. Written notice of the Annual Meeting stating the place, date and hour
of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, (iv) the Secretary or (v) any
Assistant Secretary, if there be one, and shall be called by any such officer at
the request in writing of a majority of the Board of Directors or at the request
in writing of stockholders owning a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote at such meeting, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote at such meeting, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as
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originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
capital stock represented and entitled to vote at such meeting. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote at such meeting held by such
stockholder. Such votes may be cast in person or by proxy but no proxy shall be
voted on or after three years from its date, unless such proxy provides for a
longer period. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding capital stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
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Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article 11 or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next
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Annual Meeting and until his or her successor is duly elected and qualified, or
until his or her earlier resignation or removal. Any director may resign at any
time upon notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statue or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, or any two directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
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Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors If a quorum shall not be present at any meeting of the
Board of Directors, the directors present at such meeting may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of
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one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of any such committee.
In the absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate member to
replace the absent or disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason,
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or solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose if (i) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice-Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need not be
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stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation.. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice-President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
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Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He or she shall be the Chief
Executive Officer of the Corporation, and except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these By-Laws or by the Board of
Directors.
Section 5. The President shall, subject to the control of the Board of
Directors and, if there be one, the Chairman of the Board of Directors, have
general supervision of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. He or
she shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other
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duties and may exercise such other powers as from time to time may be assigned
to him or her by these By-Laws or by the Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
or her absence or in the event of his or her inability or refusal to act (and if
there be no Chairman of the Board of Directors), the Vice-President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice-President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice-President the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings at such meeting in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he or she shall be. If the Secretary shall be
unable or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors or the President may
choose another
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officer to cause such notice to be given. The Secretary shall have custody of
the seal of the Corporation and the Secretary or any Assistant Secretary, if
there be one, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by the signature of the Secretary or
by the signature of any such Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his or her signature. The Secretary shall see that
all books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable. effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his or her transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
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Section 9. Assistant Secretaries. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice-President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his or her disability or refusal to act, shall perform the duties of
the Treasurer, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his or her possession or under his
or her control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
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ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of capital stock of the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him or her in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be an officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim
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that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his or her attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be canceled before a new certificate
shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
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or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waiver of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to
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<PAGE>
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions. Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees),
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<PAGE>
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
crminal action or proceeding, had no reason or cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 2. Power to Indemnify in Actions. Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for gross negligence or willful
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<PAGE>
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless otherwise ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith, without the necessity of
authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with
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respect to any criminal action or proceeding, to have had no reasonable cause to
believe his or her conduct was unlawful, if his or her action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to him or her by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 4 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be.
Section 5. Indemnification by the Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
or she has met the applicable standards of conduct set forth in Sections 1 or 2
of this Article VIII, as the case may be. Notice
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<PAGE>
of any application for indemnification pursuant to this Section 5 shall be given
to the Corporation promptly upon the filing of such application.
Section 6. Expenses Payable in Advance. Expenses incurred in defending
or investigating a threatened or pending action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he or
she is entitled to be indemnified by the Corporation as authorized in this
Article VIII.
Section 7. Non-exclusivity and Survival of Indemnification. The
indemnification provided by this Article VII shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any bylaw, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, it being the policy
of the Corporation that indemnification of the persons specified in Sections 1
and 2 of this Article VIII shall be made to the fullest extent permitted by law.
The provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise. The indemnification provided by this Article VIII shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
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<PAGE>
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
or the obligation to indemnify him or her against such liability under the
provisions of this Article VIII.
Section 9. Meaning of "the Corporation" for Purposes of Article VIII.
For purposes of this Article VIII, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the resulting
or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
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ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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Exhibit 3.9
ARTICLES OF INCORPORATION
OF
EVENTS CENTER CATERING, INC.
1. The name of the corporation is: Events Center Catering, Inc.
2. This is a Statutory Close Corporation.
3. The corporation is authorized to issue an unlimited number of
shares, without par value.
4. The corporation may operate without a Board of Directors, in which
case the management of the business and affairs of the corporation and the
relationship among the shareholders of the corporation shall be governed by a
shareholder and/or management agreement executed by all of the shareholders of
the corporation.
5. Shares of the corporation shall be freely transferable.
6. The corporation may be dissolved at will, upon the affirmative vote
of a majority of issued and outstanding shares of the corporation.
7. The name of the registered agent and the street address of the
registered office of the corporation are:
James R. Bell
201 North Wolcott
Casper, WY 82601
8. The name and address of the incorporator is:
Albert E. Moerke
200 North David Street
Casper, WY 82601
DATED this 10th day of June, 1994.
/s/ Albert E. Moerke
------------------------
Albert E. Moerke
<PAGE>
Exhibit 3.11
SERVICE AMERICA CONCESSIONS CORPORATION
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1. Certificates Representing Stock. Certificates
representing shares of stock shall set forth thereon the statements prescribed
by Sections 2-207 and 2-211 of the Maryland General Corporation Law and by any
other applicable provision of law and shall be signed by the President or the
Chairman of the Board, if any, or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal or a facsimile of it or in any other
form. The signatures of any such officers may be either manual or facsimile
signatures. In case any such officer who has signed manually or by facsimile any
such certificate ceases to be such officer before the certificate is issued, it
may nevertheless be issued by the corporation with the same effect as if the
officer had not ceased to be such officer as of the date of its issue.
No certificate representing shares of stock shall be issued for any
share of stock until such share is fully paid,
<PAGE>
2
except as otherwise authorized by the provisions of Section 2-210 of the
Maryland General Corporation Law.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may, in its discretion, require the owner
of any such certificate to give bond, with sufficient surety, to the corporation
to indemnify it against any loss or claim that may arise by reason of the
issuance of a new certificate.
Upon compliance with the provisions of Section 2-514 of the Maryland
General Corporation Law, the Board of Directors of the corporation may adopt by
resolution a procedure by which a stockholder of the corporation may certify in
writing to the corporation that any shares registered in the name of the
stockholder are held for the account of a specified person other than the
stockholder.
Section 2. Fractional Share Interests or Scrip. The corporation may,
but shall not be obliged to, issue fractional shares of stock, eliminate a
fractional interest by rounding off to a full share of stock, arrange for the
disposition of a fractional interest by the person entitled to it, pay cash for
the fair value of a fractional share of stock determined as of the time when the
person entitled to receive it is determined, or
<PAGE>
3
issue scrip or other evidence of ownership, and which shall entitle its holder
to exchange such scrip or other evidence of ownership aggregating a full share
for a certificate which represents the share but such scrip or other evidence of
ownership shall not, unless otherwise provided, entitle the holder to exercise
any voting right, or to receive dividends thereon or to participate in any of
the assets of the corporation in the event of liquidation. The Board of
Directors may impose any reasonable condition on the issuance of scrip or other
evidence of ownership, and may cause such scrip or evidence of ownership to be
issued subject to the condition that it shall become void if not exchanged for a
certificate representing a full share of stock before a specified date or
subject to the condition that the shares for which such scrip or evidence of
ownership is exchangeable may be sold by the corporation and the proceeds
thereof distributed to the holders of such scrip or evidence of ownership, or
subject to a provision for forfeiture of such proceeds to the corporation if not
claimed within a period of not less than three years from the date the scrip or
other evidence of ownership was originally issued.
Section 3. Share Transfers. Upon compliance with provisions restricting
the transferability of shares of stock, if any, transfers of shares of stock of
the corporation shall be
<PAGE>
4
made only on the stock transfer books of the corporation by the record holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon, if any.
Section 4. Record Date for Stockholders. The Board of Directors may set
a record date or direct that the stock transfer books be closed for a stated
period for the purpose of making any proper determination with respect to
stockholders, including which stockholders are entitled to notice of a meeting,
to vote at a meeting, to receive a dividend, or to be allotted other
rights; provided, that, except as may be otherwise provided herein, any such
record date shall be not more than ninety days before the date on which the
action requiring the determination will be taken, that any such closing of the
transfer books may not be for a period longer than twenty days, and that, in the
case of a meeting of stockholders, any such record date or any such closing of
the transfer books shall be at least ten days before the date of the meeting. If
a record date is not set, and, if the stock transfer books are not closed, the
record date for determining stockholders entitled to notice of or to vote at
<PAGE>
5
a meeting of stockholders shall be the later of either the close of business on
the day on which notice of the meeting is mailed or the thirtieth day before the
meeting, and the record date for determining stockholders entitled to receive
payment of a dividend or an allotment of any rights shall be the close of
business on the day on which the resolution of the Board of Directors declaring
the dividend or allotment of rights is adopted, but any such payment of a
dividend or allotment of rights shall not be made more than sixty days after the
date on which the resolution is adopted; and a meeting of stockholders convened
on the date for which it was called may be adjourned from time to time without
further notice to a date not more than one hundred and twenty days after the
original record date.
Section 5. Meaning of Certain Terms. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share of stock" or "shares of stock" or
"stockholder" or "stockholders" refers to an outstanding share or shares of
stock and to a holder or holders of record of outstanding shares of stock when
the corporation is authorized to issue only one class of shares of stock, and
said reference is also intended to include any outstanding share or shares of
stock and any holder
<PAGE>
6
or holders of record of outstanding shares of stock of any class or series upon
which or upon whom the Articles of Incorporation confer such rights where there
are two or more classes or series of shares or upon which or upon whom the
provisions of the Maryland General Corporation Law may confer such rights or the
right of dissent notwithstanding that the Articles of Incorporation may provide
for more than one class or series of shares of stock, one or more of which are
limited or denied such rights thereunder.
Section 6. Stockholder Meetings.
- Time. The annual meeting of stockholders shall be held on the date
fixed, from time to time, by the directors, within 150 days after the end of the
corporation's fiscal year for the transaction of any business within the powers
of the corporation. A special meeting shall be held on the date fixed by the
directors.
- Place. Annual meetings and special meetings shall be held at such
place, either within the State of Maryland or at such other place within the
United States, as the directors may, from time to time, set. Whenever the
directors shall fail to set such place, or, whenever stockholders entitled to
call a special meeting shall call the same, and a place of meeting is not set,
<PAGE>
7
the meeting shall be held at the principal office of the corporation in the
State of Maryland.
- Call. Annual meetings may be called by the directors or the President
or by any officer instructed by the directors or the President to call the
meeting. Except as may be otherwise provided by the provisions of the Maryland
General Corporation Law, special meetings may be called in like manner and shall
be called by the Secretary whenever the holders of shares entitled to at least
twenty-five percent of all the votes entitled to be cast at such meeting shall
make a duly authorized request that such meeting be called.
- Notice or Actual or Constructive Waiver of Notice. Written notice of
all meetings shall be given by the Secretary and shall state the time and place
of the meeting. The notice of an annual meeting shall state that the meeting is
called for the election of directors and for the transaction of other business
which may properly come before the meeting, and shall (if any other action which
could be taken at a special meeting is to be taken at such annual meeting)
contain any additional statements required in a notice of a special meeting, and
shall include a copy of any requisite statements or provisions prescribed by the
provisions of the Maryland General Corporation Law; provided, however, that any
business of the corporation may be transacted
<PAGE>
8
at any annual meeting without being specially noticed unless the provisions of
the Maryland General Corporation Law provide otherwise. The notice of a special
meeting shall in all instances state the purpose or purposes for which the
meeting is called and shall include a copy of any requisite statements or
provisions prescribed by the provisions of the Maryland General Corporation Law.
Written notice of any meeting shall be given to each stockholder either by mail
or personally delivered to him or by leaving it at his residence or usual place
of business not less than ten days and not more than ninety days before the date
of the meeting, unless any provisions of the Maryland General Corporation Law
shall prescribe a different elapsed period of time, to each stockholder at his
address appearing on the books of the corporation or the address supplied by him
for the purpose of notice. If mailed, notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his address
as it appears on the records of the corporation with postage thereon prepaid.
Whenever any notice of the time, place or purpose of any meeting of stockholders
is required to be given under the provisions of the Articles of Incorporation,
these Bylaws or of the provisions of the Maryland General Corporation Law, a
waiver thereof in writing, signed by the stockholder and filed with the records
of the meeting, whether
<PAGE>
9
before or after the holding thereof, or his presence in person or by proxy at
the meeting shall be deemed equivalent to the giving of such notice to such
stockholder. The foregoing requirements of notice shall also apply, whenever the
corporation shall have any class of stock which is not entitled to vote, to
holders of stock who are not entitled to vote at the meeting, but who are
entitled to notice thereof and to dissent from any action taken thereat.
- Statement of Affairs. The President of the corporation, or, if the
Board of Directors shall determine otherwise, some other executive officer
thereof, shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the corporation, including a balance sheet and a
financial statement of operations for the preceding fiscal year, which shall be
submitted at the Annual Meeting and placed on file within twenty days thereafter
at the principal office of the corporation in the State of Maryland.
- Conduct of Meetings. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice Chairman of the Board,
if any, the President, a Vice President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the
<PAGE>
10
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present, the Chairman of the meeting shall appoint
a secretary of the meeting.
- Proxy Representation. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether for the purposes of determining his presence at
a meeting, or whether by waiving notice of any meeting, voting or participating
at a meeting, or expressing consent or dissent without a meeting, or otherwise.
Every proxy shall be executed in writing by the stockholder or by his duly
authorized attorney in fact, and filed with the Secretary of the corporation. No
proxy shall be valid more than eleven months from the date of its execution,
unless the proxy provides otherwise.
- Inspectors of Election. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by
<PAGE>
11
the directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, if any, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any fact found by
him or them.
- Quorum. Except as may otherwise be required by the provisions of the
Maryland General Corporation Law, the Articles of Incorporation, or these
Bylaws, the presence in person or by proxy at a meeting of the stockholders
entitled to cast at least
<PAGE>
12
a majority of the votes entitled to be cast at the meeting shall constitute a
quorum.
- Voting. Each share of stock shall entitle the holder thereof to one
vote except in the election of directors, at which each said vote may be cast
for as many persons as there are directors to be elected. Except as may
otherwise be provided in the provisions of the Maryland General Corporation Law,
the Articles of Incorporation or these Bylaws, a majority of all the votes cast
at a meeting of stockholders at which a quorum is present shall be sufficient to
approve any matter which may properly come before the meeting. A plurality of
all the votes cast at a meeting of stockholders at which a quorum is present is
sufficient to elect a director.
Section 7. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting if the
following are filed with the records of the meeting: a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter, and, as applicable, a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote at it.
ARTICLE II
<PAGE>
13
BOARD OF DIRECTORS
Section 1. Functions and Definition. The business and the affairs of
the corporation shall be managed by or under the direction of its Board
of-Directors. All powers of the corporation may be exercised by or under
authority of said Board of Directors. The use of the phrase "entire board"
herein refers to the total number of directors which the corporation would have
if there were no vacancies.
Section 2. Qualifications and Number. Each director shall be a natural
person of full age. A director need not be a stockholder, a citizen of the
United States, or a resident of the State of Maryland. The initial Board of
Directors shall consist of three persons, which is the number set forth in the
Articles of Incorporation. Thereafter, the number of directors constituting the
entire board shall be at least three, except that when the number of
stockholders is fewer than three, the number of directors may be the same as the
number of said stockholders. Except for the first Board of Directors, such
number may be set from time to time by action of the stockholders or of a
majority of the entire Board of Directors or, if the number is not so set, the
number shall be three. The number of directors may be increased or decreased by
an amendment to these Bylaws, provided, however, that the tenure of office of a
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14
Director shall not be affected by any decrease in the number of directors.
Section 3. Election and Term. The first Board of Directors shall
consist of the directors named in the Articles of Incorporation and shall hold
office until the first annual meeting of stockholders or until their successors
have been elected and qualified. Thereafter, directors who are elected at an
annual meeting of stockholders, and directors who are elected in the interim to
fill vacancies and newly created directorships, shall hold office until the next
annual meeting of stockholders and until their successors have been elected and
qualified. In the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors, newly created
directorships and any vacancies in the Board of Directors, including vacancies
resulting from the removal of directors by the stockholders which have not been
filled by said stockholders, may be filled by the Board of Directors. Newly
created directorships filled by the Board of Directors shall be by action of a
majority of the entire Board of Directors. All other vacancies to be filled by
the Board of Directors may be filled by a majority of the remaining members of
the Board of Directors, whether or not sufficient to constitute a quorum.
Section 4. Meetings.
<PAGE>
15
- Time. Meetings shall be held at such time as the Board shall set,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- Place. Meetings shall be held at such place within or without the
State of Maryland as shall be set by the Board.
- Call. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, of the Presidente or of a
majority of the directors in office.
- Notice or Actual or Constructive Waiver. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. The notice of any meeting need not specify the business to be
transacted or the purpose of the meeting. Whenever any notice of the time,
place, or purpose of any meeting of directors or any committee thereof is
required to be given under the provisions of the Maryland General Corporation
Law or of these Bylaws, a waiver thereof in writing, signed by the director or
committee member entitled to such notice and filed with the
<PAGE>
16
records of the meeting, whether before or after the meetings or presence at the
meeting, shall be deemed equivalent to the giving of such notice to such
director or such committee member.
- Quorum and Action. A majority of the entire Board of Directors shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided such majority shall constitute at least one-third of the entire Board
and, in no event, less than two directors provided, that whenever the entire
Board of Directors consists of one director, that one director shall constitute
a quorum. Except as in the Articles of Incorporation and herein otherwise
provided and, except as in provisions of the Maryland General Corporation Law
otherwise provided, the action of the directors present at a meeting at which a
quorum is present shall be the action of the Board of Directors. Members of the
Board of Directors or of a committee thereof may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time; and
participation by such means shall constitute presence in person at a meeting.
- Chairman of the Meeting. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings.
<PAGE>
17
Otherwise, the President, if present and acting, or any other director chosen by
the Board, shall preside.
Section 5. Removal of Directors. Any or all of the directors may be
removed, with or without cause, pursuant to the provisions of Section 2-406 of
the Maryland General Corporation Law.
Section 6. Committees. The Board of Directors may appoint from among
its members an Executive Committee and other committees composed of two or more
directors and may delegate to such committee or committees any of the powers of
the Board of Directors except such powers as may not be delegated under the
provisions of the Maryland General Corporation Law. In the absence of any member
of any such committee, the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors to
act in the place of such absent member.
Section 7. Informal Action. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board of Directors or any such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
any such committee.
<PAGE>
18
ARTICLE III
OFFICERS
The corporation shall have a President, a Secretary, and a Treasurer,
and may have a Chairman of the Board, a Vice Chairman of the Board and one or
more Vice Presidents, who shall be elected by the Board of Directors, and may
also have such other officers, assistant officers, and agents as the Board of
Directors shall authorize from time to time, each of whom shall be elected or
appointed in the manner prescribed by the Board of Directors. Any two or more
offices, except those of President and Vice President, may be held by the same
person, but no person shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law to be executed,
acknowledged or verified by more than one officer. Unless otherwise provided in
the resolution of election or appointment, each officer shall hold office until
the meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor has been elected or appointed and
qualified.
The officers and agents of the corporation shall have the authority and
perform the duties in the management of the corporation as determined by the
resolution electing or appointing them.
<PAGE>
19
Any officer or agent may be removed by the Board of Directors whenever,
in its judgment, the best interests of the corporation will be served thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the initial principal office of the corporation in the
State of Maryland and the name and the address of the initial resident agent of
the corporation in the State of Maryland are set forth in the Articles of
Incorporation.
The corporation shall maintain, at its principal office in the State of
Maryland or at a business office or in agency of the corporation an original or
duplicate stock ledger containing the name and address of each stockholder and
the number of shares of each class held by each stockholder. Such stock ledger
may be in written form or any other form capable of being converted into written
form within a reasonable time for visual inspection.
The corporation shall keep at its principal office in the State of
Maryland the original or a certified copy of the Bylaws, including all
amendments thereto, and shall duly file thereat the annual statement of affairs
of the corporation.
ARTICLE V
<PAGE>
20
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and shall be in such form and contain such other words and/or
figures as the Board of Directors shall determine or the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
The power to adopt, alter, amend, and repeal the Bylaws is vested in
the Board of Directors of the corporation.
<PAGE>
21
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Bylaws of SERVICE AMERICA CONCESSIONS CORPORATION, a Maryland corporation,
as in effect on the date hereof.
WITNESS my hand and the seal of the corporation.
Dated: June 27, 1986
/s/ Marla A. Garfinler
-----------------------------------
Secretary of
SERVICE AMERICA CONCESSIONS
CORPORATION
(SEAL)
<PAGE>
Exhibit 3.13
BYLAWS
of
SERVICE AMERICA CORPORATION OF WISCONSIN
ADOPTED
November 29, 1989
<PAGE>
TABLE OF CONTENTS
<TABLE>
ARTICLE I. OFFICES
<S> <C> <C> <C>
1.01 Principal and Business Offices.....................................................................1
1.02 Registered office..................................................................................1
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting.....................................................................................1
2.02 Special Meeting....................................................................................1
2.03 Place of Meeting...................................................................................1
2.04 Notice of Meeting..................................................................................2
2.05 Closing of Transfer Books or Fixing of Record Date.................................................2
2.06 Voting Records.....................................................................................2
2.07 Quorum.............................................................................................3
2.08 Conduct of Meetings................................................................................3
2.09 Proxies............................................................................................3
2.10 Voting of Shares...................................................................................4
2.11 Voting of Shares by Certain Holders................................................................4
(a) Other Corporations.........................................................................4
(b) Legal Representatives and Fiduciaries......................................................4
(c) Pledges....................................................................................4
(d) Treasury Stock and Subsidiaries............................................................5
(e) Minors.....................................................................................5
(f) Incompetents and Spendthrifts..............................................................5
(g) Joint Tenants..............................................................................5
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number..........................................................................5
3.02 Tenure and Qualifications..........................................................................6
3.03 Regular Meetings...................................................................................6
3.04 Special Meetings...................................................................................6
3.05 Notice of Meetings.................................................................................6
3.06 Quorum.............................................................................................7
3.07 Manner of Acting...................................................................................7
3.08 Conduct of Meetings................................................................................7
3.09 Vacancies..........................................................................................7
3.10 Compensation.......................................................................................7
3.11 Presumption of Assent..............................................................................8
3.12 Committees.........................................................................................8
</TABLE>
-i-
<PAGE>
<TABLE>
ARTICLE IV. OFFICERS
<S> <C> <C> <C>
4.01 Number.............................................................................................8
4.02 Election and Term of Office........................................................................9
4.03 Removal............................................................................................9
4.04 Vacancies..........................................................................................9
4.05 President..........................................................................................9
4.06 Vice Presidents...................................................................................10
4.07 Secretary.........................................................................................10
4.08 Treasurer.........................................................................................10
4.09 Assistant Secretaries and Assistant Treasurers....................................................11
4.10 Other Assistants and Acting Officers..............................................................11
4.11 Salaries..........................................................................................11
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contracts.........................................................................................11
5.02 Loans.............................................................................................12
5.03 Checks, Drafts, etc...............................................................................12
5.04 Deposits..........................................................................................12
5.05 Voting of Securities Owned by this Corporation....................................................12
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificate for Shares............................................................................13
6.02 Facsimile Signatures and Seal.....................................................................13
6.03 Signature by Former Officers......................................................................13
6.04 Transfer of Shares................................................................................13
6.05 Restrictions on Transfer..........................................................................14
6.06 Lost, Destroyed or Stolen Certificates............................................................14
6.07 Consideration for Shares..........................................................................14
6.08 Stock Regulations.................................................................................14
ARTICLE VII. WAIVER OF NOTICE
ARTICLE VIII. UNANIMOUS CONSENT WITHOUT A MEETING
ARTICLE IX. INDEMNIFICATION
9.01 Indemnification for Successful Defense............................................................15
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C> <C>
9.02 Other Indemnification.............................................................................15
9.03 Written Request...................................................................................16
9.04 Nonduplication....................................................................................16
9.05 Determination of Right to Indemnification.........................................................16
9.06 Advance Expenses..................................................................................17
9.07 Nonexclusivity....................................................................................18
9.08 Court-Ordered Indemnification.....................................................................19
9.09 Indemnification of Employees or Agents............................................................19
9.10 Insurance.........................................................................................20
9.11 Securities Law Claims.............................................................................20
9.12 Liberal Construction..............................................................................20
9.13 Definitions Applicable to this Article............................................................20
ARTICLE X. SEAL
ARTICLE XI. AMENDMENTS
11.01 By Shareholders..................................................................................22
11.02 By Directors.....................................................................................22
11.03 Implied Amendments...............................................................................22
ARTICLE XII. STOCK TRANSFER RESTRICTION
</TABLE>
-iii-
<PAGE>
ARTICLE I. OFFICES
1.01 Principal and Business Offices. The corporation may have
such principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02 Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin. The address of the registered office may be
changed from time to time by the Board of Directors or, if within the county, by
the registered agent. The business office of the registered agent of the
corporation shall be identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting. The annual meeting of the share holders
shall be held on the second Tuesday of October in each year at 10:00 o'clock
a.m. or at such other time and date as may be fixed by or under the authority of
the Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the State of Wisconsin,
such meeting shall be held on the next succeeding business day. If the election
of directors shall not be held on the day designated herein, or fixed as herein
provided, for any annual meeting of the shareholders, or at any adjournment
there of, the Board of Directors shall cause the election to be held at a
special meeting of the shareholders as soon thereafter as conveniently may be.
2.02 Special Meeting. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or the Board of Directors or by the person designated in
the written request of the holders of not less than one-tenth of all shares of
the corporation entitled to vote at the meeting.
2.03 Place of Meeting. The Board of Directors may designate
any place, either within or without the State of Wisconsin, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meet-
<PAGE>
2
ing may designate any place, whether within or without the State of Wisconsin,
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
business office of the corporation in the State of Wisconsin or such other
suitable place in the county of such principal office as may be designated by
the person calling such meeting, but any meeting may be adjourned to reconvene
at any place designated by vote of a majority of the shares represented thereat.
2.04 Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than five
(5) days (unless a longer period is required by law or the articles of
incorporation) nor more than fifty (50) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the person(s) calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his or her address as it appears on the stock record books of the
corporation, with postage thereon prepaid.
2.05 Closing of Transfer Books or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, at less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the
<PAGE>
3
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
close of business on the date on which notice of the meeting is mailed or on the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
2.06 Voting Records. The officer or agent having charge of the
stock transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting.
2.07 Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by the Wisconsin Business Corporation Law or the articles of
incorporation. If less than a quorum is represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting
<PAGE>
4
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
2.08 Conduct of Meetings. The President, or in the President's
absence, a Vice President in the order provided under Section 4.06, and in their
absence, any person chosen by the shareholders present shall call the meeting of
the shareholders to order and shall act as chairman of the meeting, and the
Secretary shall act as secretary of all meetings of the share holders, but, in
the absence of the Secretary, the presiding officer may appoint any other person
to act as secretary of the meeting.
2.09 Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary before or at the time of the meeting. Unless otherwise
provided in the proxy, a proxy may be revoked at any time before it is
voted, either by written notice filed with the Secretary or the acting secretary
of the meeting or by oral notice given by the shareholder to the presiding
officer during the meeting. The presence of a shareholder who has filed a proxy
shall not of itself constitute a revocation. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy. The Board of Directors shall have the power and authority to make rules
as to the validity and suffi ciency of proxies.
2.10 Voting of Shares. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are enlarged, limited or denied by the articles of
incorporation.
2.11 Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name
of another corporation may be voted either in person or by
proxy, by the president of such corporation or any other
officer appointed by such president. A proxy executed by any
principal officer
<PAGE>
5
of such other corporation or assistant thereto shall be
conclusive evidence of the signer's authority to act, in the
absence of express notice to this corporation, given in
writing to the Secretary of this corporation, of the
designation of some other person by the board of directors or
the bylaws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares
held by a personal representative, an administrator, executor,
guardian, conservator, trustee in bankruptcy, receiver, or
assignee for creditors may be voted by such person, either in
person or by proxy, without a transfer of such shares into his
or her name, provided that there is filed with the Secretary
before or at the time of meeting proper evidence of such
person's incumbency and the number of shares held. Shares
standing in the name of a fiduciary may be voted by him or
her, either in person or by proxy. A proxy executed by a
fiduciary, shall be conclusive evidence of the signer's
authority to act, in the absence of express notice, given in
writing to the Secretary, that such manner of voting is
prohibited or otherwise directed by the document creating the
fiduciary relationship.
(c) Pledges. A shareholder whose shares are pledged
shall be entitled to vote such shares in person
or by proxy, until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury
shares, nor shares held by another corporation if a majority
of the shares entitled to vote for the election of directors
of such other corporation is held by this corporation, shall
be voted at any meeting or counted in determining the total
number of outstanding shares entitled to vote, but shares of
its own issue held by this corporation in a fiduciary
capacity, or held by such other corporation in a fiduciary
capacity, may be voted and shall be counted in determining the
total number of outstanding shares entitled to vote.
<PAGE>
6
(e) Minors. Shares held by a minor may be voted by
such minor in person or by proxy and no such vote shall be
subject to disaffirmance or avoidance, unless prior to such
vote the Secretary of the corporation has received written
notice or has actual knowledge that such shareholder is a
minor.
(f) Incompetents and Spendthrifts. Shares held by an
incompetent or spendthrift may be voted by such incompetent or
spendthrift in person or by proxy and no such vote shall be
subject to disaffirmance or avoidance, unless prior to such
vote the Secretary of the corporation has actual knowledge
that such shareholder has been adjudicated an incompetent or
spendthrift or actual knowledge of filing of judicial
proceedings for appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of
two or more individuals who are named in the registration as
joint tenants may be voted in person or by proxy signed by any
one or more of such individuals if either (i) no other such
individual or his or her legal representative is present and
claims the right to participate in the voting of such shares
or prior to the vote files with the Secretary of the
corporation a contrary written voting authorization or
direction or written denial of authority of the individual
present or having signed the proxy proposed to be voted, or
(ii) all such other individuals are deceased and the Secretary
of the corporation has no actual knowledge that the survivor
has been adjudicated not to be the successor to the interests
of those deceased.
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number. The business and affairs of
the corporation shall be managed by its Board of Directors. The number of
directors of the corporation shall be two (2). The number of directors may be
increased or decreased from time to time by amendment to this Section adopted by
the shareholders or the Board of Directors but no decrease shall have the effect
of shortening the term of an incumbent director.
<PAGE>
7
3.02 Tenure and Qualifications. Each director shall hold
office until next annual meeting of shareholders and until the director's
successor shall have been elected, or until his or her prior death, resignation
or removal. Any director or the entire Board of Directors may be removed from
office, with or without cause, by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such director, of Board
of Directors, taken at a meeting of shareholders called for that purpose. A
director may resign at any time by filing a written resignation with the
Secretary of the corporation. Directors need not be residents of the State of
Wisconsin or shareholders of the corporation.
3.03 Regular Meetings. A regular meeting of the Board of
Directors shall be held, without other notice than this bylaw, immediately after
the annual meeting of shareholders, and each adjourned session thereof. The
place of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Wisconsin,
for the holding of additional regular meetings without other notice than such
resolution.
3.04 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The persons calling any special meeting of the Board of Directors may
fix any place, either within or without the State of Wisconsin, as the place for
holding any special meeting of the Board of Directors called by them, and if no
other place is fixed the place of meeting shall be the principal business office
of the corporation in the State of Wisconsin.
3.05 Notice of Meetings. Notice of each meeting of the Board
of Directors (unless otherwise provided in or pursuant to Section 3.03) shall be
given by written notice delivered personally or mailed or given by telephone or
telegram to each director at his or her business or home address or at such
other address as such director shall have designated in writing filed with the
Secretary, in each case not less than 48 hours prior thereto. If mailed, such
notice shall be deemed to be delivered
<PAGE>
8
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company; if by
telephone, at the time the call is completed. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting and objects thereat to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3.06 Quorum. A majority of the number of directors as provided
in Section 3.01 shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but a majority of the directors present
(though less than such quorum) may adjourn the meeting from time to time without
further notice.
3.07 Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by the
Wisconsin Business Corporation Law, the corporation's Articles of Incorporation
or these Bylaws.
3.08 Conduct of Meetings. The President, and in the
President's absence, a Vice President in the order provided under Section 4.08,
and in their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall chair the meeting. The
Secretary of the corporation shall act as secretary of all meetings of the Board
of Directors, but in the absence of the Secretary, the presiding officer may
appoint any assistant secretary or any director or other person present to act
as secretary of the meeting.
3.09 Vacancies. Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, may be filled until the next succeeding annual election by the
affirmative vote of a majority of the directors then in office, though less than
a quorum of the Board of Directors, provided, that in case of a vacancy created
by removal of a director(s), the shareholders shall have the right
<PAGE>
9
to fill such vacancy at the same meeting or any adjournment thereof.
3.10 Compensation. The Board of Directors, by affirmative vote
of a majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
and the manner and time of payment thereof, or may delegate such authority to an
appropriate committee. The Board of Directors also shall have authority to
provide for or to delegate authority to an appropriate committee to provide for
reasonable pensions, disability or death benefits, and other benefits or
payments, to directors, officers and employees and to their estates, families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employees to the corporation.
3.11 Presumption of Assent. A director who is present at a
meeting of Board of Directors or a committee thereof of which he is a member at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
3.12 Committees. The Board of Directors, by resolution adopted
by the affirmative vote of a majority of the number of directors as provided in
Section 3.01, may designate one or more committees, each committee to consist of
three or more directors elected by the Board of Directors, which to the extent
provided in said resolution as initially adopted, and as thereafter supplemented
or amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the powers of the Board
of Directors in the management of the business and affairs of the corporation,
except action in respect to dividends to shareholders, election of the principal
officers or the filling of vacancies in the Board of Directors or committees
created pursuant to this section. The Board of Directors may elect one or more
of its
<PAGE>
10
members as alternate members of any such committee who may take the place of any
absent member or members at any meeting of such committee, upon request by the
President or upon request by the chairman of such meeting. Each such committee
shall fix its own rules governing the conduct of its activities and shall make
such reports to the Board of Directors of its activities as the Board of
Directors may request.
ARTICLE IV. OFFICERS
4.01 Number. The principal officers shall be a President, one
or more Vice Presidents (the number and designations to be determined by the
Board of Directors), a Secretary, and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may designate one of the Vice
Presidents as the Executive Vice President. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors or the President. Any two or more offices may be held by the same
person, except the offices of President and Secretary and the offices of
President and Vice President.
4.02 Election and Term of Office. The officers to be elected
by the Board of Directors shall be elected annually by the Board of Directors at
the first meeting of the Board of Directors held after each annual meeting of
the shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been duly elected or
until his prior death, resignation or removal.
4.03 Removal. Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04 Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or
<PAGE>
11
otherwise, shall be filled by the Board of Directors for the unexpired portion
of the term.
4.05 President. The President shall be the principal executive
officer and, subject to the control of the Board of Directors, shall in general
supervise and control all of the business and affairs of the corporation. He or
she shall preside at all meetings of the shareholders and of the Board of
Directors. The President shall have authority, subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the discretion of the President. The President
shall have authority to sign, execute and acknowledge, on behalf of the
corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases,
reports and all other documents or instruments necessary or proper to be
executed in the course of the corporation's regular business, or which
shall be authorized by resolution of the Board of Directors; and, except as
otherwise provided by law or the Board of Directors, the President may authorize
any Vice President or other officer or agent of the corporation to sign, execute
and acknowledge such documents or instruments in his or her place and stead. In
general he shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
4.06 Vice Presidents. In absence of the President, or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or the
Board of Directors. The execution of any instrument of the corporation by
<PAGE>
12
any Vice President shall be conclusive evidence, as to third parties, of the
Vice President's authority to act in the stead of the President.
4.07 Secretary. The Secretary shall: (a) keep the minutes of
the meetings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation, if any,
and see that the seal of the corporation, if any, is affixed to all documents
which are authorized to be executed on behalf of the corporation under its seal;
(d) keep or arrange for the keeping of a register of the post office address of
each shareholder which shall be furnished to the Secretary by such shareholder;
(e) sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him or her by the President or by the Board
of Directors.
4.08 Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of
the corporation; (b) receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 5.04; and (c) in
general perform all of the duties incident to the office of Treasurer and have
such other duties and exercise such other authority as from time to time may be
delegated or assigned to him or her by the President or by the Board of
Directors.
4.09 Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors or President from time to time authorize. The Assistant
Secretaries may sign with the President or a Vice President certificates for
shares of the corporation the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries
<PAGE>
13
and Assistant Treasurers, in general, shall perform such duties and have such
authority as from time to time shall be delegated or assigned to them by the
Secretary or the Treasurer, respectively, or by the President or the Board of
Directors.
4.10 Other Assistants and Acting Officers. The Board of
Directors and President shall have the power to appoint any person to act as
assistant to any officer, or as agent for the corporation in the officer's
stead, or to perform the duties of such officer whenever for any reason it is
impracticable for such officer to act personally, and such assistant or acting
officer or other agent so appointed by the Board of Directors or President shall
have the power to perform all the duties of the office to which that person is
so appointed to be assistant, or as to which he or she is so appointed to act,
except as such power may be otherwise defined or restricted by the Board of
Directors or President.
4.11 Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. No contract or
other transaction between the corporation and one or more of its
directors or any other corporation, firm, association, or entity in which one or
more of its directors are directors or officers or are financially interested,
shall be either void or voidable because of such relationship or interest or
because such director or directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction or because the votes of the interested director(s) are
counted for such purpose, if (1) the fact of such relationship or interest is
disclosed or known to the Board of Directors or committee which authorizes,
approves or
<PAGE>
14
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors; or
(2) the fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or (3) the contract or
transaction is fair and reasonable to the corporation. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or a committee thereof which authorizes, approves or
ratifies such contract or transaction.
5.02 Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such indebtedness
shall be issued in its name unless authorized by or under the authority of a
resolution of the Board of Directors. Such authorization may be general or
confined to specific instances.
5.03 Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer(s), employee(s) or
agents of the corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.
5.04 Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as may be selected by or
under the authority of a resolution of the Board of Directors.
5.05 Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he or she is present, or in
the President's absence, by any Vice President of this corporation who may be
present, and (b) whenever, in the judgment of the President, or in the
President's absence, of any Vice President, it is desirable for this corporation
to execute a
<PAGE>
15
proxy or written consent in respect to any shares or other securities issued by
any other corporation and owned by this corporation, such proxy or consent shall
be executed in the name of this corporation by the President or one of the Vice
Presidents of this corporation, without necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer. Any person or persons designated in the manner
above stated as the proxy or proxies of this corporation shall have full right,
power and authority to vote the shares or other securities issued by such other
corporation and owned by this corporation the same as such shares or other
securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificate for Shares. Certificates representing shares
of the corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
President or a Vice President and by the Secretary or an Assistant Secretary.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except as provided in Section
6.06.
6.02 Facsimile Signatures and Seal. The seal of the
corporation, if the corporation has elected to have a seal, on any certificates
for shares may be a facsimile. The signatures of the President or Vice President
and the Secretary or Assistant Secretary upon a certificate may be facsimiles if
the certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or an employee of the corporation.
6.03 Signature by Former Officers. If an officer, who has
signed or whose facsimile signature has been placed upon any
<PAGE>
16
certificate for shares, shall have ceased to be such officer before such
certificate is issued, the certificate may be issued by the corporation with the
same effect as if that person were such officer at the date of its issue.
6.04 Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer, the corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
corporation with a request to register for transfer, the corporation shall not
be liable to the owner, or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
reasonable assurance that said endorsements are genuine and effective and in
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
6.05 Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.06 Lost, Destroyed or Stolen Certificates. Where the owner
claims that his or her certificate for shares has been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if the
owner (a) so requests before the corporation has notice that such shares have
been acquired by a bona fide purchaser, and (b) if required by the corporation,
files with the corporation a sufficient indemnity bond, and (c) satisfies such
other reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
6.07 Consideration for Shares. The shares of the corporation
may be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consideration less than the par value thereof. The consideration to
be paid for shares may be paid in whole or in part, in money,
<PAGE>
17
in other property, tangible or intangible, or in labor or services actually
performed for the corporation. When payment of the consideration for which
shares are to be issued shall have been received by the corporation, such shares
shall be deemed to be fully paid and nonassessable by the corporation. No
certificate shall be issued for any share until such share is fully paid.
6.08 Stock Regulations. The Board of Directors shall have the
power and authority to make all such rules and regulations not inconsistent with
the statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation.
ARTICLE VII. WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of the Wisconsin Business Corporation Law or under corresponding
provisions of the corporation's articles of incorporation or bylaws, a waiver
thereof in writing, signed at any time, whether before or after the time of the
meeting, by the person or persons entitled to such notice, shall be deemed
equivalent to the giving of such notice. Such waiver by a shareholder in respect
of any matter of which notice is required under any provision of the Wisconsin
Business Corporation Law shall contain the same information as would have been
required to be included in such notice under any applicable provisions of said
Law, except that the time and place of meeting need not be stated.
ARTICLE VIII. UNANIMOUS CONSENT WITHOUT A MEETING
Any action required by the articles of incorporation or bylaws
or any provision of the Wisconsin Business Corporation Law to be taken at a
meeting, or any other action which may be taken at a meeting, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by all of the shareholders, directors or members of a committee
thereof entitled to vote with respect to the subject matter thereof and
<PAGE>
18
such consent shall have the same force and effect as a unanimous vote.
ARTICLE IX. INDEMNIFICATION
9.01 Indemnification for Successful Defense. Within 20 days
after receipt of a written request pursuant to Section 9.03, the corporation
shall indemnify a director or officer, to the extent he or she has been
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the corporation.
9.02 Other Indemnification.
(a) In cases not included under Section 9.01, the
corporation shall indemnify a director or officer against all
liabilities and expenses incurred by the director or officer
in a proceeding to which the director or officer was a party
because he or she is a director or officer of the corporation,
unless liability was incurred because the director or officer
breached or failed to perform a duty he or she owes to the
corporation and the breach or failure to perform constitutes
any of the following:
(1) A willful failure to deal fairly with
the corporation or its shareholders in connection
with a matter in which the director or officer has a
material conflict of interest.
(2) A violation of criminal law, unless the
director or officer had reasonable cause to believe
his or her conduct was lawful or no reasonable cause
to believe his or her conduct was unlawful.
(3) A transaction from which the director or
officer derived an improper personal profit.
(4) Willful misconduct.
<PAGE>
19
(b) Determination of whether indemnification is
required under this Section shall be made pursuant to Section
9.05.
(c) The termination of a proceeding by judgment,
order, settlement or conviction, or upon a plea of no contest
or an equivalent plea, does not, by itself, create a
presumption that indemnification of the director or officer is
not required under this Section.
9.03 Written Request. A director or officer who seeks
indemnification under Sections 9.01 or 9.02 shall make a written request to the
corporation.
9.04 Nonduplication. The corporation shall not indemnify a
director or officer under Sections 9.01 or 9.02 if the director or officer has
previously received indemnification or allowance of expenses from any person,
including the corporation, in connection with the same proceeding. However, the
director or officer has no duty to look to any other person for indemnification.
9.05 Determination of Right to Indemnification.
(a) Unless otherwise provided by the Articles of
Incorporation or by written agreement between the
director or officer and the corporation, the director or
officer seeking indemnification under Section 9.02 shall
select one of the following means for determining his or her
right to indemnification:
(1) By a majority vote of a quorum of the
board of directors consisting of directors not at the
time parties to the same or related proceedings. If a
quorum of disinterested directors cannot be obtained,
by majority vote of a committee duly appointed by the
board of directors and consisting solely of 2 or more
directors not at the time parties to the same or
related proceedings. Directors who are parties to the
same or related proceedings may participate in the
designation of members of the committee.
<PAGE>
20
(2) By independent legal counsel selected by
a quorum of the board of directors or its committee
in the manner prescribed in sub.(1) or, if unable to
obtain such a quorum or committee, by a majority vote
of the full board of directors, including directors
who are parties to the same or related proceedings.
(3) By a panel of 3 arbitrators consisting
of one arbitrator selected by those directors
entitled under sub.(2) to select independent legal
counsel, one arbitrator selected by the director or
officer seeking indemnification and one arbitrator
selected by the 2 arbitrators previously selected.
(4) By an affirmative vote of the majority
of shares represented at a meeting of shareholders at
which a quorum is present. Shares owned by, or voted
under the control of, persons who are at the time
parties to the same or related proceedings, whether
as plaintiffs or defendants or in any other capacity,
may not be voted in making the determination.
(5) By a court under Section 9.08.
(6) By any other method provided for in any
additional right to indemnification permitted under
Section 9.07.
(b) In any determination under (a), the burden of
proof is on the corporation to prove by clear and
convincing evidence that indemnification under Section
9.02 should not be allowed.
(c) A written determination as to a director's or
officer's indemnification under Section 9.02 shall be
submitted to both the corporation and the director or officer
within 60 days of the selection made under (a).
(d) If it is determined that indemnification is
required under Section 9.02, the corporation shall pay
<PAGE>
21
all liabilities and expenses not prohibited by Section 9.04
within 10 days after receipt of the written determination
under (c). The corporation shall also pay all expenses
incurred by the director or officer in the determination
process under (a).
9.06 Advance Expenses. Within 10 days after receipt of a
written request by a director or officer who is a party to a proceeding, the
corporation shall pay or reimburse his or her reasonable expenses as incurred if
the director or officer provides the corporation with all of the following:
(1) A written affirmation of his or her good
faith belief that he or she has not breached or
failed to perform his or her duties to the
corporation.
(2) A written undertaking, executed
personally or on his or her behalf, to repay the
allowance to the extent that it is ultimately
determined under Section 9.05 that indemnification
under Section 9.02 is not required and that
indemnification is not ordered by a court under
Section 9.08(b)(2). The undertaking under this
subsection shall be an unlimited general obligation
of the director or officer and may be accepted
without reference to his or her ability to repay the
allowance. The undertaking may be secured or
unsecured.
9.07 Nonexclusivity.
(a) Except as provided in (b), Sections 9.01, 9.02
and 9.06 do not preclude any additional right to
indemnification or allowance of expenses that a director or
officer may have under any of the following:
(1) The Articles of Incorporation.
(2) A written agreement between the
director or officer and the corporation.
<PAGE>
22
(3) A resolution of the board of directors.
(4) A resolution, after notice, adopted by a
majority vote of all of the corporation's voting
shares then issued and outstanding.
(b) Regardless of the existence of an additional
right under (a), the corporation shall not indemnify a
director or officer, or permit a director or officer to retain
any allowance of expenses unless it is determined by or on
behalf of the corporation that the director or officer did not
breach or fail to perform a duty he or she owes to the
corporation which constitutes conduct under Section
9.02(a)(1), (2), (3) or (4). A director or officer who is a
party to the same or related proceeding for which
indemnification or an allowance of expenses is sought may not
participate in a determination under this subsection.
(c) Sections 9.01 to 9.13 do not affect the
corporation's power to pay or reimburse expenses incurred by a
director or officer in any of the following circumstances.
(1) As a witness in a proceeding to which he
or she is not a party.
(2) As a plaintiff or petitioner in a
proceeding because he or she is or was an employee,
agent, director or officer of the corporation.
9.08 Court-Ordered Indemnification.
(a) Except as provided otherwise by written agreement
between the director or officer and the corporation, a
director or officer who is a party to a proceeding may apply
for indemnification to the court conducting the proceeding or
to another court of competent jurisdiction. Application may be
made for an initial determination by the court under Section
9.05(a)(5) or for review by the court of an adverse
determination under Section 9.05(a) (1), (2), (3), (4)
<PAGE>
23
or (6). After receipt of an application, the court shall give
any notice it considers necessary.
(b) The court shall order indemnification if it
determines any of the following:
(1) That the director or officer is entitled
to indemnification under Sections 9.01 or 9.02.
(2) That the director or officer is fairly
and reasonably entitled to indemnification in view of
all the relevant circumstances, regardless of whether
indemnification is required under Section 9.02.
(c) If the court determines under (b) that the
director or officer is entitled to indemnification, the
corporation shall pay the director's or officer's expenses
incurred to obtain the court-ordered indemnification.
9.09 Indemnification of Employees or Agents. The corporation
may indemnify and allow reasonable expenses of an employee or agent who is not a
director or officer to the extent provided by the Articles of Incorporation or
Bylaws, by general or specific action of the board of directors or by contract.
9.10 Insurance. The corporation may purchase and maintain
insurance on behalf of an individual who is an employee, agent, director or
officer of the corporation against liability asserted against or incurred by the
individual in his or her capacity as an employee, agent, director or officer,
regardless of whether the corporation is required or authorized to indemnify or
allow expenses to the individual against the same liability under Sections 9.01,
9.02, 9.06 and 9.09.
9.11 Securities Law Claims.
(a) Pursuant to the public policy of the State of
Wisconsin, the corporation shall provide indemnification and
allowance of expenses and may insure for any liability
incurred in connection with a proceeding involving securities
regulation described
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24
under (b) to the extent required or permitted under Sections
9.01 to 9.10.
(b) Sections 9.01 to 9.10 apply, to the extent
applicable to any other proceeding, to any proceeding
involving a federal or state statute, rule or regulation
regulating the offer, sale or purchase of securities,
securities brokers or dealers, or investment companies or
investment advisers.
9.12 Liberal Construction. In order for the corporation to
obtain and retain qualified directors and officers, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors and officers and, accordingly, the indemnification above provided for
shall be granted in all cases unless to do so would clearly contravene
applicable law, controlling precedent or public policy.
9.13 Definitions Applicable to this Article.
(a) "Affiliate" shall include, without limitation,
any corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise that directly or indirectly
through one or more intermediaries, controls or is controlled
by, or is under common control with, the corporation.
(b) "Corporation" means this corporation and any
domestic or foreign predecessor of this corporation where the
predecessor corporation's existence ceased upon the
consummation of a merger or other transaction.
(c) "Director or Officer" means any of the following:
(1) A natural person who is or was a
director or officer of this corporation.
(2) A natural person who, while a director
or officer of this corporation, is or was serving at
the corporation's request as a director, officer,
partner, trustee, member of any governing
<PAGE>
25
or decision-making committee, employe or agent of
another corporation or foreign corporation,
partnership, joint venture, trust or other
enterprise.
(3) A natural person who, while a director
or officer of this corporation, is or was serving an
employe benefit plan because his or her duties to the
corporation also impose duties on, or otherwise
involve services by, the person to the plan or to
participants or beneficiaries of the plan.
(4) Unless the context requires otherwise,
the estate or personal representative of a director
or officer.
For purposes of this Article, it shall be conclusively presumed that any
Director or Officer serving as a director, officer, partner, trustee, member of
any governing or decision-making committee, employee or agent of an Affiliate
shall be so serving at the request of the corporation.
(d) "Expenses" include fees, costs, charges,
disbursements, attorney fees and other expenses incurred in
connection with a proceeding.
(e) "Liability" includes the obligation to pay a
judgment, settlement, penalty, assessment, forfeiture or fine,
including an excise tax assessed with respect to an employe
benefit plan, and reasonable expenses.
(f) "Party" includes a natural person who was or is,
or who is threatened to be made, a named defendant or
respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or
completed civil, criminal, administrative or investigative
action, suit, arbitration or other proceeding, whether formal
or informal, which involves foreign, federal, state or local
law and which is brought by or in the right of the corporation
or by any other person.
<PAGE>
26
ARTICLE X. SEAL
The Board of Directors may provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words "Corporate Seal."
ARTICLE XI. AMENDMENTS
11.01 By Shareholders. These bylaws may be altered, amended or
repealed and new bylaws may be adopted by the shareholders by affirmative vote
of not less than a majority of the shares present or represented at an annual or
special meeting of the shareholders at which a quorum is in attendance.
11.02 By Directors. These bylaws may also be altered, amended
or repealed and new bylaws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any meeting
at which a quorum is in attendance; but no bylaw adopted by the shareholders
shall be amended or repealed by the Board of Directors if the bylaw so adopted
so provides.
11.03 Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors, which would be inconsistent with
the bylaws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be given
the same effect as though the bylaws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE XII. STOCK TRANSFER RESTRICTION
In the event the corporation makes a valid election, pursuant
to ss.1362 of the Internal Revenue Code of 1986, or any successor provision
thereto, to be treated as an S Corporation, no shareholder of the corporation
shall, without the written consent of shareholders holding more than fifty
percent (50%) of
<PAGE>
27
the outstanding stock of the corporation, transfer any shares of stock to any
person who, by reason of being a shareholder of the corporation, will cause a
termination of the corporation's election to be treated as an S Corporation.
<PAGE>
Exhibit 3.15
BYLAWS
OF
SERVO-KANSAS, INC.
Officers
1. Registered (office and Resident Agent. The location of
the registered office and name of the resident agent in the state of Kansas
shall be such as shall be designated from time to time by the Board of Directors
and be on file in the appropriate office of the State of Kansas pursuant to
applicable provisions of law.
2. Corporate Offices. The corporation may also have offices
at such other places within and without the state of Kansas as the Board of
Directors may from time to time appoint or as the business of the corporation
may require.
Stockholders' Meetings
3. Place of Meetings. Meetings of the stockholders may be
held within or without the state of Kansas at such place as may be specified in
the notice of meeting, or as may be consented to by the holders of all of the
issued and outstanding capital stock of the corporation having the right to vote
at such meeting. If no place for any such meeting is specified in the notice
thereof, the same shall be held at the registered office of the corporation in
the state of Kansas.
4. Annual Meeting. An annual meeting of the stockholders for
the election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held on the first Friday of April of each year, if not a legal holiday,
and if a legal holiday, then on the day following. The hour of the meeting shall
be fixed in the notice of waiver or call of the meeting. If no time is so fixed,
the hour of the meeting shall be 10:00 A.M.
5. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President, or the acting President, by the Board of Directors, or
by the holder of not fewer than one-fifth of all outstanding shares of stock
entitled to vote at an annual meeting, and shall be called by any officer
directed to do so by the Board of Directors. Business transacted at all special
meetings shall be confined to the
<PAGE>
2
subjects stated in the call.
The "Call" and the "Notice" of any such meeting shall be
deemed synonymous.
6. Notice. Written or printed notice of each meeting of the
stockholders, whether annual or special, stating the place, date and time
thereof, and in case of a special meeting, the purpose or purposes thereof,
shall be delivered to or mailed to each stockholder entitled to vote thereat at
his post office address as appears on the stock books of the corporation, not
less than ten nor more than thirty days prior to the meeting, unless, as to a
particular matter, other or further notice is required by law, in which case
such other or further notice shall be given.
Any notice of a stockholders' meeting sent by mail shall be
deemed to be delivered when deposited in the United States mail with postage
thereon prepaid, addressed to the stockholder at his address as it appears on
the stock books of the corporation.
7. Waiver of Notice. Whenever any notice is required to be
given under the provisions of these Bylaws, the Articles of Incorporation of the
corporation, or of any law, a waiver thereof, if permitted by law, in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed the equivalent to the giving of such
notice.
8. Quorum. Except as otherwise may be provided by law, by
the Articles of Incorporation or by these Bylaws, the holders of a majority of
the stock issued and outstanding and entitled to vote thereat, present in person
or by proxy, shall be required for, and shall constitute, a quorum at all
meetings of the stockholders for the transaction of business.
9. Proxies. At any meeting of the stockholders, every
stockholder having the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting unless said
instrument provides for a longer period.
10. Voting. Such stockholder shall have one vote for each
share of stock having voting power registered in his name on the books of the
corporation. Except where the transfer books of the corporation shall have been
closed, or a date shall have been
<PAGE>
3
fixed as a record date for the determination of its stockholders entitled to
vote, no share of stock shall be voted at any election for directors which shall
have been transferred on the books of the corporation within twenty days next
preceding such election of directors.
Directors
11. Directors - Powers of the Board. The property and
business of this corporation shall be managed by its Board of Directors, which
may consist of one or more persons. Stockholders may fix the number of Directors
at any number from one to five. Directors need not be stockholders unless the
Articles of Incorporation at any time so require. In addition to the powers and
authorities by these Bylaws expressly conferred upon it, the Board of Directors
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws prohibited or directed or required to be exercised or done by the
stockholders only.
12. Term of Office. The first Board of Directors shall be
elected at the first duly held meeting of the incorporators, and thereafter they
shall be elected at the annual meetings of the stockholders. Each director so
elected, or appointed as hereinafter provided, shall serve until his successor
shall have been elected and shall qualify, or until his written resignation
shall have been filed with the Secretary of the corporation. Each director, upon
his election, shall qualify by accepting the office of director by executing and
filing with the corporation a written acceptance of his election, which shall be
placed in the minute book.
13. Vacancies. If the office of any director becomes vacant
by reason of death, resignation or incapacity to act (which incapacity may be
conclusively determined by the remaining directors), a majority of the remaining
directors, or the remaining director though less than a quorum, may fill the
vacancy. The director so chosen shall hold office until his successor shall be
elected at the next annual meeting of the stockholders, and shall qualify.
14. Regular Meetings - Notice. Regular meetings of the Board
of Directors may be held without notice at the registered office of the
corporation in the state of Kansas, or at such other place or places, within or
without the state of Kansas, as the Board of Directors may from time to time
<PAGE>
4
designate. Any business may be transacted at a regular meeting.
15. Special Meetings - Notice. Special meetings may be
called at any time by the Chairman of the Board or President, or in their
absence, by any Vice President, by the Secretary or by any two directors, by
giving two days' notice of such meeting to each director, either personally or
by mail or telegram, stating the time, place and purpose of any such meeting.
The place may be within or without the state of Kansas as designated in the
notice.
16. Quorum. A quorum at all meetings of the Board of
Directors shall consist of a majority of the whole board, unless a greater
number as to any particular matter is required by statute, by the Articles of
Incorporation or by these Bylaws. Less than a quorum may adjourn the meeting
successively until a quorum is present, and no notice of adjournment shall be
required.
17. Waiver. Any notice provided or required to be given to
the directors may be waived in writing by any of them, whether before, or at or
after the time stated therein. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where he attends for the
express purpose, and so states at the opening of such meeting, or objects to the
transaction of any business because the meeting is not lawfully called or
convened.
18. Committees of Directors. The Board of Directors may by
resolution, or resolutions, passed by a majority of the whole board, create and
designate one or more committees, each committee to consist of two or more of
the directors of the corporation.
19. Compensation of Directors and Committee Members.
Directors and committee members shall not receive any stated salary for their
services as such; but by resolution of the Board of-Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the board or committee, provided that nothing herein
contained shall be construed to preclude any director or committee member from
saving the corporation in any, other capacity and receiving compensation
therefor.
20. Indemnification of Directors and Voting Trustees.
Each director of the corporation and each voting trustee under any
voting trust agreement (which has been entered into between the owners and
holders of the shares of the corporation,
<PAGE>
5
such voting trustees and the corporation), shall be indemnified by the
corporation against all costs and expenses (including counsel fees) actually and
necessarily incurred by or empowered upon him in connection with the defense of
any action, suit or proceeding to which he shall be made a party by reason of
his being or having been a director of the corporation or such voting trustee
(whether or not he continues to be a director or such voting trustee at the time
of incurring such costs and expenses), except in relation to any matters as to
which he shall be adjudged in such action, suit or proceeding, without such
judgment being reversed, to have been liable for gross misconduct in the
performance of his duties as such director or such voting trustee. In the event
of the settlement of any such action, suit or proceeding prior to final
judgment, the corporation shall also make reimbursement or payment of the costs,
expenses and amounts paid or to be paid in settling any such action, suit or
proceeding, when such settlement appears to be in the interests of the
corporation to a majority of the directors who are not involved, or to two or
more stockholders holding or beneficially owning at least one-third in amount of
the shares of stock of the corporation having voting rights then outstanding.
Officers
21. Elected officers. The Board of Directors at each annual
meeting thereof shall elect a President from among their own number, and shall
also elect a Secretary and Treasurer and, if desired, one or more Vice
Presidents. The Secretary, Treasurer and Vice Presidents need not be members of
the Board of Directors. If the board so desires, the President, Secretary and
Treasurer may be the same person, and also a Vice President may hold the office
of Secretary and Treasurer. The Secretary and Treasurer may be the same person.
22. Appointed Officers and Agents. The Board of Directors
may from time to time appoint such Assistant Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other agents and attorneys as may be
deemed necessary, who may exercise such powers, possess such authorities, and
perform such duties as shall be determined by the Board of Directors.
23. Term of Office. Each elected officer of the corporation
shall hold office until his successor is chosen and qualified, or until he
resigns or is removed by the Board of Directors, whichever occurs first.
Appointed officers and agents shall hold office at the pleasure of the board.
Any officer elected or appointed by the Board of Directors may be removed at
<PAGE>
6
any time by the affirmative vote of the majority of the whole Board of
Directors. If the office of any officer becomes vacant for any reason, such
vacancy shall be filled by the affirmative vote of a majority of the whole Board
of Directors.
24. Salaries and Compensation of the Board. Salaries and
compensation of all elected officers of the corporation shall be fixed by the
Board of Directors. However, unless prohibited by law, the power to fix salaries
and compensation, except as to the salary and compensation of the President, may
be delegated by the Board of Directors to the President or to a committee.
Salaries and compensation of all other officers, employees and agents of the
corporation may be fixed by the Board of Directors; but until action is taken
with respect thereto by the Board of Directors, they may be fixed, increased or
decreased by the President of the corporation or by any other elected officer to
whom the Board of Directors may delegate authority therefor.
Duties of officers
25. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the directors
and at all meetings of the stockholders, unless the stockholders choose a
different presiding officer for any meeting. He shall have general and active
management of the affairs and activities of the corporation subject to the
direction of the Board of Directors, and shall see that all orders and
resolutions of the board are carried into effect. He shall execute bonds,
mortgages and other contracts requiring execution by the corporation. He shall
also be ex officio a member of all standing committees.
26. Vice President. The Vice Presidents in the order of
their seniority shall, in the absence, disability or inability to act of the
President, perform the duties and exercise the powers of the President (except
the power to fix or alter compensation) and shall perform such other duties as
the Board of Directors shall from time to time prescribe.
27. The Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the Board of Directors and stockholders, unless the
stockholders at any meeting choose a different person to act as secretary of the
meeting; shall record or cause to be recorded all votes taken and the minutes of
all such proceedings at which he acts as Secretary; and shall file such in a
minute book of the corporation to be kept for that purpose. He shall give, or
cause to be given, notice of all
<PAGE>
7
meetings of the stockholders and of the Board of Directors, except as otherwise
provided in these Bylaws, and shall perform such other duties as are incident to
the office of Secretary and as may be assigned by the Board of Directors or
President under whose supervision he shall be. When authorized to do so, he
shall attest any instruments requiring it by affixing his signature.
The Assistant Secretaries, in the order of their seniority, in
the absence, disability or inability to act of the Secretary, shall perform the
duties and exercise the powers of the Secretary and shall perform such other
duties as the Board of Directors may from time to time prescribe.
28. The Treasurer and Assistant Treasurers. The Treasurer
shall have responsibility for the safekeeping of the funds and securities of the
corporation and shall keep, or cause to be kept, full and accurate accounts of
receipts and disbursements in books belonging to the corporation. He shall keep,
or cause to be kept, all other books of account and accounting records of the
corporation, and shall deposit, or cause to be deposited, all moneys and other
valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors.
He shall disburse, or permit to be disbursed, the funds of the
corporation as may be ordered or authorized generally by the Board of Directors,
or as may be directed specifically by the President. He shall render to the
chief executive officers of the corporation and the Board of Directors, whenever
they may require it, an account of all his transactions as Treasurer, of those
under his jurisdiction, and of the financial status and affairs of the
corporation.
He shall be the chief financial and account officer of the
corporation; shall have the general duties, powers and responsibilities of a
Treasurer of a corporation; and shall perform such other duties and have such
other responsibilities and authority as may be assigned to him from time to time
by the Board of Directors or President.
The Assistant Treasurers, in the order of their seniority, in
the absence, disability or inability of the Treasurer, shall perform the duties
and exercise the powers of the Treasurer and shall perform such other duties as
the Board of Directors shall from time to time prescribe.
<PAGE>
8
29. Duties of Officers May Be Delegated. If an officer of
the corporation be absent or unable to act, or for any other reason that the
Board of Directors may deem sufficient, the Board of Directors may delegate for
the time being some or all of the functions, duties, powers and responsibilities
of any officer to any other officer, or to any other agent or employee of the
corporation or other responsible person, provided a majority of the whole board
concurs therein.
Shares of Stock
30. Certificates of Stock. Each holder of stock of the
corporation shall be entitled to a certificate signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, certifying the number, class and character of shares owned
by him. If the corporation has a transfer agent or assistant transfer agent or a
transfer clerk acting on behalf of such corporation and a registrar, the
signature of any such officer may be facsimile. The certificates of stock shall
be numbered consecutively and shall be entered in the books of the corporation
as they are issued.
31. Transfers of Stock - Transfer Agent - Registrar.
Transfers of stock shall be made on the books of the corporation only by the
person named in the stock certificate or by his attorney lawfully constituted in
writing, and upon surrender of the certificate therefor. The stock record book
and other transfer records shall be in the possession of the Secretary or of a
transfer agent or clerk of the corporation.
32. Lost Certificates. In the case of the loss or
destruction of any outstanding certificate of stock of the corporation, the
President or Secretary may issue a duplicate certificate (plainly marked
"duplicate") in its place, upon the registered owner thereof or his legal
representative furnishing due proof of loss thereof by affidavit, the
advertisement thereof in such manner as required by the Board of Directors and
if required by the Board of Directors, and a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of such certificate.
33. Preemptive or Reserved Rights. The existing stockholders
shall have the right to purchase and acquire the stock of a selling stockholder
before sale thereof to a nonstockholder.
<PAGE>
9
34. Procedure for Sale. If any stockholder desires to sell
his shares of stock, he shall first offer such share or shares for sale to the
other stockholders and the corporation (it being the intention hereof to give
the other stockholders and the corporation a preference in the purchase of such
shares of stock). An attempted sale thereof in violation of this provision shall
be void. A stockholder desiring to sell his shares of stock shall file notice in
writing of his intention so to do with the Secretary of the corporation, stating
the price and terms of sale. Unless his terms are accepted by any or all of the
stockholders, or the corporation, within thirty days thereafter, they shall be
deemed to have waived their privileges of purchasing said shares of stock. The
owner thereof then shall have the right to sell to whomsoever will purchase for
the price and upon the terms stated in said notice so filed with the Secretary
of the corporation, or at a cash price in excess thereof.
35. Exceptions. Section 34 of these Bylaws is subject to the
following provisions: (1) the shares of stock owned by any stockholder who dies
intestate shall pass to his heirs by the laws of intestate succession; (2) any
stockholder shall have the right to sell and dispose of his stock to any person
or persons who are his heirs-apparent, or who are within the degree of
relationship provided by Section 59-509 of the Kansas Statutes Annotated; (3)
any such stockholder shall have the right and power to dispose of his stock by
will; (4) any such stockholder shall have the right and power to pledge his
stock to a bank or other lending institution as security for a loan.
General
36. Dividends. Dividends upon the shares of stock of the
corporation, subject to the provisions of the Articles of Incorporation, if any,
and of the applicable law or statute, may be declared by the Board of Directors
at any regular or special meeting. Dividends may be paid in cash, in property or
in shares of its stock and to the extent and in the manner provided by law out
of any available earned surplus or earnings of the corporation.
Liquidating dividends or dividends representing a distribution
of paid-in surplus or a return of capital shall be made only when and in the
manner permitted by law.
37. Creation of Reserves. Before the payment of any
dividend, there nay be set aside out of any funds of the
<PAGE>
10
corporation available for dividends such sum or sums as the directors from time
to time, in their discretion, think proper as a reserve fund or funds, to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation. The directors may abolish
any such reserve in the manner in which it was created.
38. Fixing of Capital, Transfers of Surplus. Except as may
be specifically otherwise provided in the Articles of Incorporation, the Board
of Directors is expressly empowered to exercise all authority conferred upon it
or the corporation by any law or statute, and in conformity therewith relative
to:
(i) The determination of what part of the
consideration received for shares of the
corporation shall be capital.
(ii) increasing capital.
(iii) Transferring surplus to capital.
(iv) The consideration to be received by the
corporation for its shares.
(v) All similar or related matters; provided that any
concurrent action or consent by or of the
corporation and its stockholders required to be
taken or given pursuant to law shall be duly taken
or given in connection therewith.
39. Checks, Notes and Mortgages. All checks or instruments
for the payment, disbursement or transfer of moneys or funds of the corporation
may be signed in its behalf by the Treasurer and/or such other officer or
officers or responsible persons as may be designated from time to time by
resolution of the Board of Directors. All notes of the corporation and any
mortgages or other forms of security given to secure the payment of the same
shall be signed by the President and attested by the Secretary or Assistant
Secretary; provided that the Board of Directors by resolutions adopted by a
majority of the whole board may authorize such other officer or officers or
other responsible person or persons to execute any such instruments for and in
behalf of the corporation.
40. Fiscal Year. The fiscal year of the corporation may be
designated from time to time by the Board of Directors.
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11
Amendment of Bylaws
41. Amendment of Bylaws. Subject to the provisions of the
Articles of Incorporation and the paramount power of the stockholders to amend,
alter or repeal these Bylaws at any annual or special meeting, these Bylaws may
be altered, amended or repealed, and new Bylaws enacted by the Board of
Directors at an annual, regular or special meeting thereof, if notice of the
proposed change be contained in the notice of the meeting; provided, however,
that no change of the time and place of the election of directors shall be made
within sixty days next before the day on which such election is to be held and
that in case of any change of such time and place, notice thereof shall be given
to each stockholder in person or by mail, mailed to his last known post office
address at least twenty days before the election next ensuing. Notice of any
amendment of these Bylaws by the Board of Directors shall be given to each
stockholder having voting rights, in person or by mail, mailed to his last known
post office address within ten days after the date of such amendment having been
made by the Board of Directors.
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12
Certificate
I, Morton M. Lapides, the undersigned, certify that I acted as
chairman of the first meeting of directors of Servo-Kansas, Inc. held on the 9th
day of April 1987, at which meeting the foregoing Bylaws were duly adopted as
and for the Bylaws of the corporation; and I hereby further certify that the
foregoing constitute the Bylaws of said corporation. Dated April 9, 1987.
Dated: April 9, 1987.
/s/ Morton M. Lapides
----------------------------------
Morton M. Lapides, Chairman of
Board of Directors
<PAGE>
Exhibit 3.17
Exhibit A
BY-LAWS FOR THE REGULATION. EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR
ITS ARTICLES OF INCORPORATION
OF
SERVOMATION DUCHESS. INC.
ARTICLE I
Offices
-------
Section 1: PRINCIPAL OFFICE. The principal office for the
transaction of the business of the corporation is hereby fixed and located in
the County of San Diego at La Mesa Boulevard and El Cajon Boulevard, City of La
Mesa. The Board of Directors is hereby granted full power and authority to
change said principal office from one location to another in said country.
Section 2: OTHER OFFICES. Branch or subordinate offices may
at any time be established by the Board & Directors at any place or places where
the corporation is qualified to do business.
ARTICLE II
Meeting of Shareholders
-----------------------
Section 1: PLACE OF MEETING. All meetings of shareholders
shall be held either at the principal office of the corporation or any other
place within the State of California which may be designated either by the Board
of Directors pursuant to authority hereinafter granted to said Board or by the
written consent of all shareholders entitled to vote thereat, given either
before or after the meeting and filed with the Secretary of the Corporation.
Section 2: ANNUAL MEETINGS. The annual meetings of
shareholders shall be held on the first Thursday of September of each year at
10:00 A.M. of said day; provided, however, that should said day fall upon a
holiday then any such annual meeting of shareholders shall be held at the same
time and place on the next day thereafter ensuing which is not a legal holiday.
At such meetings directors shall be elected, reports of the affairs of the
corporation shall be considered, and any other business may be transacted which
is within the powers of the shareholders.
<PAGE>
2
Written notice of each annual meeting shall be given to each
shareholder entitled to vote either personally or by mail, telegram or other
means of written communication, charges prepaid, addressed to such shareholder
at his address appearing on the books of the corporation, or given by him to the
corporation for the purpose of notice. If a shareholder gives no address, notice
shall be deemed to have been given him if sent by mail, telegram, or other means
of written communication addressed to the place where the principal office of
the corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) days before each annual meeting. Such notice shall specify the place, the
day, and the hour of such meeting, and shall state such other matters, if any,
as may be expressly required by statute.
Section 3: SPECIAL MEETINGS. Special meetings of shareholders,
or any purpose or purposes whatsoever, may be called at any time by the
President or by the Board of Directors, or by one or more shareholders holding
not less than one-fifth (1/5th) of the voting power of the corporation. Except
in special cases where other express provision is made by statute, notice of
such special meetings shall be given in the same manner as for annual meetings
of shareholders. Notice of any special meeting shall specify in addition to the
place, day and hour of such meeting, the general nature of the business to be
transacted.
Section 4: ADJOURNED MEETINGS AND NOTICE THEREOF. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum no other business may be transacted at any such
meeting.
When any shareholders' meeting, either annual or special, is
adjourned for thirty (30) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall not be
necessary to given any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by an announcement at the
meeting which such adjournment is taken.
Section 5: ENTRY OF NOTICE. Whenever any shareholder entitled
to vote has been absent from any meeting of shareholders, whether annual or
special, an entry in the minutes to the effect that notice has been duly given
shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such shareholder, as required by law and the ByLaws of the
corporation.
Section 6: VOTING. Subject to the provisions of Section I of
Article V of these By-Laws, every person in whose name shares entitled to vote
stand on the stock records of the corporation shall have the right to vote that
number of shares in person or in proxy at all meetings of shareholders. Such
vote may be viva voce or by ballot; provided, however, that all elections for
Directors must be by ballot upon demand made by a shareholder at any election
and before the voting begins. Every shareholder entitled to vote at any election
for Directors shall have the right to cumulate his votes and give one candidate
a number of votes equal to the
<PAGE>
3
number of Directors to be elected multiplied by the number of votes to which his
shares are entitled, or to distribute his votes on the same principle among as
many candidates as he shall think fit. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Section 7: QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8: CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 9: ACTION WITHOUT MEETING. Any action, which under the
provisions of the California General Corporation Law may be taken at a meeting
of the shareholders, may be taken without a meeting if authorized by a writing
signed by all of the holders of shares who would be entitled to vote at a
meeting for such purpose, and filed with the Secretary of the Corporation.
Section 10: PROXIES. Every person entitled to vote or execute
written consents shall have the right to do so either in person or by one or
more agents authorized by a written proxy executed and dated by such person or
his duly authorized agent and filed with the Secretary of the Corporation. Any
proxy duly executed is not revoked and continues in full and force and effect
until an instrument revoking it or a duly executed proxy bearing a later date is
filed with the Secretary of the Corporation, or the person executing such proxy
is present at the meeting and elects to vote in person; provided that not such
proxy shall be valid at the expiration of eleven (11) months from the date of
its execution, unless the person executing it specified therein the length of
time for which such proxy is to continue in force, which in no case shall exceed
seven (7) years from the date of its execution.
Section 11: INSPECTORS OF ELECTION. In advance of any meeting
of shareholder the Board of Directors may appoint any person other than nominees
for office inspectors of election to act at such meeting or any adjournment
thereof. If inspectors of election be not so appointed, the Chairman of any such
meeting may, and on the request of any shareholder or his proxy, shall make such
appointment at the meeting. The number of inspectors shall be either one (1) or
three (3). If appointed at a meeting on the request of one or more shareholders
or proxies, the majority of shares present shall determine whether one (1) or
three (3) inspectors are to be appointed. In case any person appointed as
inspector fails to appear or
<PAGE>
4
fails or refuses to act, the vacancy may be filled by appointment by the Board
of Directors in advance of the meeting, or at the meeting by the Chairman.
The duty of such inspectors shall be as described by Section
2233, of the Corporation Code of California, and shall include: determining the
number of shares outstanding and the voting power of each; the shares
represented at the meeting, the existence of a quorum, and the authenticity and
effect of proxies; receiving votes, ballots, or consents; hearing and
determining all challenges and questions in any way arising in connection with
the right to vote; counting and tabulating all votes or consents; determining
the result; and such acts as may be proper to conduct the election or vote with
fairness to all shareholders.
ARTICLE III
Directors
---------
Section 1: POWERS. Subject to limitations of the Articles of
Incorporation, of the By-Laws, and the California General Corporation Law as to
Action to be authorized or approved by shareholders, and subject to the duties
of Directors as prescribed by the By-Laws, all corporate powers shall be
exercised by or under the authority of and the business and affairs of the
Corporation shall be controlled by the Board of Directors. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the Directors shall have the following powers:
First: To select and remove all the other officers, agents and
employees of the Corporation; prescribe such powers and duties for them as may
not be inconsistent with law, with the Articles of Incorporation or the By-Laws;
fix their compensation; and require from them security or faithful service.
Second: To conduct manage and control the affairs and business
of the corporation, and to make such rules and regulations therefor not
inconsistent with law, with the Articles of Incorporation or the By-Laws as they
may deem best.
Third: To change the principal office for the transaction of
the business of the Corporation from one location to another within the same
county as provided in Article I, Section 1 hereof; to fix and locate from time
to time one or more subsidiary offices of the Corporation within or without the
State of California, as provided in Article I, Section 2 hereof; to designate
any place within the State of California for the holding of any shareholders'
meeting or meetings; to adopt, make and use a corporate seal; to prescribe the
forms of share certificates; and to alter the form of such seal and of such
certificates from time to time as in their judgment they may deem best, provided
such seal and such certificates shall at all times comply with the provisions of
law.
Fourth: To authorize the issuance of shares of stock of the
Corporation from time to time upon such terms as may be lawful, in consideration
of money paid, labor done or services actually rendered, debts or securities
cancelled, or tangible or intangible property
<PAGE>
5
actually received, or in the case of shares issued as a dividend, against
amounts transferred from surplus to stated capital.
Fifth: To borrow money and incur indebtedness for the purpose
of the Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor .
Sixth: To appoint an Executive Committee and other committees,
and to delegate to the Executive Committee any of the powers and authority of
the Board in the management of the business and affairs of the Corporation,
except the power to declare dividends and to adopt, amend, or repeal By-Laws.
The Board of Directors shall have the power to prescribe the manner in which
proceedings of the Executive Committee and other committees shall be conducted.
The Executive Committee shall be composed of two (2) or more Directors. Unless
the Board of Directors shall otherwise provide: regular meetings of the
Executive Committee, notice of which is hereby dispensed with, shall be held at
such times as are determined by the Board of Directors or by such committee as
appointed; special meetings of the Executive Committee shall be held at the
principal office of the corporation, or at any place which has been designated
from time to time by resolution of the Executive Committee or by written consent
of all members thereof, and may be called by the President, any Vice President
who is a member of the Executive Committee, or any two members thereof, upon
written notice to the members of the Executive Committee of the time and place
of such special meeting, given in the manner provided for giving of written
notice of the members of the Board of Directors of the time and place of special
meeting of the Board of Directors; minutes shall be kept of each meeting of the
Executive Committee; vacancies in the membership of the Executive Committee may
be filled by the Board of Directors; a majority of the authorized number of
members of the Executive Committee shall constitute a quorum for the transaction
of business; and transactions of any meeting of the Executive Committee, however
called and noticed or wherever held, shall be as valid as though a meeting had
been duly held after regular call and notice, if a quorum be present, and if
either before or after the meeting each of the members not present signs a
written waiver of notice or a consent to holding such meeting or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Section 2: NUMBER AND QUALIFICATION OF DIRECTORS. The Board of
Directors shall consist of three (3) Directors until changed by amendment to
this Section 2, of Article III of the By-Laws adopted by the vote or written
assent of shareholders entitled to exercise a majority of the voting power.
Directors need not be shareholders of the Corporation.
Section 3: ELECTION AND TERM OF OFFICE. The Directors shall be
elected at each annual meeting of the shareholders, but if any such annual
meeting is not held, or the directors are not elected thereat, the directors may
be elected at any special meeting of shareholders held for that purpose. All
directors shall hold office until their successors are elected.
<PAGE>
6
Section 4: VACANCIES. Vacancies in the Board of Directors may
be filled by a majority of the remaining directors, though less than a quorum,
and each director so elected shall hold office until his successor is elected at
an annual meeting of the shareholders, or at a special meeting called for that
purpose.
A vacancy or vacancies shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if the shareholders shall
increase the authorized number of Directors, but shall fail at the meeting at
which such increase is authorized, or at any adjournment thereof, to elect the
additional Directors so provided for, or in case the shareholders fail at any
time to elect the full number of authorized Directors.
The shareholders may at any time elect Directors to fill any
vacancy not filled by the Directors, and may elect the additional Directors at
the meeting at which an amendment of these By-Laws is voted authorizing an
increase in the number of Directors, or any adjournment thereof.
If any Director tenders his resignation to the Board of
Directors, then the Board shall have the power to elect a successor to take
office at such time as the resignation shall become effective. No reduction of
the number of Directors shall have the effect of removing any Director prior to
the expiration of his term of office.
Section 5: PLACE OF MEETING. All meetings of the Board of
Directors shall be held at any place within or without the state which has been
designated from time to time by resolution of the Board or by written consent of
all the members of the Board. In the absence of such designation, regular
meetings shall be held at the principal office of the corporation.
Section 6: ORGANIZATION MEETING. Immediately following each
annual meeting of shareholders the Board of Directors shall hold a regular
meeting for the purpose of organization, election of officers and the
transaction of other business. Call and notice of such meeting is hereby
dispensed with.
Section 7: OTHER REGULAR MEETING. Other regular meetings of
the Board of Directors shall be held without call quarterly on the first Monday
of the third, sixth, ninth and twelfth months of each year provided, however,
should said day fall upon a legal holiday, then said meeting shall be held at
the same time on the next day thereafter ensuing which is not a legal holiday.
Notice of all such regular meeting of the Board of Directors is hereby dispensed
with.
Section 8: SPECIAL MEETINGS. Special meetings of the Board
of Directors for any purpose or purposes shall be called at any time by the
President, or if he is absent or unable or refuses to act, by any Vice-President
or by any two Directors.
Written notice of the time and place of special meetings shall
be delivered personally to the Directors or sent to each Director by mail,
telegram, or other form of written communication, charges pre-paid, addressed to
him at his address as it is shown upon the records
<PAGE>
7
of the corporation, or, if it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the Directors are regularly
held.
In case such notice is mailed, telegraphed, or sent by other
form of written communication, it shall be deposited in the United States Mail
or delivered to the telegraph company, or other agency for transmission in the
place in which the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered personally as above provided, it shall be so delivered
at least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such Director.
Section 9: ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Board of Directors under any provision of the
California General Corporation Law may be taken without a meeting if all members
of the Board of Directors shall individually or collectively consent in writing
to such action. Such written consent or consents shall be filed with the Minutes
of the proceedings of the Board. Such action by written consent shall have the
same force and effect as a unanimous vote of the Directors. Any certificate or
other document filed under any provision of the California General Corporation
Law which relates to the action so taken shall state that the action was taken
by written unanimous consent of the Board of Directors without a meeting and
that the By-Laws authorized the Directors to so act.
Section 10: QUORUM. A majority of the Directors shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the Directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors unless a greater
number be required by law or by the Articles of Incorporation.
Section 11: WAIVER OF NOTICE. The transactions of any meeting
of the Board of Directors, however called and noticed or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if a
quorum be present, and if, either before or after the meeting, each of the
Directors not present signs a written waiver of notice or a consent to holding
such meeting or an approval of the minutes thereof. All such waivers, consents
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 12: ENTRY OF NOTICE. Whenever any director has been
absent from any special meeting of the Board of Directors, an entry in the
minutes to the effect that notice has been duly given shall be conclusive and
incontrovertible evidence that due notice of such special meeting was given to
such Director, as required by law and the By-Laws of the corporation.
Section 13: ADJOURNMENT. A quorum of the directors may adjourn
any Directors' meeting to meet again at a stated day and hour; provided,
however, that in the absence of a quorum a majority of the Directors present at
any Directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
<PAGE>
8
Section 14: NOTICE OF ADJOURNMENT. Notice of the time and
place of holding an adjourned meeting need not be given to absent Directors if
the time and place be fixed at the meeting adjourned.
Section 15: FEES AND COMPENSATION. Directors and members of
the committees may receive such compensation, if any, for their services and
such reimbursement for expenses as may be fixed or determined by resolution of
the Board. Nothing herein contained shall be considered to preclude any Director
from serving the Corporation in any other capacity, including officer, agent,
employee, or otherwise, and receiving compensation therefor.
ARTICLE IV
Officers
--------
Section 1: OFFICERS. The officers of the Corporation shall be
a President, a Vice-President, a Secretary and a Treasurer. The Corporation may
also have at the discretion of the Board of Directors, a Chairman of the Board,
one or more additional vice-presidents, one or more assistant secretaries, one
or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article. One person may hold
two or more offices, except that the offices of the President and Secretary
shall not be held by the same person.
Section 2: ELECTION. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article IV, shall be chosen annually by the Board of
Directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
Section 3: SUBORDINATE OFFICERS. The Board of Directors may
appoint and may empower the President to appoint such other officers as the
business of the Corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in the
By-Laws or as the Board of Directors may from time to time determine.
Section 4: REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by the Board of Directors at any regular
or special meeting thereof, or, except in case of an officer chosen by the Board
of Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to
the Board of Directors, or to the President, or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
<PAGE>
9
Section 5: VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, shall be
filled in the manner prescribed in the ByLaws for regular appointments to such
office.
Section 6: CHAIRMAN OF THE BOARD. The Chairman of the Board,
if there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors and exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of Directors or prescribed
by the By-Laws.
Section 7: PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman, if there be such
an officer, the President shall be the chief executive officer of the
Corporation, and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be one, at all meetings of the
Board of Directors. He shall be ex-officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of the
President of a Corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or by the By-Laws.
Section 8: VICE-PRESIDENT. In the absence or disability of the
President, the Vice-Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice-President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to, all the restrictions upon the
President. The Vice-Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or by the By-Laws.
Section 9: SECRETARY. The Secretary shall keep, or cause to be
kept, at the principal office or such other place as the Board of Directors may
order, a book of Minutes of all meetings of Directors, shareholders, and the
Executive Committee, if any, with the time and place of holding, whether regular
or special, and if special how authorized, the notice thereof given, the names
of those present at the Directors' and Executive Committee meetings, the number
of shares present or represented at shareholders' meetings, and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the
principal office, at the office of the Corporation's transfer agent, or at such
other place as the Board of Directors may order, a share register, or a
duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he
<PAGE>
10
shall keep the seal of the Corporation in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors, or the By-Laws.
Section 10: TREASURER. The Treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus, and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
at all times be open to inspection of any Director.
The Treasurer shall deposit all moneys and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all of his
transactions as Treasurer, and of the financial condition of the Corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the By-Laws.
ARTICLE V
Miscellaneous
-------------
Section 1: RECORD DATE AND CLOSING STOCK BOOKS. The Board of
Directors may fix a time in the future for the record date for the determination
of the shareholders entitled to: (1) Notice of, and to vote at, any meeting of
the shareholders, (2) give any written consent provided for by law, or (3)
receive any dividend or distribution or any allotment of rights or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
date of the meeting or event for the purpose of which it is fixed. When a record
date is so fixed only shareholders of record on that date are entitled to notice
of, and to vote at the meeting; to give written consents; to receive a dividend,
distribution or allotment of rights; or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date.
The Board of Directors may close the books of the Corporation
against transfers of shares during the whole or any part of a period not more
than fifty (50) days prior to the date of a shareholders' meeting; the date for
giving of written consents; the date when the right to any dividend,
distribution or allotment of rights vests; or the effective date of any change,
conversion or exchange of shares.
Section 2: INSPECTION OF CORPORATE RECORDS. The share
register, or duplicate share register, the books of account, and Minutes of the
proceedings of the shareholders and Directors, and of the Executive Committee or
other committees of the Directors shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate at any
reasonable time, and for a purpose reasonably related to his interest as a
shareholder, or the holder of a voting trust certificate, and shall be exhibited
at any time when
<PAGE>
11
required by the demand of ten percent (10%) of the shares represented at any
shareholders' meeting. Such inspection may be made in person or by an agent or
attorney, and shall include the right to make extracts. Demand of inspection
other than at a shareholders' meeting shall be made in writing upon the
President or Secretary of the Corporation.
Section 3: CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as from time to time shall be determined by
resolution of the Board of Directors.
Section 4: CONTRACTS, ETC., HOW EXECUTED. The Board of
Directors, except as in the By-Laws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name and on behalf of the corporation, and such authority may
be general or confined to specific instances; and unless so authorized by the
Board of Directors, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or to any amount.
Section 5: ANNUAL REPORTS. The Board of Directors of the
Corporation shall cause an annual report to be sent to the shareholders not
later than one hundred twenty (120) days after the close of the fiscal year
calendar year in compliance with the provisions of Section 3007, et seq. of the
California Corporations Code.
Section 6: CERTIFICATE OF STOCK. A certificate or certificates
for shares of the capital stock of the corporation shall be issued to each
shareholder when any such shares are fully paid up. All such certificates shall
be signed by the President or a Vice-President and the Secretary or an Assistant
Secretary, or be authenticated by facsimiles of signatures of the President and
Secretary, or by a facsimile of the signature of the President and the written
signature of the Secretary or an Assistant Secretary. Every certificate
authenticated by a facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and be registered by an incorporated bank or trust
company, either domestic or foreign, as registrar of transfers, before issuance.
Even though an officer who signed, or whose facsimile signature has been
written, printed or stamped on, a certificate for shares shall have ceased by
death, resignation or otherwise to be an officer of the corporation before such
certificate is delivered by the Corporation, such certificate shall be as valid
as though signed by a duly elected, qualified and authorized officer, if it be
countersigned by a transfer agent or transfer clerk and registered by an
incorporated bank or trust company as registrar of transfers.
Certificates for shares may be issued prior to full payment
under such restrictions and for such purposes as the Board of Directors or the
By-Laws may provide, provided, however, that any such certificate so issued
prior to full payment shall state the amount remaining unpaid and the terms of
payment thereof.
Section 7: LOST CERTIFICATES. Except as hereinafter in this
Section provided, no new certificate for shares shall be issued in lieu of an
old one unless the latter is
<PAGE>
12
surrendered and canceled at the same time. The Board of Directors may, however,
in case any certificate of shares is lost, stolen, mutilated or destroyed,
authorize the issuance of a new certificate in lieu thereof upon such terms and
conditions, including reasonable indemnification of the corporation, as the
Board shall determine.
Section 8: REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice-President and Secretary or any Assistant Secretary of this
Corporation are authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any other person
authorized to do so by proxy or power of attorney duly executed by said
officers.
Section 9: INSPECTION OF BY-LAWS. The Corporation shall keep
in its principal office for the transaction of business the original or a copy
of the By-Laws as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 10: REGISTRARS AND TRANSFER AGENTS. The Board of
Directors may appoint one or more registrars of transfers, which shall be
incorporated banks or trust companies, either domestic or foreign, and one or
more transfer agents or transfer clerks, and who shall be appointed at such
times and places as the requirements of the Corporation may necessitate.
Section 11: FISCAL YEAR. The fiscal year of the Corporation
shall be determined by the Board of Directors and, having been so determined, is
subject to change from time to time as the Board of Directors shall determine.
Section 12: CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the California General Corporation Law shall govern the
construction of these By-Laws. Without limiting the generality of the foregoing,
the masculine gender includes the feminine and neuter, the singular number
includes the plural and the plural number includes the singular and the term
"person" includes a corporation, partnership and trust, as well as a natural
person.
ARTICLE VI
Subchapter S Election
---------------------
Section 1: SUBCHAPTER S. ELECTION. If this Corporation has
elected to be taxed pursuant to the provisions of Subchapter S of the Internal
Revenue Code of 1954 as amended, then any person to whom any of its shares are
transferred, shall upon demand by the Corporation, file with the proper Tax
Director of the Internal Revenue Service the necessary
<PAGE>
13
shareholder consent to such election within thirty (30) days after the date of
sale or transfer to him.
ARTICLE VII
Transfer of Shares
------------------
Section 1: TRANSFER OF SHARES. The shares of stock of this
Corporation shall be issued and held upon the condition that before there can be
a valid sale or transfer of any of said shares, the holder of the shares to be
sold or transferred shall give notice to the Secretary of this Corporation of
his intention to sell or transfer such shares. Said notice shall specify the
number of shares to be sold or transferred, the price per share, the terms upon
which such holder intends to make such sale or transfer, and the name of the
intended purchaser or transferee. The Board of Directors shall have ten (10)
days from the date of receipt of such notice by the Secretary within which to
exercise an option to purchase such stock for the Corporation at the same price
and upon the same terms as set forth in said notice. The right of this
Corporation to exercise such option and to purchase such shares is subject to
the restrictions governing the right of a corporation to purchase its own stock
contained in Section 1705 of the California Corporation Code, and such other
pertinent governmental restrictions as are now or may be hereafter effective.
If any such shares shall not be purchased by the Corporation,
the Secretary of this Corporation shall notify all of the shareholders of record
of this Corporation by mail of said contemplated sale or transfer. Said notice
to shareholders shall contain the same information concerning the proposed sale
or transfer as received by the Corporation, and the Secretary shall mail said
notice to the shareholders immediately upon receipt by him of notification from
the Board of Directors that the Corporation will not purchase any or all of said
shares, or in no event late than ten (10) days after receipt by the Secretary of
the notice of intended sale or transfer. Within twenty (20) days after the date
of mailing of said notice to the shareholders any such shareholders desiring to
acquire any or all of the shares referred to in said notice, shall deliver to
said Secretary a written offer to purchase said shares or a specified number
thereof at the same price and upon the same terms stated in the above mentioned
notice filed with the Secretary.
If the total number of shares specified in such offers by
shareholders equals but does not exceed the number of shares referred to in said
notice to shareholders and not purchased by this Corporation, then the offering
shareholders shall be entitled to purchase the shares pursuant to their
respective offers. If the total number of shares specified in said offers
exceeds the number of shares referred to in said notice, and not purchased by
the Corporation, each offering shareholder shall be entitled to purchase such
proportion of the shares available for purchase as the number of shares of the
Corporation which he holds bears to the total number of shares held by all of
such shareholders desiring to purchase shares. If the total number of shares
specified in such offers to purchase is less than the number of shares referred
to in the notice to shareholders, and not purchased by said Corporation, the
offering shareholders shall not be entitled to purchase any shares, and the
exercise of any option to purchase, or election to purchase any shares by the
Corporation shall be void and without force and effect. The seller or
<PAGE>
14
transferor in such case may sell or transfer said shares subject to the
provisions and restrictions provided for below.
Any shares mentioned in such notice of intention to transfer
filed with the Secretary and not so purchased by the Corporation, or other
shareholders, may be sold or transferred at any time within six (6) months from
the date of such notice to the person and at the price and terms specified
therein. Such purchaser or transferee shall receive and hold said shares subject
to all of the provisions and restrictions herein contained.
Section 2: WAIVER. The provisions of Section 1 of this Article
VII, and the options and rights therein granted may be waived with respect to
any proposed sale or transfer of shares by written waiver executed by the
Corporation and by the owners of one hundred percent (100%) of the outstanding
capital stock of the Corporation. In the event of any such waiver the provisions
of this Article shall not be applicable to the proposed sale or transfer of
shares with respect to which such waivers shall have been executed, but shall be
applicable to all other shares or transfers of shares.
ARTICLE VIII
Amendments
----------
Section 1: POWERS OF SHAREHOLDERS. New By-Laws may be adopted
or these By-Laws may be amended or repealed by the vote of shareholders entitled
to exercise a majority of the voting power of the Corporation, or by the written
assent of such shareholders, provided, however, that neither Article VII nor
this Article VIII may be amended or repealed without the vote or written assent
of the shareholders owning at least eighty percent (80%) of the outstanding
capital stock of the Corporation.
Section 2: POWERS OF DIRECTORS. Subject to the right of the
shareholders, as provided in Section 1 of this Article VIII to adopt, amend or
repeal By-Laws, By-Laws other than By-Laws amending or repealing Article VI, and
this Article VIII, and a By-Law changing the authorized number of Directors may
be adopted, amended, or repealed by the Board of Directors; provided, however,
that the Board of Directors may adopt, amend or repeal a By-Law fixing the exact
number of Directors within the limits set by Section 2 of Article III of these
ByLaws if said section provides for a variable number of Directors.
<PAGE>
Exhibit 3.19
Exhibit A
SVM of Texas, Inc.
----------------------------------
BY-LAWS
----------------------------------
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Dallas,
Texas.
Section 2. The corporation may also have offices at such other
places both within and without the State of Texas as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of
directors shall be held in Dallas, State of Texas, at such place as may be fixed
from time to time by the board of directors. Said meetings may also be held at
such other place either within or without the State of Texas as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting.
Section 2. Annual meetings of shareholders commencing
with the year 1984 shall be held on the first Monday of October,
<PAGE>
2
if not a legal holiday, and if a legal holiday, then on the next secular day
following, at which they shall elect by a plurality vote a board of directors,
and transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting
stating the place, day and hour of the meeting shall be delivered not less than
ten, nor more than fifty, days before the date of the meeting, either personally
or by mail, by or at the direction of the president, the secretary or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose
other than the election of directors may be held at such time and place within
or without the State of Texas as shall be stated in the notice of the meeting or
in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute or by the articles
of incorporation, may be called by the president, the board of directors, or the
holders of not less
<PAGE>
3
than one-tenth of all of the shares entitled to vote at the meeting.
Section 3. Written or printed notice of a special meeting
stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be delivered not less than ten, nor more than
fifty, days before the date of the meeting, either personally or by mail, by or
at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person
<PAGE>
4
or represented by proxy shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a
majority of the shares of stock represented at the meeting shall be the act of
the shareholders unless the vote of a greater number of shares of stock is
required by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting
power, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact.
In all elections for directors every shareholder, entitled to
vote, shall have the right to vote, in person or by proxy, the number of shares
of stock owned by him, for as many persons as there are directors to be elected.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be
<PAGE>
5
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be three. Directors
need not be residents of the State of Texas nor shareholders of the corporation.
The directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his board of directors shall hold
office until the first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
Any directorship to be filled by reason of an increase in the
number of directors shall be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose. A director elected to
fill a newly created
<PAGE>
6
directorship shall serve until the next succeeding annual meeting of
shareholders and until his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be
managed by its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the articles of incorporation or by these by-laws directed or required to be
exercised or done by the shareholders.
Section 4. The directors may keep the books of the
corporation, except such as are required by law to be kept within the state,
outside of the State of Texas, at such place or places as they may from time to
time determine.
Section 5. The board of directors, by the affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
<PAGE>
7
Section 1. Meetings of the board of directors, regular or
special, may be held either within or without the State of Texas.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be
held upon such notice, or without notice, and at such time and at such place as
shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be
called by the president on two days' notice to each director, either personally
or by mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where
<PAGE>
8
a director attends for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need by specified in the notice or waiver of notice of
such meeting.
Section 6. Two of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Unless otherwise restricted by the articles of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing which shall set forth the action taken and be
<PAGE>
9
signed by all members of the board of directors or of the committee as the case
may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a
majority of the full board of directors, may designate from among its members an
executive committee and one or more other committees, each of which, to the
extent provided in the resolution, shall have and may exercise all of the
authority of the board of directors, except that no such committee shall have
the authority of the board of directors in reference to amending the articles of
incorporation, approving a plan of merger or consolidation, recommending to the
shareholders the sale, lease or exchange of all or substantially all of the
property and assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a voluntary dissolution
of the corporation or a revocation thereof, amending, altering, or
<PAGE>
10
repealing the by-laws of the corporation or adopting new by-laws for the
corporation, filling vacancies in the board of directors or any committee,
electing or removing officers or members of any committee, fixing the
compensation of any member of a committee, or altering or repealing any
resolution of the board of directors which by its terms provides that it shall
not be so amendable or repealable; and, unless the resolution expressly so
provides, no committee shall have the power or authority to declare a dividend
or to authorize the issuance of shares of the corporation.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the articles of incorporation or of these by-laws, notice is required to be
given to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon paid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice whatever is required to be
given under the provisions of the statutes or under the pro visions of the
articles of incorporation or these by-laws, a waiver thereof in writing signed
by the person or persons en-
<PAGE>
11
titled to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president and a secretary. The board of
directors may also choose one or more vice presidents, a treasurer, and one or
more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after
each annual meeting of shareholders shall choose the officers, none of whom need
be a member of the board.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the board of directors may be removed at
<PAGE>
12
any time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the corporation shall be filled by the board
of directors.
THE PRESIDENT
Section 6. The president shall be the chief operating officer
of the corporation, shall have general and active manage ment of the day to day
business of the corporation and shall see that all orders and resolutions of the
board of directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, if any, or if there shall be
more than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such powers as the board of directors may from time to time
prescribe.
<PAGE>
13
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be pre scribed by the
board of directors or president, under whose supervision he shall be. He shall
have custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, if any, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and
<PAGE>
14
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all
<PAGE>
15
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, if any, or, if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented
by certificates signed by the president or a vice president and the secretary or
assistant secretary of the corpor ation, and may be sealed with the seal of the
corporation or a facsimile thereof.
When the corporation is authorized to issue shares of more
than one class there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any shareholder upon request and without charge, a full statement of
the designations, preferences, limitations and relative rights of the
<PAGE>
16
shares of each class authorized to be issued and the corporation will furnish a
copy of such statement to the record holder of the certificate without charge on
written request to the corporation at its principal place of business or
registered office. Every certificate shall have noted thereon any information
required to be set forth by the Texas Business Corporation Act and such
information shall be set forth in the manner provided in said Act.
Section 2. The signatures of the officers of the corporation
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the
<PAGE>
17
issuance thereof, may prescribe such terms and conditions as it deems expedient,
and may require such indemnities as it deems adequate, to protect the
corporation from any claim that may be made against it with respect to any such
certificate alleged to have been lost or destroyed.
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders,
<PAGE>
18
such books shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the stock transfer books, the board of directors may
fix in advance a date as the record date for any such determination o f
shareholders, such date in any case to be not more than fifty days and, in case
of a meeting of shareholders, not less than ten days prior to the date an which
the particular action, requiring such determination of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the board of directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person
<PAGE>
19
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Texas.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer
books for shares shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of each and the number
of shares held by each, which list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original share ledger or transfer
book, or a duplicate thereof, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of the share holders.
ARTICLE XI
<PAGE>
20
GENERAL PROVISIONS - DIVIDENDS
Section 1. Subject to the provisions of the articles of
incorporation relating thereto, if any, dividends may be de clared by the board
of directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property or in shares of the capital stock, subject to any
pro visions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
<PAGE>
21
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Texas". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed
or new by-laws may be adopted by the affirmative vote of a majority of the board
of directors at any regular or special meeting of the board subject to repeal or
change at any regular or special meeting of shareholders at which a quorum is
present or represented, by the affirmative vote of a majority of the stock
entitled to vote, provided notice of the proposed repeal or change be contained
in the notice of such meeting.
Section 2. These by-laws may be altered, amended or repealed
or new by-laws may be adopted at any regular or special meeting of shareholders
at which a quorum is present or represented, by the affirmative vote of a
majority of the stock
<PAGE>
22
entitled to vote, provided notice of the proposed alteration, amendment or
repeal be contained in the notice of such meeting.
<PAGE>
Exhibit 3.20
FOR PROFIT 161-121-9
D-___________ Articles of Incorporation
We, the undersigned, incorporator(s), hereby associate ourselves
together to form and establish a corporation FOR profit under the laws of the
State of Kansas.
ARTICLE ONE: The name of the corporation is VOLUME SERVICES, INC.
ARTICLE TWO: The address of its registered office in Kansas is Shadow
Wood Office Park, 5863 S.W. 29th Street, in the city of Topeka , county of
Shawnee , 66614 , and the name of the resident agent in charge thereof at the
above address is Bob W. Storey.
ARTICLE THREE: This corporation is organized FOR profit and the
nature of its business or purposes to be conducted or promoted is: To provide
food and beverage service and to engage in any other lawful act or activity for
which corporations may be organized under the Kansas General Corporation Code.
ARTICLE FOUR: The total number of shares which this corporation shall
be authorized to issue is as follows: (Describe fully the class or classes of
stock and the value of each.)
100 shares of common stock, class A par value of ten dollars each
- -------------- ---------- --- ------
shares of stock, class par value of dollars each
- -------------- ---------- --- ------
shares of stock, class without nominal or par value
- -------------- ---------- ---
shares of stock, class without nominal or par value
- -------------- ---------- ---
State the designations, powers, preferences, rights, qualifications,
limitations or restrictions applicable to any class of stock, if any: As
provided by Bylaws.
Statement of Grant of Authority to be given to the Board of Directors,
if any: As provided by Bylaws.
ARTICLE FIVE: The name and mailing address of each INCORPORATOR is as
follows:
- --------------------------------------------------------------------------------
| | Shadow Wood Office Park | |
| | 5863 S.W. 29th Street | |
| Bob W. Storey | Topeka, Kansas 66614 | |
|-------------------------------|--------------------------|-------------------|
|-------------------------------|--------------------------|-------------------|
|-------------------------------|--------------------------|-------------------|
|-------------------------------|--------------------------|-------------------|
- --------------------------------------------------------------------------------
ARTICLE SIX: The name and mailing address of each person who is to
serve as a director until the first annual meeting of the stockholders or until
a successor is elected and qualified is as follows:
- --------------------------------------------------------------------------------
| | Volume Services, Inc. | |
| Nicholas A. Dinielli | 222 N. La Salle St., | Chicago, IL 60601 |
- --------------------------------------------------------------------------------
| Karl H. Sedlarz | " " " | " " " |
- --------------------------------------------------------------------------------
| Ronald R. Skadow | " " " | " " " |
- --------------------------------------------------------------------------------
| | Volume Services | |
| | 323 W. 8th Street, Suite 407 | |
| Lawrence A. Hatch | Kansas City, MO 64105 | |
- --------------------------------------------------------------------------------
<PAGE>
2
ARTICLE SEVEN: Is this corporation to exist perpetually? YES X NO
-- --
If no, the term for which this corporation is to exist is__________________.
ARTICLE EIGHT: The corporation's annual fiscal year closing date is
(if known) December 31.
In Testimony Whereof, I have hereunto subscribed my name this 10th
day of November, A.D. 1987. (Signatures must correspond to the names of the
incorporator(s) listed in ARTICLE FIVE.)
/s/ Bob W. Storey
- ---------------------------- ----------------------------------------------
- ---------------------------- ----------------------------------------------
- ---------------------------- ----------------------------------------------
STATE OF KANSAS )
---------------- ) ss.
COUNTY OF SHAWNEE )
----------------
Before me, a Notary Public in and for said county and state,
personally appeared: Bob W. Storey who is known to me to be the same person
who executed the foregoing Articles of Incorporation and duly acknowledged the
execution of the same.
In Witness Whereof, I have hereunto subscribed
my name and affixed my official seal, this
10th day of November, A.D. 1987.
-----------------------------------------
Notary Public
[SEAL]
Edna Ferguson
NOTARY PUBLIC
State of Kansas
My Appt. Expires March 19, 1980
My appointment or commission expires ______________ , 19___.
THIS FORM MUST BE SUBMITTED TO THIS OFFICE IN DUPLICATE.
THE FILING FEE OF $75 MUST ACCOMPANY THIS FORM.
MAIL THIS DOCUMENT, WITH PAYMENT TO:
Secretary of State
Capitol, 2nd Floor
Topeka, Kansas 66612
<PAGE>
BYLAWS
OF
VOLUME SERVICES, INC.
Offices
1. Registered Office and Resident Agent. The location of the
registered office and name of the resident agent in the state of Kansas shall be
such as shall be designated from time to time by the Board of Directors and be
on file in the appropriate office of the State of Kansas pursuant to applicable
provisions of law.
2. Corporate Offices. The corporation may also have offices at
such other places within and without the state of Kansas as the Board of
Directors may from time to time appoint or as the business of the corporation
may require.
Stockholders' Meetings
3. Place of Meetings. Meetings of the stockholders may be held
within or without the state of Kansas at such place as may be specified in the
notice of meeting, or as may be consented to by the holders of all of the issued
and outstanding capital stock of the corporation having the right to vote at
such meeting. If no place for any such meeting is specified in the notice
thereof, the same shall be held at the registered office of the corporation in
the state of Kansas.
4. Annual Meeting. An annual meeting of the stockholders for
the election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held on the third Friday of November of each year, if not a legal
holiday, and if a legal holiday, then on the day following. The hour of the
meeting shall be fixed in the notice of waiver or call of the meeting. If no
time is so fixed, the hour of the meeting shall be 10:00 A.M.
5. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President, or the acting President, by the Board of Directors, or by the
holder of not fewer than one-fifth of all outstanding shares of stock entitled
to vote at an annual meeting, and shall be called by any officer directed to do
so by the Board of Directors. Business transacted at all special meetings shall
be confined to the subjects stated in the call.
The "Call" and the "Notice" of any such meeting shall be
deemed synonymous.
<PAGE>
2
6. Notice. Written or printed notice of each meeting of the
stockholders, whether annual or special, stating the place, date and time
thereof, and in case of a special meeting, the purpose or purposes thereof,
shall be delivered to or mailed to each stockholder entitled to vote thereat at
his post office address as appears on the stock books of the corporation, not
less than ten nor more than thirty days prior to the meeting, unless, as to a
particular matter, other or further notice is required by law, in which case
such other or further notice shall be given.
Any notice of a stockholders' meeting sent by mail shall be
deemed to be delivered when deposited in the United States mail with postage
thereon prepaid, addressed to the stockholder at his address as it appears on
the stock books of the corporation.
7. Waiver of Notice. Whenever any notice is required to be
given under the provisions of these Bylaws, the Articles of Incorporation of the
corporation, or of any law, a waiver thereof, if permitted by law, in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed the equivalent to the giving of such
notice.
8. Quorum. Except as otherwise may be provided by law, by the
Articles of Incorporation or by these Bylaws, the holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
by proxy, shall be required for, and shall constitute, a quorum at all meetings
of the stockholders for the transaction of business.
9. Proxies. At any meeting of the stockholders, every
stockholder having the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting unless said
instrument provides for a longer period.
10. Voting. Such stockholder shall have one vote for each
share of stock having voting power registered in his name on the books of the
corporation. Except where the transfer books of the corporation shall have been
closed, or a date shall have been fixed as a record date for the determination
of its stockholders entitled to vote, no share of stock shall be voted at any
election for directors which shall have been transferred on the books of the
corporation within twenty days next preceding such election of directors.
Directors
11. Directors - Powers of the Board. The property and business
of this corporation shall be managed by its Board of
<PAGE>
3
Directors, which may consist of one or more persons. Directors need not be
stockholders unless the Articles of Incorporation at any time so require. In
addition to the powers and authorities by these Bylaws expressly conferred upon
it, the Board of Directors may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws prohibited or directed or required to be
exercised or done by the stockholders only.
12. Term of Office. The first Board of Directors shall be
elected at the first duly held meeting of the incorporators, and thereafter they
shall be elected at the annual meetings of the stockholders. Each director so
elected, or appointed as hereinafter provided, shall serve until his successor
shall have been elected and shall qualify, or until his written resignation
shall have been filed with the Secretary of the corporation. Each director, upon
his election, shall qualify by accepting the office of director by executing and
filing with the corporation a written acceptance of his election, which shall be
placed in the minute book.
13. Vacancies. If the office of any director becomes vacant by
reason of death, resignation or incapacity to act (which incapacity may be
conclusively determined by the remaining directors), a majority of the remaining
directors, or the remaining director though less than a quorum, may fill the
vacancy. The director so chosen shall hold office until his successor shall be
elected at the next annual meeting of the stockholders, and shall qualify.
14. Regular Meetings - Notice. Regular meetings of the Board
of Directors may be held without notice at the registered office of the
corporation in the state of Kansas, or at such other place or places, within or
without the state of Kansas, as the Board of Directors may from time to time
designate. Any business may be transacted at a regular meeting.
15. Special Meetings - Notice. Special meetings may be called
at any time by the Chairman of the Board or President, or in their absence, by
any Vice President, by the Secretary or by any two directors, by giving two
days' notice of such meeting to each director, either personally or by mail or
telegram, stating the time, place and purpose of any such meeting. The place may
be within or without the state of Kansas as designated in the notice.
16. Quorum. A quorum at all meetings of the Board of Directors
shall consist of a majority of the whole board, unless a greater number as to
any particular matter is required by statute, by the Articles of Incorporation
or by these Bylaws. Less than a quorum may adjourn the meeting successively
until a quorum is present, and no notice of adjournment shall be required.
<PAGE>
4
17. Waiver. Any notice provided or required to be given to the
directors may be waived in writing by any of them, whether before, or at or
after the time stated therein. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where he attends for the
express purpose, and so states at the opening of such meeting, or objects to the
transaction of any business because the meeting is not lawfully called or
convened.
18. Committees of Directors. The Board of Directors may by
resolution, or resolutions, passed by a majority of the whole board, create and
designate one or more committees, each committee to consist of two or more of
the directors of the corporation.
19. Compensation of Directors and Committee Members. Directors
and committee members shall not receive any stated salary for their services as
such; but by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the board or committee, provided that nothing herein contained shall
be construed to preclude any director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
20. Indemnification of Directors and Voting Trustees. Each
director of the corporation and each voting trustee under any voting trust
agreement (which has been entered into between the owners and holders of the
shares of the corporation, such voting trustees and the corporation), shall be
indemnified by the corporation against all costs and expenses (including counsel
fees) actually and necessarily incurred by or empowered upon him in connection
with the defense of any action, suit or proceeding to which he shall be made a
party by reason of his being or having been a director of the corporation or
such voting trustee (whether or not he continues to be a director or such voting
trustee at the time of incurring such costs and expenses), except in relation to
any matters as to which he shall be adjudged in such action, suit or proceeding,
without such judgment being reversed, to have been liable for gross misconduct
in the performance of his duties as such director or such voting trustee. In the
event of the settlement of any such action, suit or proceeding prior to final
judgment, the corporation shall also make reimbursement or payment of the costs,
expenses and amounts paid or to be paid in settling any such action, suit or
proceeding, when such settlement appears to be in the interests of the
corporation to a majority of the directors who are not involved, or to two or
more stockholders holding or beneficially owning at least one-third in amount of
the shares of stock of the corporation having voting rights then outstanding.
<PAGE>
5
Officers
21. Elected Officers. The Board of Directors at each annual
meeting thereof shall elect a President from among their own number, and shall
also elect a Secretary and Treasurer and, if desired, one or more Vice
Presidents. The Secretary, Treasurer and Vice Presidents need not be members of
the Board of Directors. If the board so desires, the President, Secretary and
Treasurer may be the same person, and also a Vice President may hold the office
of Secretary and Treasurer. The Secretary and Treasurer may be the same person.
22. Appointed Officers and Agents. The Board of Directors may
from time to time appoint such Assistant Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other agents and attorneys as may be deemed necessary,
who may exercise such powers, possess such authorities, and perform such duties
as shall be determined by the Board of Directors.
23. Term of Office. Each elected officer of the corporation
shall hold office until his successor is chosen and qualified, or until he
resigns or is removed by the Board of Directors, whichever occurs first.
Appointed officers and agents shall hold office at the pleasure of the board.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of the majority of the whole Board of Directors. If
the office of any officer becomes vacant for any reason, such vacancy shall be
filled by the affirmative vote of a majority of the whole Board of Directors.
24. Salaries and Compensation of the Board. Salaries
and compensation of all elected officers of the corporation shall be fixed by
the Board of Directors. However, unless prohibited by law, the power to fix
salaries and compensation, except as to the salary and compensation of the
President, may be delegated by the Board of Directors to the President or to a
committee. Salaries and compensation of all other officers, employees and agents
of the corporation may be fixed by the Board of Directors; but until action is
taken with respect thereto by the Board of Directors, they may be fixed,
increased or decreased by the President of the corporation or by any other
elected officer to whom the Board of Directors may delegate authority therefor.
Duties of Officers
25. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the directors
and at all meetings of the stockholders, unless the stockholders choose a
different presiding officer for any meeting. He shall have general and active
management of the affairs and activities of the corporation, subject to the
direction of the Board of Directors, and shall see that all orders and
resolutions of the board are carried into effect. He shall execute bonds,
mortgages and other
<PAGE>
6
contracts requiring execution by the corporation. He shall also be ex officio a
member of all standing committees.
26. Vice President. The Vice Presidents in the order of their
seniority shall, in the absence, disability or inability to act of the
President, perform the duties and exercise the powers of the President (except
the power to fix or alter compensation) and shall perform such other duties as
the Board of Directors shall from time to time prescribe.
27. The Secretary and Assistant Secretaries. The
Secretary shall attend all meetings of the Board of Directors and stockholders,
unless the stockholders at any meeting choose a different person to act as
secretary of the meeting; shall record or cause to be recorded all votes taken
and the minutes of all such proceedings at which he acts as Secretary; and shall
file such in a minute book of the corporation to be kept for that purpose. He
shall give, or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors, except as otherwise provided in these Bylaws, and
shall perform such other duties as are incident to the office of Secretary and
as may be assigned by the Board of Directors or President under whose
supervision he shall be. When authorized to do so, he shall attest any
instruments requiring it by affixing his signature.
The Assistant Secretaries, in the order of their seniority, in
the absence, disability or inability to act of the Secretary, shall perform the
duties and exercise the powers of the Secretary and shall perform such other
duties as the Board of Directors may from time to time prescribe.
28. The Treasurer and Assistant Treasurers. The
Treasurer shall have responsibility for the safekeeping of the funds and
securities of the corporation and shall keep, or cause to be kept, full and
accurate accounts of receipts and disbursements in books belonging to the
corporation. He shall keep, or cause to be kept, all other books of account and
accounting records of the corporation, and shall deposit, or cause to be
deposited, all moneys and other valuable effects in the name and to the credit
of the corporation in such depositories as may be designated by the Board of
Directors.
He shall disburse, or permit to be disbursed, the funds of the
corporation as may be ordered or authorized generally by the Board of Directors,
or as may be directed specifically by the President. He shall render to the
chief executive officers of the corporation and the Board of Directors, whenever
they may require it, an account of all his transactions as Treasurer, of those
under his jurisdiction, and of the financial status and affairs of the
corporation.
He shall be the chief financial and account officer of the
corporation; shall have the general duties, powers and
<PAGE>
7
responsibilities of a Treasurer of a corporation; and shall perform such other
duties and have such other responsibilities and authority as may be assigned to
him from time to time by the Board of Directors or President.
The Assistant Treasurers, in the order of their seniority, in
the absence, disability or inability of the Treasurer, shall perform the duties
and exercise the powers of the Treasurer and shall perform such other duties as
the Board of Directors shall from time to time prescribe.
29. Duties of Officers May Be Delegated. If an officer of the
corporation be absent or unable to act, or for any other reason that the Board
of Directors may deem sufficient, the Board of Directors may delegate for the
time being some or all of the functions, duties, powers and responsibilities of
any officer to any other officer, or to any other agent or employee of the
corporation or other responsible person, provided a majority of the whole board
concurs therein.
Shares of Stock
30. Certificates of Stock. Each holder of stock of the
corporation shall be entitled to a certificate signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, certifying the number, class and character of shares owned
by him. If the corporation has a transfer agent or assistant transfer agent or a
transfer clerk acting on behalf of such corporation and a registrar, the
signature of any such officer may be facsimile. The certificates of stock shall
be numbered consecutively and shall be entered in the books of the corporation
as they are issued.
31. Transfers of Stock - Transfer Agent - Registrar. Transfers
of stock shall be made on the books of the corporation only by the person named
in the stock certificate or by his attorney lawfully constituted in writing, and
upon surrender of the certificate therefor. The stock record book and other
transfer records shall be in the possession of the Secretary or of a transfer
agent or clerk of the corporation.
32. Lost Certificates. In the case of the loss or destruction
of any outstanding certificate of stock of the corporation, the President or
Secretary may issue a duplicate certificate (plainly marked "duplicate") in its
place, upon the registered owner thereof or his legal representative furnishing
due proof of loss thereof by affidavit, the advertisement thereof in such manner
as required by the Board of Directors and if required by the Board of Directors,
and a bond sufficient to indemnify the corporation against any claim that may be
made against it on account of the alleged loss of such certificate.
<PAGE>
8
33. Preemptive or Reserved Rights. The existing stockholders
shall have the right to purchase and acquire the stock of a selling stockholder
before sale thereof to a nonstockholder.
34. Procedure for Sale. If any stockholder desires to sell his
shares of stock, he shall first offer such share or shares for sale to the other
stockholders and the corporation (it being the intention hereof to give the
other stockholders and the corporation a preference in the purchase of such
shares of stock). An attempted sale thereof in violation of this provision shall
be void. A stockholder desiring to sell his shares of stock shall file notice in
writing of his intention so to do with the Secretary of the corporation, stating
the price and terms of sale. Unless his terms are accepted by any or all of the
stockholders, or the corporation, within thirty days thereafter, they shall be
deemed to have waived their privileges of purchasing said shares of stock. The
owner thereof then shall have the right to sell to whomsoever will purchase for
the price and upon the terms stated in said notice so filed with the Secretary
of the corporation, or at a cash price in excess thereof.
35. Exceptions. Section 34 of these Bylaws is subject to the
following provisions: (1) the shares of stock owned by any stockholder who dies
intestate shall pass to his heirs by the laws of intestate succession; (2) any
stockholder shall have the right to sell and dispose of his stock to any person
or persons who are his heirs-apparent, or who are within the degree of
relationship provided by Section 59-509 of the Kansas Statutes Annotated; (3)
any such stockholder shall have the right and power to dispose of his stock by
will; (4) any such stockholder shall have the right and power to pledge his
stock to a bank or other lending institution as security for a loan.
General
36. Dividends. Dividends upon the shares of stock of the
corporation, subject to the provisions of the Articles of Incorporation, if any,
and of the applicable law or statute, may be declared by the Board of Directors
at any regular or special meeting. Dividends may be paid in cash, in property or
in shares of its stock and to the extent and in the manner provided by law
out of any available earned surplus or earnings of the corporation.
Liquidating dividends or dividends representing a distribution
of paid-in surplus or a return of capital shall be made only when and in the
manner permitted by law.
37. Creation of Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the
<PAGE>
9
directors from time to time, in their discretion, think proper as a reserve fund
or funds, to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interests of the corporation. The
directors may abolish any such reserve in the manner in which it was created.
38. Fixing of Capital, Transfers of Surplus. Except as may be
specifically otherwise provided in the Articles of Incorporation, the Board of
Directors is expressly empowered to exercise all authority conferred upon it or
the corporation by any law or statute, and in conformity therewith relative to:
(i) The determination of what part of the consideration
received for shares of the corporation shall be
capital.
(ii) Increasing capital.
(iii) Transferring surplus to capital.
(iv) The consideration to be received by the corporation
for its shares.
(v) All similar or related matters; provided that any
concurrent action or consent by or of the corporation
and its stockholders required to be taken or given
pursuant to law shall be duly taken or given in
connection therewith.
39. Checks, Notes and Mortgages. All checks or instruments for
payment, disbursement or transfer of moneys or funds of the corporation may be
signed in its behalf by the Treasurer and/or such other officer or officers or
responsible persons as may be designated from time to time by resolution of the
Board of Directors. All notes of the corporation and any mortgages or other
forms of security given to secure the payment of the same shall be signed by the
President and attested by the Secretary or Assistant Secretary; provided that
the Board of Directors by resolutions adopted by a majority of the whole board
may authorize such other officer or officers or other responsible person or
persons to execute any such instruments for and in behalf of the corporation.
40. Fiscal Year. The fiscal year of the corporation may be
designated from time to time by the Board of Directors.
Amendment of Bylaws
41. Amendment of Bylaws. Subject to the provisions of the
Articles of Incorporation and the paramount power of the stockholders to amend,
alter or repeal these Bylaws at any annual
<PAGE>
10
or special meeting, these Bylaws may be altered, amended or repealed, and new
Bylaws enacted by the Board of Directors at an annual, regular or special
meeting thereof, if notice of the proposed change be contained in the notice of
the meeting; provided, however, that no change of the time and place of the
election of directors shall be made within sixty days next before the day on
which such election is to be held and that in case of any change of such time
and place, notice thereof shall be given to each stockholder in person or by
mail, mailed to his last known post office address at least twenty days before
the election next ensuing. Notice of any amendment of these Bylaws by the Board
of Directors shall be given to each stockholder having voting rights, in person
or by mail, mailed to his last known post office address within ten days after
the date of such amendment having been made by the Board of Directors.
<PAGE>
Certificate
I, Nicholas A. Dinielli, the undersigned, certify that I acted
as chairman of the first meeting of directors of Volume Services, Inc. held on
the 20th day of November 1987, at which meeting the foregoing Bylaws were duly
adopted as and for the Bylaws of the corporation; and I hereby further certify
that the foregoing constitute the Bylaws of said corporation.
Dated November 20, 1987.
/s/ Nicholas A. Dinielli
---------------------------
Nicholas A. Dinielli
<PAGE>
Exhibit 4.1
EXECUTION COPY
================================================================================
VOLUME SERVICES AMERICA, INC.
11 1/4% Senior Subordinated Notes due 2009
--------------------
INDENTURE
Dated as of March 4, 1999
--------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1
Definitions and Incorporation by Reference
<S> <C> <C> <C>
SECTION 1.01. Definitions ..............................................................................1
SECTION 1.02. Other Definitions........................................................................20
SECTION 1.03. Incorporation by Reference of Trust Indenture Act........................................20
SECTION 1.04. Rules of Construction....................................................................21
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series.................................................22
SECTION 2.02. Form and Dating..........................................................................23
SECTION 2.03. Execution and Authentication.............................................................23
SECTION 2.04. Registrar and Paying Agent...............................................................23
SECTION 2.05. Paying Agent To Hold Money in Trust......................................................24
SECTION 2.06. Securityholder Lists.....................................................................24
SECTION 2.07. Transfer and Exchange....................................................................25
SECTION 2.08. Replacement Securities...................................................................25
SECTION 2.09. Outstanding Securities...................................................................26
SECTION 2.10. Temporary Securities.....................................................................26
SECTION 2.11. Cancelation .............................................................................26
SECTION 2.12. CUSIP Numbers............................................................................26
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee.......................................................................27
SECTION 3.02. Selection of Securities to Be Redeemed...................................................27
SECTION 3.03. Notice of Redemption.....................................................................27
SECTION 3.04. Effect of Notice of Redemption...........................................................28
SECTION 3.05. Deposit of Redemption Price..............................................................28
SECTION 3.06. Securities Redeemed in Part..............................................................29
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ARTICLE 4
Covenants
<S> <C> <C> <C>
SECTION 4.01. Payment of Securities....................................................................29
SECTION 4.02. Reports and Other Information............................................................29
SECTION 4.03. Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock and Preferred Stock....................................30
SECTION 4.04. Limitation on Restricted Payments........................................................33
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Subsidiaries.................................................................38
SECTION 4.06. Asset Sales .............................................................................39
SECTION 4.07. Transactions with Affiliates.............................................................42
SECTION 4.08. Liens .............................................................................43
SECTION 4.09. Change of Control........................................................................43
SECTION 4.10. Compliance Certificate...................................................................45
SECTION 4.11. Further Instruments and Acts.............................................................45
SECTION 4.12. Future Guarantors........................................................................45
ARTICLE 5
Successor Company
SECTION 5.01. Merger, Consolidation or Sale of All or Substantially All
Assets.......................................................................45
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default........................................................................47
SECTION 6.02. Acceleration.............................................................................49
SECTION 6.03. Other Remedies...........................................................................49
SECTION 6.04. Waiver of Past Defaults..................................................................49
SECTION 6.05. Control by Majority......................................................................50
SECTION 6.06. Limitation on Suits......................................................................50
SECTION 6.07. Rights of Holders to Receive Payment.....................................................51
SECTION 6.08. Collection Suit by Trustee...............................................................51
SECTION 6.09. Trustee May File Proofs of Claim.........................................................51
SECTION 6.10. Priorities .............................................................................51
SECTION 6.11. Undertaking for Costs....................................................................51
SECTION 6.12. Waiver of Stay or Extension Laws.........................................................52
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ARTICLE 7
Trustee
<S> <C> <C> <C>
SECTION 7.01. Duties of Trustee........................................................................52
SECTION 7.02. Rights of Trustee........................................................................53
SECTION 7.03. Individual Rights of Trustee.............................................................54
SECTION 7.04. Trustee's Disclaimer.....................................................................54
SECTION 7.05. Notice of Defaults.......................................................................54
SECTION 7.06. Reports by Trustee to Holders............................................................54
SECTION 7.07. Compensation and Indemnity...............................................................54
SECTION 7.08. Replacement of Trustee...................................................................55
SECTION 7.09. Successor Trustee by Merger..............................................................56
SECTION 7.10. Eligibility; Disqualification............................................................56
SECTION 7.11. Preferential Collection of Claims Against Company........................................56
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.........................................57
SECTION 8.02. Conditions to Defeasance.................................................................58
SECTION 8.03. Application of Trust Money...............................................................59
SECTION 8.04. Repayment to Company.....................................................................59
SECTION 8.05. Indemnity for Government Obligations.....................................................59
SECTION 8.06. Reinstatement............................................................................59
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders...............................................................60
SECTION 9.02. With Consent of Holders..................................................................61
SECTION 9.03. Compliance with Trust Indenture Act......................................................62
SECTION 9.04. Revocation and Effect of Consents and Waivers............................................62
SECTION 9.05. Notation on or Exchange of Securities....................................................62
SECTION 9.06. Trustee To Sign Amendments...............................................................62
SECTION 9.07. Payment for Consent......................................................................63
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ARTICLE 10
Subordination
<S> <C> <C> <C>
SECTION 10.01. Agreement To Subordinate................................................................63
SECTION 10.02. Liquidation, Dissolution, Bankruptcy....................................................63
SECTION 10.03. Default on Senior Indebtedness..........................................................63
SECTION 10.04. Acceleration of Payment of Securities...................................................64
SECTION 10.05. When Distribution Must Be Paid Over.....................................................65
SECTION 10.06. Subrogation.............................................................................65
SECTION 10.07. Relative Rights.........................................................................65
SECTION 10.08. Subordination May Not Be Impaired by Company............................................65
SECTION 10.09. Rights of Trustee and Paying Agent......................................................65
SECTION 10.10. Distribution or Notice to Representative................................................66
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate..........................................................66
SECTION 10.12. Trust Moneys Not Subordinated...........................................................66
SECTION 10.13. Trustee Entitled To Rely................................................................66
SECTION 10.14. Trustee To Effectuate Subordination.....................................................66
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness.................................................................67
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions.....................................................67
SECTION 10.17. Trustee's Compensation Not Prejudiced...................................................67
SECTION 10.18. Defeassance ............................................................................67
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees .............................................................................67
SECTION 11.02. Limitation on Liability.................................................................69
SECTION 11.03. Successors and Assigns..................................................................70
SECTION 11.04. No Waiver .............................................................................70
SECTION 11.05. Modification............................................................................70
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantors...................................................................70
ARTICLE 12
Subordination of the Guarantees
SECTION 12.01. Agreement To Subordinate................................................................71
SECTION 12.02. Liquidation, Dissolution, Bankruptcy....................................................71
SECTION 12.03. Default on Designated Senior Indebtedness of a
Guarantor....................................................................71
SECTION 12.04. Demand for Payment......................................................................72
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iv
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SECTION 12.05. When Distribution Must Be Paid Over.....................................................72
SECTION 12.06. Subrogation.............................................................................72
SECTION 12.07. Relative Rights.........................................................................73
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor........................................73
SECTION 12.09. Rights of Trustee and Paying Agent......................................................73
SECTION 12.10. Distribution or Notice to Representative................................................73
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Accelerate..........................................................73
SECTION 12.12. Trustee Entitled To Rely................................................................74
SECTION 12.13. Trustee To Effectuate Subordination.....................................................74
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor..................................................74
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions........................................74
SECTION 12.16. Defeasance .............................................................................74
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls............................................................75
SECTION 13.02. Notices .............................................................................75
SECTION 13.03. Communication by Holders with Other Holders.............................................75
SECTION 13.04. Certificate and Opinion as to Conditions Precedent......................................76
SECTION 13.05. Statements Required in Certificate or Opinion...........................................76
SECTION 13.06. When Securities Disregarded.............................................................76
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............................................76
SECTION 13.08. Legal Holidays..........................................................................76
SECTION 13.09. GOVERNING LAW...........................................................................77
SECTION 13.10. No Recourse Against Others..............................................................77
SECTION 13.11. Successors .............................................................................77
SECTION 13.12. Multiple Originals......................................................................77
SECTION 13.13. Table of Contents; Headings.............................................................77
Appendix A - Provisions Relating to Original Securities, Additional
Securities, Exchange Securities and Private
Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Supplemental Indenture
Exhibit D - Form of Transferee Letter of Representation
</TABLE>
v
<PAGE>
INDENTURE dated as of March 4, 1999, among
VOLUME SERVICES AMERICA, INC., a Delaware corporation
(the "Company"), VOLUME SERVICES AMERICA HOLDINGS,
INC. ("Volume Holdings"), each subsidiary of the
Company listed on the signature pages hereto and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of (i) the
Company's 11 1/4% Senior Subordinated Notes due 2009 issued on the date hereof
(the "Original Securities"), (ii) any Additional Securities (as defined herein)
that may be issued on any Issue Date (all such Securities in clauses (i) and
(ii) being referred to collectively as the "Initial Securities"), (iii) if and
when issued as provided in a Registration Agreement (as defined in Appendix A
hereto (the "Appendix")), the Company's 11 1/4% Senior Subordinated Notes due
2009 issued in a Registered Exchange Offer (as defined in the Appendix) in
exchange for any Initial Securities (the "Exchange Securities") and (iv) if and
when issued as provided in a Registration Agreement, the Private Exchange
Securities (as defined in the Appendix, and together with the Initial Securities
and any Exchange Securities issued hereunder, the "Securities") issued in a
Private Exchange (as defined in the Appendix). Except as otherwise provided
herein, the Securities shall be limited to $200,000,000 in aggregate principal
amount outstanding, of which $100,000,000 in aggregate principal amount shall be
initially issued on the date hereof. Subject to the conditions and in compliance
with the covenants set forth herein, the Company may issue up to $100,000,000
aggregate principal amount of Additional Securities.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person, in each case, other than Indebtedness
Incurred as consideration in, in contemplation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by such Person, or such
asset was acquired by such Person, as applicable.
"Additional Securities" means up to $100,000,000 aggregate
principal amount of 11 1/4% Senior Subordinated Notes due 2009 issued under the
terms of this Indenture subsequent to the Closing Date.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of
<PAGE>
2
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise. For purposes of Section 4.06 and 4.07 only, "Affiliate" shall also
mean any beneficial owner of shares representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or Volume
Holdings or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Applicable Premium" means with respect to a Security at any
redemption date, the greater of (i) 1.0% of the principal amount of such
Security or (ii) the excess of (A) the present value of (1) the redemption price
of such Security at March 1, 2004 (such redemption price being set forth in
paragraph 5 of the Security) plus (2) all required interest payments due on such
Security through March 1, 2004, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the then-outstanding principal
amount of such Security.
"Asset Sale" means (i) the sale, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a Sale/Leaseback
Transaction) of the Company or any Restricted Subsidiary (each referred to in
this definition as a "disposition") or (ii) the issuance or sale of Equity
Interests of any Restricted Subsidiary (other than to the Company or another
Restricted Subsidiary) (whether in a single transaction or a series of related
transactions), in each case other than: (a) a disposition of Cash Equivalents or
Investment Grade Securities or obsolete or worn out equipment in the ordinary
course of business; (b) the disposition of all or substantially all of the
assets of the Company in a manner permitted pursuant to Section 5.01 or any
disposition that constitutes a Change of Control; (c) any Restricted Payment or
Permitted Investment that is permitted to be made, and is made, under Section
4.04; (d) any disposition of assets with an aggregate Fair Market Value of less
than $2,000,000; (e) any disposition of property or assets by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Restricted Subsidiary; (f) any exchange of like property pursuant to Section
1031 of the Internal Revenue Code of 1986, as amended, for use in a Similar
Business; (g) sales of assets received by the Company upon the foreclosure on a
Lien; (h) any sale of Equity Interests in, or Indebtedness or other securities
of, an Unrestricted Subsidiary; and (i) sales of inventory in the ordinary
course of business consistent with past practices and sales of equipment upon
termination of a contract with a client entered into in the ordinary course of
business pursuant to the terms of such contract.
"Bank Indebtedness" means any and all amounts payable under or
in respect of the Credit Agreement, the other Senior Credit Documents and any
Refinancing Indebtedness with respect thereto, as amended from time to time,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
"Blackstone" means Blackstone Capital Partners II Merchant
Banking Fund L.P. and its Affiliates.
<PAGE>
3
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in New York State are authorized or
required by law to close.
"Capitalized Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized and
reflected as a liability on a balance sheet (excluding the footnotes thereto) in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited), and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) U.S. dollars and foreign currency
exchanged into U.S. dollars within 180 days, (ii) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank having capital
and surplus in excess of $500,000,000 and whose long-term debt is rated "A" or
the equivalent thereof by Moody's or S&P, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper issued by a corporation (other than
an Affiliate of the Company) rated at least "A-2" or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing at least 95% of their assets in
securities of the types described in clauses (i) through (v) above, (vii)
readily marketable direct obligations issued by any state of the United States
of America or any political subdivision thereof having one of the two highest
rating categories obtainable from either Moody's or S&P, and (viii) Indebtedness
or preferred stock issued by Persons (other than Blackstone, GE Capital or their
Affiliates) with a rating of "A" or higher from S&P or "A-2" or higher from
Moody's.
"Change of Control" means the occurrence of any of the
following events:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all the assets of the Company and
its Subsidiaries, taken as a whole, to a Person other than the
Permitted Holders;
(ii)(A) the Company becomes aware (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy,
vote, written notice or otherwise) of the acquisition by any Person or
group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act, or any successor provision), including any group
acting for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the
<PAGE>
4
Exchange Act), other than the Permitted Holders, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act, or
any successor provision), of 35% or more of the total voting power of
the Voting Stock of the Company or Volume Holdings and (B) the
Permitted Holders beneficially own (as defined above), directly or
indirectly, in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Company or Volume Holdings, as
applicable, than such other Person or group and do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors; or
(iii) during any one year period, individuals who at the
beginning of such period constituted the board of directors of the
Company or Volume Holdings (together with any new directors whose
election by such board of directors or whose nomination for election by
the shareholders of the Company or Volume Holdings, as applicable, was
approved by a vote of a majority of the directors of the Company or
Volume Holdings, as applicable, then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the board of directors of the
Company or Volume Holdings, as applicable, then in office.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Depreciation and Amortization Expense" means
with respect to any Person for any period, the total amount of depreciation and
amortization expense (excluding amortization of deferred financing fees) of such
Person and its Restricted Subsidiaries for such period on a consolidated basis
and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum, without duplication, of: (i) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
to the extent such expense was deducted in computing Consolidated Net Income
(including amortization of original issue discount, the interest component of
Capitalized Lease Obligations (or any financing lease which has substantially
the same economic effect as a Capitalized Lease Obligation) and net payments and
receipts (if any) pursuant to Hedging Obligations and excluding amortization of
deferred financing fees), (ii) consolidated capitalized interest of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued and
(iii) the earned discount or yield with respect to the sale of receivables.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis; provided,
however, that (i) any net after-tax
<PAGE>
5
extraordinary gains or losses (less all fees and expenses relating thereto)
shall be excluded, (ii) any increase in amortization or depreciation resulting
from purchase accounting in relation to any acquisition that is consummated
after the Closing Date, net of taxes, shall be excluded, (iii) the Net Income
for such period shall not include the cumulative effect of a change in
accounting principles during such period, (iv) any net after-tax income or loss
from discontinued operations and any net after-tax gains or losses on disposal
of discontinued operations shall be excluded, (v) any net after-tax gains or
losses (less all fees and expenses relating thereto) attributable to asset
dispositions other than in the ordinary course of business (as determined in
good faith by the Board of Directors) shall be excluded, (vi) the Net Income for
such period of any Person that is not a Subsidiary of such Person, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be included only to the extent of the amount of dividends or
distributions or other payments paid in cash (or to the extent converted into
cash) to the referent Person or a Restricted Subsidiary thereof in respect of
such period, (vii) the Net Income of any Person acquired in a pooling of
interests transaction shall not be included for any period prior to the date of
such acquisition, and (viii) the Net Income for such period of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, unless such restrictions with
respect to the payment of dividends or in similar distributions have been
legally waived; provided that the net loss of any such Restricted Subsidiary
shall be included. Notwithstanding the foregoing, for the purpose of Section
4.04 only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under clauses (a)(3)(D) and (a)(3)(E) of Section 4.04.
"Contribution Indebtedness" means Indebtedness of the Company
in an aggregate principal amount not greater than the amount of all Specified
Cash Contributions, provided that such Contribution Indebtedness (i) has a
Stated Maturity later than the Stated Maturity of the Securities, (ii) is
Incurred substantially concurrently with such Specified Cash Contributions, and
(iii) is so designated as Contribution Indebtedness pursuant to an Officers'
Certificate on the Incurrence date thereof.
"Credit Agreement" means the credit agreement dated as of
December 3, 1998, as amended, restated, supplemented, waived, replaced,
restructured, repaid, refunded, refinanced or otherwise modified from time to
time, including any agreement extending the maturity thereof or otherwise
restructuring all or any portion of the Indebtedness under such agreement
(except to the extent that any such amendment, restatement, supplement, waiver,
replacement, refunding, refinancing or other modification thereto would be
prohibited by the terms of this Indenture, unless otherwise agreed to by the
Holders of at least a majority in aggregate principal amount of Securities at
the time outstanding), among the Company, Volume Holdings, the financial
institutions named therein and The Chase Manhattan Bank, as Administrative
Agent.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
<PAGE>
6
"Designated Noncash Consideration" means the Fair Market Value
of noncash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, less the amount of Cash Equivalents received
in connection with a subsequent sale of such Designated Noncash Consideration.
"Designated Preferred Stock" means Preferred Stock of the
Company (other than Disqualified Stock) that is issued for cash (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries) and is so designated as
Designated Preferred Stock, pursuant to an Officers' Certificate, on the
issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in Section 4.04(a)(3).
"Designated Senior Indebtedness" means, with respect to the
Company or a Guarantor, (i) the Bank Indebtedness and (ii) any other Senior
Indebtedness of the Company or such Guarantor which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof, are committed to lend up to,
at least $15,000,000 and is specifically designated by the Company or such
Guarantor in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is redeemable or
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock, or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case prior to the first anniversary of the maturity date of the Securities;
provided, however, that only the portion of Capital Stock which so matures or is
mandatorily redeemable, is so convertible or exchangeable or is so redeemable at
the option of the holder thereof prior to such first anniversary shall be deemed
to be Disqualified Stock; provided further, however, that if such Capital Stock
is issued to any employee or to any plan for the benefit of employees of the
Company or its Subsidiaries or by any such plan to such employees, such Capital
Stock shall not constitute Disqualified Stock solely because it may be required
to be repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations or as a result of such employee's termination, death or
disability.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, without
duplication, (i) provision for taxes based on income or profits of such Person
for such period deducted in computing Consolidated Net Income, plus (ii)
Consolidated Interest Expense of such Person for such period to the extent the
same was deducted in computing Consolidated Net Income, plus (iii) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such Consolidated Depreciation and Amortization Expense was deducted in
computing Consolidated Net Income, plus (iv) any non-recurring fees, expenses or
charges related to any Equity Offering, Permitted Investment, acquisition or
Indebtedness permitted to be Incurred by this Indenture (in each case, whether
or not successful), including any such fees, expenses or charges related to the
Transactions (including fees to Blackstone), deducted in such period in
computing Consolidated Net Income, plus (v) the amount of any nonrecurring
charges related to
<PAGE>
7
client contract terminations, one-time severance costs related to the
Acquisition or one-time severance costs incurred in connection with acquisitions
consummated after the Closing Date deducted in such period in computing
Consolidated Net Income, plus (vi) any other noncash charges reducing
Consolidated Net Income for such period (excluding any such charge which
consists of or requires an accrual of, or cash reserve for, anticipated cash
charges for any future period), plus (vii) the amount of annual management,
monitoring, consulting and advisory fees and related expenses paid to Blackstone
and GE Capital deducted in such period in computing Consolidated Net Income in
an amount not to exceed $1,500,000 during any fiscal year, less, without
duplication, (viii) noncash items increasing Consolidated Net Income of such
Person for such period (excluding any items which represent the reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior period).
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale of common
stock or Preferred Stock of the Company or Volume Holdings (other than
Disqualified Stock), other than (i) public offerings with respect to the
Company's common stock registered on Form S-8 and (ii) any such public or
private sale that constitutes an Excluded Contribution or a Specified Cash
Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exchange Offer Registration Statement" has the meaning
assigned to it in the Registration Agreement dated the date hereof.
"Excluded Contributions" means the net cash proceeds (other
than Specified Cash Contributions) received by the Company after the Closing
Date from (i) contributions to its common equity capital and (ii) the sale
(other than to a Subsidiary of the Company or to any Company or Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Stock and
Designated Preferred Stock) of the Company, in each case designated as Excluded
Contributions pursuant to an Officers' Certificate executed by an Officer of the
Company, the cash proceeds of which are excluded from the calculation set forth
in Section 4.04(a)(3).
"Fair Market Value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a
<PAGE>
8
willing seller and a willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of EBITDA of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Company or
any of its Restricted Subsidiaries Incurs or redeems any Indebtedness (other
than in the case of revolving credit borrowings, in which case interest expense
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period) or issues or redeems Preferred Stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such Incurrence or
redemption of Indebtedness, or such issuance or redemption of Preferred Stock,
as if the same had occurred at the beginning of the applicable four-quarter
period. For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with GAAP), in each case with respect to an
operating unit of a business, that have been made by the Company or any of its
Restricted Subsidiaries during the four-quarter reference period or subsequent
to such reference period and on or prior to or simultaneously with the
Calculation Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, discontinued operations, mergers and
consolidations (and the reduction of any associated fixed charge obligations and
the change in EBITDA resulting therefrom) had occurred on the first day of the
four-quarter reference period. If since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, discontinued operation,
merger or consolidation, in each case with respect to an operating unit of a
business, that would have required adjustment pursuant to this definition, then
the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such Investment, acquisition, disposition,
discontinued operation, merger or consolidation had occurred at the beginning of
the applicable four-quarter period. For purposes of this definition, whenever
pro forma effect is to be given to any transaction, the pro forma calculations
shall be made in good faith by a responsible financial or accounting officer of
the Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the Calculation Date had been the applicable rate for
the entire period (taking into account any Hedging Obligations applicable to
such Indebtedness if such Hedging Obligation has a remaining term in excess of
12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue
at an interest rate reasonably determined by a responsible financial or
accounting officer of the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP. For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate. Any such pro forma calculation may include adjustments
appropriate, in the reasonable determination of the Company as set forth in
<PAGE>
9
an Officers' Certificate, to reflect operating expense reductions reasonably
expected to result from any acquisition or merger.
"Fixed Charges" means, with respect to any Person for any
period, the sum of (i) Consolidated Interest Expense of such Person for such
period and (ii) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Preferred Stock or Disqualified Stock of such
Person and its Subsidiaries.
"Foreign Subsidiary" means any Restricted Subsidiary not
organized or existing under the laws of the United States of America or any
state or territory thereof.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Closing Date. For the
purposes of this Indenture, the term "consolidated" with respect to any Person
shall mean such Person consolidated with its Restricted Subsidiaries, and shall
not include any Unrestricted Subsidiary, but the interest of such Person in an
Unrestricted Subsidiary shall be accounted for as an Investment.
"GE Capital" means General Electric Capital Corporation and
its Affiliates.
"Government Securities" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in each
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such Government
Securities or a specific payment of principal of or interest on any such
Government Securities held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such depository receipt.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness or other obligations.
"Guarantee" means any guarantee of the obligations of the
Company under this Indenture and the Securities by any Person in accordance with
the provisions of this Indenture.
<PAGE>
10
"Guarantor" means any Person that Incurs a Guarantee; provided
that upon the release or discharge of such Person from its Guarantee in
accordance with this Indenture, such Person ceases to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity cap
agreements and currency exchange, interest rate or commodity collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity prices.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person, (i) the
principal and premium (if any) of any indebtedness of such Person, whether or
not contingent, (a) in respect of borrowed money, (b) evidenced by bonds, notes,
debentures or similar instruments or letters of credit or bankers' acceptances
(or, without duplication, reimbursement agreements in respect thereof), (c)
representing the deferred and unpaid purchase price of any property, except any
such balance that constitutes a trade payable or similar obligation to a trade
creditor due within six months from the date on which it is Incurred, in each
case Incurred in the ordinary course of business, which purchase price is due
more than six months after the date of placing the property in service or taking
delivery and title thereto, (d) in respect of Capitalized Lease Obligations, or
(e) representing any Hedging Obligations, if and to the extent that any of the
foregoing Indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability on a balance sheet (excluding the footnotes thereto)
of such Person prepared in accordance with GAAP, (ii) to the extent not
otherwise included, any obligation of such Person to be liable for, or to pay,
as obligor, guarantor or otherwise, on the Indebtedness of another Person (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), and (iii) to the extent not otherwise included,
Indebtedness of another Person secured by a Lien on any asset owned by such
Person (whether or not such Indebtedness is assumed by such Person); provided,
however, that the amount of such Indebtedness will be the lesser of (a) the Fair
Market Value of such asset at such date of determination and (b) the amount of
such Indebtedness of such other Person; provided, further, that any obligation
of the Company or any Restricted Subsidiary in respect of (i) minimum guaranteed
commissions, or other similar payments, to clients or (ii) indemnification
obligations to clients, in each case pursuant to contracts to provide services
to clients entered into in the ordinary course of business shall be deemed not
to constitute Indebtedness.
"Indenture" means this Indenture as amended or supplemented
from time to time.
<PAGE>
11
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm or consultant to Persons engaged in a Similar
Business, in each case of nationally recognized standing that is, in the good
faith determination of the Company, qualified to perform the task for which it
has been engaged.
"Investment Grade Securities" means (i) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (other than Cash Equivalents), (ii) debt
securities or debt instruments (other than those issued by Blackstone, GE
Capital or any of their Affiliates) with a rating of BBB- or higher by S&P or
Baa3 or higher by Moody's or the equivalent of such rating by such rating
organization, or if no rating of S&P or Moody's then exists, the equivalent of
such rating by any other nationally recognized securities rating agency, but
excluding any debt securities or instruments constituting loans or advances
among the Company and its Subsidiaries, and (iii) investments in any fund that
invests exclusively in investments of the type described in clauses (i) and (ii)
which fund may also hold immaterial amounts of cash pending investment and/or
distribution.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the form
of loans (including guarantees), advances or capital contributions (excluding
accounts receivable, trade credit and advances to customers and commission,
travel and similar advances to officers, employees and consultants made in the
ordinary course of business), purchases or other acquisitions for consideration
(including agreements providing for the adjustment of purchase price) of
Indebtedness, Equity Interests or other securities issued by any other Person
and investments that are required by GAAP to be classified on the balance sheet
of the Company in the same manner as the other investments included in this
definition to the extent such transactions involve the transfer of cash or other
property. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investments" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
net assets of a Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date", with respect to any Initial Securities, means
the date on which the Initial Securities are originally issued.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction); provided that in no event shall an operating lease be deemed to
constitute a Lien.
<PAGE>
12
"liquidated damages" means any liquidated damages payable
under a Registration Agreement.
"Management Group" means the group consisting of the
directors, executive officers and other personnel of the Company and Volume
Holdings on the Closing Date.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends.
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received in respect of or upon the sale
or other disposition of any Designated Noncash Consideration received in any
Asset Sale and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding the assumption by the acquiring person of
Indebtedness relating to the disposed assets or other considerations received in
any other noncash form), net of the direct costs relating to such Asset Sale and
the sale or disposition of such Designated Noncash Consideration (including,
without limitation, legal, accounting and investment banking fees, and brokerage
and sales commissions), and any relocation expenses Incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements related
thereto), amounts required to be applied to the repayment of principal, premium
(if any) and interest on Indebtedness required (other than pursuant to Section
4.06(b)) to be paid as a result of such transaction, and any deduction of
appropriate amounts to be provided by the Company as a reserve in accordance
with GAAP against any liabilities associated with the asset disposed of in such
transaction and retained by the Company after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with such transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and bankers' acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness; provided that Obligations with respect to the Securities shall not
include fees or indemnifications in favor of the Trustee and other third parties
other than the Holders of the Securities.
"Offering Memorandum" means the Offering Memorandum dated
February 25, 1999 relating to the Company's 11 1/4% Senior Subordinated Notes
due 2009.
"Officer" means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of the Company.
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13
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Pari Passu Indebtedness" means (i) with respect to the
Company, the Securities and any Indebtedness which ranks pari passu in right of
payment to the Securities and (ii) with respect to any Guarantor, its Guarantee
and any Indebtedness which ranks pari passu in right of payment to such
Guarantor's Guarantee.
"Permitted Asset Swap" means any one or more transactions in
which the Company or any Restricted Subsidiary exchanges assets for
consideration consisting of (i) assets used or useful in a Similar Business and
(ii) any cash or Cash Equivalents; provided that such cash or Cash Equivalents
will be considered Net Proceeds from an Asset Sale.
"Permitted Holders" means Blackstone, GE Capital and the
Management Group.
"Permitted Investments" means (i) any Investment in the
Company or any Restricted Subsidiary; (ii) any Investment in Cash Equivalents or
Investment Grade Securities; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person that is primarily engaged in a
Similar Business if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary or (b) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary; (iv) any Investment in securities or
other assets not constituting Cash Equivalents and received in connection with
an Asset Sale made pursuant to Section 4.06 or any other disposition of assets
not constituting an Asset Sale; (v) any Investment existing on the Closing Date;
(vi) advances to employees not in excess of $5,000,000 outstanding at any one
time in the aggregate; (vii) any Investment acquired by the Company or any of
its Restricted Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (b) as a result
of a foreclosure by the Company or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect to any
secured Investment in default; (viii) Hedging Obligations permitted under
Section 4.03(b)(x); (ix) additional Investments having an aggregate Fair Market
Value, taken together with all other Investments made pursuant to this clause
(ix) that are at that time outstanding, not to exceed the greater of 7.5% of
Total Assets or $10,000,000 at the time of such Investment (with the Fair Market
Value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); (x) loans and advances to officers,
directors and employees for business-related travel expenses, moving expenses
and other similar expenses, in each case Incurred in the ordinary course of
business; (xi) Investments the payment for which consists of Equity Interests of
the Company (other than Disqualified Stock) ("Equity Payment Investments");
provided, however, that such
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14
Equity Payment Investments will not increase the amount available for Restricted
Payments under Section 4.04(a)(3); (xii) any transaction to the extent it
constitutes an Investment that is permitted by and made in accordance with
Section 4.07(b) (except transactions described in Section 4.07(b)(ii), (vi) and
(vii)); (xiii) Investments consisting of the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons; (xiv) Guarantees issued in accordance with Section 4.03; (xv) any
Investment by Restricted Subsidiaries in other Restricted Subsidiaries and
Investments by Subsidiaries that are not Restricted Subsidiaries in other
Subsidiaries that are not Restricted Subsidiaries; (xvi) Investments consisting
of purchases and acquisitions of inventory, supplies, materials and equipment or
purchases of contract rights or licenses or leases of intellectual property, in
each case in the ordinary course of business; (xvii) loans and advances to
Volume Holdings not to exceed $20,000,000 in aggregate principal amount at any
time outstanding, provided that any cash proceeds thereof shall be immediately
contributed by Volume Holdings to the Company or used to repay or service
existing Indebtedness of Volume Holdings to the Company ("Loan Contributions");
provided, however, that the amount of such Loan Contributions will not increase
the amount available for Restricted Payments under Section 4.04(a)(3); (xviii)
loans and advances to VSI Management Direct L.P. and/or Recreational Services,
L.L.C. and/or current or former management personnel of the Company not to
exceed $7,500,000 in aggregate principal amount at any time outstanding, the
proceeds of which will be used to purchase or redeem, directly or indirectly,
shares of Capital Stock of the Company or Volume Holdings or to purchase limited
partnership interests in VSI Management Direct L.P. or Recreational Services,
L.L.C.; and (xix) loans to clients made in connection with entering into
contracts to provide services not to exceed $15,000,000 in any fiscal year or
$30,000,000 in aggregate amount at any time outstanding.
"Permitted Junior Securities" shall mean debt or equity
securities of the Company or any successor corporation issued pursuant to a plan
of reorganization or readjustment of the Company that are subordinated to the
payment of all then-outstanding Senior Indebtedness of the Company at least to
the same extent that the Securities are subordinated to the payment of all
Senior Indebtedness of the Company on the Closing Date, so long as to the extent
that any Senior Indebtedness of the Company outstanding on the date of
consummation of any such plan of reorganization or readjustment is not paid in
full in cash on such date, either (a) the holders of any such Senior
Indebtedness not so paid in full in cash have consented to the terms of such
plan of reorganization or readjustment or (b) such holders receive securities
which constitute Senior Indebtedness and which have been determined by the
relevant court to constitute satisfaction in full in cash of any Senior
Indebtedness not paid in full in cash.
"Permitted Liens" means, with respect to any Person, (i)
pledges or deposits by such Person under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business; (ii)
Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an appeal
or other proceedings for review; (iii)
<PAGE>
15
Liens for taxes, assessments or other governmental charges not
yet due or payable or subject to penalties for nonpayment or which are being
contested in good faith by appropriate proceedings; (iv) Liens in favor of
issuers of performance and surety bonds or bid bonds or completion guarantees or
with respect to other regulatory requirements or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; (v) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real properties or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (vi) Liens securing Indebtedness permitted to be
incurred pursuant to Section 4.03(b)(iv); (vii) Liens to secure Indebtedness
permitted pursuant to Section 4.03(b)(i); (viii) Liens existing on the Closing
Date; (ix) Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; provided, however, that such Liens are not created
or Incurred in connection with, or in contemplation of, such other Person
becoming such a Subsidiary; provided further, however, that such Liens may not
extend to any other property owned by the Company or any Restricted Subsidiary;
(x) Liens on property at the time the Company or a Restricted Subsidiary
acquired the property, including any acquisition by means of a merger or
consolidation with or into the Company or any Restricted Subsidiary; provided,
however, that such Liens are not created or Incurred in connection with, or in
contemplation of, such acquisition; provided further, however, that the Liens
may not extend to any other property owned by the Company or any Restricted
Subsidiary; (xi) Liens securing Indebtedness or other obligations of a
Restricted Subsidiary owing to the Company or another Restricted Subsidiary
permitted to be Incurred in accordance with Section 4.03; (xii) Liens securing
Hedging Obligations so long as the related Indebtedness is, and is permitted to
be under this Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (xiii) Liens on specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(xiv) leases and subleases of real property which do not materially interfere
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (xv) Liens arising from Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Company and its Restricted Subsidiaries in the ordinary course of business;
(xvi) Liens in favor of the Company; (xvii) Liens on equipment of the Company
granted in the ordinary course of business to the Company's client at which such
equipment is located; (xviii) Liens encumbering deposits made in the ordinary
course of business to secure obligations arising from statutory, regulatory,
contractual or warranty requirements, including rights of offset and set-off;
(xix) Liens on the Equity Interests of Unrestricted Subsidiaries securing
obligations of Unrestricted Subsidiaries not otherwise prohibited by this
Indenture; (xx) Liens to secure Indebtedness permitted by Section 4.03(b)(xii);
and (xxi) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (vi), (vii), (viii), (ix), (x), (xi), (xii)
and (xx); provided, however, that (A) such new Lien shall be limited to all or
part of the same property that secured the original Lien (plus improvements on
such property) and (B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (x) the outstanding principal
<PAGE>
16
amount or, if greater, committed amount of the Indebtedness described under
clauses (vi), (vii), (viii), (ix), (x), (xi), (xii) or (xx) at the time the
original Lien became a Permitted Lien under this Indenture and (y) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential
right of payment of dividends or upon liquidation, dissolution, or winding up.
"Representative" means the trustee, agent or representative
(if any) for an issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Credit Documents" means the collective reference to
the Credit Agreement, the notes issued pursuant thereto and the guarantees
thereof, and the collateral documents relating thereto.
"Senior Indebtedness" with respect to the Company or any
Guarantor means all Indebtedness of the Company or such Guarantor, including
interest thereon (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company or any
Subsidiary of the Company whether or not a claim for post-filing interest is
allowed in such proceeding) and other amounts (including fees, expenses,
reimbursement obligations under letters of credit and indemnities) owing in
respect thereof, whether outstanding on the Closing Date or thereafter Incurred,
unless in the instrument creating or evidencing the same or pursuant
<PAGE>
17
to which the same is outstanding it is provided that such obligations are not
superior in right of payment to the Securities or such Guarantor's Guarantee, as
applicable; provided, however, that Senior Indebtedness shall not include, as
applicable, (i) any obligation of the Company to any Subsidiary of the Company,
or of such Guarantor to the Company or any other Subsidiary of the Company, (ii)
any liability for Federal, state, local or other taxes owed or owing by the
Company or such Guarantor, (iii) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (iv) any Indebtedness or
obligation of the Company or such Guarantor which is subordinate or junior in
any respect to any other Indebtedness or obligation of the Company or such
Guarantor, as applicable, including any Pari Passu Indebtedness and any
Subordinated Indebtedness, (v) any obligations with respect to any Capital Stock
or (vi) any Indebtedness Incurred in violation of this Indenture.
"Shelf Registration Statement" has the meaning assigned to it
in the Registration Agreement dated the date hereof.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Similar Business" means a business, the majority of whose
revenues are derived from the provision of food, beverage, catering,
merchandise, management or other services at stadiums, convention centers, ball
parks, concert halls, theaters, seaports, airports, golf courses, arenas,
racetracks, parks, malls, zoos, bandstands, or other recreational venues, or the
activities of the Company and its Subsidiaries as of the Closing Date or any
business or activity that is reasonably similar thereto or a reasonable
extension, development or expansion thereof or ancillary thereto.
"Specified Cash Contributions" means the aggregate amount of
cash contributions (other than Excluded Contributions) made to the capital of
the Company which are designated as "Specified Cash Contributions" pursuant to
an Officers' Certificate.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Indebtedness" means (a) with respect to the
Company, any Indebtedness of the Company which is by its terms subordinated in
right of payment to the Securities and (b) with respect to any Guarantor, any
Indebtedness of such Guarantor which is by its terms subordinated in right of
payment to its Guarantee.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity (other than a partnership,
joint venture or limited liability company) of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time of determination owned or
<PAGE>
18
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof and (ii) any partnership,
joint venture or limited liability company of which (x) more than 50% of the
capital accounts, distribution rights, total equity and voting interests or
general and limited partnership interests, as applicable, are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof, whether in the form of
membership, general, special or limited partnership interests or otherwise and
(y) such Person or any Wholly Owned Restricted Subsidiary of such Person is a
controlling general partner or otherwise controls such entity.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Section Section 77aaa-77bbbb) as in effect on the Closing Date.
"Total Assets" means the total consolidated assets of the
Company and its Restricted Subsidiaries, as shown on the most recent balance
sheet of the Company.
"Transactions" has the meaning assigned to it in the Offering
Memorandum.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release H.
15(519) which has become publicly available at least two Business Days prior to
the redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to March 1, 2004; provided, however, that if the
period from the redemption date to March 1, 2004 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the redemption date to March 1, 2004 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means (i) any officer within the corporate
trust department of the Trustee, including any vice president, assistant vice
president, assistant secretary, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and (ii) who shall have
direct responsibility for the administration of this Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted
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19
Subsidiary. The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that the
Subsidiary to be so designated and its Subsidiaries do not at the time of
designation have and do not thereafter Incur any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries; provided further, however, that either (a) the
Subsidiary to be so designated has total consolidated assets of $1,000 or less
or (b) if such Subsidiary has consolidated assets greater than $1,000, then such
designation would be permitted under Section 4.04. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) (1) the
Company could Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a)
or (2) the Fixed Charge Coverage Ratio for the Company and its Restricted
Subsidiaries would be greater than such ratio for the Company and its Restricted
Subsidiaries immediately prior to such designation, in each case on a pro forma
basis taking into account such designation and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (i) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such payment, by
(ii) the sum of all such payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned
Subsidiary that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person 100% of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
<PAGE>
20
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ------------------
"Affiliate Transaction"............................. 4.07(a)
"Asset Sale Offer".................................. 4.06(b)
"Bankruptcy Law".................................... 6.01
"Blockage Notice"................................... 10.03
"Change of Control Offer"........................... 4.09(b)
"covenant defeasance option"........................ 8.01(b)
"Custodian"......................................... 6.01
"Equity Payment Investments"........................ 1.01, "Permitted
Investments"
"Event of Default".................................. 6.01
"Excess Proceeds"................................... 4.06(b)
"Guarantee Blockage Notice"......................... 12.03
"Guaranteed Obligations"............................ 11.01
"Guarantee Payment Blockage Period"................. 12.03
"legal defeasance option"........................... 8.01(b)
"Legal Holiday"..................................... 13.08
"Loan Contributions"................................ 1.01, "Permitted
"Management Equity"................................. Investments"
4.04(b)
"Offer Period"...................................... 4.06(c)
"pay its Guarantee"................................. 12.03
"pay the Securities"................................ 10.03
"Paying Agent"...................................... 2.04
"Payment Blockage Period"........................... 10.03
"protected purchaser"............................... 2.08
"Purchase Date"..................................... 4.06(c)
"Refinancing Indebtedness".......................... 4.03(b)
"Refunding Capital Stock"........................... 4.04(b)
"Registrar"......................................... 2.04
"Restricted Payments"............................... 4.04(a)
"Retired Capital Stock"............................. 4.04(b)
"Royalty Fee Contributions"......................... 4.04(b)
"Successor Company"................................. 5.01(a)
"Successor Guarantor"............................... 5.01(b)
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the
Guarantees.
"indenture security holder" means a Holder or Securityholder.
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21
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is $200,000,000. The Securities may be issued in
one or more series. All Securities of any one series shall be substantially
identical except as to denomination.
With respect to any Additional Securities issued after the
Closing Date (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 2.07, 2.08, 2.10 or 3.06 or
<PAGE>
22
the Appendix and, except for Securities which, pursuant to Section 2.03, are
deemed never to have been authenticated and delivered hereunder), there shall be
(i) established in or pursuant to a resolution of the Board of Directors and
(ii) (A) set forth or determined in the manner provided in an Officers'
Certificate or (B) established in one or more indentures supplemental hereto,
prior to the issuance of such Additional Securities:
(1) whether such Additional Securities shall be issued as part
of a new or existing series of Securities and the title of such
Additional Securities (which shall distinguish the Additional
Securities of the series from Securities of any other series);
(2) the aggregate principal amount of such Additional
Securities which may be authenticated and delivered under this
Indenture, which shall be in an aggregate principal amount not to
exceed $100,000,000 (except for Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the same series pursuant to Section 2.07, 2.08,
2.10 or 3.06 or the Appendix and except for Securities which, pursuant
to Section 2.03, are deemed never to have been authenticated and
delivered hereunder);
(3) the issue price and issuance date of such Additional
Securities, including the date from which interest on such Additional
Securities shall accrue;
(4) if applicable, that such Additional Securities shall be
issuable in whole or in part in the form of one or more Global
Securities (as defined in the Appendix) and, in such case, the
respective depositaries for such Global Securities, the form of any
legend or legends which shall be borne by such Global Securities in
addition to or in lieu of those set forth in Exhibit A hereto and any
circumstances in addition to or in lieu of those set forth in Section
2.3 of the Appendix in which any such Global Security may be exchanged
in whole or in part for Additional Securities registered, or any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the depositary for such
Global Security or a nominee thereof; and
(5) if applicable, that such Additional Securities shall not
be issued in the form of Initial Securities as set forth in Exhibit A,
but shall be issued in the form of Exchange Securities as set forth in
Exhibit B.
If any of the terms of any Additional Securities are
established by action taken pursuant to a resolution of the Board of Directors,
a copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Company and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate or the indenture
supplemental hereto setting forth the terms of the Additional Securities.
SECTION 2.02. Form and Dating. Provisions relating to the
Original Securities, the Additional Securities, the Private Exchange Securities
and the Exchange Securities are set forth in the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The (i) Original
Securities and the Trustee's certificate of authentication, (ii) Private
Exchange Securities and the Trustee's certificate of authentication and (iii)
any Additional Securities (if issued as Transfer Restricted Securities (as
defined in the Appendix)) and the Trustee's certificate of authentication
<PAGE>
23
shall each be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and any Additional Securities issued other than as Transfer
Restricted Securities and the Trustee's certificate of authentication shall each
be substantially in the form of Exhibit B hereto, which is hereby incorporated
in and expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company or any Guarantor is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Security shall be dated the date of its authentication.
The Securities shall be issuable only in registered form without interest
coupons and only in denominations of $1,000 and integral multiples thereof.
SECTION 2.03. Execution and Authentication. One or more
Officers shall sign the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Any such appointment
shall be evidenced by an instrument signed by a Trust Officer, a copy of which
shall be furnished to the Company. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent, and the
term "Registrar" includes any co-registrars. The Company initially appoints the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Securities.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Company shall notify the
Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section
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24
7.07. The Company or any of its domestically organized Wholly Owned Subsidiaries
may act as Paying Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon
written notice to such Registrar or Paying Agent and to the Trustee; provided,
however, that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Company and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the Trustee may resign as
Paying Agent or Registrar only if the Trustee also resigns as Trustee in
accordance with Section 7.08.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent (or if the Company or a Subsidiary is acting as
Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary of the Company acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.06. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.07. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer and in compliance with the Appendix. When
a Security is presented to the Registrar with a request to register a transfer,
the Registrar shall register the transfer as requested if the requirements of
Section 8-401(a)(l) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in
<PAGE>
25
part, the portion thereof not to be redeemed) or any Securities for a period of
15 days before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Guarantors, the Trustee, the Paying Agent, and
the Registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest, if any, on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of the
Company, any Guarantor, the Trustee, the Paying Agent, or the Registrar shall be
affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interest in such Global
Security may be effected only through a book-entry system maintained by (i) the
Holder of such Global Security (or its agent) or (ii) any Holder of a beneficial
interest in such Global Security, and that ownership of a beneficial interest in
such Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities surrendered
upon such transfer or exchange.
SECTION 2.08. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge the Holder for their expenses in replacing a Security. In the event
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.08 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.09. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancelation and those described in
this Section as not outstanding.
<PAGE>
26
Subject to Section 13.06, a Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest and liquidated damages payable on
that date with respect to the Securities (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10. Temporary Securities. In the event that
Definitive Securities (as defined in the Appendix) are to be issued under the
terms of this Indenture, until such Definitive Securities are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substan tially in the form of
Definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities and
deliver them in exchange for temporary Securities upon surrender of such
temporary Securities at the office or agency of the Company, without charge to
the Holder.
SECTION 2.11. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver proof of canceled Securities to the Company pursuant to
written direction by an Officer. The Company may not issue new Securities to
replace Securities it has redeemed, paid or delivered to the Trustee for
cancelation. The Trustee shall not authenticate Securities in place of canceled
Securities other than pursuant to the terms of this Indenture.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company, upon becoming aware, through written
notice, of any change in such "CUSIP" numbers, shall promptly notify the Trustee
of such change.
<PAGE>
27
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption shall comply
with the conditions herein. If fewer than all the Securities are to be redeemed,
the record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not fewer than 15 days after
the date of notice to the Trustee. Any such notice may be canceled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.
SECTION 3.02. Selection of Securities to Be Redeemed. In the
case of any partial redemption, selection of the Securities for redemption shall
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such Securities are listed, or if
such Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in such manner as
complies with applicable legal requirements); provided that no Securities of
$1,000 or less shall be redeemed in part. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company, or
the Trustee at the Company's direction, shall mail a notice of redemption by
first-class mail to each Holder of Securities to be redeemed at such Holder's
registered address; provided that in the event the Trustee is to mail such
notice, the Company shall deliver to the Trustee, at least 45 days prior to the
Redemption Date, an Officer's Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
below.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to
the redemption date;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
<PAGE>
28
(5) if fewer than all the outstanding Securities are to be
redeemed, the certificate numbers and principal amounts of the
particular Securities to be redeemed in full or part;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest and liquidated damages, if
any, to the redemption date; provided, however, that if the redemption date is
after a regular record date and on or prior to the interest payment date, the
accrued interest shall be payable to the Securityholder of the redeemed
Securities registered on the relevant record date. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of the notice
to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00
a.m., New York City time, on the redemption date, the Company shall deposit with
the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest and liquidated damages, if any, on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
redemption that have been delivered by the Company to the Trustee for
cancelation. On and after the redemption date, interest will cease to accrue on
Securities or portions thereof called for redemption so long as the Company has
deposited with the Paying Agent funds sufficient to pay the principal of, plus
accrued and unpaid interest and liquidated damages (if any) on, the Securities
to be redeemed.
SECTION 3.06. Securities Redeemed in Part. Upon surrender and
cancelation of a Security that is redeemed in part, the Company shall execute
and the Trustee shall authenticate for the Holder (at the Company's expense) a
new Security equal in principal amount to the unredeemed portion of the Security
surrendered.
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29
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports and Other Information. Notwithstanding
that the Company may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Company shall file with the
SEC (and provide the Trustee and Holders with copies thereof, without cost to
each Holder, within 15 days after it files them with the SEC), (i) within 90
days after the end of each fiscal year, annual reports on Form 10-K (or any
successor or comparable form) containing the information required to be
contained therein (or required in such successor or comparable form), (ii)
within 45 days after the end of each of the first three fiscal quarters of each
fiscal year, reports on Form 10-Q (or any successor or comparable form), (iii)
promptly from time to time after the occurrence of an event required to be
therein reported, such other reports on Form 8-K (or any successor or comparable
form), and (iv) any other information, documents and other reports which the
Company would be required to file with the SEC if it were subject to Section 13
or 15(d) of the Exchange Act; provided, however, the Company shall not be so
obligated to file such reports with the SEC if the SEC does not permit such
filing, in which event the Company will make available such information to
prospective purchasers of Securities, in addition to providing such information
to the Trustee and the Holders, in each case within 15 days after the time the
Company would be required to file such information with the SEC if it were
subject to Section 13 or 15(d) of the Exchange Act. Notwithstanding the
foregoing, such requirements shall be deemed satisfied prior to the earlier of
(i) 90 days after the Closing Date and (ii) the filing with the SEC of the
Exchange Offer Registration Statement and/or Shelf Registration Statement, by
the filing with the SEC of the Exchange Offer Registration Statement and/or
Shelf Registration Statement, with such financial information that satisfies
Regulation S-X of the Securities Act, provided, however, that in order for the
provisions of clause (i) above to be deemed satisfied with respect to the year
ended December 29, 1998, such Exchange Offer Registration Statement or Shelf
Registration Statement must include audited financial statements for the year
ended December 29, 1998.
SECTION 4.03. Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness) or issue
any shares of Disqualified Stock and (ii) the Company shall not permit any of
its Restricted Subsidiaries to issue any shares of
<PAGE>
30
Preferred Stock; provided, however, that the Company and any Guarantor may Incur
Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified
Stock and any Guarantor may issue shares of Preferred Stock if the Fixed Charge
Coverage Ratio of the Company for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is Incurred or such
Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to
1.00 determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been Incurred, or
the Disqualified Stock or Preferred Stock had been issued, as the case may be,
and the application of proceeds therefrom had occurred at the beginning of such
four-quarter period.
(b) Section 4.03(a) will not apply to:
(i) the Incurrence by the Company or its Restricted
Subsidiaries of Indebtedness under the Credit Agreement and the
issuance and creation of letters of credit and bankers' acceptances
thereunder (with letters of credit and bankers' acceptances being
deemed to have a principal amount equal to the face amount thereof) up
to an aggregate principal amount of $230,000,000 outstanding at any one
time;
(ii) the Incurrence by the Company and the Guarantors of
Indebtedness represented by the Original Securities (not including any
Additional Securities) and any Exchange Securities in respect thereof
and the Guarantees, as applicable;
(iii) Indebtedness existing on the Closing Date (other than
Indebtedness described in clauses (i) and (ii));
(iv) Indebtedness (including Capitalized Lease Obligations)
Incurred by the Company or any of its Restricted Subsidiaries, to
finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets
or the Capital Stock of any Person owning such assets) in an aggregate
principal amount which, when aggregated with the principal amount of
all other Indebtedness then outstanding and Incurred pursuant to this
clause (iv) and all Refinancing Indebtedness (as defined below)
Incurred to refund, refinance or replace any Indebtedness Incurred
pursuant to this clause (iv), does not exceed the greater of 7.5% of
Total Assets at the time of Incurrence or $10,000,000;
(v) Indebtedness Incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including without limitation letters of credit in respect of workers'
compensation claims, health, disability or other employee benefits or
property, casualty or liability insurance or self-insurance, or with
respect to agreements to provide services, or other Indebtedness with
respect to reimbursement type obligations regarding workers'
compensation claims; provided, however, that upon the drawing of such
letters of credit, such obligations are reimbursed within 30 days
following such drawing;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, Incurred in
connection with the disposition of any
<PAGE>
31
business, assets or a Subsidiary of the Company in accordance with the
terms of this Indenture, other than guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition;
(vii) Indebtedness of the Company to a Restricted Subsidiary
of the Company; provided that any such Indebtedness is subordinated in
right of payment to the Securities; provided further, that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary of the Company or any other subsequent transfer
of any such Indebtedness (except to the Company or another Restricted
Subsidiary) shall be deemed, in each case to be an Incurrence of such
Indebtedness;
(viii) shares of Preferred Stock of a Restricted Subsidiary
issued to the Company or another Restricted Subsidiary of the Company;
provided that any subsequent issuance or transfer of any Capital Stock
or any other event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any other subsequent transfer
of any such shares of Preferred Stock (except to the Company or another
Restricted Subsidiary of the Company) shall be deemed, in each case, to
be an issuance of shares of Preferred Stock;
(ix) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary of the Company; provided that (A) any
such Indebtedness is made pursuant to an intercompany note and (B) if a
Guarantor incurs such Indebtedness to a Restricted Subsidiary that is
not a Guarantor such Indebtedness is subordinated in right of payment
to the Guarantee of such Guarantor; provided further that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any Restricted Subsidiary lending such Indebtedness
ceasing to be a Restricted Subsidiary or any other subsequent transfer
of any such Indebtedness (except to the Company or another Restricted
Subsidiary of the Company) shall be deemed, in each case, to be an
Incurrence of such Indebtedness;
(x) Hedging Obligations that are Incurred in the ordinary
course of business (A) for the purpose of fixing or hedging interest
rate risk with respect to any Indebtedness that is permitted by the
terms of this Indenture to be outstanding, (B) for the purpose of
fixing or hedging currency exchange rate risk with respect to any
currency exchanges or (C) for the purpose of fixing or hedging
commodity price risk with respect to any commodity purchases;
(xi) obligations in respect of performance, bid and surety
bonds and completion guarantees provided by the Company or any
Restricted Subsidiary in the ordinary course of business;
(xii) Indebtedness or Disqualified Stock of the Company and
any Restricted Subsidiary not otherwise permitted hereunder in an
aggregate principal amount, which when aggregated with the principal
amount or liquidation preference of all other Indebtedness and
Disqualified Stock then outstanding and Incurred pursuant to this
clause (xii), does not exceed $25,000,000 at any one time outstanding;
provided, however, that Indebtedness of Foreign Subsidiaries, which
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32
when aggregated with the principal amount of all other Indebtedness of
Foreign Subsidiaries then outstanding and Incurred pursuant to this
clause (xii), does not exceed $10,000,000 (or the equivalent thereof in
any other currency) at any one time outstanding (it being understood
that any Indebtedness Incurred under this clause (xii) shall cease to
be deemed Incurred or outstanding for purposes of this clause (xii) but
shall be deemed to be Incurred for purposes of Section 4.03(a) from and
after the first date on which the Company could have Incurred such
Indebtedness under Section 4.03(a) without reliance upon this clause
(xii));
(xiii) any guarantee by the Company or a Guarantor of
Indebtedness or other obligations of the Company or any of its
Restricted Subsidiaries so long as the Incurrence of such Indebtedness
Incurred by the Company or such Restricted Subsidiary is permitted
under the terms of this Indenture; provided that if such Indebtedness
is by its express terms subordinated in right of payment to the
Securities or the Guarantee of such Restricted Subsidiary, as
applicable, any such guarantee of such Guarantor with respect to such
Indebtedness shall be subordinated in right of payment to such
Guarantor's Guarantee with respect to the Securities substantially to
the same extent as such Indebtedness is subordinated to the Securities
or the Guarantee of such Restricted Subsidiary, as applicable;
(xiv) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund or refinance any
Indebtedness Incurred as permitted under Section 4.03(a) and clauses
(ii) and (iii) above, or any Indebtedness issued to so refund or
refinance such Indebtedness (subject to the following proviso,
"Refinancing Indebtedness") prior to its respective maturity; provided,
however, that such Refinancing Indebtedness (A) has a Weighted Average
Life to Maturity at the time such Refinancing Indebtedness is Incurred
which is not less than the remaining Weighted Average Life to Maturity
of the Indebtedness being refunded or refinanced, (B) has a Stated
Maturity which is no earlier than the Stated Maturity of the
Indebtedness being refunded or refinanced, (C) to the extent such
Refinancing Indebtedness refinances Indebtedness pari passu with the
Securities or the Guarantee of such Restricted Subsidiary, as
applicable, is pari passu with the Securities or the Guarantee of such
Restricted Subsidiary, as applicable, (D) is Incurred in an aggregate
principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate
principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being
refinanced plus premium and fees Incurred in connection with such
refinancing, and (E) shall not include (x) Indebtedness of a Restricted
Subsidiary that is not a Guarantor that refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary
that refinances Indebtedness of an Unrestricted Subsidiary; and
provided further that subclauses (A) and (B) of this clause (xiv) shall
not apply to any refunding or refinancing of any Senior Indebtedness;
(xv) Indebtedness or Disqualified Stock of Persons that are
acquired by the Company or any of its Restricted Subsidiaries or merged
into a Restricted Subsidiary in accordance with the terms of this
Indenture; provided, however, that such Indebtedness or Disqualified
Stock is not Incurred in contemplation of such acquisition or merger or
to provide all or a portion of the funds or credit support required to
consummate such acquisition or merger; provided further, however,
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33
that after giving effect to such acquisition and the Incurrence of such
Indebtedness either (A) the Company would be permitted to Incur at
least $1.00 of additional Indebtedness pursuant to Section 4.03(a) or
(B) the Fixed Charge Coverage Ratio would be greater than immediately
prior to such acquisition; and
(xvi) Contribution Indebtedness.
(c) Notwithstanding the foregoing, neither the Company nor any
Guarantor may Incur any Indebtedness pursuant to Section 4.03(b) above if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Indebtedness unless such
Indebtedness will be subordinated to the Securities or such Guarantor's
Guarantee, as applicable, to at least the same extent as such Subordinated
Indebtedness. For purposes of determining compliance with this Section 4.03, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of permitted Indebtedness described in clauses 4.03(b)(i) through
(xvi) above or is entitled to be Incurred pursuant to Section 4.03(a), the
Company shall, in its sole discretion, classify or reclassify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been Incurred pursuant to only one of
such clauses of Section 4.03(b) or pursuant to Section 4.03(a) hereof. Accrual
of interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an Incurrence of
Indebtedness for purposes of this Section 4.03.
(d) The Company shall not, and not permit any Guarantor to,
directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness)
that is subordinate in right of payment to any Indebtedness of the Company or
any Indebtedness of any Guarantor, as the case may be, unless such Indebtedness
is either (i) pari passu in right of payment with the Securities or such
Guarantor's Guarantee, as the case may be, or (ii) subordinate in right of
payment to the Securities or such Guarantor's Guarantee, as the case may be.
SECTION 4.04. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any distribution
on account of Volume Holdings', the Company's or any of its Restricted
Subsidiaries' Equity Interests, including any payment made in connection with
any merger or consolidation involving the Company (other than (A) dividends or
distributions by the Company payable solely in Equity Interests (other than
Disqualified Stock) of the Company or (B) dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the
Company or a Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase or otherwise acquire or retire for value
any Equity Interests of Volume Holdings or the Company; (iii) make any principal
payment on, or redeem, repurchase, defease or otherwise acquire or retire for
value, in each case prior to any scheduled repayment or scheduled maturity, any
Subordinated Indebtedness (other than the payment, redemption, repurchase,
defeasance, acquisition or retirement of (A) Subordinated Indebtedness in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of such payment,
redemption, repurchase, defeasance, acquisition or retirement and (B)
Indebtedness permitted under clauses (vii) and (ix) of Section 4.03(b));
<PAGE>
34
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a
pro forma basis, the Company could Incur $1.00 of additional
Indebtedness under Section 4.03(a); and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the Closing Date (including Restricted
Payments permitted by clauses (i), (v), (vi), and (viii) of Section
4.04(b), but excluding all other Restricted Payments permitted by
Section 4.04(b)), is less than the sum of, without duplication, (A) 50%
of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the fiscal quarter that first begins after
the Closing Date to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, in the case such Consolidated Net
Income for such period is a deficit, minus 100% of such deficit), plus
(B) 100% of the aggregate net proceeds, including cash and the Fair
Market Value (as determined in accordance with the next succeeding
sentence) of property other than cash, received by the Company since
the Closing Date from the issue or sale of Equity Interests of the
Company (excluding Refunding Capital Stock (as defined below),
Designated Preferred Stock, Excluded Contributions and Disqualified
Stock), including Equity Interests issued upon conversion of
Indebtedness or upon exercise of warrants or options (other than an
issuance or sale to a Subsidiary of the Company or an employee stock
ownership plan or trust established by the Company or any of its
Subsidiaries), plus (C) 100% of the aggregate amount of contributions
to the capital of the Company received in cash and the Fair Market
Value (as determined in accordance with the next succeeding sentence)
of property other than cash since the Closing Date (other than Excluded
Contributions, Refunding Capital Stock, Designated Preferred Stock and
Disqualified Stock), plus (D) 100% of the aggregate amount received in
cash and the Fair Market Value (as determined in accordance with the
next succeeding sentence) of property other than cash received from (x)
the sale or other disposition (other than to the Company or a
Restricted Subsidiary) of Restricted Investments made by the Company
and its Restricted Subsidiaries and from repurchases and redemptions of
such Restricted Investments from the Company and its Restricted
Subsidiaries by any Person (other than the Company or any of its
Subsidiaries) and from repayments of loans or advances which
constituted Restricted Investments, (y) the sale (other than to the
Company or a Subsidiary) of the Capital Stock of an Unrestricted
Subsidiary or (z) a distribution or dividend from an Unrestricted
Subsidiary, plus (E) in the event any Unrestricted Subsidiary has been
redesignated as a Restricted Subsidiary or has been merged,
consolidated or amalgamated with or into, or transfers or conveys its
assets to, or is liquidated into, the Company or a Restricted
Subsidiary, the Fair Market Value (as determined in good faith by the
Board of Directors) of the Investment of the Company in such
Unrestricted Subsidiary at the time of such redesignation, combination
or transfer (or of the
<PAGE>
35
assets transferred or conveyed, as applicable), after deducting any
Indebtedness associated with the Unrestricted Subsidiary so designated
or combined or any Indebtedness associated with the assets so
transferred or conveyed, not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary, which amount
was included in the calculation of the amount of Restricted Payments,
less (F) the amount of all Specified Cash Contributions, less (G) the
amount of all Equity Payment Investments, less (H) the amount of all
Loan Contributions, less (I) the amount of all Management Equity and
less (J) the amount of all Royalty Fee Contributions. The Fair Market
Value of property other than cash covered by clauses (B), (C), (D) and
(E) above shall be determined in good faith by the Company and (x) in
the event of property with a Fair Market Value in excess of $2,500,000,
shall be set forth in an Officers' Certificate or (y) in the event of
property with a Fair Market Value in excess of $10,000,000, shall be
set forth in a resolution approved by at least a majority of the Board
of Directors.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) the payment of any dividend or distribution within 60 days
after the date of declaration thereof, if at the date of declaration
such payment would have complied with the provisions of this Indenture;
(ii) (A) the repurchase, retirement or other acquisition of
any Equity Interests ("Retired Capital Stock") or Subordinated
Indebtedness of the Company in exchange for, or out of the proceeds of
the substantially concurrent sale of, Equity Interests of the Company
or contributions to the equity capital of the Company (other than any
Disqualified Stock or any Equity Interests sold to a Subsidiary of the
Company or to an employee stock ownership plan or any trust established
by the Company or any of its Subsidiaries) (collectively, including any
such contributions, "Refunding Capital Stock") and (B) the declaration
and payment of accrued dividends on the Retired Capital Stock out of
the proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company or to an employee stock ownership plan or any
trust established by the Company or any of its Subsidiaries) of
Refunding Capital Stock;
(iii) the redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
new Indebtedness of the Company which is Incurred in accordance with
Section 4.03 hereof so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired for
value (plus the amount of any premium required to be paid under the
terms of the instrument governing the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired), (B) such Indebtedness
is subordinated to Senior Indebtedness and the Securities at least to
the same extent as such Subordinated Indebtedness so purchased,
exchanged, redeemed, repurchased, acquired or retired for value, (C)
such Indebtedness has a final scheduled maturity date equal to or later
than the final scheduled maturity date of the Subordinated Indebtedness
being so redeemed, repurchased, acquired or retired, and (D) such
Indebtedness has a Weighted Average Life to Maturity equal
<PAGE>
36
to or greater than the remaining Weighted Average Life to Maturity of
the Subordinated Indebtedness being so redeemed, repurchased, acquired
or retired;
(iv) the repurchase, retirement or other acquisition (or
dividends to Volume Holdings to finance any such repurchase, retirement
or other acquisition) for value of Equity Interests of the Company or
Volume Holdings held, directly or indirectly, by any future, present or
former employee, director or consultant of the Company or any
Subsidiary of the Company or any entity in which any of the foregoing
has a beneficial or economic ownership interest pursuant to any
management equity plan or stock option plan or any other management or
employee benefit plan or agreement or any other agreement pursuant to
which stock is held for the benefit of such persons; provided, however,
that the aggregate amounts paid under this clause (iv) do not exceed
$3,500,000 in any calendar year (with unused amounts in any calendar
year being permitted to be carried over for the two succeeding calendar
years); provided further, however, that such amount in any calendar
year may be increased by an amount not to exceed (A) the cash proceeds
received by the Company or any of its Restricted Subsidiaries from the
sale of Equity Interests of the Company (other than Disqualified Stock)
to members of management, directors or consultants of the Company and
its Restricted Subsidiaries that occurs after the Closing Date (any
such cash proceeds that are utilized for any such repurchase,
retirement, other acquisition or dividend, "Management Equity")
(provided that the amount of such Management Equity will not increase
the amount available for Restricted Payments under Section
4.04(a)(3)hereof) plus (B) the cash proceeds of key man life insurance
policies received by the Company and its Restricted Subsidiaries after
the Closing Date (provided that the Company may elect to apply all or
any portion of the aggregate increase contemplated by clauses (A) and
(B) above in any single calendar year);
(v) the declaration and payment of dividends or distributions
to holders of any class or series of Disqualified Stock of the Company
or any of its Restricted Subsidiaries issued or incurred in accordance
with Section 4.03 hereof;
(vi) the declaration and payment of dividends or distributions
to holders of any class or series of Designated Preferred Stock issued
after the Closing Date; provided, however, that (A) for the most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date of issuance of
such Designated Preferred Stock, after giving effect to such issuance
(and the payment of dividends or distributions) on a pro forma basis,
the Company would have had a Fixed Charge Coverage Ratio of at least
2.25 to 1.00 and (B) the aggregate amount of dividends declared and
paid pursuant to this clause (vi) does not exceed the net cash proceeds
received by the Company from the sale of Designated Preferred Stock
issued after the Closing Date;
(vii) Investments in Unrestricted Subsidiaries having an
aggregate Fair Market Value, taken together with all other Investments
made pursuant to this clause (vii) that are at that time outstanding,
not to exceed $10,000,000 (with the Fair Market Value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
<PAGE>
37
(viii) the payment of dividends on the Company's common stock
(or the payment of dividends to Volume Holdings to fund the payment by
Volume Holdings of dividends on Volume Holdings' common stock)
following the first public offering of common stock of the Company or
Volume Holdings, as the case may be, after the Closing Date, of up to
6% per annum of the net proceeds received by the Company or contributed
to the Company by Volume Holdings from such public offering;
(ix) Investments that are made with Excluded Contributions;
(x) other Restricted Payments in an aggregate amount not to
exceed $7,500,000;
(xi) the payment of dividends, other distributions or other
amounts by the Company (A) to Volume Holdings in amounts equal to the
amounts required for Volume Holdings to pay fees and expenses required
to maintain its corporate existence and other operating costs in an
aggregate amount of up to $1,000,000 per fiscal year and (B) to Volume
Holdings in amounts equal to amounts required for Volume Holdings to
pay franchise taxes and federal, state and local income taxes to the
extent such income taxes are attributable to the income of the Company
and its Restricted Subsidiaries (and, to the extent of amounts actually
received from its Unrestricted Subsidiaries, in amounts required to pay
such taxes to the extent attributable to the income of such
Unrestricted Subsidiaries);
(xii) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion
of the exercise price of such options;
(xiii) the transfer to Volume Holdings of trademarks and
servicemarks and the payment of license fees to Volume Holdings in
respect of such trademarks and servicemarks; provided, however, that
all such license fees are immediately contributed by Volume Holdings to
the Company or used to repay or service existing Indebtedness of Volume
Holdings to the Company ("Royalty Fee Contributions") (provided that
the amount of such Royalty Fee Contributions will not increase the
amount available for Restricted Payments under Section 4.04(a)(3)
hereof); and
(xiv) dividends to Volume Holdings in an amount not to exceed
$50,000,000 as contemplated by the "Use of Proceeds" section of the
Offering Memorandum;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (v), (vi), (vii), (viii) and (x), no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof; provided further, however, that for purposes of
determining the aggregate amount expended for Restricted Payments in accordance
with Section 4.04(a)(3) hereof, only the amounts expended under clauses (i),
(v), (vi) and (viii) of this Section 4.04(b) shall be included.
As of the Closing Date, all of the Company's Subsidiaries
shall be Restricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the definition
of "Unrestricted
<PAGE>
38
Subsidiary." For purposes of designating any Restricted Subsidiary as an
Unrestricted Subsidiary, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so
designated will be deemed to be Restricted Payments in an amount determined as
set forth in the last sentence of the definition of "Investments." Such
designation will only be permitted if a Restricted Payment in such amount would
be permitted at such time (whether pursuant to Section 4.04(a) hereof or under
clause (vii), (ix) or (x) of this Section 4.04(b)) and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.05. Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to: (a) (i) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (ii) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make
loans or advances to the Company or any of its Restricted Subsidiaries; or (c)
sell, lease or transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries except in each case for such encumbrances or
restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Closing Date, including pursuant to the Credit Agreement and the other
Senior Credit Documents;
(2) this Indenture and the Securities;
(3) applicable law or any applicable rule, regulation or
order;
(4) any agreement or other instrument relating to Indebtedness
of a Person acquired by the Company or any Restricted Subsidiary which
was in existence at the time of such acquisition (but not created in
contemplation thereof or to provide all or any portion of the funds or
credit support utilized to consummate such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(6) Secured Indebtedness otherwise permitted to be Incurred
pursuant to Sections 4.03 and 4.08 hereof that limit the right of the
debtor to dispose of the assets securing such Indebtedness;
(7) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business;
(8) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
<PAGE>
39
(9) customary provisions contained in leases, agreements to
provide services and other similar agreements entered into in the
ordinary course of business that impose restrictions of the type
described in clause (c) above;
(10) other Indebtedness of Restricted Subsidiaries permitted
to be Incurred subsequent to the Closing Date pursuant to clause (xii)
of the Section 4.03(b) hereof; or
(11) any encumbrances or restrictions of the type referred to
in clauses (a), (b) and (c) above imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (1) through (10) above; provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are, in the good
faith judgment of the Board of Directors, no more restrictive with
respect to such dividend and other payment restrictions than those
contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
SECTION 4.06. Asset Sales. (a) The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, cause or make an Asset
Sale, unless (x) the Company, or its Restricted Subsidiaries, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) except in the case of a Permitted Asset
Swap, at least 75% of the consideration therefor received by the Company, or
such Restricted Subsidiary, as the case may be, is in the form of Cash
Equivalents; provided that the amount of (i) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Securities) that are
assumed by the transferee of any such assets, (ii) any notes or other
obligations or other securities received by the Company or such Restricted
Subsidiary from such transferee that are converted by the Company or such
Restricted Subsidiary into cash within 180 days of the receipt thereof (to the
extent of the cash received), and (iii) any Designated Noncash Consideration
received by the Company or any of its Restricted Subsidiaries in such Asset Sale
having an aggregate Fair Market Value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (iii) that is at that
time outstanding, not to exceed the greater of 7.5% of Total Assets or
$10,000,000 (with the Fair Market Value of each item of Designated Noncash
Consideration being measured at the time received and without giving effect to
subsequent changes in value) shall be deemed to be Cash Equivalents for the
purposes of this provision.
(b) Within 365 days after the Company's or any Restricted
Subsidiary's receipt of the Net Proceeds of any Asset Sale, the Company or such
Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its
option, (i) to permanently reduce Obligations under the Credit Agreement (and,
in the case of revolving Obligations, to correspondingly reduce commitments with
respect thereto) or other Senior Indebtedness or Pari Passu Indebtedness
(provided that if the Company shall so reduce Obligations under Pari Passu
Indebtedness, it will equally and ratably reduce Obligations under the
Securities by making an offer (in accordance with the procedures set forth below
for an Asset Sale Offer) to all Holders to purchase at a purchase price equal to
100% of the
<PAGE>
40
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, the pro rata principal amount of Securities) or Indebtedness of
a Restricted Subsidiary, in each case other than Indebtedness owed to the
Company or an Affiliate of the Company, (ii) to an investment in any one or more
businesses, capital expenditures or acquisitions of other assets in each case
used or useful in a Similar Business, and/or (iii) to make an investment in
properties or assets that replace the properties and assets that are the subject
of such Asset Sale. Pending the final application of any such Net Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Net Proceeds in
Cash Equivalents or Investment Grade Securities. Any Net Proceeds from any Asset
Sale that are not applied as provided and within the time period set forth in
the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds". When the aggregate amount of Excess Proceeds exceeds $15,000,000, the
Company shall make an offer to all Holders of Securities (an "Asset Sale Offer")
to purchase the maximum principal amount of Securities, that is an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages, if any, to the date fixed
for the closing of such offer, in accordance with the procedures set forth in
this Section 4.06. The Company will commence an Asset Sale Offer with respect to
Excess Proceeds within ten Business Days after the date that Excess Proceeds
exceeds $15,000,000 by mailing the notice required pursuant to Section
4.06(c)(1). To the extent that the aggregate amount of Securities tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Securities surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Securities to be
purchased in the manner described in Section 4.06(c)(3). Upon completion of any
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
(c) (1) Promptly, and in any event within ten Business Days
after the Company becomes obligated to make an Asset Sale Offer, the Company
shall deliver to the Trustee and send, by first-class mail, postage prepaid, to
each Holder at such Holder's registered address, a written notice stating that
the Holder may elect to have his Securities purchased by the Company either in
whole or in part (subject to prorating as hereinafter described in the event the
Asset Sale Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall be mailed at least 30
but not more than 60 days before the purchase date and shall contain such
information concerning the business of the Company which the Company in good
faith believes will enable such Holders to make an informed decision (which at a
minimum shall include (i) the most recently filed annual report on Form 10-K (or
any successor or comparable form) (including audited consolidated financial
statements) of the Company, the most recent subsequently filed quarterly report
on Form 10-Q (or any successor or comparable form) of the Company and any
current report on Form 8-K (or any successor or comparable form) of the Company
filed subsequent to such quarterly report, other than current reports describing
Asset Sales otherwise described in the offering materials, (ii) a description of
material developments in the Company's business subsequent to the date of the
latest of such reports, and (iii) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Secur ities
pursuant to the Asset Sale Offer, together with the address referred to in
Section 4.06(c)(3) below. If any Security is to be purchased in part only, any
notice of purchase that relates to such
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41
Security shall state the portion of the principal amount thereof that has been
or is to be purchased.
(2) Not later than the date upon which written notice of an
Asset Sale Offer is delivered to the Trustee as provided above, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset
Sales pursuant to which such Asset Sale Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.06(b). On such
date, the Company shall also irrevocably deposit with the Trustee or with a
paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) an amount equal to the Excess Proceeds to be invested in Cash
Equivalents and to be held for payment in accordance with the provisions of this
Section 4.06. Upon the expiration of the period for which the Offer remains open
(the "Offer Period"), the Company shall deliver to the Trustee for cancelation
the Securities or portions thereof that have been properly tendered to and are
to be accepted by the Company. The Trustee (or the Paying Agent, if not the
Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
Excess Proceeds delivered by the Company to the Trustee is greater than the
purchase price of the Securities tendered, the Trustee shall deliver the excess
to the Company immediately after the expiration of the Offer Period for
application in accordance with Section 4.06(b) above.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period more Securities are tendered pursuant to an Asset Sale Offer
than the Company is required to purchase, selection of such Securities for
purchase shall be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which such Securities are
listed, or if such Securities are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); provided that no
Securities of $1,000 or less shall be purchased in part. A new Security in
principal amount equal to the unpurchased portion of any Security purchased in
part will be issued in the name of the Holder thereof upon cancelation of the
original Security. On and after the purchase date unless the Company defaults in
payment of the purchase price, interest shall cease to accrue on Securities or
portions thereof purchased.
(d) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws or regulations are applicable in connection with the
repurchase of the Securities pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in this Indenture by virtue thereof.
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42
SECTION 4.07. Transactions with Affiliates. (a) The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction or series of
transactions, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of the Company (each of the
foregoing, an "Affiliate Transaction") involving aggregate consideration in
excess of $2,500,000, unless (i) such Affiliate Transaction is on terms that are
not materially less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10,000,000, the
Company delivers to the Trustee a resolution adopted by the majority of the
Board of Directors of the Company, approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above.
(b) The provisions of Section 4.07(a) shall not apply to the
following: (i) transactions between or among the Company and/or any of its
Restricted Subsidiaries; (ii) Permitted Investments and Restricted Payments
permitted by Section 4.04; (iii) the payment of annual management, consulting,
monitoring and advisory fees to Blackstone or GE Capital in an amount not to
exceed $1,500,000 in any calendar year and any related out-of-pocket expenses;
(iv) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary; (v) payments by the Company or any of its
Restricted Subsidiaries to Blackstone or GE Capital, made for any financial
advisory, financing, underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in connection with
acquisitions or divestitures, which payments are approved by a majority of the
Board of Directors of the Company in good faith; (vi) transactions in which the
Company or any of its Restricted Subsidiaries, as the case may be, delivers to
the Trustee a letter from an Independent Financial Advisor stating that such
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view or meets the requirements of clause (i) Section 4.07(a)
hereof; (vii) payments or loans to employees or consultants in the ordinary
course of business which are approved by a majority of the Board of Directors of
the Company in good faith; (viii) any agreement as in effect as of the Closing
Date or any amendment thereto (so long as any such amendment is not
disadvantageous to the holders of the Securities in any material respect) or any
transaction contemplated thereby; (ix) the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of its obligations under the
terms of, any stockholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party as of
the Closing Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Company or
any of its Restricted Subsidiaries of its obligations under any future amendment
to any such existing agreement or under any similar agreement entered into after
the Closing Date shall only be permitted by this clause (ix) to the extent that
the terms of any such amendment or new agreement are not otherwise
disadvantageous to the Holders of the Securities in any material respect; (x)
the payment of all fees and expenses related to the Transactions, including fees
to Blackstone; (xi) transactions with customers, clients, suppliers or
purchasers or sellers of goods or services, in each case in the ordinary course
of business and otherwise in compliance with the terms of this Indenture, which
are fair to the Company and its
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43
Restricted Subsidiaries in the reasonable determination of the Board of
Directors or the senior management of the Company, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party; and (xii) the issuance of Capital Stock (other than
Disqualified Stock) of the Company or Volume Holdings to any Permitted Holder.
SECTION 4.08. Liens. This Company shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
Incur or suffer to exist any Lien on any asset or property of the Company or
such Restricted Subsidiary, or any income or profits therefrom, or assign or
convey any right to receive income therefrom, that secures any obligations of
the Company or any of its Subsidiaries (other than Senior Indebtedness) unless
the Securities are equally and ratably secured with (or on a senior basis to, in
the case of obligations subordinated in right of payment to the Securities) the
obligations so secured or until such time as such obligations are no longer
secured by a Lien. The preceding sentence shall not require the Company or any
Restricted Subsidiary to secure the Securities if the Lien consists of a
Permitted Lien.
No Guarantor shall directly or indirectly create, Incur or
suffer to exist any Lien on any asset or property of such Guarantor or any
income or profits therefrom, or assign or convey any right to receive income
therefrom, that secures any obligation of such Guarantor (other than Senior
Indebtedness of such Guarantor) unless the Guarantee of such Guarantor is
equally and ratably secured with (or on a senior basis to, in the case of
obligations subordinated on right of payment to such Guarantor's Guarantee) the
obligations so secured or until such time as such obligations are no longer
secured by a Lien. The preceding sentence shall not require any Guarantor to
secure its Guarantee if the Lien consists of a Permitted Lien.
SECTION 4.09. Change of Control. (a) Upon a Change of Control,
each Holder shall have the right to require that the Company repurchase all or
any part of such Holder's Securities at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), in accordance with the terms contem plated in Section
4.09(b); provided, however, that notwithstanding the occurrence of a Change of
Control, the Company shall not be obligated to purchase the Securities pursuant
to this Section 4.09 in the event that it has exercised its right to redeem all
the Securities pursuant to paragraph 5 of the Securities. In the event that at
the time of such Change of Control the terms of the Bank Indebtedness restrict
or prohibit the repurchase of Securities pursuant to this Section 4.09, then
prior to the mailing of the notice to Holders provided for in Section 4.09(b)
below but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all Bank Indebtedness or offer to repay in full
all Bank Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer or (ii) obtain the requisite consent under the agreements
governing the Bank Indebtedness to permit the repurchase of the Securities as
provided for in Section 4.09(b).
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44
(b) Within 30 days following any Change of Control (except as
provided in Section 4.09(a)), the Company shall mail a notice to each Holder
with a copy to the Trustee (the "Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due
on the relevant interest payment date);
(2) the circumstances and relevant facts and financial
information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent
with this Section 4.09, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Securities which were
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Securities purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section 4.09 shall be delivered to the Trustee for
cancelation, and the Company shall pay the purchase price plus accrued and
unpaid interest, if any, to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section
4.09, the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in Section 4.09(b) applicable to a Change of Control Offer made by the Company
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.
(f) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.09. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.09, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.09 by virtue
thereof.
SECTION 4.10. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company commencing
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45
with the fiscal year ending on December 28, 1999, an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
Officers of the Company they would normally have knowledge of any Default and
whether or not the signers know of any Default that occurred during such period.
If they do, the certificate shall describe the Default, its status and what
action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.11. Further Instruments and Acts. Upon request of
the Trustee, the Company shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.12. Future Guarantors. The Company shall cause each
Restricted Subsidiary organized under the laws of the United States of America
or any state or territory thereof that Incurs Indebtedness or issues shares of
Disqualified Stock or Preferred Stock to execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit C hereto pursuant to which such
Subsidiary shall guarantee payment of the Securities.
ARTICLE 5
Successor Company
SECTION 5.01. (a) Merger, Consolidation or Sale of All or
Substantially All Assets. The Company shall not consolidate or merge with or
into or wind up into (whether or not the Company is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless:
(i) the Company is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation,
partnership or limited liability company organized or existing under
the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (the Company or such Person, as the
case may be, being herein called the "Successor Company");
(ii) the Successor Company (if other than the Company)
expressly assumes all the obligations of the Company under this
Indenture and the Securities pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the
Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any of its Restricted Subsidiaries as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction) no Default or
Event of Default shall have occurred and be continuing;
(iv) immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of
the applicable four-quarter
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46
period, either (A) the Successor Company would be permitted to Incur at
least $1.00 of additional Indebtedness pursuant to Section 4.03(a)
hereof or (B) the Fixed Charge Coverage Ratio for the Successor Company
and its Restricted Subsidiaries would be greater than such ratio for
the Company and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, unless it is the other party to the
transactions described above, shall have by supplemental indenture
confirmed that its Guarantee shall apply to such Person's obligations
under this Indenture and the Securities; and
(vi) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted
for, the Company under this Indenture and the Securities. Notwithstanding the
foregoing clauses (iii) and (iv), (a) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company or to another Restricted Subsidiary and (b) the Company may merge with
an Affiliate incorporated solely for the purpose of reincorporating the Company
in another state of the United States so long as the amount of Indebtedness of
the Company and its Restricted Subsidiaries is not increased thereby.
(b) Subject to Section 11.02(b) hereof governing the release
of a Guarantee upon the sale or disposition of a Guarantor that is a Subsidiary
of the Company, each Guarantor shall not, and the Company shall not permit a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless:
(i) such Guarantor is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation,
partnership or limited liability company organized or existing under
the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (such Guarantor or such Person, as
the case may be, being herein called the "Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor under this
Indenture and such Guarantors's Guarantee pursuant to a supplemental
indenture or other documents or instruments in form reasonably
satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Guarantor or any of its Subsidiaries as a result of such transaction as
having been Incurred by the Successor Guarantor or such Subsidiary at
the time of such transaction) no Default or Event of Default shall have
occurred and be continuing; and
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47
(iv) the Guarantor shall have delivered or caused to be
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture.
Subject to Section 11.02(b), the Successor Guarantor shall
succeed to, and be substituted for, such Guarantor under this Indenture and such
Guarantor's Guarantee. Notwithstanding the foregoing clause (iii), a Guarantor
may merge with an Affiliate incorporated solely for the purpose of
reincorporating such Guarantor in another state of the United States so long as
the amount of Indebtedness of the Guarantor is not increased thereby.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohib ited by Article 10, and such default continues
for a period of 30 days;
(2) the Company defaults in the payment of the principal or
premium, if any, of any Security when the same becomes due and payable
at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01 hereof;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09 or 4.12 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) Indebtedness of the Company or any Subsidiary (other than
Indebtedness owing to the Company or a Restricted Subsidiary) is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $15,000,000
or its foreign currency equivalent;
(7) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
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48
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of the
property of the Company or any Significant Subsidiary; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money (other
than judgments which are covered by enforceable insurance policies
issued by solvent carriers) in excess of $15,000,000 or its foreign
currency equivalent against the Company or a Significant Subsidiary and
either (A) an enforcement proceeding thereon has been commenced by any
creditor upon such judgment or decree or (B) there is a period of 60
days following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof
stayed; or
(10) any Guarantee ceases to be in full force and effect
(except as contemplated by the terms thereof) or any Guarantor or
Person acting by or on behalf of such Guarantor denies or disaffirms
its obligations under this Indenture or any Guarantee and such Default
continues for 10 days.
The foregoing shall constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
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49
A Default under clause (4) or (5) above is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified in clause (4) or (5), as
the case may be, after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company, may declare the principal of, premium, if any, and
accrued but unpaid interest on all the Securities to be due and payable. Upon
such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 6.01(7) or (8) with
respect to the Company occurs, the principal of, premium, if any, and interest
on all the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Securityholders. The Holders of a majority in principal amount of the Securities
by notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpay ment of principal or
interest that has become due solely because of acceleration. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquies cence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the outstanding Securities by notice to the
Trustee may on behalf of the Holders of all such Securities waive an existing
Default or an Event of Default and its consequences except (i) a continuing
Default or an Event of Default in the payment of the principal of or interest on
a Security, (ii) a Default or an Event of Default arising from the failure to
redeem or purchase any Security when required pursuant to the terms of this
Indenture or (iii) a Default or an Event of Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. In the event of any Event of Default specified in
Section 6.01(4), such Event of Default and all consequences thereof (including
without limitation any acceleration or resulting
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50
payment default) shall be annulled, waived and rescinded, automatically and
without any action by the Trustee or the Holders, if within 20 days after such
Event of Default arose (x) the Indebtedness or guarantee that is the basis for
such Event of Default has been discharged, or (y) the holders thereof have
rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default, or (z) if the default that is the basis
for such Event of Default has been cured. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemni fication
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and liquidated damages and interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
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51
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default speci fied in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary or
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to
the extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated
damages without preference or priority of any kind, according to the
amounts due and payable on the Securi ties for principal, any
liquidated damages and interest, respectively; and
FOURTH: to the Company or any other obligor on the
Securities..
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 6.10. At least 15 days
before such record date, the Trustee shall mail to each Securityholder and the
Company a notice that states the record date, the payment date and amount to be
paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the Securities.
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SECTION 6.12. Waiver of Stay or Extension Laws. Neither the
Company nor any Guarantor (to the extent it may lawfully do so) shall at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
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53
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Securities
at the time outstanding, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
(g) In case an Event of Default occurs and is continuing, the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the Holders
pursuant to this Indenture,
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54
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might reasonably be
incurred by it in compliance with such request or direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and is actually known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within the earlier of 90 days after it
occurs or 30 days after it is actually known to a Trust Officer or written
notice of it is received by the Trustee. Except in the case of a Default in
payment of principal of, premium (if any) or interest on any Security, the
Trustee may withhold notice if and so long as a committee of its Trust Officers
in good faith determines that withholding notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of July 15 that
complies with Section 313(a) of the TIA. The Trustee shall also comply with
Section 313(b) of the TIA.
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Guarantor, jointly and severally, shall indemnify
the Trustee against any and all loss, liability or expense (including reasonable
attorneys' fees) incurred by or in connection with the administration of this
trust and the performance of its duties hereunder. The Trustee shall notify the
Company of any claim for which it may seek indemnity promptly upon obtaining
actual knowledge thereof; provided, however, that any failure so to notify the
Company shall not relieve the Company or any Guarantor of its indemnity
obligations hereunder. The Company shall defend the claim and the indemnified
party shall provide reasonable cooperation at the Company's expense in the
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55
defense of such claim. Such indemnified parties may together have one separate
counsel and the Company and the Guarantors, as applicable shall pay the fees and
expenses of such counsel; provided, however, that the Company shall not be
required to pay such fees and expenses if it assumes such indemnified parties'
defense and, in such indemnified parties' reasonable judgment, there is no
conflict of interest between the Company and the Guarantors, as applicable, and
such parties in connection with such defense. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by an
indemnified party through such party's own wilful misconduct, negligence or bad
faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest and any liquidated damages on particular
Securities.
The Company's payment obligations pursuant to this Section
shall survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(7) or (8) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
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56
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
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57
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.08 or paid or
Securities for which payment money has heretofore been deposited in trust
pursuant to this Article 8) for cancelation or (ii) all outstanding Securities
not theretofore delivered for cancelation have become due and payable, whether
at maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof or will become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice in the name and at the expense of the Company,
and the Company or any Guarantor irrevocably deposits or causes to be deposited
with the Trustee funds or U.S. Government Obligations on which payment of
principal and interest when due will be sufficient to pay at maturity or upon
redemption all outstanding Securities, including interest thereon to maturity or
such redemption date (other than Securities replaced pursuant to Section 2.08),
and if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all of its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the
operation of Section 5.01(a)(iv), 6.01(4), 6.01(6), 6.01(7) (with respect to
Subsidiaries of the Company only), 6.01(8) (with respect to Subsidiaries of the
Company only) and 6.01(9) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option. In the event that the Company terminates all of its
obligations under the Securities and this Indenture by exercising its legal
defeasance option, the obligations under the Guarantees shall each be terminated
simultaneously with the termination of such obligations.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exer cises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries of the Company only),
6.01(8) (with respect to Significant Subsidiaries of the Company only) or
6.01(9) or because of the failure of the Company to comply with clause (iv) of
Section 5.01(a).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
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58
SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to maturity or
redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
material agreement binding on the Company and is not prohibited by
Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that,
subject to customary assumptions and exclusions, (i) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, subject to customary assumptions and exclusions, the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that, subject to customary assumptions and exclusions, the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel (which Opinion of Counsel may be
subject to customary assumptions and exclusions), each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with.
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Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed for
two years, and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
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(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 or Article 12 that would
limit or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10 or Article
12;
(5) to add additional Guarantees with respect to the
Securities or to secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(7) to comply with any requirement of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA;
(8) to make any change that does not adversely affect the
rights of any Securityholder; or
(9) to provide for the issuance of the Exchange Securities,
Private Exchange Securities or Additional Securities, which shall have
terms substantially identical in all material respects to the Original
Securities (except that the transfer restrictions contained in the
Original Securities shall be modified or eliminated, as appropriate),
and which shall be treated, together with any outstanding Original
Securities, as a single issue of securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. With Consent of Holders. The Company, the
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in
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61
connection with a tender offer or exchange for the Securities), and any existing
Default (subject to Article 6) or compliance with any provision of this
Indenture or the Securities may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Securities (including
consents obtained in connection with a purchase of or tender offer or exchange
offer for Securities). However, without the consent of each Securityholder
affected, an amendment or waiver may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) make any change in Article 10 or Article 12 that adversely
affects the rights of any Securityholder under Article 10 or Article
12;
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02; or
(8) modify the Guarantees in any manner adverse to the
Holders; or
(9) impair the right of any Holder to receive payment of
principal of, or interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
An amendment or waiver under this Section 9.02 may not make
any change that adversely affects the rights under Article 10 or Article 12 of
any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment or waiver under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly describing
such amendment or waiver. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or waiver under this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
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62
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officers'
Certificate from the Company certifying that the requisite number of consents
has been received. After an amendment or waiver becomes effective, it shall bind
every Securityholder. An amendment or waiver becomes effective upon the (i)
receipt by the Company or the Trustee of the requisite number of consents, (ii)
satisfaction of conditions to effectiveness as set forth in this Indenture and
an indenture supplemental hereto containing such amendment or waiver and (iii)
execution of such amendment or waiver (or supplemental indenture) by the Company
and the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture and
that such amendment is the legal, valid and binding obligation of the Company
and the Guarantors enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders
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that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full of
all existing and future Senior Indebtedness of the Company and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness. The Securities shall in all respects rank pari passu in
right of payment with all existing and future Pari Passu Indebtedness of the
Company and shall rank senior in right of payment to all existing and future
Subordinated Indebtedness of the Company; and only Indebtedness of the Company
that is Senior Indebtedness of the Company shall rank senior to the Securities
in accordance with the provisions set forth herein. For purposes of this Article
10, the Indebtedness evidenced by the Securities shall be deemed to include the
liquidated damages payable pursuant to the provisions set forth in the
Securities and the Registration Agreement. All provisions of this Article 10
shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or dissolution of the Company or reorganization of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness of the Company shall be entitled to receive payment in full
of the Senior Indebtedness of the Company before the Securityholders are
entitled to receive any payment and until the Senior Indebtedness is paid in
full, any payment or distribution to which Securityholders would be entitled but
for this Article 10 shall be made to holders of the Senior Indebtedness of the
Company as their interests may appear (except that Securityholders may receive
and retain (i) Permitted Junior Securities and (ii) payments made from the trust
described under Section 8.01 so long as, on the date or dates the respective
amounts were paid into the trust, such payments were made with respect to the
Securities without violating this Article 10). If a distribution is made to
Securityholders that due to this Article 10 should not have been made to them,
such Securityholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
SECTION 10.03. Default on Senior Indebtedness. The Company may
not pay the principal of, premium (if any) or interest on, the Securities or
make any deposit pursuant to Section 8.01 and may not otherwise purchase, redeem
or otherwise retire any Securities (except that Holders may receive and retain
(a) Permitted Junior Securities and (b) payments made from the trust described
in Section 8.01) (collectively, "pay the Securities") if (i) a default in the
payment of the principal of, premium, if any, or interest on any Designated
Senior Indebtedness of the Company occurs and is continuing or any other amount
owing in respect of any Designated Senior Indebtedness of the Company is not
paid when due, or (ii) any other default on Designated Senior Indebtedness of
the Company occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or
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waived and any such acceleration has been rescinded or (y) such Designated
Senior Indebtedness has been paid in full. However, the Company may pay the
Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of such
Designated Senior Indebtedness with respect to which either of the events set
forth in clause (i) or (ii) of the immediately preceding sentence has occurred
and is continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second preceding sentence) with respect
to any Designated Senior Indebtedness of the Company pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, the Company may not pay the Securities for a
period (a "Payment Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage Notice") of such
default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice is
no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03 and Section 10.02), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders shall
have accelerated the maturity of such Designated Senior Indebtedness, the
Company may resume payments on the Securities after the end of such Payment
Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of the Company during such period. However, if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness of the Company other than the Bank
Indebtedness, the Representative of the Bank Indebtedness may give one
additional Blockage Notice within such period. In no event, however, may the
total number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any 360 consecutive day period.
For purposes of this Section 10.03, no default or event of default that existed
or was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of the Company initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness of the Company (or their Representative) of the
acceleration. If any Designated Senior Indebtedness of the Company is
outstanding, the Company may not pay the Securities until five Business Days
after such holders or the Representative of such Designated Senior Indebtedness
receive notice of such acceleration and, thereafter, may pay the Securities only
if this Article 10 otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to
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them, the Securityholders who receive the distribution shall hold it in trust
for holders of Senior Indebtedness of the Company and pay it over to them as
their respective interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of
the Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
of the Company which otherwise would have been made to Securityholders is not,
as between the Company and Securityholders, a payment by the Company on such
Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on and liquidated damages in respect of, the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness of the Company to receive distributions
otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 10. The Company, the Registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of the Company may give the
notice; provided, however, that, if an issue of Senior Indebtedness of the
Company has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of the Company with the same rights it would have if it were
not Trustee. The Registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness of the Company which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the
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66
Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Security holders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article 10, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of such Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this
Article 10, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall
be applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Security holder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Securityholders or
the Company or any other
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Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing
in this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
SECTION 10.18. Defeasance. The terms of this Article 10 shall
not apply to payments from money or the proceeds of U.S. Government Obligations
held in trust by the Trustee for the payment of principal of and interest on the
Securities pursuant to the provisions described in Section 8.03.
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees. Each Guarantor hereby jointly and
severally irrevocably and unconditionally guarantees, as a primary obligor and
not merely as a surety, to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment when due, whether at Stated Maturity,
by acceleration, by redemption or otherwise, of all obligations of the Company
under this Indenture (including obligations to the Trustee) and the Securities,
whether for payment of principal of, interest on or liquidated damages in
respect of the Securities and all other monetary obligations of the Company
under this Indenture and the Securities and (b) the full and punctual
performance within applicable grace periods of all other obligations of the
Company whether for expenses, indemnification or otherwise under this Indenture
and the Securities (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from each such Guarantor, and that each such Guarantor shall
remain bound under this Article 11 notwithstanding any extension or renewal of
any Guaranteed Obligation.
Each Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this
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Indenture, the Securities or any other agreement or otherwise; (b) any extension
or renewal of any thereof; (c) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or the Trustee for
the Guaranteed Obligations or any of them; (e) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Guaranteed Obligations; or (f) any change in the ownership of such Guarantor,
except as provided in Section 11.02(b).
Each Guarantor hereby waives any right to which it may be
entitled to have its obligations hereunder divided among the Guarantors, such
that such Guarantor's obligations would be less than the full amount claimed.
Each Guarantor hereby waives any right to which it may be entitled to have the
assets of the Company first be used and depleted as payment of the Company's or
such Guarantor's obligations hereunder prior to any amounts being claimed from
or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Company be sued prior to an action
being initiated against such Guarantor.
Each Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
The Guarantee of each Guarantor is, to the extent and in the
manner set forth in Article 12, subordinated and subject in right of payment to
the prior payment in full of the principal of and premium, if any, and interest
on all Senior Indebtedness of the relevant Guarantor and is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and
11.06, the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
any Guarantor or would otherwise operate as a discharge of any Guarantor as a
matter of law or equity.
Each Guarantor agrees that its Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. Each
Guarantor further agrees that its Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue
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hereof, upon the failure of the Company to pay the principal of or interest on
any Guaranteed Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Guaranteed Obligation, each Guarantor hereby promises to and
shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to
be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid principal amount of such Guaranteed Obligations then due and
owing, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only
to the extent not prohibited by law) and (iii) all other monetary obligations of
the Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations and all obligations to which the Guaranteed Obligations are
subordinated as provided in Article 12. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Guaranteed Obligations guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of any Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y)
in the event of any declaration of acceleration of such Guaranteed Obligations
as provided in Article 6, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purposes of this Section 11.01.
Each Guarantor also agrees to pay any and all reasonable costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the
Trustee or any Holder in enforcing any rights under this Section 11.01.
Upon request of the Trustee, each Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 11.02. Limitation on Liability. (a) Any term or
provision of this Indenture to the contrary notwithstanding, the maximum,
aggregate amount of the Guaranteed Obligations guaranteed hereunder by any
Guarantor shall not exceed the maximum amount that, after giving effect to all
other contingent and fixed liabilities of such Guarantor (including, without
limitation, any guarantees under the Credit Agreement) and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under this Indenture, can be hereby
guaranteed without rendering this Indenture, as it relates to such Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.
(b) A Guarantee as to any Guarantor that is a Subsidiary of
the Company shall terminate and be of no further force or effect and such
Guarantor shall be deemed to be released from all obligations under this Article
11 upon (i) the merger or consolidation of such Guarantor with or into any
Person other than the Company or a Subsidiary or Affiliate of the Company where
such Guarantor is not the surviving entity of such consolidation or merger or
(ii) the sale by the Company or any Subsidiary of the Company (or any pledgee of
the Company) of the Capital Stock of such Guarantor, where, after such sale,
such Guarantor is no longer a Subsidiary of the Company;
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provided, however, that each such merger, consolidation or sale (or, in the case
of a sale by such a pledgee, the disposition of the proceeds of such sale) shall
comply with Section 4.06 and Section 5.01(b). At the request of the Company, the
Trustee shall execute and deliver an appropriate instrument evidencing such
release.
SECTION 11.03. Successors and Assigns. This Article 11 shall
be binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
any Guarantor therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Trustee, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on any Guarantor in any case shall entitle such Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantors. Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.12 hereof shall promptly execute and deliver to the Trustee a
supplemental indenture substantially in the form of Exhibit C hereto pursuant to
which such Subsidiary shall become a Guarantor under this Article 11 and shall
guarantee the Guaranteed Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
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ARTICLE 12
Subordination of the Guarantees
SECTION 12.01. Agreement To Subordinate. Each Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
obligations of a Guarantor hereunder are subordinated in right of payment, to
the extent and in the manner provided in this Article 12, to the prior payment
in full of all existing and future Senior Indebtedness of such Guarantor and
that the subordination is for the benefit of and enforceable by the holders of
such Senior Indebtedness of such Guarantor. The obligations hereunder with
respect to a Guarantor shall in all respects rank pari passu in right of payment
with all existing and future Pari Passu Indebtedness of such Guarantor and shall
rank senior in right of payment to all existing and future Subordinated
Indebtedness of such Guarantor; and only Indebtedness of such Guarantor that is
Senior Indebtedness of such Guarantor shall rank senior to the obligations of
such Guarantor in accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of a Guarantor to creditors upon a total
or partial liquidation or dissolution of such Guarantor or reorganization of or
similar proceeding relating to such Guarantor and its properties, the holders of
Senior Indebtedness of such Guarantor shall be entitled to receive payment in
full of such Senior Indebtedness of such Guarantor before Securityholders are
entitled to receive any payment and until the Senior Indebtedness of such
Guarantor is paid in full, any payment or distribution to which Securityholders
would be entitled but for this Article 12 shall be made to holders of such
Senior Indebtedness of such Guarantor as their interests may appear. If a
distribution is made to Securityholders that due to this Article 12 should not
have been made to them, such Securityholders are required to hold it in trust
for the holders of Senior Indebtedness of such Guarantor and pay it over to them
as their interests may appear (except that Securityholders may receive and
retain (i) Permitted Junior Securities and (ii) payments made from the trust
described under Section 8.01 so long as, on the date or dates the respective
amounts were paid into the trust, such payments were made with respect to the
Securities without violating this Article 12).
SECTION 12.03. Default on Designated Senior Indebtedness of a
Guarantor. A Guarantor may not make any payment pursuant to any of the
Guaranteed Obligations and may not otherwise purchase, redeem or otherwise
retire any Securities (collectively, "pay its Guarantee") if (i) a default in
the payment of the principal of, premium, if any, or interest on any Designated
Senior Indebtedness of such Guarantor occurs and is continuing or any other
amount owing in respect of any Designated Senior Indebtedness of such Guarantor
is not paid when due, or (ii) any other default on Designated Senior
Indebtedness of such Guarantor occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded or (y) such Designated Senior Indebtedness has been paid in full.
However, such Guarantor may pay its Guarantee without regard to the foregoing if
such Guarantor and the Trustee receive written notice approving such payment
from the Representative of such Designated Senior Indebtedness with respect to
which either of the events in clause (i) or (ii) of the immediately preceding
sentence has occurred and is continuing. During the continuance of any default
(other than a default described in clause (i) or (ii) of the second preceding
sentence) with respect to any Designated Senior Indebtedness of
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a Guarantor pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
such Guarantor may not pay its Guarantee for a period (a "Guarantee Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to
such Guarantor and the Company) of written notice (a "Guarantee Blockage
Notice") of such default from the Representative of such Designated Senior
Indebtedness specifying an election to effect a Guarantee Payment Blockage
Period and ending 179 days thereafter (or earlier if such Guarantee Payment
Blockage Period is terminated (i) by written notice to the Trustee (with a copy
to such Guarantor and the Company) from the Person or Persons who gave such
Guarantee Blockage Notice, (ii) because such Designated Senior Indebtedness has
been repaid in full or (iii) because the default giving rise to such Guarantee
Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section 12.03 and in Section 12.02),
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Indebtedness, such Guarantor may resume payments on its Guarantee after such
Guarantee Payment Blockage Period, including any missed payments. Not more than
one Guarantee Blockage Notice may be given with respect to a Guarantor in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of such Guarantor during such period.
SECTION 12.04. Demand for Payment. If payment of the
Securities is accelerated because of an Event of Default and a demand for
payment is made on a Guarantor pursuant to Article 11, the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness of such
Guarantor (or the Representative of such holders) of such demand. If any
Designated Senior Indebtedness of such Guarantor is outstanding, such Guarantor
may not pay its Guarantee until five Business Days after such holders or the
Representative of the holders of the Designated Senior Indebtedness of such
Guarantor receive notice of such demand and, thereafter, may pay its Guarantee
only if this Article 12 otherwise permits payment at that time.
SECTION 12.05. When Distribution Must Be Paid Over. If a
payment or distribution is made to Securityholders that because of this Article
12 should not have been made to them, the Securityholders who receive the
payment or distribution shall hold such payment or distribution in trust for
holders of the Senior Indebtedness of the relevant Guarantor and pay it over to
them as their respective interests may appear.
SECTION 12.06. Subrogation. After all Designated Senior
Indebtedness of a Guarantor is paid in full and until the Securities are paid in
full in cash, Securityholders shall be subrogated to the rights of holders of
Senior Indebtedness of such Guarantor to receive distributions applicable to
Senior Indebtedness of such Guarantor. A distribution made under this Article 12
to holders of Senior Indebtedness of such Guarantor which otherwise would have
been made to Securityholders is not, as between such Guarantor and
Securityholders, a payment by such Guarantor on such Senior Indebtedness.
<PAGE>
73
SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Securityholders, the
obligation of a Guarantor which is absolute and unconditional, to make
payments with respect to the Guaranteed Obligations to the extent set
forth in Article 11; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by a Guarantor under its
obligations with respect to the Guaranteed Obligations, subject to the
rights of holders of Senior Indebtedness of such Guarantor to receive
distributions otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a
Guarantor. No right of any holder of Senior Indebtedness of a Guarantor to
enforce the subordination of the obligations of such Guarantor hereunder shall
be impaired by any act or failure to act by such Guarantor or by its failure to
comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or the Paying Agent may continue to
make payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 12. A Guarantor, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness of a Guarantor
may give the notice; provided, however, that if an issue of Senior Indebtedness
of a Guarantor has a Representative, only the Representative may give the
notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of a Guarantor with the same rights it would have if it were
not Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 12 with respect to any Senior Indebtedness of a Guarantor which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness of such Guarantor; and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 12 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 12.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of a Guarantor, the distribution may be made and the notice given
to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure of a Guarantor to make a payment on any
of its obligations by reason of any provision in this Article 12 shall not be
construed as preventing the occurrence of a default by such Guarantor under such
obligations. Nothing in this Article 12 shall have any effect on the right of
the Securityholders or the Trustee to make a demand for payment on a Guarantor
pursuant to Article 11.
<PAGE>
74
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of a Guarantor for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness of a Guarantor and other Indebtedness of a Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 12. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of a Guarantor to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of such
Guarantor held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Security holder by accepting a Security authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of each of the Guarantors as provided in this
Article 12 and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the relevant Guarantor or any other Person, money or
assets to which any holders of Senior Indebtedness of such Guarantor shall be
entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions. Each Securityholder by accepting a
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of a Guarantor, whether such Senior Indebtedness of such
Guarantor was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness of such Guarantor and such holder of Senior Indebtedness of such
Guarantor shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness of such Guarantor.
SECTION 12.16. Defeasance. The terms of this Article 12 shall
not apply to payments from money or the proceeds of U.S. Government Obligations
held in trust by the Trustee for the payment of principal of and interest on the
Securities pursuant to the provisions described in Section 8.03.
<PAGE>
75
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Guarantor:
Volume Services America, Inc.
201 East Broad Street
Spartanburg, South Carolina 29306
Attention of: Chief Financial Officer
if to the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis MN 55479-0069
Attention of: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
<PAGE>
76
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direc tion, waiver or consent, Securities owned by the Company,
any Guarantor or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company or any Guarantor
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded. Subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
<PAGE>
77
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 13.10. No Recourse Against Others. A director,
officer, employee or stockholder of the Company or any Guarantor shall not have
any liability for any obligations of the Company or any Guarantor under the
Securities, the Guarantees or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 13.11. Successors. All agreements of the Company and
each Guarantor in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE>
78
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
VOLUME SERVICES AMERICA, INC.,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES AMERICA
HOLDINGS, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVICE AMERICA CORPORATION, as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
VOLUME SERVICES, INC. (Kansas), as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
<PAGE>
79
EVENTS CENTER CATERING, INC., as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVICE AMERICA CONCESSIONS
CORPORATION, as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVICE AMERICA CORPORATION OF
WISCONSIN, as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVO-KANSAS, INC. as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SERVOMATION DUCHESS, INC., as
Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
SVM OF TEXAS, INC., as Guarantor,
By /s/ John T. Dee
-----------------------------------
Name: John T. Dee
Title: CEO and Chairman of the Board of Directors
<PAGE>
80
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
by /s/ Timothy P. Mowdy
--------------------------------
Name: Timothy P. Mowdy
Title: Designated Signer
<PAGE>
APPENDIX A
PROVISIONS RELATING TO ORIGINAL SECURITIES,
ADDITIONAL SECURITIES, EXCHANGE SECURITIES
AND PRIVATE EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such Global Security,
Euroclear and Cedel, in each case to the extent applicable to such transaction
and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities
clearing agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means the Euroclear Clearance System or any
successor securities clearing agency.
"Global Securities Legend" means the legend set forth under
that caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc. and Goldman,
Sachs & Co.
"Private Exchange" means an offer by the Company, pursuant to
a Registration Agreement, to issue and deliver to certain purchasers, in
exchange for the Initial Securities held by such purchasers as part of their
initial distribution, a like aggregate principal amount of Private Exchange
Securities.
"Private Exchange Securities" means the Securities of the
Company issued in exchange for Initial Securities pursuant to this Indenture in
connection with a Private Exchange pursuant to a Registration Agreement.
"Purchase Agreement" means (i) the Purchase Agreement dated
February 25, 1999, among the Company, the Guarantors and the Initial Purchasers
and (ii) any other similar Purchase Agreement relating to Additional Securities.
<PAGE>
2
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means an offer by the Company,
pursuant to a Registration Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for their Initial Securities,
a like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means (i) the Exchange and
Registration Rights Agreement dated March 4, 1999, among the Company, the
Guarantors and the Initial Purchasers and (ii) any other similar Exchange and
Registration Rights Agreement relating to Additional Securities.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities offered
and sold outside the United States in reliance on Regulation S.
"Restricted Period", with respect to any Securities, means the
period of 40 consecutive days beginning on and including the later of (i) the
day on which such Securities are first offered to persons other than
distributors (as defined in Regulation S under the Securities Act) in reliance
on Regulation S and (ii) the Issue Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in
Section 2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered
and sold to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary) or any successor person
thereto, who shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement
filed by the Company in connection with the offer and sale of Initial Securities
pursuant to a Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities
and any other Securities that bear or are required to bear the Restricted
Securities Legend.
<PAGE>
3
1.2 Other Definitions
Term: Defined in Section:
----- -------------------
"Agent Members".........................................................2.1(b)
"IAI Global Security"...................................................2.1(a)
"Global Security".......................................................2.1(a)
"Regulation S Global Security"..........................................2.1(a)
"Rule 144A Global Security".............................................2.1(a)
2. The Securities
2.1 Form and Dating
The Initial Securities issued on the date hereof will be (i)
offered and sold by the Company pursuant to a Purchase Agreement and (ii)
resold, initially only to (A) QIBs in reliance on Rule 144A and (B) Persons
other than U.S. Persons (as defined in Regulation S) in reliance on Regulation
S. Such Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501. Additional Securities offered after the date hereof
may be offered and sold by the Company from time to time pursuant to one or more
Purchase Agreements in accordance with applicable law.
(a) Global Securities. Rule 144A Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
global Securities (collectively, the "Regulation S Global Security"), in each
case without interest coupons and bearing the Global Securities Legend and
Restricted Securities Legend, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as provided in
this Indenture. One or more global securities in definitive, fully registered
form without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security") shall
also be issued on the Closing Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture to accommodate transfers of beneficial interests in the Securities to
IAIs subsequent to the initial distribution. Beneficial ownership interests in
the Regulation S Global Security shall not be exchangeable for interests in the
Rule 144A Global Security, the IAI Global Security or any other Security without
a Restricted Securities Legend until the expiration of the Restricted Period.
The Rule 144A Global Security, the IAI Global Security and the Regulation S
Global Security are each referred to herein as a "Global Security" and are
collectively referred to herein as "Global Securities." The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depositary.
<PAGE>
4
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Company, authenticate
and deliver initially one or more Global Securities that (a) shall be registered
in the name of the Depositary for such Global Security or Global Securities or
the nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as Securities
Custodian or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3
or 2.4, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available
for delivery upon a written order of the Company signed by two Officers (1)
Original Securities for original issue on the date hereof in an aggregate
principal amount of $100,000,000 (2) subject to the terms of this Indenture,
Additional Securities in an aggregate principal amount of up to $100,000,000 and
(3) the (A) Exchange Securities for issue only in a Registered Exchange Offer
and (B) Private Exchange Securities for issue only in a Private Exchange, in the
case of each of (A) and (B) pursuant to a Registration Agreement and for a like
principal amount of Initial Securities exchanged pursuant thereto. Such order
shall specify the amount of the Securities to be authenticated, the date on
which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private Exchange
Securities. The aggregate principal amount of Securities outstanding at any time
may not exceed $200,000,000 except as provided in Section 2.08 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of
Definitive Securities. When Definitive Securities are presented to the Registrar
with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
<PAGE>
5
(ii) are accompanied by the following additional information
and documents, as applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse
side of the Initial Security); or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that effect (in
the form set forth on the reverse side of the Initial
Security); or
(C) if such Definitive Securities are being
transferred pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or in
reliance upon another exemption from the registration
requirements of the Securities Act, (i) a certification to
that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Company so requests, an
opinion of counsel or other evidence reasonably satisfactory
to it as to the compliance with the restrictions set forth in
the legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side
of the Initial Security) that such Definitive Security is being
transferred (A) to a QIB in accordance with Rule 144A, (B) to an IAI
that has furnished to the Trustee a signed letter substantially in the
form of Exhibit D or (C) outside the United States in an offshore
transaction within the meaning of Regulation S and in compliance with
Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee
<PAGE>
6
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Security or
another Global Security and such account shall be credited in accordance with
such order with a beneficial interest in the applicable Global Security and the
account of the Person making the transfer shall be debited by an amount equal to
the beneficial interest in the Global Security being transferred. Transfers by
an owner of a beneficial interest in the Rule 144A Global Security or the IAI
Global Security to a transferee who takes delivery of such interest through the
Regulation S Global Security, whether before or after the expiration of the
Restricted Period, shall be made only upon receipt by the Trustee of a
certification from the transferor to the effect that such transfer is being made
in accordance with Regulation S or (if available) Rule 144 under the Securities
Act and that, if such transfer is being made prior to the expiration of the
Restricted Period, the interest transferred shall be held immediately thereafter
through Euroclear or Cedel. In the case of a transfer of a beneficial interest
in either the Regulation S Global Security or the Rule 144A Global Security for
an interest in the IAI Global Security, the transferee must furnish a signed
letter substantially in the form of Exhibit D to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in another
Global Security, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Global Security
to which such interest is being transferred in an amount equal to the
principal amount of the interest to be so transferred, and the
Registrar shall reflect on its books and records the date and a
corresponding decrease in the principal amount of Global Security from
which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary.
(iv) In the event that a Global Security is exchanged for
Definitive Securities pursuant to Section 2.4 prior to the consummation
of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities
may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse of
the Initial Securities intended to ensure that such transfers comply
with Rule 144A, Regulation S or such other applicable exemption from
registration under the Securities Act, as the case may be) and such
other procedures as may from time to time be adopted by the Company.
<PAGE>
7
(d) Restrictions on Transfer of Regulation S Global Security.
(i) Prior to the expiration of the Restricted Period, interests in the
Regulation S Global Security may only be held through Euroclear or Cedel. During
the Restricted Period, beneficial ownership interests in the Regulation S Global
Security may only be sold, pledged or transferred through Euroclear or Cedel in
accordance with the Applicable Procedures and only (A) to the Company, (B) so
long as such security is eligible for resale pursuant to Rule 144A, to a person
whom the selling Holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, (E) to an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum principal amount of Securities of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States. Prior to the expiration of the Restricted Period, transfers
by an owner of a beneficial interest in the Regulation S Global Security to a
transferee who takes delivery of such interest through the Rule 144A Global
Security or the IAI Global Security shall be made only in accordance with
Applicable Procedures and upon receipt by the Trustee of a written certification
from the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being made
to (i) a person whom the transferor reasonably believes is a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(ii) an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount of the Securities of $250,000. Such written
certification shall no longer be required after the expiration of the Restricted
Period. In the case of a transfer of a beneficial interest in the Regulation S
Global Security for an interest in the IAI Global Security, the transferee must
furnish a signed letter substantially in the form of Exhibit D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Security shall be
transferable in accordance with applicable law and the other terms of
this Indenture.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) or (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form (each defined term in the legend being
defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH
<PAGE>
8
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE
MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES
OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted
Security if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Initial
Security).
<PAGE>
9
(iii) After a transfer of any Original or Additional
Securities or Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Original or Additional Securities or Private Exchange Securities, as
the case may be, all requirements pertaining to the Restricted
Securities Legend on such Original or Additional Securities or such
Private Exchange Securities shall cease to apply and the requirements
that any such Original or Additional Securities or such Private
Exchange Securities be issued in global form shall continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Original or Additional Securities pursuant to which
Holders of such Original or Additional Securities are offered Exchange
Securities in exchange for their Original or Additional Securities, all
requirements pertaining to Original or Additional Securities that
Original or Additional Securities be issued in global form shall
continue to apply, and Exchange Securities in global form without the
Restricted Securities Legend shall be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Original or Additional Securities pursuant to which Holders of
such Original or Additional Securities are offered Private Exchange
Securities in exchange for their Original or Additional Securities, all
requirements pertaining to such Original or Additional Securities that
Original or Additional Securities be issued in global form shall
continue to apply, and Private Exchange Securities in global form with
the Restricted Securities Legend shall be available to Holders that
exchange such Original or Additional Securities in such Private
Exchange.
(vi) Upon a sale or transfer after the expiration of the
Restricted Period of any Initial Security acquired pursuant to
Regulation S, all requirements that such Initial Security bear the
Restricted Securities Legend shall cease to apply and the requirements
requiring any such Initial Security be issued in global form shall
continue to apply.
(vii) Any Additional Securities sold in a registered offering
shall not be required to bear the Restricted Securities Legend.
(f) Cancelation or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate, Definitive
Securities and Global Securities at the Registrar's request.
<PAGE>
10
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.08 and
9.05 of the Indenture).
(iii) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent or
the Registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent or the Registrar
shall be affected by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depositary or any other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depositary) of
any notice (including any notice of redemption or repurchase) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depositary or its nominee
in the case of a Global Security). The rights of beneficial owners in
any Global Security shall be exercised only through the Depositary
subject to the applicable rules and pro cedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Inden ture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depositary participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
<PAGE>
11
2.4 Definitive Securities
(a) A Global Security deposited with the Depositary or with
the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or if
at any time the Depositary ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depositary to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of Definitive Securities of authorized denominations. Any
portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depositary shall
direct. Any certificated Initial Security in the form of a Definitive Security
delivered in exchange for an interest in the Global Security shall, except as
otherwise provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of Definitive Securities in fully
registered form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE
<PAGE>
2
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
<PAGE>
No. ____ $__________
11 1/4% Senior Subordinated Note due 2009
CUSIP No. ______
VOLUME SERVICES AMERICA, INC., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum
[of Dollars] [listed on the Schedule of Increases or Decreases in Global
Security attached hereto]1 on March 1, 2009.
Interest Payment Dates: March 1 and September 1.
Record Dates: February 15 and August 15.
- --------
1 Use the Schedule of Increases and Decreases language for a Global Security.
<PAGE>
2
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.
VOLUME SERVICES AMERICA, INC.
by
_____________________________
Name:
Title:
by
_____________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by _____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
11 1/4% Senior Subordinated Note due 2009
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture (as defined).
1. Interest
(a) VOLUME SERVICES AMERICA, INC., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Company shall pay interest semiannually on March 1 and September 1 of
each year. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from March 4,
1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
(b) Liquidated Damages. The holder of this Security is
entitled to the benefits of an Exchange and Registration Rights Agreement, dated
as of March 4, 1999, among the Company, Volume Services America Holdings, Inc.,
Volume Services, Inc. (Delaware), Service America Corporation, Volume Services,
Inc. (Kansas), Events Center Catering, Inc., Service America Concessions
Corporation, Service America Corporation of Wisconsin, Servo-Kansas, Inc.,
Servomation Duchess, Inc., and SVM of Texas, Inc. (the "Guarantors") and the
Initial Purchasers named therein (the "Registration Agreement"). Capitalized
terms used in this paragraph (b) but not defined herein have the meanings
assigned to them in the Registration Agreement. If (i) the Shelf Registration
Statement or Exchange Offer Registration Statement, as applicable under the
Registration Agreement, is not filed with the Commission on or prior to 90 days
after the Issue Date (or, in the case of a Shelf Registration Statement required
to be filed in response to a change in law or applicable interpretations of the
Commission's staff, if later, within 60 days after publication of the change in
law or interpretations, but in no event before 90 days after the Issue Date),
(ii) the Exchange Offer Registration Statement or the Shelf Registration
Statement, as the case may be, is not declared effective within 180 days after
the Issue Date (or, in the case of a Shelf Registration Statement required to be
filed in response to a change in law or applicable interpretations of the
Commission's staff, if later, within 60 days after publication of the change in
law or interpretations, but in no event before 180 days after the Issue Date),
(iii) the Registered Exchange Offer is not consummated on or prior to 210 days
after the Issue Date (other than in the event the Company files a Shelf
Registration Statement), or (iv) the Shelf Registration Statement is filed and
declared effective within 180 days after the Issue Date (or, in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or applicable interpretations of the Commission's staff, if later, within 60
days after publication of the change in law or interpretations, but in no event
before 180 days after the Issue Date) but shall thereafter cease to be effective
(other than at any time that the Company and the Guarantors are not obligated to
maintain the effectiveness thereof) without being succeeded within 90 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
and the Guarantors will be jointly and severally obligated to pay liquidated
damages to each holder of Transfer Restricted Securities, during the period of
one or more such Registration Defaults, in an amount equal to $0.192 per week
per $1,000 principal amount of the Securities constituting Transfer Restricted
Securities held by such holder until the applicable
<PAGE>
2
Registration Statement is filed or declared effective and the Registered
Exchange Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Securities on semi-annual
payment dates which correspond to interest payment dates for the Securities.
Following the cure of all Registration Defaults, the accrual of liquidated
damages shall cease. The Trustee shall have no responsibility with respect to
the determination of the amount of any such liquidated damages. For purposes of
the foregoing, "Transfer Restricted Securities" means (i) each Initial Security
until the date on which such Initial Security has been exchanged for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security has been effectively registered
under the Securities Act and disposed of in accordance with a Shelf Registration
Statement or (iii) each Initial Security or Private Exchange Security until the
date on which such Initial Security or Private Exchange Security is distributed
to the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act.
2. Method of Payment
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 15 or August 15 next preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal,
premium, liquidated damages, if any, and interest in money of the United States
of America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages, if any, and
interest) shall be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium,
liquidated damages, if any, and interest), and the Securities may be exchanged
or transferred, at the office or agency of the Company in the Borough of
Manhattan, The City of New York (which initially shall be the office of the
Trustee maintained for such purpose at The Depository Trust Company, 55 Water
Street, New York, NY 10041), except that, at the option of the Company, payment
of interest may be made by check mailed to the Holders at their registered
addresses; provided, however, that payments on the Securities may also be made,
in the case of a Holder of at least $1,000,000 aggregate principal amount of
Securities, by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
Initially, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
<PAGE>
3
4. Indenture
The Company issued the Securities under an Indenture dated as
of March 4, 1999 (the "Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Section Section 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all terms and provisions of the Indenture, and Securityholders are referred
to the Indenture and the TIA for a statement of such terms and provisions.
The Securities are senior subordinated unsecured obligations
of the Company limited to $200,000,000 aggregate principal amount at any one
time outstanding (subject to Sections 2.01 and 2.08 of the Indenture), of which
$100,000,000 in aggregate principal amount shall be initially issued on the
Closing Date. Subject to the conditions set forth in the Indenture, the Company
may issue up to an additional $100,000,000 aggregate principal amount of
Additional Securities. This Security is one of the [Original][Additional]
Securities referred to in the Indenture issued in an aggregate principal amount
of $[ ]. The Securities include the Initial Securities and any Exchange
Securities and Private Exchange Securities issued in exchange for Initial
Securities. The Initial Securities, the Exchange Securities and the Private
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, incur
Indebtedness and issue Disqualified Stock and Preferred Stock; pay dividends on,
and redeem, capital stock and redeem Indebtedness that is subordinate in right
of payment to the Securities; make certain other Restricted Payments, including
Investments; enter into consensual restrictions on the payment of certain
dividends and distributions by Restricted Subsidiaries; enter into or permit
certain transactions with Affiliates; create or incur Liens; and make Asset
Sales. The Indenture also imposes limitations on the ability of the Company and
the Guarantors to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company or the
Guarantors.
To guarantee the due and punctual payment of the principal and
interest on the Securities and all other amounts payable by the Company under
the Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Guarantors have jointly and severally
unconditionally guaranteed the Guaranteed Obligations on a senior subordinated
basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities
shall not be redeemable at the option of the Company prior to March 1, 2004.
Thereafter, the Securities shall be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice mailed
by first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest and liquidated damages (if any) to the redemption date
(subject to
<PAGE>
4
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period commencing on March 1 of the years set forth below:
Redemption
Year Price
-----------------------------------------------------------
2004 105.625%
2005 103.750%
2006 101.875%
2007 and thereafter 100.000%
In addition, at any time and from time to time, prior to March
1, 2002, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of the Securities (calculated after giving effect to
any issuance of Additional Securities) with the net cash proceeds of one or more
Equity Offerings (i) by the Company or (ii) by Volume Holdings to the extent the
net cash proceeds thereof are contributed to the Company or used to purchase
from the Company Capital Stock (other than Disqualified Stock) of the Company,
at a redemption price (expressed as a percentage of principal amount thereof) of
111.25% plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Securities (calculated after giving effect to any issuance of Additional
Securities) must remain outstanding after each such redemption and provided
further that such redemption shall be made within 90 days after the date on
which any such Equity Offering is consummated upon not less than 30 nor more
than 60 days' notice mailed to each holder of Securities being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
In addition, at any time on or prior to March 1, 2004, the
Notes may be redeemed as a whole but not in part at the option of the Company
upon the occurrence of a Change of Control, upon not less than 30 or more than
60 days' prior notice (but in no event may any such redemption occur more than
90 days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued but
unpaid interest and liquidated damages, if any, to, the redemption date, subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages (if any) on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before
<PAGE>
5
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have
the right, subject to certain conditions specified in the Indenture, to cause
the Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company and each Guarantor agrees, and each Securityholder by
accepting a Security agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
<PAGE>
6
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any Default or compliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article 5 of the
Indenture; (iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; (iv) to add Guarantees with respect to the
Securities; (v) to secure the Securities; (vi) to add additional covenants or to
surrender rights and powers conferred on the Company; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Securityholder; (ix) to make any change in the
subordination provisions of the Indenture that would limit or terminate the
benefits available to any holder of Senior Indebtedness of the Issuer (or any
representative thereof) under such subordination provisions; or (x) to provide
for the issuance of the Exchange Securities, Private Exchange Securities or
Additional Securities.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Securities shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Securities may rescind any such acceleration with respect to the Securities and
its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking
<PAGE>
7
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder of the Company or
any Guarantor shall not have any liability for any obligations of the Company or
any Guarantor under the Securities, the Guarantees or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
_____________________________________________________________________
Date: _____________________ Your Signature: _____________________
_____________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated
above);
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933;
or
(5) [ ] to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
Person other than the registered holder thereof; provided, however,
that if box (4), (5) or (6) is checked, the
<PAGE>
2
Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information
as the Company has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of
1933.
________________________________
Your Signature
Signature Guarantee:
Date: ___________________ ________________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ _____________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, check the box:
Asset Sale [ ] Change of Control [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: ______________________ Your Signature: ________________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:____________________________________________________________
Signature must be guaranteed by a participant in a recognized
signature guaranty medallion program or other signature
guarantor acceptable to the Trustee
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
No. ___ $__________
11 1/4% Senior Subordinated Note due 2009
CUSIP No. ______
VOLUME SERVICES AMERICA, INC., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum [of
Dollars] [listed on the Schedule of Increases or Decreases in Global Security
attached hereto]1 on March 1, 2009.
Interest Payment Dates: March 1 and September 1.
Record Dates: February 15 and August 15.
- --------
1 Use the Schedule of Increases and Decreases language for a Global Security.
<PAGE>
2
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.
VOLUME SERVICES AMERICA, INC.,
by
_____________________________________
Name:
Title:
by
_____________________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee, certifies
that this is one of
the Securities referred
to in this Indenture.
by
______________________________
Authorized Signatory
- --------
*/ If the Security is to be issued in global form, add the Global Securities
Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL
SECURITIES SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
11 1/4% Senior Subordinated Note due 2009
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture (as defined).
1. Interest
VOLUME SERVICES AMERICA, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
shall pay interest semiannually on March 1 and September 1 of each year.
Interest on the Securities shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from March 4, 1999.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 15 or August 15 next preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal,
premium, liquidated damages, if any, and interest in money of the United States
of America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages, if any, and
interest) shall be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company shall make all
payments in respect of a certificated Security (including principal, premium,
liquidated damages, if any, and interest), and the Securities may be exchanged
or transferred, at the office or agency of the Company in the Borough of
Manhattan, The City of New York (which initially shall be the office of the
Trustee maintained for such purpose at the Depository Trust Company, 55 Water
Street, New York, NY 10041), except that, at the option of the Company, payment
of interest may be made by check mailed to the Holders at their registered
addresses; provided, however, that payments on the Securities may also be made,
in the case of a Holder of at least $1,000,000 aggregate principal amount of
Securities, by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
Initially, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
<PAGE>
2
4. Indenture
The Company issued the Securities under an Indenture dated as
of March 4, 1999 (the "Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Section Section 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all terms and provisions of the Indenture, and Securityholders are referred
to the Indenture and the TIA for a statement of such terms and provisions.
The Securities are senior subordinated unsecured obligations
of the Company limited to $200,000,000 aggregate principal amount at any one
time outstanding, of which $100,000,000 in aggregate principal amount was
initially issued on the Closing Date. Subject to the conditions set forth in the
Indenture, the Company may issue up to an additional $100,000,000 aggregate
principal amount of Additional Securities. This Security is one of the [Exchange
Securities] [Private Exchange Securities] referred to in the Indenture. The
Securities include the Original Securities, the Additional Securities and any
Exchange Securities and Private Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Original Securities, the
Additional Securities, the Exchange Securities and the Private Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things, incur Indebtedness and issue
Disqualified Stock and Preferred Stock; pay dividends on, and redeem, capital
stock and redeem Indebtedness that is subordinate in right of payment to the
Securities; make certain other Restricted Payments, including Investments; enter
into consensual restrictions on the payment of certain dividends and
distributions by Restricted Subsidiaries; enter into or permit certain
transactions with Affiliates; create or incur Liens; and make Asset Sales. The
Indenture also imposes limitations on the ability of the Company and the
Guarantors to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company or the
Guarantors.
To guarantee the due and punctual payment of the principal and
interest, if any, on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Guarantors have, jointly and
severally, unconditionally guaranteed the Guaranteed Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities
shall not be redeemable at the option of the Company prior to March 1, 2004.
Thereafter, the Securities shall be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice mailed
by first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest and liquidated damages (if any) to the redemption date
(subject to
<PAGE>
3
the right of Holders of record on the relevant record date to receive interest
dueon the relevant interest payment date), if redeemed during the 12-month
period commencing on March 1 of the years set forth below:
Redemption
Year Price
---------------------------------------------------------
2004 105.625%
2005 103.750%
2006 101.875%
2007 and thereafter 100.000%
In addition, at any time and from time to time, prior to March
1, 2002, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of the Securities (calculated after giving effect to
any issuance of Additional Securities)] with the net cash proceeds of one or
more Equity Offerings (i) by the Company or (ii) by Volume Holdings to the
extent the net cash proceeds thereof are contributed to the Company or used to
purchase from the Company Capital Stock (other than Disqualified Stock) of the
Company, at a redemption price (expressed as a percentage of principal amount
thereof) of 111.25% plus accrued and unpaid interest and liquidated damages, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided, however, at least 65% of the original aggregate principal
amount of the Securities (calculated after giving effect to any issuance of
Additional Securities) must remain outstanding after each such redemption and
provided further that such redemption shall be made within 90 days after the
date on which any such Equity Offering is consummated upon not less than 30 nor
more than 60 days' notice mailed to each holder of Securities being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
In addition, at any time on or prior to March 1, 2004, the
Notes may be redeemed as a whole but not in part at the option of the Company
upon the occurrence of a Change of Control, upon not less than 30 or more than
60 days' prior notice (but in no event may any such redemption occur more than
90 days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued but
unpaid interest and liquidated damages, if any, to, the redemption date, subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages (if any) on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before
<PAGE>
4
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have
the right, subject to certain conditions specified in the Indenture, to cause
the Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company and each Guarantor agrees, and each Securityholder by
accepting a Security agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Company deposits with the
<PAGE>
5
Trustee money or U.S. Government Obligations for the payment of principal and
interest on the Securities to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any Default or compliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article 5 of the
Indenture; (iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; (iv) to add Guarantees with respect to the
Securities; (v) to secure the Securities; (vi) to add additional covenants or to
surrender rights and powers conferred on the Company; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Securityholder; (ix) to make any change in the
subordination provisions of the Indenture that would limit or terminate the
benefits available to any holder of Senior Indebtedness of the Issuer (or any
representative thereof) under such subordination provisions; or (x) to provide
for the issuance of the Exchange Securities, Private Exchange Securities or
Additional Securities.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Securities shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Securities may rescind any such acceleration with respect to the Securities and
its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or
<PAGE>
6
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder of the Company or
any Guarantor shall not have any liability for any obligations of the Company or
any Guarantor under the Securities, the Guarantees or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
<PAGE>
7
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
________________________________________________________________
Date: ________________ Your Signature: _____________________
_________________________________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, check the box:
Asset Sale [ ] Change of Control [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: __________________ Your Signature: _____________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee.
<PAGE>
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture") dated as of , among [GUARANTOR]
(the "New Guarantor"), a subsidiary of VOLUME
SERVICES AMERICA, INC. (or its successor), a
Delaware corporation (the "Company"), [EXISTING
GUARANTORS] and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as
trustee under the Indenture referred to below (the
"Trustee").
W I T N E S S E T H :
WHEREAS the Company and [OLD GUARANTORS] (the "Existing
Guarantors") have heretofore executed and delivered to the Trustee an Indenture
(the "Indenture") dated as of March 4, 1999, providing for the issuance of an
aggregate principal amount of up to $200,000,000 of 11 1/4% Senior Subordinated
Notes due 2009 (the "Securities");
WHEREAS Section 4.12 of the Indenture provides that under
certain circumstances the Company is required to cause the New Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor shall unconditionally guarantee all the Company's obligations
under the Securities pursuant to a Guarantee on the terms and conditions set
forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the
Trustee, the Company and the Existing Guarantors are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees,
jointly and severally with all the Existing Guarantors, to unconditionally
guarantee the Company's obligations under the Securities on the terms and
subject to the conditions set forth in Article 10 of the Indenture and to be
bound by all other applicable provisions of the Indenture and the Securities.
2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE>
2
4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
________________________________________
Name:
Title:
VOLUME SERVICES AMERICA, INC.
by
________________________________________
Name:
Title:
[EXISTING GUARANTORS],
by
________________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee,
by
________________________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of
Transferee Letter of Representation
Volume Services America, Inc.
201 East Broad Street
Spartanburg, South Carolina 29306
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[ ] principal
amount of the 11 1/4% Senior Subordinated Notes due 2009 (the "Securities") of
Volume Services America, Inc. (the "Company").
Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing
for its own account or for the account of a QIB and to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Securities
of
<PAGE>
2
$250,000, or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Securities is proposed
to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Company and the Trustee, which
shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act. Each
purchaser acknowledges that the Company and the Trustee reserve the right prior
to the offer, sale or other transfer prior to the Resale Restriction Termination
Date of the Securities pursuant to clause (d), (e) or (f) above to require the
delivery of an opinion of counsel, certifications or other information
satisfactory to the Company and the Trustee.
TRANSFEREE:_________________,
by:___________________________
<PAGE>
Exhibit 4.2
VOLUME SERVICES AMERICA, INC.
$100,000,000
11 1/4% Senior Subordinated Notes due 2009
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
March 4, 1999
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Volume Services America, Inc. a Delaware corporation (the
"Company"), proposes to issue and sell to Chase Securities Inc. ("CSI") and
Goldman, Sachs & Co. (together with CSI, the "Initial Purchasers"), upon the
terms and subject to the conditions set forth in a purchase agreement dated
February 25, 1999 (the "Purchase Agreement"), $100,000,000 aggregate principal
amount of its 11 1/4% Senior Subordinated Notes due 2009 (the "Securities") to
be jointly and severally guaranteed on a senior subordinated basis by certain of
the Company's subsidiaries signatory hereto, (collectively, the "Subsidiary
Guarantors") and Volume Services America Holdings, Inc., the parent company of
the Company ("Parent" and together with the Subsidiary Guarantors, the
"Guarantors"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company and the Guarantors agree with the
Initial Purchasers, for the benefit of the holders (including the Initial
Purchasers) of the Securities, the Exchange Securities (as defined herein) and
the Private Exchange Securities (as defined herein) (collectively, the
"Holders"), as follows:
1. Registered Exchange Offer. The Company and the Guarantors
shall (i) prepare and, not later than 90 days following the date of original
issuance of the Securities (the "Issue Date"), file with the Commission a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Securities (the "Registered Exchange Offer") to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company (the "Exchange Securities")
that are identical in all material respects to the Securities, except for the
transfer restrictions relating to the Securities, (ii) use their reasonable best
efforts to cause the Exchange Offer Registration Statement to become effective
under the Securities Act no later than 180 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 210 days after the
Issue Date and (iii) keep the Exchange Offer Registration Statement effective
for not less than 20 business days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "Exchange Offer Registration Period"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") among the Company, the Guarantors and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such
indenture to be identical in all material respects to the Indenture, except for
the transfer restrictions relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate (as defined in Rule 405 under the Securities Act)
of the Company or an Exchanging Dealer (as defined herein) not complying with
the requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to
<PAGE>
participate in the distribution of the Exchange Securities) and to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company, the
Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that,
pursuant to current interpretations by the Commission's staff of Section 5 of
the Securities Act, each Holder that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making activities
or other trading activities, for Exchange Securities (an "Exchanging Dealer"),
is required to deliver a prospectus containing substantially the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange
Offer, any Holder holds any Securities acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer, issue and deliver to any such Holder, in exchange for
the Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail or cause to be mailed to each Holder a copy of the
prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(b) keep the Registered Exchange Offer open for not less than
20 business days (or longer, if required by applicable law) after the
date on which notice of the Registered Exchange Offer is mailed to the
Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(b) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder,
Exchange Securities or Private Exchange Securities, as the case may be,
equal in principal amount to the Securities of such Holder so accepted
for exchange.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for
<PAGE>
use in connection with any resale of any Exchange Securities for a period of not
less than 180 days after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the
case may be, shall provide that the Securities, the Exchange Securities and the
Private Exchange Securities shall vote and consent together on all matters as
one class and that none of the Securities, the Exchange Securities or the
Private Exchange Securities will have the right to vote or consent as a separate
class on any matter.
Interest on each Exchange Security and Private Exchange
Security issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue from the last interest payment date on which interest was
paid on the Securities surrendered in exchange therefor or, if no interest has
been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities to be
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or, if it is such an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
Notwithstanding any other provisions hereof, the Company and
the Guarantors will ensure that (i) any Exchange Offer Registration Statement
and any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 210 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(a) The Company and the Guarantors shall use their reasonable
best efforts to file as promptly as practicable with the Commission,
and thereafter shall use their reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders
thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a
"Shelf Registration Statement" and, together with any Exchange Offer
Registration Statement, a "Registration Statement").
(b) The Company and the Guarantors shall use their reasonable
best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be
used by Holders of Transfer Restricted Securities for a period ending
on the earlier of (i) two years from the Issue Date or such shorter
period that will terminate when all the Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant
thereto and (ii) the date on which the Securities become eligible for
resale without volume restrictions pursuant to Rule 144 under the
Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company and the Guarantors shall be deemed
not to have used their reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite
<PAGE>
period if any of them voluntarily take any action that would result in
Holders of Transfer Restricted Securities covered thereby not being
able to offer and sell such Transfer Restricted Securities during that
period, unless (A) such action is required by applicable law or (B)
such action was permitted by Section 2(c).
(c) Notwithstanding the provisions of Section 2(b) (but
subject to the provisions of Section 3(b)), the Company and the
Guarantors may issue a notice that the Shelf Registration Statement is
unusable pending the announcement of a material corporate transaction
and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws to be issued.
(d) Notwithstanding any other provisions hereof, the Company
and the Guarantors will ensure that (i) any Shelf Registration
Statement and any amendment thereto and any prospectus forming part
thereof and any supplement thereto complies in all material respects
with the Securities Act and the rules and regulations of the Commission
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written
information furnished to the Company by or on behalf of any Holder
specifically for use therein (the "Holders' Information")) does not,
after it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect
to Holders' Information), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company and
the Guarantors fail to fulfill their obligations under Section 1 or Section 2,
as applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 90 days after the Issue Date (or, in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
60 days after publication of the change in law or interpretations, but in no
event before 90 days after the Issue Date), (ii) the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is not
declared effective within 180 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or the applicable interpretations of the Commission's staff, if later, within 60
days after the publication of the change in law or interpretations, but in no
event before 180 days after the Issue Date), (iii) the Registered Exchange Offer
is not consummated on or prior to 210 days after the Issue Date (other than in
the event the Company files a Shelf Registration Statement), or (iv) the Shelf
Registration Statement is filed and declared effective within 180 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 60 days after the publication of the change
in law or interpretations, but in no event before 180 days after the Issue Date)
but shall thereafter cease to be effective (other than at any time that the
Company and the Guarantors are not obligated to maintain the effectiveness
thereof, including as set forth in Sections 2(c) and 3(b)) without being
succeeded within 90 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantors will be jointly and
severally obligated to pay liquidated damages to each Holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Offer Registration Statement
is declared effective and the Registered Exchange Offer is consummated, (iii)
the Shelf Registration Statement is declared effective or (iv) the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease.
(b) Notwithstanding the foregoing provisions of Section 3(a),
the Company and the Guarantors may issue a notice that the Shelf Registration
Statement is unusable pending the announcement of a material corporate
transaction and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws to be issued and, in the
event that the aggregate number of days in any consecutive twelve-month period
for which all such notices are issued and effective exceeds 60 days in the
aggregate, then the Company and the Guarantors will be jointly and severally
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities in an amount equal to $0.192 per week per $1,000 principal amount of
Securities constituting Transfer Restricted Securities held by such Holder. Upon
the Company and the Guarantors declaring that the Shelf Registration
<PAGE>
Statement is useable after the period of time described in the preceding
sentence, accrual liquidated damages shall cease; provided, however, that if
after any such cessation of the accrual of liquidated damages the Shelf
Registration Statement again ceases to be useable beyond the period permitted
above, liquidated damages will again accrue pursuant to the foregoing
provisions.
(c) The Company shall notify the Trustee and the Paying Agent
under the Indenture promptly upon the happening of each and every Registration
Default. The Company and the Guarantors shall pay the liquidated damages due on
the Transfer Restricted Securities by depositing with the Paying Agent (which
may not be the Company for these purposes), in trust, for the benefit of the
Holders thereof, prior to 10:00 a.m., New York City time, on the next interest
payment date specified by the Indenture and the Securities, sums sufficient to
pay the liquidated damages then due. The liquidated damages due shall be payable
on each interest payment date specified by the Indenture and the Securities to
the record holder entitled to receive the interest payment to be made on such
date. Each obligation to pay liquidated damages shall be deemed to accrue from
and including the date of the applicable Registration Default.
(d) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.
(e) As used herein, the term "Transfer Restricted Securities"
means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in Sections 3(a) and 3(b), the Company and the Guarantors shall not be required
to pay liquidated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
4. Registration Procedures. In connection with any
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein; (ii) include substantially
the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser and, in
the case of clauses (ii), (iii), (iv) and (v) below, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been
made):
(i) when any Registration Statement and any
amendment thereto has been filed with the Commission and when
such Registration Statement or any post-effective amendment
thereto has become effective;
<PAGE>
(ii) of any request by the Commission after the
effective date for amendments or supplements to any
Registration Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities, the Exchange Securities or
the Private Exchange Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the
prospectus included therein in order that the statements
therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) The Company and the Guarantors will make every reasonable
effort to obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if any such
Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of
the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any Initial Purchaser or Exchanging
Dealer or any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly
deliver to each Initial Purchaser, each Exchanging Dealer and such
other persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of
the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or
supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company and the
Guarantors consent to the use of such prospectus or any amendment or
supplement thereto by any such Initial Purchaser, Exchanging Dealer or
other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement,
the Company and the Guarantors will use their reasonable best efforts
to register or qualify, or cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities included therein and
their respective counsel in connection with the registration or
qualification of, such Securities, Exchange Securities or Private
Exchange Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holder reasonably requests in
writing
<PAGE>
and do any and all other acts or things reasonably necessary to enable
the offer and sale in such jurisdictions of the Securities, Exchange
Securities or Private Exchange Securities covered by such Registration
Statement; provided that the Company and the Guarantors will not be
required to qualify generally to do business in any jurisdiction where
they are not then so qualified or to take any action which would
subject them to general service of process or to taxation in any such
jurisdiction where they are not then so subject.
(i) The Company and the Guarantors will cooperate with the
Holders of Securities, Exchange Securities or Private Exchange
Securities to facilitate the timely preparation and delivery of
certificates representing Securities, Exchange Securities or Private
Exchange Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing
at least three business days prior to the closing date of any sales of
Securities, Exchange Securities or Private Exchange Securities pursuant
to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company and the Guarantors are
required to maintain an effective Registration Statement, the Company
and the Guarantors will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus or file any other required document so that,
as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus
will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Securities, the Exchange Securities and the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company and the Guarantors will comply in all material
respects with all applicable rules and regulations of the Commission
and the Company will make generally available to its security holders
as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions
of Section 11(a) of the Securities Act.
(m) The Company and the Guarantors will cause the Indenture or
the Exchange Securities Indenture, as the case may be, to be qualified
under the Trust Indenture Act as required by applicable law in a timely
manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the
Holder and the distribution of such Transfer Restricted Securities as
the Company may from time to time reasonably request for inclusion in
such Shelf Registration Statement, and the Company may exclude from
such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that, upon
receipt of any notice from the Company pursuant to Sections 2(c), 3(b)
or 4(b)(ii) through (v), such Holder will discontinue disposition of
such Transfer Restricted Securities until such Holder's receipt of
copies of the supplemental or amended prospectus contemplated by
Section 4(j) or until advised in writing (the "Advice") by the Company
that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Sections 2(c), 3(b) or 4(b)(ii)
through (v) during the period that the Company is required to maintain
an effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to
and including the date when each seller of Transfer Restricted
Securities covered by such Registration Statement shall have received
(x) the copies of the
<PAGE>
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if
no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company
and the Guarantors shall enter into such customary agreements
(including, if requested by the Holders of a majority in aggregate
principal amount of the Exchange Securities, an underwriting agreement
in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by a representative
of, and Special Counsel (as defined below) acting for, Holders of a
majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection
with such Shelf Registration Statement; provided, however, that such
Inspector shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Inspector, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities
laws in connection with the filing of such Registration Statement or
the use of any prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such Inspector or (iv) such
information becomes available to such Inspector from a source other
than the Company and its subsidiaries and such source is not known,
after due inquiry, by the relevant Holder to be bound by a
confidentiality agreement; provided further, that the foregoing
investigation shall be coordinated on behalf of the Holders by one
representative designated by and on behalf of such Holders and any
such confidential information shall be available from such
representative to such Holders so long as any Holder agrees
to be bound by such confidentiality agreement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to
deliver an opinion relating to the Shelf Registration Statement and the
Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form and substance, (ii) its officers to
execute and deliver all customary documents and certificates requested
by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being
sold, their Special Counsel or the managing underwriters (if any) and
(iii) its independent public accountants to provide a comfort letter or
letters in customary form and substance, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company and the Guarantors will
jointly and severally bear all expenses incurred in connection with the
performance of its obligations under Sections 1, 2, 3 and 4 and, other than in
connection with the Exchange Offer Registration Statement, the Company will
reimburse the Initial Purchasers and the Holders for the reasonable fees and
disbursements of one firm of attorneys (in addition to any local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Securities,
the Exchange Securities and the Private Exchange Securities to be sold pursuant
to each Registration Statement (the "Special Counsel") acting for the Initial
Purchasers or Holders in connection therewith, which counsel shall be approved
by the Company (such approval to not be unreasonably withheld). Each Initial
Purchaser and Holder shall pay all expenses of its counsel other than as set
forth in the preceding sentence, underwriting discounts and commissions (prior
to the reduction thereof with respect to selling concessions, if any) and
transfer taxes, if any, relating to the sale or disposition of such Initial
Purchaser's or Holder's Securities pursuant to the Shelf Registration Statement.
<PAGE>
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and the Guarantors shall jointly and severally indemnify
and hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company and
the Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with any Holders'
Information; and provided, further, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement contained in this Section 6(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Securities, Exchange Securities or Private Exchange Securities
to the extent that such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that both (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities, Exchange Securities or Private
Exchange Securities to such person and (B) the untrue statement in or omission
from the related preliminary prospectus was corrected in the final prospectus,
unless such failure to deliver the final prospectus was a result of
non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, the Guarantors and their
respective affiliates, officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than
<PAGE>
under this Section 6. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than the
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) otherwise than as a result of the limitations therein
contained, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Guarantors, on the one hand, and such Holder, on the other,
with respect to the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and a Holder, on the other, with respect to
such offering and such sale shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) received by or on behalf of the Company as set forth in the table on
the cover of the Offering Memorandum, on the one hand, bear to the total
proceeds received by such Holder with respect to its sale of Securities,
Exchange Securities or Private Exchange Securities, on the other. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to the Company and the Guarantors or
information supplied by the Company and the Guarantors, on the one hand, or to
any Holders' Information supplied by such Holder, on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 7 shall be deemed to include, for purposes of this
Section 7, any legal or other
<PAGE>
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Securities, Exchange Securities or Private
Exchange Securities sold by such indemnifying party to any purchaser exceeds
the amount of any damages which such indemnifying party has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable
best efforts to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company is
not required to file such reports, it will, upon the written request of any
Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that
they will take such further action as any Holder of Transfer Restricted
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer
Restricted Securities, the Company and the Guarantors shall deliver to such
Holder a written statement as to whether they have complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
9. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company so agrees and has obtained the written consent of Holders of a majority
in aggregate principal amount of the Securities, the Exchange Securities and the
Private Exchange Securities, taken as a single class. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose Securities,
Exchange Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to CSI and Goldman, Sachs & Co.;
(2) if to an Initial Purchaser, initially at its address
set forth in the Purchase Agreement;
<PAGE>
(3) if to the Company, initially at the address of the
Company set forth in the Purchase Agreement; and
(4) If to the Guarantors, initially at the addresses set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding
upon the Company, the Guarantors and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) No Inconsistent Agreements. The Company and each Guarantor
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii) (with
respect to the Company) without limiting the generality of the foregoing,
without the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
<PAGE>
(i) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(j) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
VOLUME SERVICES AMERICA, INC.
By
----------------------------------------
Name:
Title:
VOLUME SERVICES AMERICA HOLDINGS, INC.,
as Guarantor
By
----------------------------------------
Name:
Title:
VOLUME SERVICES, INC., as Guarantor
By
----------------------------------------
Name:
Title:
SERVICE AMERICA CORPORATION, as Guarantor
By
----------------------------------------
Name:
Title:
VOLUME SERVICES, INC. (Kansas), as Guarantor,
By
----------------------------------------
Name:
Title:
EVENTS CENTER CATERING, INC., as Guarantor,
By
----------------------------------------
Name:
Title:
SERVICE AMERICA CONCESSIONS CORPORATION,
as Guarantor,
By
----------------------------------------
Name:
Title:
SERVICE AMERICA CORPORATION OF WISCONSIN,
as Guarantor,
By
----------------------------------------
Name:
Title:
<PAGE>
SERVO-KANSAS, INC. as Guarantor,
By
----------------------------------------
Name:
Title:
SERVOMATION DUCHESS, INC., as Guarantor,
By
----------------------------------------
Name:
Title:
SVM OF TEXAS, INC., as Guarantor,
By
----------------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
By
------------------------------
Authorized Signatory
GOLDMAN, SACHS & CO.,
By
------------------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
consummation of the Registered Exchange Offer (the "Expiration Date"), it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the Expiration Date,
it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
[____________________ ] 199[ ], all dealers effecting transactions in the
Exchange Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer other than commissions or concessions
of any broker-dealers and will indemnify the Holders of the Securities
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 10.1
- -------------------------------------------------------------------------------
SHARE EXCHANGE AGREEMENT
DATED AS OF JULY 27, 1998
AMONG
VSI ACQUISITION II CORPORATION, as Buyer,
THE STOCKHOLDERS OF BUYER,
AND
THE SELLERS SPECIFIED HEREIN
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
1. DEFINITIONS..............................................................................................1
2. SALE, EXCHANGE AND TRANSFER OF SHARES; CLOSING..........................................................12
2.1 Sale of Shares.................................................................................12
2.2 Consideration..................................................................................12
2.3 Repurchase of Shares...........................................................................13
2.4 Closing........................................................................................14
2.5 Closing Obligations............................................................................14
3. CONDITIONS TO OBLIGATIONS OF BUYER AND THE
VSI STOCKHOLDERS........................................................................................15
3.1 Accuracy of Representations....................................................................15
3.2 Sellers' Performance...........................................................................16
3.3 Governmental Approvals.........................................................................16
3.4 Material Adverse Effect........................................................................16
3.5 No Proceedings.................................................................................17
3.6 No Prohibition.................................................................................17
3.7 Stockholders' Agreement........................................................................17
3.8 Additional Documents...........................................................................17
3.9 Consent of GE Capital..........................................................................18
3.10 Bank Consent...................................................................................18
3.11 GE Capital.....................................................................................18
3.12 Non-Foreign Tax Status.........................................................................18
3.13 Proceedings Satisfactory.......................................................................18
4. CONDITIONS TO OBLIGATIONS OF SELLERS....................................................................18
4.1 Accuracy of Representations....................................................................18
4.2 Buyer's and the VSI Stockholders' Performance..................................................19
4.3 Governmental Approvals.........................................................................19
4.4 Material Adverse Effect........................................................................19
4.5 No Proceedings.................................................................................20
4.6 No Prohibition.................................................................................20
4.7 Stockholders' Agreement........................................................................20
4.8 Additional Documents...........................................................................21
4.9 Lien in Favor of GE Capital....................................................................21
4.10 Bank Consent...................................................................................21
4.11 Proceedings Satisfactory.......................................................................21
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND THE VSI
STOCKHOLDERS............................................................................................21
5.1 Organization and Good Standing.................................................................21
5.2 Capital Structure..............................................................................22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.3 Authority Relative to Contemplated Transactions................................................23
5.4 Absence of Conflict............................................................................23
5.5 Governmental Approvals and Consents............................................................23
5.6 Financial Statements...........................................................................23
5.7 Books and Records..............................................................................24
5.8 Inventory......................................................................................24
5.9 Accounts Receivable............................................................................24
5.10 Title to Property; Encumbrances................................................................24
5.11 Marks, Software and Similar Rights.............................................................25
5.12 Litigation.....................................................................................25
5.13 Absence of Undisclosed Liabilities.............................................................26
5.14 Tax Matters....................................................................................26
5.15 Absence of Certain Changes or Events...........................................................26
5.16 Employee and Labor Matters.....................................................................28
5.17 Employee Benefit Matters.......................................................................28
5.18 Insurance......................................................................................29
5.19 Environmental Matters..........................................................................29
5.20 Material Agreements............................................................................31
5.21 Compliance with Law............................................................................32
5.22 No Brokers or Finders..........................................................................33
5.23 Investment Intent..............................................................................34
5.24 Absence of Certain Business Practices..........................................................34
5.25 Disclosure.....................................................................................34
5.26 Affiliate Transactions.........................................................................35
5.27 Securities and Other Matters...................................................................35
6. REPRESENTATIONS AND WARRANTIES OF SELLERS...............................................................35
6.1 Organization and Good Standing.................................................................35
6.2 Capital Structure..............................................................................36
6.3 Authority Relative to Contemplated Transactions................................................37
6.4 Absence of Conflict............................................................................37
6.5 Governmental Approvals and Consents............................................................37
6.6 Financial Statements...........................................................................37
6.7 Books and Records..............................................................................38
6.8 Inventory......................................................................................38
6.9 Accounts Receivable............................................................................38
6.10 Title to Property; Encumbrances................................................................38
6.11 Marks, Software................................................................................39
6.12 Litigation.....................................................................................39
6.13 Absence of Undisclosed Liabilities.............................................................40
6.14 Tax Matters....................................................................................40
6.15 Absence of Certain Changes or Events...........................................................40
6.16 Employee and Labor Matters.....................................................................42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.17 Employee Benefit Matters.......................................................................43
6.18 Insurance......................................................................................43
6.19 Environmental Matters..........................................................................44
6.20 Material Agreements............................................................................46
6.21 Compliance with Law............................................................................47
6.22 No Brokers or Finders..........................................................................48
6.23 Investment Intent..............................................................................48
6.24 Absence of Certain Business Practices..........................................................48
6.25 Disclosure.....................................................................................49
6.26 Affiliate Transactions.........................................................................49
6.27 Securities and Other Matters...................................................................49
7. FURTHER AGREEMENTS OF THE PARTIES.......................................................................50
7.1 Operation of the Businesses of the Buyer Companies and
Service America Companies......................................................................50
7.2 Negative Covenant..............................................................................50
7.3 Notification...................................................................................50
7.4 No Negotiation.................................................................................51
7.5 Access Prior to the Closing....................................................................51
7.6 Director and Officer Liability and Indemnification.............................................51
7.7 Third Party Consents; Further Assurances.......................................................52
7.8 Offering Memorandum............................................................................52
7.9 Consent of GE Capital..........................................................................52
7.10 Execution of Document..........................................................................53
7.11 Buyer Obligation to Obtain Appraisal...........................................................53
7.12 Service America Preferred Stock Matters........................................................53
7.13 Other Preferred Stock Matters..................................................................53
7.14 GE Capital Lien. .............................................................................54
8. TERMINATION.............................................................................................54
8.1 Termination Events.............................................................................54
8.2 Effect of Termination..........................................................................54
9. INDEMNIFICATION AND RELATED MATTERS.....................................................................55
9.1 Indemnity......................................................................................55
9.2 Indemnification Procedure......................................................................55
9.3 Limits on Indemnification......................................................................56
9.4 Calculation of Damages.........................................................................58
10. MINORITY STOCKHOLDERS...................................................................................58
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11. GENERAL PROVISIONS......................................................................................58
11.1 Expenses.......................................................................................58
11.2 Public Disclosure or Communications............................................................59
11.3 Confidentiality................................................................................59
11.4 Notices........................................................................................59
11.5 Further Assurances.............................................................................61
11.6 Arbitration; Exclusive Remedy..................................................................61
11.7 Amendment and Waiver...........................................................................61
11.8 Entire Agreement...............................................................................62
11.9 Schedules......................................................................................62
11.10 Governing Law..................................................................................62
11.11 Assignments, Successors, and No Third-Party Rights.............................................62
11.12 Paoletti.......................................................................................63
11.13 Severability...................................................................................63
11.14 Section Headings, Construction.................................................................63
11.15 Counterparts...................................................................................63
</TABLE>
Exhibits
2.5(b)(ii) Promissory Note
3.7 Stockholders' Agreement
3.8(a)(i) Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP
3.9 Waiver and Amendment Agreement
3.11 Assignment and Assumption Amendment
4.8(a)(i) Opinion of Simpson, Thacher & Bartlett
7.7(b) Joint Request
iv
<PAGE>
Schedules
Schedule 2.2 Methodology to Determine Consideration
Schedule 2.3(a) Methodology to Determine Repurchase of Shares
Schedule 3.4(a) Aggregate value for Service America Customer Contracts
terminated or to which no consents obtained
Schedule 4.4 Aggregate value for Buyer Company Customers Contracts
terminated
Schedule 5.1(a) List of Subsidiaries of Buyer and the capitalization thereof;
Encumbrances on Subsidiary shares
Schedule 5.1(b) Jurisdiction in which Buyer and each of its Subsidiaries are
incorporated and qualified to do business
Schedule 5.2(a) Ownership of Buyer Common Stock
Schedule 5.2(c) Outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements pertaining to
capital stock of Buyer or any of its Subsidiaries
Schedule 5.4 Exceptions to absence of conflict representation pertaining to
any material contract identified on Section 5.20
Schedule 5.5 Governmental approvals and consents required by VSI
Stockholders or any Buyer Companies
Schedule 5.6 Buyer Financial Statement items not in conformance with
GAAP
Schedule 5.9 List of exceptions to Buyer Companies accounts receivable
representation
Schedule 5.10(a) List of Buyer real property leases; exceptions to
representation
Schedule 5.10(b) List of Buyer Assets
Schedule 5.10(c) Unsuitable and inappropriate uses of tangible personal
property of any Buyer Company
Schedule 5.11 List of Buyer Company Software and Marks
Schedule 5.12 List of Proceedings against any Buyer Company
Schedule 5.13 List of undisclosed liabilities of Buyer Companies
Schedule 5.14 Exceptions to tax matter representation
v
<PAGE>
Schedule 5.15 Non-Ordinary Course Activities of each Buyer Company
Schedule 5.16 List of collective bargaining agreements and strikes and
similar activities affecting Buyer Companies and other
employee and labor related matters
Schedule 5.18 List of insurance policies of Buyer Companies; other
insurance arrangements and obligations of Buyer Companies
Schedule 5.19 Exceptions to environmental matters representation
pertaining to Buyer
Schedule 5.20(a) List of material agreements of Buyer Companies
Schedule 5.20(b) Exceptions to contract representation of Buyer Companies
Schedule 5.21(c) List of Governmental Authorizations of Buyer Companies
Schedule 5.22 Brokers or finders retained by VSI Stockholders or Buyer
Companies
Schedule 5.26 Affiliate transactions
Schedule 6.1(a) List of Subsidiaries of Service America and the
capitalization thereof; Encumbrances on Subsidiary shares
Schedule 6.1(b) Jurisdiction in which Service America and each of its
Subsidiaries are incorporated and qualified to do Business
Schedule 6.2(a) Ownership of Service America Capital
Schedule 6.2(c) Outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements pertaining to
capital stock of Service America or any of its Subsidiaries
Schedule 6.4 Exceptions to absence of conflict representation pertaining to
any material contract identified on Schedule 6.20
Schedule 6.5 Governmental approvals and Consents required by Sellers or
any Service America Seller
Schedule 6.6 Service America Financial Statements items not in
conformance with GAAP
Schedule 6.7 Exceptions to books and records representation
Schedule 6.9 List of exceptions to Service America Companies accounts
receivable representations
Schedule 6.10(a) List of Service America real property leases; exceptions to
representations
vi
<PAGE>
Schedule 6.10(b) List of Service America Assets
Schedule 6.10(c) Unsuitable or inappropriate uses of tangible personal
property of any Service America Company
Schedule 6.11 List of Service America Company Software and Marks
Schedule 6.12 List of Proceedings against any Service America Company
Schedule 6.13 List of undisclosed liabilities of Service America Companies
Schedule 6.15 Non-Ordinary Course Activities of each Service America
Company
Schedule 6.16 List of collective bargaining agreements and strikes and
similar activities affecting Service America and its
Subsidiaries and other employee and labor related matters
Schedule 6.18(a) List of insurance policies of Service America Companies
Schedule 6.18(b) Other insurance arrangements and obligations of Service
America Companies
Schedule 6.19 Exceptions to environmental matters representation
pertaining to Service America Companies
Schedule 6.20(a) List of material agreements of Service America Companies
Schedule 6.20(b) Exceptions to contract representation pertaining to Service
America Companies
Schedule 6.21(c) List of Governmental Authorizations of Service America
Companies
Schedule 6.22 Brokers or Finders retained by Service America Sellers or
Service America Companies
Schedule 6.26 Affiliate transactions
vii
<PAGE>
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this "Agreement") is made as of July 27,
1998 by (i) VSI Acquisition II Corporation, a Delaware corporation ("Buyer"),
(ii) BCP Volume L.P., a Delaware limited partnership ("BCP Volume"), BCP
Offshore Volume L.P., a Cayman Island exempt limited partnership ("BCP
Offshore"), and VSI Management Direct L.P., a Delaware limited partnership ("VSI
Management Direct" and, collectively with BCP Volume and BCP Offshore, the "VSI
Stockholders"), and (iii) General Electric Capital Corporation, a New York
corporation ("GE Capital"), the Dee Family Limited Partnership, a Virginia
limited partnership (the "Dee Partnership"), John T. Dee ("Dee"), Michael J.
Higgins ("Higgins") and Robert Paoletti ("Paoletti" and, collectively with GE
Capital, the Dee Partnership, Dee and Higgins, "Sellers").
Recitals:
A. Sellers own substantially all of the issued and outstanding Service
America Common Stock (as hereinafter defined) and the Service America Preferred
Stock (as hereinafter defined) (collectively, the "Service America Shares") and
a warrant to purchase Service America Common Stock (the "Service America
Warrant" and, together with the Service America Shares, the "Service America
Capital") of Service America Corporation, a Delaware corporation ("Service
America"), each Seller owning the number and class of Service America Capital
set forth opposite such Seller's name on Schedule 6.2(a); and
B. Sellers desire to sell, and Buyer desires to buy, all of the Service
America Capital for the consideration and on the terms set forth in this
Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1 (terms defined in the singular to
have the correlative meaning in the plural and vice versa):
"AAA" -- as defined in Section 11.6.
"Affiliate" -- with respect to any Person, any entity that, directly or
indirectly, controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Agreement" -- as defined in the preamble to this Agreement.
<PAGE>
"Assignment and Assumption Amendment" -- as defined in Section 3.11.
"Basket Amount" -- as defined in Section 9.3(c).
"BCP Offshore" -- as defined in the preamble to this Agreement.
"BCP Volume" -- as defined in the preamble to this Agreement.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"Best Knowledge of Buyer and the VSI Stockholders" -- the actual
knowledge of Lawrence Hatch, Ronald Skadow, Kenneth Frick and/or any general
partner of Blackstone.
"Best Knowledge of Sellers" -- the actual knowledge of any executive
officer of GE Capital involved in the business of, or decisions affecting,
Service America, Dee, Higgins and/or Paoletti.
"Blackstone" -- BCP Offshore and BCP Volume.
"Business Day" -- any day that is not a Saturday or Sunday or a day on
which banks located in New York are authorized or required to be closed.
"Buyer" -- as defined in the preamble to this Agreement.
"Buyer and the VSI Stockholders Disclosure Schedule" -- as defined in
Section 5.
"Buyer Assets" -- as defined in Section 5.10(b).
"Buyer Audited Financial Statements" -- as defined in Section 5.6.
"Buyer Common Stock" -- the common stock, par value $.01 per share, of
Buyer.
"Buyer Companies" -- Buyer or any of its Subsidiaries.
"Buyer Financial Statements" -- as defined in Section 5.6.
"Buyer 401(K) Plan" -- as defined in Section 5.17.
"Buyer Interim Financial Statements" -- as defined in Section 5.6.
"Buyer Personal Property Leases" -- as defined in Section 5.20(a).
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"Buyer Real Property Leases" -- as defined in Section 5.10(a).
"Capital Expenditure Amount" -- with respect to Service America
Companies or Buyer Companies, the amount of capital expenditures recorded as
such in accordance with GAAP on its financial statements during the six month
period ending June 27, 1998 (for the Service America Companies) or June 30, 1998
(for the Buyer Companies).
"Claim Statement" -- as defined in Section 9.2(a).
"Closing" -- as defined in Section 2.4.
"Closing Date" -- the date and time as of which the Closing actually
takes place.
"Confidentiality Agreements" -- (i) the two letter agreements between
Service America and Volume Services, Inc. dated May 21, 1998 and (ii) the letter
agreement between Service America and BCP Volume dated February 18, 1998.
"Consent" -- any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Service America Capital by Sellers to Buyer and
the delivery by Buyer to Sellers of the consideration contemplated in Section 2;
and
(b) the performance by Buyer, the VSI Stockholders and Sellers of
their respective covenants and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Customer" -- the customer party to each Customer Contract.
"Customer Contract" -- each Contract pursuant to which an entity
provides food, beverage and other services to any Person.
"Dee" -- as defined in the preamble to this Agreement.
"Dee Partnership" -- as defined in the preamble to this Agreement.
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
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"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended.
"Environmental Law" -- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
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(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Excess Financing Proceeds" -- the balance of the proceeds derived from
the Financing after the payment of the amounts identified in Section 6.1(a)(i)
through and including (v) of the Stockholders' Agreement.
"Facilities" -- any real property, leaseholds orother interests
currently or formerly owned or operated by any Person and any buildings, plants
or structures currently or formerly owned or operated by any Person.
"Fifth Tranche" -- the next amount of Excess Financing Proceeds after
full utilization of the Fourth Tranche.
"Final Adjustment" -- with respect to Service America Companies or
Buyer Companies, the sum of its (a) Capital Expenditure Amount (which will be
expressed as a positive number), (b) Indebtedness Amount (which will be
expressed as a negative number) and (c) Working Capital Difference (which will
be expressed as either a positive or a negative number), in each case based on
the procedures for finally determining such amount in accordance with Section
2.2(b).
"Financial Representative" -- Dominick & Dominick Incorporated.
"Financing" -- a financing consummated by Buyer on or prior to the
first anniversary of the Closing Date, the proceeds of which shall be used to
pay or redeem certain expenses, indebtedness and capital stock of Buyer in the
manner described herein and in the Stockholders' Agreement.
"First Tranche" -- the first $1,250,000 of Excess Financing Proceeds.
"Fourth Tranche" -- the next amount of Excess Financing Proceeds after
full utilization of the Third Tranche which, upon being applied to repurchase
shares of Buyer Common Stock held by the VSI Stockholders in accordance with
Section 2.3, would result in their holding 60% of the issued
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and outstanding shares of Buyer Common Stock, without taking into account
issuances of Buyer Common Stock after the Closing Date (other than pursuant to
Section 2.2).
"GAAP" -- generally accepted United States accounting principles.
"GE Capital" -- as defined in the preamble to this Agreement.
"GE Capital Objection" -- as defined in Section 2.2(b).
"GE Capital Loan Agreement" -- as defined in Section 3.9.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver or other authorization issued, granted, given or otherwise made available
by, or under the authority of, any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities of a Person or
such Person or its Subsidiaries.
"Hazardous Materials" -- any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Higgins" -- as defined in the preamble to this Agreement.
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"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or any successor law and regulations and rules issued pursuant to
that Act or any successor law.
"Indebtedness Amount" -- with respect to Service America Companies or
Buyer Companies, the amount of indebtedness reflected as such in accordance with
GAAP on its balance sheet as of June 27, 1998 (for the Service America
Companies) or June 30, 1998 (for the Buyer Companies).
"Indemnified Party" -- as defined in Section 9.2(a).
"Indemnifying Party" -- as defined in Section 9.2(a).
"Individual Service America Stockholders" -- Dee, Higgins and Paoletti.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency and, to the extent relevant, the United States Department of the
Treasury.
"Joint Request" -- as defined in Section 7.7(b).
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"LLC" -- as defined in Section 11.11.
"Losses" -- any loss, cost, expense, liability, claim or damage,
including, without limitation, reasonable fees and disbursements of counsel and
accountants and other costs and expenses incidental to any claim, suit or
Proceeding.
"Marks" -- all patents, trademarks, servicemarks, trade names and
copyrights of a Person.
"Material Adverse Effect" -- any effect that is materially adverse to
the business, operations, prospects, results of operations or financial
condition of a Person.
"Minority Stockholders" -- as defined in Section 10.
"Neutral Accounting Firm" -- as defined in Section 2.2(b).
"1998 Buyer Balance Sheet" -- as defined in Section 5.6.
"1998 Service America Balance Sheet" -- as defined in Section 6.6.
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"Normalized Working Capital Amount" -- the amount as reflected as such
for each of Buyer and Service America on Schedule 2.2.
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Offering Memorandum" -- an offering memorandum to be delivered to the
Minority Stockholders in connection with the exchange of their Service America
Common Stock for Buyer Common Stock.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Personwill be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation, (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (d) any charter or similar document adopted or filed in connection
with the creation, formation or organization of a Person and (e) any amendment
to any of the foregoing.
"Panel"-- as defined in Section 11.6.
"Paoletti" -- as defined in the preamble to this Agreement.
"Permitted Encumbrances" -- (a) those liens disclosed on a Person's
latest fiscal year end balance sheet or the notes thereto, (b) any liens
existing on the date of this Agreement under any loan for borrowed money or
guarantee or security in respect thereof identified in Schedule 5.20 (with
respect to the Buyer Companies) or Schedule 6.20 (with respect to the Service
America Companies), (c) statutory liens for current taxes or assessments not yet
due or delinquent or the validity of which
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are being contested in good faith by appropriate proceedings, (d) mechanics',
carriers', workers', repairmen's and other similar liens arising or incurred in
the Ordinary Course of Business with respect to charges not yet due and payable
or the validity of which are being contested in good faith by appropriate
proceedings, (e) such other Encumbrances, if any, that are provided for under
the Customer Contracts or which do not materially detract from the value of, or
interfere with the present use of, or with any use presently anticipated by a
Person of, the property subject thereto or affected thereby, (f) Encumbrances
created by the other party to this Agreement and (g) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
or subject thereto or impairs the operation of the owner of the property and
(ii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"Proceeding" -- any legal motion, action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted, or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Promissory Note" -- as defined in Section 2.5(b)(ii).
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping or other releasing into the Environment, whether
intentional or unintentional.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor or other representative of such
Person, including legal counsel, accountants and financial advisors.
"SAC Holders" -- as defined in Section 2.3.
"Second Tranche" -- the next $24 million of Excess Financing Proceeds
after full utilization of the First Tranche.
"Securities Act" -- the Securities Act of 1933, as amended, or any
successor law and regulations and rules issued pursuant to that Act or any
successor law.
"Sellers" -- as defined in the preamble to this Agreement.
"Sellers Disclosure Schedule" -- as defined in Section 6.
"Senior Subordinated Promissory Note" -- as defined in Section 2.3.
"Service America" -- as defined in the Recitals of this Agreement.
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"Service America Assets" -- as defined in Section 6.10(b).
"Service America Audited Financial Statements" -- as defined in
Section 6.6.
"Service America Capital" -- as defined in the Recitals of this
Agreement.
"Service America Common Stock" -- the common stock, par value $.01 per
share, of Service America.
"Service America Companies" -- Service America or any of its
Subsidiaries.
"Service America Financial Statements" -- as defined in Section 6.6.
"Service America 401(k) Plan" -- as defined in Section 6.17.
"Service America Indemnified Parties" -- as defined in Section 9.1(b).
"Service America Preferred Stock" -- the 10% Class A Senior Preferred
Stock - Series A and the 10% Class A Senior Preferred Stock - Series B of
Service America.
"Service America Personal Property Leases" -- as defined in Section
6.20(a).
"Service America Real Property Leases" -- as defined in Section
6.10(a).
"Service America Shares" -- as defined in the Recitals of this
Agreement.
"Service America Warrant" -- as defined in the Recitals of this
Agreement.
"Software" -- all computer programs and software owned or licensed by a
Person and used by such Person in connection with its business.
"Statement" -- as defined in Section 2.2(b).
"Stockholders' Agreement" -- as defined in Section 3.7.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax" -- any tax (whether federal, state, local or foreign,including,
but not limited to, any income tax, capital gains tax, value-added tax, sales
tax, property tax, transfer tax, employment tax, excise tax, gift tax, or estate
tax), levy, assessment, tariff, duty (including any customs duty),
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deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency or fee.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation or enforcement
of, or compliance with, any Legal Requirement relating to any Tax.
"Third Tranche" means the next $18.75 million of Excess Financing
Proceeds after full utilization of the Second Tranche.
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute or
other matter is likely to be asserted, commenced, taken or otherwise pursued in
the future.
"VSI Indemnified Parties" -- as defined in Section 9.1(a).
"VSI Parties" -- as defined in Section 8.1(a).
"VSI Stockholders" -- as defined in the preamble to this Agreement.
"Working Capital Difference" -- with respect to Service America
Companies or Buyer Companies, (a) the amount of working capital calculated on a
basis consistent with the manner in which working capital was calculated for
purposes of Schedule 2.2 reflected as such in accordance with GAAP on its
balance sheet as of June 27, 1998 (for the Service America Companies) or June
30, 1998 (for the Buyer Companies), minus (b) its Normalized Working Capital
Amount. If (a) is greater than (b), the Working Capital Difference will be
expressed as a positive number; if not, it will be expressed as a negative
number.
2. SALE, EXCHANGE AND TRANSFER OF SHARES; CLOSING.
2.1 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing each Seller shall sell and transfer to Buyer, and
Buyer shall purchase from each Seller the Service America Capital set forth
opposite each Seller's name on Schedule 6.2(a).
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2.2 Consideration. (a) In consideration of the sale and transfer to
Buyer by Sellers of the Service America Capital to be sold by each Seller, at
the Closing, Buyer shall: (i) pay to Sellers that are holders of the Service
America Common Stock by certified check or wire transfer the sum of One Thousand
Dollars ($1,000, pro rata according to such common stock held by such Sellers);
(ii) issue to GE Capital the Promissory Note; and (iii) issue to such Sellers
shares of Buyer Common Stock, on the basis described on Schedule 2.2.
(b) As soon as practicable, but in no event later than 60 days
following the Closing Date, Buyer shall prepare, or cause to be prepared, and
deliver to GE Capital a statement of the Final Adjustments with respect to both
Service America and Buyer (the "Statement") together with the workpapers used in
the preparation thereof. The Statement shall be prepared in accordance with GAAP
applied on a basis consistent with the audited financial statements referred to
in Section 5.6 or 6.6, as applicable. GE Capital shall within 30 days after the
delivery by Buyer of the Statement complete its review of the Statement. In such
period, GE Capital shall have access to all documentation and principal
personnel involved in preparation of such statements. In the event that GE
Capital objects to the Statement, GE Capital shall inform Buyer in writing (the
"GE Capital Objection"), setting forth a description in reasonable detail of the
basis of its objection and the adjustments to the Statement that it believes
should be made, on or before the last day of such 30 day period. Buyer shall
have 20 days to review and notify GE Capital in writing of any response to the
GE Capital Objection. During such 20 day review period and the subsequent 10 day
period the parties shall seek in good faith to resolve any differences that they
may have with respect to the matters specified in the GE Capital Objection. If
the Buyer and GE Capital are unable to resolve all of their disagreements with
respect to the GE Capital Objection within the 10 day period following
completion of Buyer's review of the GE Capital Objection, they shall refer their
remaining differences to the dispute resolution department of Arthur Andersen
LLP's New York City office or other nationally recognized firm of independent
public accountants as to which GE Capital and Buyer mutually agree (the "Neutral
Accounting Firm"), who shall determine only with respect to the remaining
differences so submitted, whether and to what extent, if any, the Statement
requires adjustment. The parties shall instruct the Neutral Accounting Firm to
deliver its written determination to Buyer and GE Capital no later than the 20th
day after the remaining differences underlying the GE Capital Objection are
referred to the Neutral Accounting Firm. The Neutral Accounting Firm's
determination shall be conclusive and binding upon the parties hereto, and shall
be based solely on presentations by Buyer and GE Capital and not by independent
review. The Neutral Accounting Firm shall address only those issues in dispute,
and may not assign a value to any item greater than the greatest value for such
item claimed by either party. The fees and expenses of the Neutral Accounting
Firm shall be borne by Buyer. The "Final Adjustment" shall be (i) as set forth
on the Statement in the event that (x) no GE Capital Objection is delivered to
the Buyer during the 30 day period specified above, or (y) as GE Capital and the
Buyer so agree, (ii) as set forth on the Statement, adjusted in accordance with
the GE Capital Objection in the event that the Buyer does not respond to the GE
Capital Objection within the 20 day period following receipt by the Buyer of the
GE Capital Objection or agrees with the GE Capital Objection or (iii) as set
forth on the Statement, as adjusted by either (x) the Agreement of the Buyer and
GE Capital or (y) the Neutral Accounting Firm.
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(c) Promptly after the determination pursuant to Section 2.2(a) of the
Final Adjustments for both Service America and Buyer, Buyer shall either issue
and deliver to Sellers additional shares of Buyer Common Stock, or Sellers shall
return to Buyer a portion of the shares of Buyer Common Stock previously
delivered to Sellers pursuant to clause Section 2.2(a) above, such that, in
either case, the number of shares of Buyer Common Stock held by Sellers is the
number called for by Schedule 2.2 (with the calculations therein made with the
Final Adjustment numbers determined under Section 2.2(b)).
2.3 Repurchase of Shares. As promptly as practicable after the
consummation of the Financing and after the application of the net proceeds
thereof pursuant to Section 6.1(a)(i) through and including (v) of the
Stockholders' Agreement, Buyer, subject to the terms and conditions of this
Agreement, shall repurchase shares of Buyer Common Stock held by the VSI
Stockholders and Sellers (and other former Service America capital stock holders
who receive Buyer Common Stock) (collectively, "SAC Holders") and repay the
Promissory Note on the following basis:
(a) with the First Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
the number of shares of Buyer Common Stock calculated pursuant to
Schedule 2.3, and 40% of such proceeds to repay the Promissory Note;
(b) with the Second Tranche of Excess Financing Proceeds, Buyer
shall repurchase from the VSI Stockholders, pro rata based on their
relative holdings, shares of Buyer Common Stock at a purchase price per
share calculated pursuant to Schedule 2.3;
(c) with the Third Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
and 40% of such proceeds to repurchase from the SAC Holders, pro rata
based on their relative holdings, shares of Buyer Common Stock at a
purchase price per share calculated pursuant to Schedule 2.3;
(d) with the Fourth Tranche of Excess Financing Proceeds, Buyer
shall repurchase from the VSI Stockholders, pro rata based on their
relative holdings, shares of Buyer Common Stock at a purchase price per
share calculated pursuant to Schedule 2.3;
(e) with the Fifth Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
and 40% of such proceeds to repurchase from the SAC Holders, pro rata
based on their relative holdings, shares of Buyer Common Stock at a
purchase price per share calculated pursuant to Schedule 2.3; and
(f) in the event the Financing does not occur or the amount
applied from the First Tranche is less than $1,250,000, Buyer shall
repurchase from the VSI Stockholders, pro rata based on their relative
holdings, the number of shares of Buyer Common Stock calculated
pursuant to Schedule 2.3, in an aggregate amount equal to the
difference between $750,000 and the amount received by the VSI
Stockholders in applying proceeds of the First Tranche,
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provided that the repurchase price shall be paid not in cash but in the
form of a senior subordinated promissory note (the "Senior Subordinated
Promissory Note") dated the date of such repurchase with the equivalent
terms of the Promissory Note issued to GE Capital by the Company.
Notwithstanding the foregoing but subject to Section 7.11, the
obligations of Buyer to make the repurchases of shares of Buyer Common Stock
called for by this Section 2.3 shall be subject to the satisfaction of the
following condition: The Board of Directors of Buyer shall not have determined
reasonably and in good faith, in accordance with applicable provisions of
corporation law, that the capital of Buyer is impaired by such repurchase or
would otherwise be impaired as a result of such repurchase on the date of such
repurchase within the meaning of Section 160(a)(1) of the Delaware General
Corporation Law.
2.4 Closing. The purchase, exchange and sale (the "Closing") provided
for in this Agreement will take place at the offices of Buyer's counsel, Simpson
Thacher & Bartlett, at 425 Lexington Avenue, New York, New York, at 10:00 a.m.
(local time), on the later of (a) August 20, 1998 or (b) the date that is two
Business Days following the satisfaction or waiver of all of the conditions set
forth in Article 3 and 4, or at such other time and place as the parties may
agree. Subject to the provisions of Section 8, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.4 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.5 Closing Obligations. At the Closing:
(a) Sellers will deliver or will cause Service America to deliver
to Buyer:
(i) the Service America Warrant and stock certificates
representing the Service America Shares set forth opposite each
Seller's name on Schedule 6.2(a), in each case duly endorsed for
transfer to Buyer or accompanied by stock or other appropriate
powers duly endorsed in blank;
(ii) duly executed resignations dated the Closing Date of
the members of the board of directors of each Service America
Company that are designated on Schedule 2.5(a)(ii); and
(iii) the documents contemplated in Section 3.
(b) Buyer will deliver to Sellers:
(i) certificates representing the shares of Buyer Common
Stock as set forth in Section 2.2;
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(ii) a duly executed promissory note payable to GE Capital
in the principal amount of $500,000 in the form of Exhibit
2.5(b)(ii) (the "Promissory Note"); and
(iii) a certified check or a wire transfer in the amount of
$1,000 payable to GE Capital.
(c) Buyer and the VSI Stockholders will deliver to Sellers the
documents contemplated in Section 4.
3. CONDITIONS TO OBLIGATIONS OF BUYER AND THE VSI STOCKHOLDERS.
Buyer's obligation to purchase the Service America Capital and Buyer's
and the VSI Stockholders' obligations to take the other actions required to be
taken by Buyer and the VSI Stockholders at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer or the VSI Stockholders in whole or in
part):
3.1 Accuracy of Representations.
(a) The representations and warranties of Sellers in this Agreement
that are not qualified by materiality must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date. The
representations and warranties of Sellers in this Agreement that are qualified
by materiality must have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects at the Closing Date as if made on
the Closing Date. No supplement to the Sellers Disclosure Schedule made
subsequent to the signing hereof shall serve to correct or make true and correct
any representation or warranty made herein, except as provided in Section
11.9(a).
(b) Buyer and the VSI Stockholders shall have received a certificate
to the foregoing signed by Sellers.
3.2 Sellers' Performance.
(a) The covenants and obligations that are not qualified by
materiality that Sellers are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been duly performed or
complied with in all material respects. The covenants and obligations that are
qualified by materiality that Sellers are required to perform or comply with
pursuant to this Agreement at or prior to the Closing must have been duly
performed or complied with in all respects.
(b) Buyer and the VSI Stockholders shall have received a certificate
to the foregoing signed by Sellers.
(c) Sellers must have delivered each of the documents required to be
delivered by Sellers pursuant to Section 2.5.
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3.3 Governmental Approvals. All necessary and appropriate Consents,
notices and filings under any Legal Requirement relating to alcoholic beverage
licenses of any Service America Company shall have been obtained or made.
3.4 Material Adverse Effect.
(a) The Service America Companies shall have received written consents
to the Contemplated Transactions under the Customer Contracts of any Service
America Company identified in Schedule 6.5, such that the aggregate value for
such Customer Contracts (as such values are listed on Schedule 3.4(a)) as to
which a consent was not obtained is not greater than $8 million. In the event
the aggregate value for such Customer Contracts (as such values are listed on
Schedule 3.4(a)) as to which consent is not obtained is greater than $8 million
and Sellers are willing to adjust the consideration to be received pursuant to
Section 2.2 by an amount that will reflect the value of the loss of such
Customer Contracts in their entirety, as computed according to the methodology
set forth in Section 2.2, this condition shall be deemed satisfied. In computing
the value of any Customer Contract as to which consent was not obtained for
purposes of this Section 3.4(a), there shall be credited any amount to which the
party is entitled upon termination of such Customer Contract and only the net
amount (i.e., the value of the Customer Contract less the amount to which the
party is entitled on termination of the Contract) shall be used.
(b) Service America Companies shall not have received written notice
of termination of Customer Contracts of any Service America Company (other than
those described in Section 3.4(a)) such that the aggregate value for such
terminated Customer Contracts (as such values are listed on Schedule 3.4(a)) is
greater than $8 million. In the event the aggregate value of such Customer
Contracts which are so terminated (as such values are listed on Schedule 3.4(a))
is greater than $8 million and Sellers are willing to adjust the consideration
to be received pursuant to Section 2.2 by an amount which will reflect the value
of the loss of such Customer Contracts in their entirety, as computed according
to the methodology set forth in Section 2.2, this condition shall be deemed
satisfied. In computing the value of any Customer Contract so terminated for
purposes of this Section 3.4(b), there shall be credited any amount to which the
party is entitled upon termination and only the net amount (i.e., the value of
the Customer Contract less the amount to which the party is entitled on
termination) shall be used.
(c) No Service America Company shall have received a written notice of
a breach or default under any Contract (other than a Customer Contract) arising
as a result of the Contemplated Transactions such that the estimated damages
from any such breach or default individually or in the aggregate can reasonably
be expected to exceed $8 million. The amount of estimated damages from any such
breach or default shall be determined by Buyer, on the one hand, and Sellers, on
the other hand. In the event such parties cannot agree within five Business Days
of the date such issue arises that the estimated amount of damages cannot
reasonably be expected to exceed $8 million, either Buyer or Sellers may submit
the matter to a single arbitrator in the manner described in Section 11.6 for
determination on an expedited basis, with the determination made by the
arbitrator being final and binding on all parties.
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(d) Buyer and the VSI Stockholders shall receive a certificate signed
by Sellers as of the Closing Date certifying as to the Customers that have given
written termination notices or refused to consent to the Contemplated
Transactions under the Customer Contracts as of the Closing Date.
3.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer or the VSI Stockholders, or
against any Affiliate of Buyer or any VSI Stockholder, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions or (b) that reasonably may be
expected to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Contemplated Transactions.
3.6 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order or (b) any Legal Requirement or Order that has been
published, introduced or otherwise formally proposed by or before any
Governmental Body.
3.7 Stockholders' Agreement. Sellers shall have executed the Amended
and Restated Stockholders' Agreement in the form of Exhibit 3.7 (the
"Stockholders' Agreement").
3.8 Additional Documents. Each of the following documents must have
been delivered to Buyer and the VSI Stockholders:
(a) an opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, dated
the Closing Date, in the form of Exhibit 3.8(a); and
(b) such other documents as Buyer and the VSI Stockholders may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 4.8(a), (ii) evidencing the accuracy of any
representation or warranty of Sellers, (iii) evidencing the performance by
Sellers of, or the compliance by Sellers with, any covenant or obligation
required to be performed or complied with by Sellers, (iv) evidencing the
satisfaction of any condition referred to in this Section 3 or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
3.9 Consent of GE Capital. GE Capital shall have granted the requisite
consent to the Contemplated Transactions under the Loan Agreement with the
Service America Companies dated January 17, 1997 (the "GE Capital Loan
Agreement"), in the form of Exhibit 3.9 (the "Waiver and Amendment Agreement").
3.10 Bank Consent. The VSI Companies shall have received the requisite
consent of its lenders to the Contemplated Transactions under the Credit
Agreement dated as of December 21, 1995 among certain of the Buyer Companies,
the lenders named therein and The Chase Manhattan Bank.
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3.11 GE Capital. On the Closing Date, GE Capital and Service America
shall enter into amendments to the Assignment and Assumption Agreement, dated as
of October 1, 1996 (the "Assignment and Assumption Amendment"), in the form of
Exhibit 3.11.
3.12 Non-Foreign Tax Status. Sellers shall have delivered to Buyer a
certificate pursuant to Section 1445 of the Code in form and substance
reasonably satisfactory to Buyer certifying their non-foreign status.
3.13 Proceedings Satisfactory. All certificates and other documents to
be delivered by Sellers and all other matters to be accomplished by Sellers
prior to or at the Closing shall be satisfactory in the reasonable judgment of
Buyer and its counsel.
4. CONDITIONS TO OBLIGATIONS OF SELLERS.
Sellers' obligation to sell the Service America Capital and to take the
other actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers in whole or in part):
4.1 Accuracy of Representations.
(a) The representations and warranties of Buyer and the VSI
Stockholders in this Agreement that are not qualified by materiality must have
been accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date. The representations and warranties of Buyer and the VSI
Stockholders in this Agreement that are qualified by materiality must have been
accurate in all respects as of the date of this Agreement and must be accurate
in all respects at the Closing Date as if made on the Closing Date. No
supplement to the Buyer and VSI Stockholders Disclosure Schedule made subsequent
to the signing hereof shall serve to correct or make true and correct any
representation or warranty made herein, except as provided in Section 11.9(a).
(b) Sellers shall have received certificates as to the foregoing
signed by Buyer and the VSI Stockholders.
4.2 Buyer's and the VSI Stockholders' Performance.
(a) The covenants and obligations that are not qualified by
materiality that each of Buyer and the VSI Stockholders is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been performed or complied with in all material respects. The covenants and
obligations that are qualified by materiality that each of Buyer and the VSI
Stockholders, respectively, is required to perform or comply with pursuant to
this Agreement at or prior to the Closing must have been performed or complied
with in all respects.
(b) Sellers shall have received certificates as to the foregoing
signed by Buyer and the VSI Stockholders.
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(c) Buyer and the VSI Stockholders must have delivered each of the
documents required to be delivered by Buyer and the VSI Stockholders pursuant to
Section 2.5.
4.3 Governmental Approvals. All necessary and appropriate Consents,
notices and filings under any Legal Requirement relating to alcoholic beverage
licenses of any Buyer Company shall have been obtained or made.
4.4 Material Adverse Effect.
(a) The Buyer Companies shall have received written consents to the
Contemplated Transactions under the Customer Contracts of any Buyer Company
identified in Schedule 5.5 such that the aggregate value for such Customer
Contracts (as such values are listed on Schedule 4.4(a)) as to which a consent
was not obtained is not greater than $8 million. In the event the aggregate
value for such Customer Contracts (as such values are listed on Schedule 4.4(a))
as to which consent is not obtained is greater than $8 million and the VSI
Stockholders are willing to adjust the consideration to be received pursuant to
Section 2.2 by an amount that will reflect the value of the loss of such
Customer Contracts in their entirety, as computed according to the methodology
set forth in Section 2.2, this condition shall be deemed satisfied. In computing
the value of any Customer Contract as to which consent was not obtained for
purposes of this Section 4.4(a), there shall be credited any amount to which the
party is entitled upon termination of such Customer Contract and only the net
amount (i.e., the value of the Customer Contract less the amount to which the
party is entitled on termination of the Contract) shall be used.
(b) The Buyer Companies shall not have received written notice of
termination of Customer Contracts of any Buyer Company (other than those
described in Section 4.4(a)) such that the aggregate value for such terminated
Customer Contracts (as such values are listed on Schedule 4.4) is greater than
$8 million. In the event the aggregate value of such Customer Contracts which
are so terminated (as such values are listed on Schedule 4.4(a)) is greater than
$8 million and the VSI Stockholders are willing to adjust the consideration to
be received pursuant to Section 2.2 by an amount that will reflect the value of
the loss of such Customer Contracts in their entirety, as computed according to
the methodology set forth in Section 2.2, this condition shall be deemed
satisfied. In computing the value of any Customer Contract as to which notice of
termination was received for purposes of this Section 4.4(b), there shall be
credited to any amount to which a party is entitled upon termination of such
Customer Contract and only the net amount (i.e., the value of the Customer
Contract less the amount to which the party is entitled on termination of the
Contract) shall be used.
(c) No Buyer Company shall have received a written notice of a breach
or default under any Contract (other than a Customer Contract) arising as a
result of the Contemplated Transactions such that the estimated damages from any
such breach or default individually or in the aggregate can reasonably be
expected to exceed $8 million. The amount of estimated damages from any such
breach or default shall be determined by Buyer, on the one hand, and Sellers, on
the other hand. In the event such parties cannot agree within five Business Days
of the date such issue arose, that the estimated amount of damages cannot
reasonably be expected to exceed $8 million, either Buyer or Sellers may submit
the matter to a single arbitrator in the manner described in Section 11.6 for
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determination on an expedited basis, with the determination made by the
arbitrator being final and binding on all parties.
(d) Sellers shall receive a certificate signed by Buyer and the VSI
Stockholders as of the Closing Date certifying as to the Customers that have
given written termination notices or refusal to consent to the Contemplated
Transactions under the Customer Contracts as of the Closing Date.
4.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Services America or Sellers, or
against any Affiliate of any Sellers or Service America, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions or (b) that reasonably may be
expected to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Contemplated Transactions.
4.6 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Sellers or any Person affiliated
with Sellers to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order or (b) any Legal Requirement or Order that
has been published, introduced or otherwise formally proposed by or before any
Governmental Body.
4.7 Stockholders' Agreement. Buyer and the VSI Stockholders shall have
executed the Stockholders' Agreement.
4.8 Additional Documents. Each of the following documents must have
been delivered to Sellers:
(a) an opinion of Simpson Thacher & Bartlett, dated the Closing Date,
in the form of Exhibit 4.8(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 3.8(a), (ii) evidencing the accuracy of any representation or warranty
of each of Buyer and the VSI Stockholders, (iii) evidencing the performance by
Buyer or the VSI Stockholders of, or the compliance by Buyer or the VSI
Stockholders with, any covenant or obligation required to be performed or
complied with by Buyer or the VSI Stockholders, (iv) evidencing the satisfaction
of any condition referred to in this Section 4 or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
4.9 Lien in Favor of GE Capital. Buyer shall have granted to GE
Capital a valid lien satisfactory to GE Capital to secure all amounts owing
under the GE Capital Loan Agreement on all Service America Capital and all other
Service America Common Stock being purchased by Buyer hereunder.
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4.10 Bank Consent. The Buyer Companies shall have received the
requisite consent of its lenders to the Contemplated Transactions under the
Credit Agreement dated as of December 21, 1995 among certain of the Buyer
Companies, the lenders named therein and The Chase Manhattan Bank.
4.11 Proceedings Satisfactory. All certificates and other documents to
be delivered by Buyer and the VSI Stockholders and all other matters to be
accomplished by Buyer or the VSI Stockholders prior to or at the Closing shall
be satisfactory in the reasonable judgment of Sellers and their counsel.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND THE VSI STOCKHOLDERS.
Buyer and the VSI Stockholders jointly and severally represent and
warrant to Sellers, except as set forth in the Schedules comprising Schedule 5
hereto and incorporated herein by reference (the "Buyer and the VSI Stockholders
Disclosure Schedule"), as follows:
5.1 Organization and Good Standing.
(a) Each Subsidiary of Buyer and the capitalization of each such
Subsidiary is set forth on Schedule 5.1(a). Except as set forth in Schedule
5.1(a), Buyer or a Subsidiary of Buyer owns all of the assets that are utilized
to carry on its business and the VSI Stockholders neither own nor control any
other entity necessary to carry on such business. All of the shares of each
Subsidiary of Buyer are owned by Buyer or a wholly owned Subsidiary of Buyer
free and clear of all Encumbrances, except as set forth in Schedule 5.1(a), and
all such shares owned by Buyer or a wholly owned Subsidiary of Buyer will be
owned as of the Closing Date, free and clear of all Encumbrances, other than
Permitted Encumbrances. All of the issued and outstanding shares of the
Subsidiaries of Buyer have been duly authorized and are validly issued, fully
paid and nonassessable. None of the outstanding equity securities or other
securities of any Buyer Company was issued in violation of the Securities Act or
any other Legal Requirement.
(b) Each of the Buyer Companies is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation set forth next to its name on Schedule 5.1(b), has all requisite
corporate power to own and lease its properties and carry on its business as the
same is now being conducted and is qualified or licensed to do business as a
foreign corporation in each jurisdiction set forth next to its name in Schedule
5.1(b). Complete and correct copies of the Organizational Documents of each
Buyer Company have been delivered or made available by Buyer to Sellers, and are
complete and correct as of the date hereof.
5.2 Capital Structure.
(a) The authorized capital stock of Buyer consists of 1,000 shares of
common stock, par value $.01 per share, of which 376.0733 shares are issued and
outstanding. All of the outstanding shares of Buyer have been duly authorized
and validly issued and are fully paid and nonassessable and were issued without
violation of any preemptive rights. As of the date hereof, the Buyer
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Common Stock is owned as shown on Schedule 5.2(a). No additional Buyer Common
Stock or any security convertible into, or exchangeable for, Buyer Common Stock,
shall be issued to any VSI Stockholder prior to the Closing and no modification
or amendment shall be made in the terms of any Buyer Common Stock held by the
VSI Stockholders. On the Closing Date, the authorized capital stock of Buyer
will consist of 1,000 shares of Buyer Common Stock, of which the issued and
outstanding shares will be duly authorized and validly issued, fully paid and
nonassessable and issued without violation of any preemptive rights.
(b) Blackstone represents and warrants and each other VSI Stockholder
represents and warrants as to itself that such VSI Stockholder has good and
valid title to the Buyer Shares that are set forth on Schedule 5.2(a) opposite
the name of such VSI Stockholder and owns such Buyer Common Stock free and clear
of all Encumbrances, other than Permitted Encumbrances.
(c) Except as set forth on Schedule 5.2(c), there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements (other than this Agreement) or calls, demands, preemptive rights or
commitments of any kind relating to the issuance, sale or transfer of any
capital stock of any Buyer Company.
(d) The delivery to Sellers of the certificates representing the Buyer
Common Stock in accordance with Section 2 will transfer to each Seller of record
and beneficial ownership of the Buyer Common Stock free and clear of all
Encumbrances (other than Encumbrances created by Sellers).
5.3 Authority Relative to Contemplated Transactions. Blackstone
represents and warrants and each of the other VSI Stockholders represents and
warrants as to itself and as to its limited partners that (i) the execution,
delivery and performance by Buyer and the VSI Stockholders of this Agreement and
the consummation of the Contemplated Transactions by Buyer and the VSI
Stockholders has been duly authorized by all necessary corporate, or partnership
action, as the case may be, and (ii) this Agreement constitutes, and upon
execution and delivery by Sellers, will constitute, a valid and binding
obligation of Buyer and the VSI Sellers, enforceable against Buyer and the VSI
Stockholders in accordance with its terms.
5.4 Absence of Conflict. Blackstone represents and warrants and Buyer
and each of the VSI Stockholders represents and warrants as to itself that
neither the execution and delivery of this Agreement by the VSI Stockholders or
Buyer nor the consummation of the Contemplated Transactions by the VSI
Stockholders or Buyer will (a) conflict with or violate any provisions of the
Organizational Documents of any Buyer Company or the VSI Stockholders, (b)
except to the extent Consents may be required as indicated on Schedule 5.5,
violate, or be in conflict with or constitute a default under (or an event
which, with notice or lapse of time or both, would constitute a default under),
(i) any judgment, Order or ruling issued with respect to Buyer or any VSI
Stockholders, (ii) any applicable law, rule or regulation or (iii) except as set
forth on Schedule 5.4, any Contract to which any Buyer Company or any VSI
Stockholder is a party, (c) cause any Buyer Company or Service America Company
to become subject to, or to become liable for the payment of, any Tax, (d) cause
any assets of any Buyer Company to be reassessed or revalued by any taxing
authority or
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other Governmental Body or (e) result in the imposition or creation of any
Encumbrance upon or with respect to any assets owned or used by any Buyer
Company.
5.5 Governmental Approvals and Consents. Except as set forth in
Schedule 5.5, no Consents of, or filings and registrations with, any
Governmental Body or any third party are required by or on behalf of the VSI
Stockholders or any Buyer Company in connection with the execution, delivery and
performance of this Agreement or the transfer of the Buyer Common Stock by Buyer
to Sellers.
5.6 Financial Statements. Buyer has delivered or made available to
Sellers (i) the audited consolidated balance sheets of Buyer and its
Subsidiaries as at December 30, 1997 and December 30, 1996 and the related
audited consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 30, 1997 and December 30, 1996, together with
the notes thereto and the report thereon of Buyer's independent accountants
(collectively, the "Buyer Audited Financial Statements") and (ii) the unaudited
condensed consolidated balance sheet of Buyer and its Subsidiaries as at June
30, 1998 (the "1998 Buyer Balance Sheet") and together with the Buyer Audited
Financial Statements (the "Buyer Financial Statements"). Except as provided in
this Section 5.6 or Schedule 5.6, the Buyer Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of Buyer and its Subsidiaries as at the respective
dates thereof and for the periods referred to therein. The 1998 Buyer Balance
Sheet does not include or reflect normal year-end adjustments or include the
type of notes that would customarily be included in a financial statement
prepared in accordance with GAAP. No financial statements of any Person other
than Buyer and its Subsidiaries are required by GAAP to be included in the
consolidated financial statements of Buyer.
5.7 Books and Records. The books of accounts, minute books, stock
record books and other records of all Buyer Companies, all of which have been
delivered or made available to Sellers, are complete and correct and have been
maintained in accordance with sound business practice, including the maintenance
of an adequate system of internal controls. The minute books of the Buyer
Companies contain accurate and complete records of all meetings held of, and
corporate actions taken by, the stockholders, the board of directors and
committees of the board of directors of the Buyer Companies, and no meeting of
any such stockholders, board of directors or committees has been held for which
minutes have not been prepared and are not contained in such minute books.
5.8 Inventory. All food inventory and other supplies and materials
used in the business of the Buyer Companies and located at the location of the
Customers of the Buyer Companies, to the extent reflected on the 1998 Buyer
Balance Sheet net of reserves, are in good condition and usable in the Ordinary
Course of Business consistent with industry practice, subject to normal and
customary allowances for spoilage, damage and outdated items. The quantities of
each item of inventory are not excessive, but are reasonable in the present
circumstances of the Buyer Companies.
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5.9 Accounts Receivable. Except as set forth in Schedule 5.9, all
accounts receivable of the Buyer Companies, unless paid prior to the Closing
Date, represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the accounts receivable are or will be current and collectible net
of reserves not exceeding customary levels (which reserves are adequate).
Subject to such reserves, each of the accounts receivable either has been or
will be collected in full, without any setoff, within 90 days after the day on
which it first became due and payable. There is no contest, claim or right of
setoff under any Customer Contract of any Buyer Company with any obligor of
accounts receivable relating to the amount or validity of such accounts
receivable.
5.10 Title to Property; Encumbrances.
(a) No Buyer Company holds title to any real property. Schedule
5.10(a) sets forth a complete and accurate list of each lease of real property
by the Buyer Companies and includes the name of each current lessor and lessee
and the dates and lease term (including renewal options) of each lease and any
amendment thereto (the "Buyer Real Property Leases"). Copies of each Buyer Real
Property Lease have heretofore been delivered or made available to Sellers.
Except as set forth in Schedule 5.10(a), (i) each Buyer Real Property Lease is
the legal, valid and binding obligation the Buyer Company party thereto,
enforceable against the Buyer Company party thereto in accordance with its
terms, (ii) the Buyer Company party thereto has not received any written notice
of any event or condition that constitutes, or with the passage of time would
constitute, a default by the Buyer Company party thereto under any of the Buyer
Real Property Leases or by any other party to any such Buyer Real Property
Leases and (iii) no Buyer Company party thereto has received from any lessor
thereunder any written notice or other advice of termination or cancellation.
(b) Schedule 5.10(b) contains a list of all material personal property
owned by the Buyer Companies as of the date hereof. Except for Permitted
Encumbrances, the Buyer Companies have, and will have on the Closing Date, good
title to all of its personal property set forth in Schedule 5.10(b) (except for
personal property sold or otherwise disposed of since June 30, 1998 in the
Ordinary Course of Business) (the "Buyer Assets"), free and clear of all
Encumbrances.
(c) All tangible personal property included in the Buyer Assets and
owned by or held by any Buyer Company pursuant to the Buyer Personal Property
Leases is in substantially good operating condition and repair, subject to
ordinary wear and tear and, except as set forth on Schedule 5.10(c) hereof, is
suitable and appropriate for use consistent with the manner in which such Buyer
Assets have been used by the Buyer Companies in their business immediately prior
to the date hereof.
5.11 Marks, Software and Similar Rights. Schedule 5.11 contains a true
and complete list of all Software and Marks owned by the Buyer Companies and
used in the business of the Buyer Companies, and all licenses of Software and
Marks used by the Buyer Companies in their business. One of the Buyer Companies
owns or otherwise has the right to use all Software and Marks in the manner
currently used in connection with the operation of its business and without
infringement of the intellectual property rights of third parties. There is no
Proceeding pending or, to the Best Knowledge of Buyer and the VSI Stockholders,
Threatened that challenges the rights of the Buyer
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Companies in respect of any Buyer Company's Software or Marks, and except as
described in Schedule 5.11 hereto, there is no claim of infringement or other
complaint that any Buyer Company's use of its Software or Marks violates or
infringes the rights of any third party. No Person is infringing in any respect
the rights of any Buyer Company with respect to any Software or Mark of any
Buyer Company. No Buyer Company has licensed or otherwise granted to any third
party any rights in any Software or Mark of a Buyer Company.
5.12 Litigation.
(a) Except as disclosed in Schedule 5.12, there is no Proceeding
pending or, to the Best Knowledge of Buyer and the VSI Stockholders, Threatened
(i) against any Buyer Company or its business or assets, except for Proceedings
that are uninsured and seek only monetary relief in an amount not exceeding (A)
$100,000 in any individual Proceeding and (B) $500,000 for the aggregate of all
such Proceedings or (ii) that challenges, or that may have the effect of
preventing or making illegal any of the Contemplated Transactions.
(b) There are no existing Orders, writs or decrees of any court or
other Governmental Body against any Buyer Company or its business or assets. No
officer, director, agent or employee of any Buyer Company is subject to any
Order, writ or decree of any court or Governmental Body that prohibits such
officer, director, agent or employee from engaging in or continuing any conduct,
activity or practice relating to the business of the Buyer Companies.
5.13 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 5.13, the Buyer Companies have no liabilities or obligations of any
nature, except for (a) liabilities and obligations reflected as reserved against
in the balance sheet included in the Buyer Audited Financial Statements or (b)
current liabilities incurred in the Ordinary Course of Business since the date
thereof.
5.14 Tax Matters.
(a) Except as set forth on Schedule 5.14, (i) All Tax Returns required
to be filed on or before the date of this Agreement by, or with respect to, any
Buyer Company have been timely filed, (ii) all such Tax returns are true,
correct and complete, (iii) Buyer or a Subsidiary of Buyer has timely paid, or
made provision for the payment of, all Taxes attributable to taxable periods
ending on or before the Closing Date, except for Taxes that are being contested
in good faith by appropriate Proceedings and (iv) the charges, accruals and
reserves with respect to Taxes (excluding deferred taxes representing
differences between the book and tax basis in assets and liabilities) on the
books of the Buyer Companies are adequate for all periods up to and including
the Closing Date (determined in accordance with GAAP consistently applied).
(b) No Encumbrances for Taxes exist with respect to any asset or
properties of any Buyer Company, except for statutory Encumbrances for Taxes not
yet due.
(c) There is no tax sharing agreement that will require any payment by
any Buyer Company after the date of this Agreement.
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(d) Neither Buyer nor any VSI Stockholder has a plan or intention to
liquidate Service America or merge Service America with or into Buyer following
consummation of the Contemplated Transactions.
5.15 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as set forth in Schedule 5.15, since December 30, 1997, each
Buyer Company has conducted its operations in the Ordinary Course of Business
consistent with past practice and has not:
(a) suffered any Material Adverse Effect (other than any that
may be the result of changes of laws generally), it being understood
that any matter relating to a cancellation or termination of, or
failure to obtain a consent disclosed in Section 5.5 with respect to,
any Customer Contract, or the breach of any other Contract of the
Buyer Companies due to the Contemplated Transactions subsequent to the
date hereof shall not be deemed a Material Adverse Effect on the Buyer
Companies but shall be dealt with as provided in Section 4.4;
(b) incurred any obligation or liability, except liabilities
incurred in the Ordinary Course of Business;
(c) other than in connection with the consummation of the
Contemplated Transactions, issued, sold or otherwise disposed of any
of its capital stock, or created or suffered to be created any
Encumbrance thereon, or reclassified, split up or otherwise changed
any of its capital stock, or granted or entered into any options,
covenants or calls or other rights to purchase or convert any
obligation into any of its capital stock, granted any registration
rights, or purchased, redeemed, retired or otherwise acquired any
shares of any such capital stock;
(d) made or granted any increases in salaries, bonuses or other
remuneration to any employee, except in the Ordinary Course of Business
consistent with past practice, or entered into any employment,
severance or other Contract with any director, officer or employee;
(e) adopted, or increased payments or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of
any Buyer Company;
(f) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of any material assets or any other
material right, except in the Ordinary Course of Business consistent
with past practice;
(g) canceled any debts or affirmatively waived any claims or
rights of substantial value;
(h) declared or paid any dividend or made any other payment or
distribution in respect of its capital stock;
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(i) amended any Organizational Documents of any Buyer Company;
(j) made any change in accounting methods, principles or
practices, except as required by law;
(k) incurred, assumed or guaranteed any indebtedness for borrowed
money or other obligations, or created or assumed any Encumbrance on
any asset other than in the Ordinary Course of Business consistent
with past practice, but in no event with respect to assets with a
value of, or obligations in an amount of, more than $25,000 in the
aggregate;
(l) made any loan, advance or capital contribution to or
investment in any Person other than in the Ordinary Course of Business
consistent with past practice, but in no event in the amount of more
than $25,000 in the aggregate, and other than investments in cash
equivalents made in the Ordinary Course of Business consistent with
past practice;
(m) entered into any other commitment or transaction material to
the Buyer Companies taken as a whole, except in the Ordinary Course of
Business consistent with past practice;
(n) entered into any Contract requiring capital expenditures
over its term in excess of $500,000 or guarantee of any obligation or
incurrence of any contingent liability in excess of $100,000;
(o) made or changed any Tax election, changed any method of
accounting with respect to Taxes or settled or compromised any
liability for Taxes; or
(p) made any agreement, commitment, arrangement or undertaking to
perform any action described in the foregoing clauses (a) through (o).
5.16 Employee and Labor Matters. Except as set forth in Schedule 5.16:
(a) no Buyer Company is a party to any collective bargaining agreement
applicable to employees of any Buyer Company nor is any such contract or
agreement presently being negotiated; (b) no Buyer Company is a party to any
employment agreement or consulting agreement with any person or entity
obligating any Buyer Company to make payments in excess of $50,000 per year nor
is any such contract or agreement presently being negotiated; (c) there is no
unfair labor practice charge or complaint pending or, to the Best Knowledge of
Buyer and the VSI Stockholders, Threatened against or otherwise affecting any
Buyer Company which, if adversely determined, would reasonably be likely to
result in a liability having a Material Adverse Effect; (d) there is no labor
strike, slowdown, work stoppage or lockout in effect or, to the Best Knowledge
of Buyer and the VSI Stockholders, Threatened against or otherwise affecting any
Buyer Company and no Buyer Company has experienced any such labor controversy
within the past three years; (e) no Buyer Company is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices; (f) no Buyer Company will have
any liability under any benefit or severance policy, practice, agreement, plan,
or program which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of the consummation
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of the Contemplated Transactions; (g) the Buyer Companies are in compliance with
their obligations pursuant to the Worker Adjustment and Retraining Notification
Act of 1998 and all other notification and bargaining obligations arising under
any collective bargaining agreement, statute or otherwise; and (h) the Buyer
Companies are in compliance with all provisions of applicable law pertaining to
the employment of their employees, including, without limitation, laws relating
to labor relations, equal employment, fair employment practices, prohibited
discrimination or other similar employment practices acts. There is no breach or
event of default under, and each Buyer Company is in full compliance with, each
employment, severance and consulting Contract to which it and any director,
officer or employee is a party.
5.17 Employee Benefit Matters. The Buyer 401(k) Plan (the "Buyer 401(k)
Plan") is the only pension plan sponsored by Buyer on the date hereof relating
to the business of the Buyer Companies. Sellers have received or had made
available to them true and correct copies of all documents embodying the Buyer
401(k) Plan. The Buyer 401(k) Plan is in substantial compliance with the
provisions of ERISA and the qualification requirements of Section 401(a) of the
IRC. There are no Proceedings pending or, to the Best Knowledge of Buyer and the
VSI Stockholders, Threatened with respect to the Buyer 401(k) Plan that would
reasonably be expected to materially and adversely affect such qualification or
result in a materially adverse effect on Buyer. To the Best Knowledge of Buyer
and the VSI Stockholders, no "prohibited transaction," as described in Section
406 (and not exempt under Section 408) of ERISA, has occurred with respect to
the Buyer 401(k) Plan.
5.18 Insurance.
(a) Schedule 5.18(a) sets forth a list of all insurance policies
maintained as of the date of this Agreement by or on behalf of the Buyer
Companies and relating to their business or assets. Sellers have received or had
made available to them true and correct copies of such policies together with
all riders and amendments thereto. Such insurance policies are in full force and
effect, all premiums due thereon have been paid (except as described in Schedule
5.18(a)) and such policies are adequate to insure the Buyer Companies' business
in such amounts and against such risks as are customary for companies engaged in
businesses similar to that of the Buyer.
(b) Schedule 5.18(b) describes:
(i) any self-insurance arrangement by or affecting any Buyer
Company, including any reserves established thereunder;
(ii) any Contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Buyer
Company; and
(iii) all obligations of any Buyer Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage
is provided, except for such obligations under the Customer Contracts
of any Buyer Company.
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(c) Neither any Buyer Company nor any VSI Stockholder has received
with respect to any current insurance claim (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights or (B) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(d) The Buyer Companies have paid all premiums due, and have otherwise
performed all of their respective obligations under, each policy to which any
Buyer Company is a party or that provides coverage to any Buyer Company or any
officer, director or employee thereof.
(e) The Buyer Companies have given notice to the insurer of all claims
that may be insured thereby.
5.19 Environmental Matters. Except as set forth in Schedule 5.19:
(a) Each Buyer Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. Neither Buyer nor any VSI
Stockholder with respect to a Buyer Company has any basis to expect,
nor has any of them or any other Person for whose conduct they are or
may be held to be responsible received, any actual or Threatened Order,
notice or other communication from (i) any Governmental Body or
private citizen acting in the public interest or (ii) the current or
prior owner or operator of any Facilities of a Buyer Company, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities of a Buyer Company
or any other properties or assets (whether real, personal or mixed)
in which any Buyer Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used or processed by any
Buyer Company, or any other Person for whose conduct they are or may
be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed,
recycled or received.
(b) There are no pending or, to the Best Knowledge of Buyer and
the VSI Stockholders, Threatened claims, Encumbrances or other
restrictions of any nature resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
of a Buyer Company or any other properties and assets (whether real,
personal or mixed) in which any Buyer Company has or had an interest.
(c) No Buyer Company has any basis to expect nor has any Buyer
Company or, to the Best Knowledge of Buyer and the VSI Stockholders,
any other Person for whose conduct they are or may be held responsible
received any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity,
Hazardous Materials or any alleged, actual or potential violation or
failure to comply with any Environmental Law, or of any alleged,
actual or potential obligation to undertake or bear
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the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities of a Buyer Company or any other of
their properties or assets (whether real, personal or mixed) in which
any Buyer Company had an interest, or with respect to any property or
Facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by any Buyer Company, or any
other Person for whose conduct it is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed,
recycled or received.
(d) Neither any Buyer Company nor, to the Best Knowledge of
Buyer and the VSI Stockholders, any other Person for whose conduct
it is or may be held responsible has any Environmental, Health, and
Safety Liabilities with respect to the Facilities of the Buyer
Companies or with respect to any other properties and assets (whether
real, personal or mixed) in which any Buyer Company (or any
predecessor) has or had an interest or at any property geologically or
hydrologically adjoining such Facilities or any such other property
or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities of any Buyer Company or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps or any other part of such
Facilities or such adjoining property, or incorporated into any
structure therein or thereon. Neither any Buyer Company nor, to the
Best Knowledge of Buyer and the VSI Stockholders any other Person for
whose conduct it is or may be held responsible or any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal or mixed) in which any Buyer Company
has or had an interest, except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Best Knowledge of Buyer
and the VSI Stockholders, Threat of Release of any Hazardous Materials
at or from the Facilities of a Buyer Company or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used or processed from or by such
Facilities, or from or by any other properties and assets (whether
real, personal or mixed) in which any Buyer Company has or had an
interest, or any geologically or hydrologically adjoining such
property, whether by any Buyer Company or any other Person.
(g) Buyer and the VSI Stockholders have delivered or made
available to Sellers true and complete copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated
by any Buyer Company pertaining to Hazardous Materials or Hazardous
Activities in, on or under the Facilities of a Buyer Company, or
concerning compliance by any Buyer Company, or any other Person for
whose conduct they are or may be held responsible, with Environmental
Laws.
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5.20 Material Agreements.
(a) Schedule 5.20(a) contains a complete and accurate list, and
Buyer has delivered or made available to Sellers true and complete copies of,
(i) each Contract for the purchase of inventory in excess of $500,000 per
calendar year, (ii) each Customer Contract, (iii) each Contract pertaining to
employment, consulting or severance arrangements with any officer, director,
employee or independent contractor, (iv) each indenture, mortgage, note,
letter of credit or other instrument relating to the borrowing of money (or
the guarantee thereof), (v) each franchise Contract, (vi) each Contract that
was not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Buyer Companies in excess of $200,000
over its term, (vii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $100,000 and with terms of less than one year)
(with respect to those agreements in this clause (vii) pertaining to personal
property, the "Buyer Personal Property Leases"), (viii) each collective
bargaining agreement and other Contract to or with any labor union or other
employee representative of a group of employees, (ix) each joint venture,
partnership and other Contract (however named) involving a sharing of profits,
losses, costs or liabilities by any Buyer Company with any other Person,
(x) each Contract containing covenants that in any way purport to restrict the
business activity of any Buyer Company or any Affiliate of a Buyer Company or
limit the freedom of any Buyer Company or any Affiliate of a Buyer Company to
engage in any line of business or to compete with any Person, (xi) each
Contract providing for payments to or by any Person based on sales, purchases
or profits, other than direct payments for goods, (xii) each power of attorney
that is currently effective and outstanding, (xiii) each Contract entered into
other than in the Ordinary Course of Business that contains or provides for an
express undertaking by any Buyer Company to be responsible for consequential
damages, (xiv) each Contract for capital expenditures in excess of $500,000
and (xv) each Contract between any Buyer Company and any VSI Stockholder (or
one of its Affiliates).
(b) Except as set forth in Schedule 5.20(b), (i) each Contract required
to be set forth in Schedule 5.20(a) is the legal, valid and binding obligation
of a Buyer Company identified in such Schedule and, to the Best Knowledge of
Buyer and VSI Stockholders, each other party thereto, enforceable against it
in accordance with its terms, (ii) no Buyer Company or any VSI Stockholder nor,
to the Best Knowledge of Buyer and the VSI Stockholders, any other party
thereto, is in default under any of the Contracts required to be identified in
Schedule 5.20(a) and (iii) neither any Buyer Company nor any VSI Stockholder
has received from any Customers of any Buyer Company any written notice or
other advice of termination or cancellation or failure to consent to the
Contemplated Transactions required to be identified in Schedule 5.20(a) of any
Customer Contract. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Buyer understands that Customer Contracts may
expire or terminate, or the party to a Customer Contract as to which consent
is required as identified in Schedule 5.5 may refuse consent to the
Contemplated Transactions or a Contract of Buyer Companies may be breached due
to the Contemplated Transactions, in each case, prior to, on or after the
Closing Date. Sellers agree that their exclusive right and remedy with respect
to any of the matters in the foregoing sentence is as provided in Section 4.4.
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5.21 Compliance with Law.
(a) The operation of the business of the Buyer Companies has been
conducted in all respects in accordance with all applicable Legal Requirements
and other applicable requirements of all Governmental Bodies. No Buyer Company
has since the date of the 1998 Buyer Balance Sheet received any notification
from any Governmental Body of any asserted present or past failure by it to
comply with any such Legal Requirements.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation
by any Buyer Company of, or a failure on the part of any Buyer Company to
comply with, any Legal Requirement or (ii) may give rise to any obligation on
the part of any Buyer Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(c) Schedule 5.21(c) contains a complete and accurate list of each
Governmental Authorization that is held by the Buyer Companies or that
otherwise relates to the business of, or to any of the assets owned or used by,
the Buyer Companies. Each Governmental Authorization listed or required to be
listed in Schedule 5.21(c) is valid and in full force and effect. Except as
set forth in such Schedule:
(i) each Buyer Company is, and at all times since June 30, 1993
has been, in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 5.21(c);
(ii) the consummation of the Contemplated Transactions will not
and no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to
be listed in Schedule 5.21(c) or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation or termination
of, or any modification to, any Governmental Authorization listed or
required to be listed in Schedule 5.21(c);
(iii) no Buyer Company has received, at any time since June 30,
1993, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Governmental Authorization
or (B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification
to, any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in
Schedule 5.21(c) have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies, except for such
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failures to timely file or make such required filings that would not
be reasonably expected to have a Material Adverse Effect.
The Governmental Authorizations listed in Schedule 5.21(c) collectively
constitute all of the Governmental Authorizations necessary to permit the Buyer
Companies to lawfully conduct and operate their businesses in the manner they
currently conduct and operate such businesses and to permit the Buyer Companies
to own and use their assets in the manner in which they currently own and use
such assets.
5.22 No Brokers or Finders. Except as set forth in Schedule 5.22,
neither any VSI Stockholder, any Buyer Company nor any of their respective
Representatives have not retained any broker or finder or incurred any liability
for any brokerage or finder's fee or commissions or similar payment in
connection with any of the Contemplated Transactions.
5.23 Investment Intent. Buyer is acquiring the Service America Capital
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Buyer confirms that (i) it has such
knowledge, sophistication and experience in business and financial matters that
it is capable of evaluating the merits and risks of an investment in the Service
America Capital, (ii) it can bear the economic risk of an investment in the
Service America Capital and can afford a complete loss of such investment, (iii)
Sellers have made available to Buyer and its Representatives the opportunity to
ask questions of the officers and management employees of Service America and to
acquire such additional information about the business and financial condition
of Service America as Buyer has requested, and all such information has been
received and (iv) it understands that the Service America Capital has not been
registered under the Securities Act and cannot be sold or transferred unless so
registered or an exemption from registration is available and that such Service
America Capital is subject to the terms of a Stockholders Agreement dated
January 17, 1997 by and among Sellers.
5.24 Absence of Certain Business Practices. Since June 30, 1995,
neither any Buyer Company nor any officer, employee or agent of any Buyer
Company or any other Person acting on its behalf has, directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help or
hinder the business of any Buyer Company (or assist any Buyer Company in
connection with any actual or proposed transaction relating to the business of
such Buyer Company) (i) which subjected or might have subjected any Buyer
Company to any damage or penalty in any civil, criminal or governmental
litigation or Proceeding, (ii) which if not given in the past, might have had a
Material Adverse Effect on any Buyer Company, (iii) which if not continued in
the future, might have a Material Adverse Effect on any Buyer Company or subject
any Buyer Company to suit or penalty in any private or governmental litigation,
(iv) which, in case of a payment made directly or indirectly to an official or
employee of any government or of an agency or instrumentality of any government,
constitutes an illegal bribe or kickback (or, if made to an official or employee
of a foreign government, is unlawful under the Foreign Corrupt Practices Act of
1977) or, in the case of a payment made directly or indirectly to a Person other
than an official or employee of a government or of an agency or instrumentality
of a government, constitutes an illegal bribe, illegal kickback or
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other illegal payment under any law of the United States or under the law of
any State which subjects the payor to a criminal penalty or the loss
of license or privilege to engage in a trade or business.
5.25 Disclosure.
(a) No representation or warranty of any Buyer or any VSI
Stockholder in this Agreement and no statement in the Buyer and the
VSI Stockholders Disclosure Schedule omits to state any fact necessary
to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) There is no fact known to Buyer or any VSI Stockholder that
has specific application to any Buyer Company (other than general
economic or industry conditions) and that adversely affects the
assets, business, prospects, financial condition or results of
operations of the Buyer Companies (on a consolidated basis) that has
been set forth in this Agreement or the Buyer and the VSI Stockholders
Disclosure Schedule.
5.26 Affiliate Transactions. Except as disclosed in Schedule 5.26,
there are no Contracts between any Buyer Company and any VSI Stockholder (or
any of their respective Affiliates).
5.27 Securities and Other Matters. The Offering Memorandum will not
include any untrue statement of a material fact or fail to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made as to information that will be supplied or be required
to be supplied for inclusion therein by Sellers regarding Sellers and the
Service America Companies. Each of Sellers and the Minority Stockholders has
been or will be given, and has availed or will avail itself, if it so desires,
of the opportunity to obtain information or documents from, and to ask
questions and receive answers of, the officers and representatives of Buyer to
evaluate the risk related to an investment in Buyer to the extent Sellers or a
Minority Stockholder deemed reasonably necessary as constituted subsequent to
the consummation of the Contemplated Transactions. Assuming the truth and
accuracy of the representations and warranties set forth in Section 6.27,
(i) the sale of the Buyer Common Stock or change, if any, in the redemption,
repurchase or other terms of the Buyer Common Stock, and/or the capitalization
of Buyer is exempt from registration and prospectus delivery requirements of
the Securities Act and (ii) any acquisition by Buyer of any Buyer Common Stock
or change in the redemption, repurchase or other terms of the Buyer Common
Stock with respect to all VSI Stockholders, will not subject Buyer or any
other party hereto to a claim for damages by any VSI Stockholder (including
any Person included in any VSI Stockholder, directly or indirectly). No form
of general advertising or solicitation was or will be used by the Buyer in the
offer and sale of the Buyer Common Stock by Buyer in connection with this
Agreement. Any acquisition by Buyer of securities of Service America taking
place subsequent to the Closing will be made in good faith and for at least
the same value (whether offered in Buyer Common Stock or cash) offered to
Sellers hereunder and will comply in all respects with applicable law,
including federal and state securities laws.
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6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers jointly and severally represent and warrant to Buyer
and the VSI Stockholders, except as set forth in the Schedules
comprising Schedule 6 hereto and incorporated herein by reference (the
"Sellers Disclosure Schedule"), as follows:
6.1 Organization and Good Standing.
(a) Each Subsidiary of Service America and the capitalization
of each such Subsidiary is set forth on Schedule 6.1(a). Except as
set forth in Schedule 6.1(a), Service America or a Subsidiary of
Service America owns all of the assets that are utilized to carry on
its business and Sellers neither own nor control any other entity
necessary to carry on such business. All of the shares of each
Subsidiary of Service America are owned by Service America or a wholly
owned Subsidiary of Service America free and clear of all
Encumbrances, except as set forth in Schedule 6.1(a), and all such
shares owned by Service America or a wholly owned Subsidiary of
Service America will be owned as of the Closing Date, free and clear
of all Encumbrances, other than Permitted Encumbrances. All of the
issued and outstanding shares of the Subsidiaries of Service America
have been duly authorized and are validly issued, fully paid and
nonassessable. None of the outstanding equity securities or other
securities of any Service America Company was issued in violation of
the Securities Act or any other Legal Requirement.
(b) Each of the Service America Companies is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation set forth next to its name on
Schedule 6.1(b), has all requisite corporate power to own and lease
its properties and carry on its business as the same is now being
conducted and is qualified or licensed to do business as a foreign
corporation in each jurisdiction set forth next to its name in
Schedule 6.1(b). Complete and correct copies of the Organizational
Documents of each Service America Company have been delivered or made
available by Sellers to Buyer, and are complete and correct as of the
date hereof.
6.2 Capital Structure.
(a) The authorized capital stock of Service America consists of
(i) 1,200,000 shares of common stock, par value $.01 per share, of
which 291,100 shares are issued and outstanding, (ii) 40,000 shares of
10% Class A Senior Preferred Stock - Series A, par value $1.00 per
share, of which 30,000 shares are issued and outstanding, and (iii)
260,000 shares of 10% Class A Senior Preferred Stock - Series B, par
value $1.00 per share, of which 200,000 shares are issued and
outstanding. All of the outstanding shares of Service America have
been duly authorized and validly issued and are fully paid and
nonassessable and were issued without violation of any preemptive
rights. The Service America Shares are owned as shown on Schedule
6.2(a).
(b) GE Capital represents and warrants and each other Seller
represents and warrants as to himself or itself, as the case may be,
that each Seller has good and valid title to the Service America
Shares that are set forth on Schedule 6.2(a) opposite the name of such
Seller and owns such Service America Shares free and clear of all
Encumbrances other than the Encumbrances listed on Schedule 6.2(b).
The delivery to Buyer of the certificates representing the Service
America Shares in accordance with Section 2.1 and the receipt by
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Sellers of the Buyer Common Stock in accordance with Section 2.2 will
transfer to Buyer record and beneficial ownership of the Service
America Shares free and clear of all Encumbrances (other than
Encumbrances placed thereon by Buyer or otherwise applicable solely
to Buyer or its assets).
(c) Except for the Service America Warrant and as set forth on
Schedule 6.2(c), there are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements (other
than this Agreement) or calls, demands, preemptive rights or
commitments of any kind relating to the issuance, sale or transfer of
any capital stock of any Service America Company. The Service America
Warrant issued to GE Capital has been duly authorized and is
exercisable, subject to the terms and conditions thereof.
6.3 Authority Relative to Contemplated Transactions. GE Capital
represents and warrants and each other Seller represents and warrants as to
himself or itself, as the case may be, that (i) the execution, delivery and
performance by Sellers of this Agreement and the consummation of the
Contemplated Transactions by Sellers have been duly authorized by all necessary
corporate action (in the case of GE Capital), partnership action (in the case of
the Dee Partnership) or are within his or its full legal right, power and
authority (in the case of the Individual Service America Stockholders) and (ii)
this Agreement constitutes, and upon execution and delivery by Buyer and the VSI
Stockholders, will constitute, a valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms.
6.4 Absence of Conflict. GE Capital represents and warrants and each
other Seller represents and warrants as to himself or itself, as the case may
be, that neither the execution and delivery of this Agreement by Sellers nor the
consummation of the Contemplated Transactions by Sellers will (a) conflict with
or violate any provisions of the Organizational Documents of any Service America
Company, GE Capital or the Dee Partnership, (b) except to the extent Consents
may be required as indicated on Schedule 6.5, violate, or be in conflict with or
constitute a default under (or an event which, with notice or lapse of time or
both, would constitute a default under), (i) any judgment, Order or ruling
issued with respect to Service America or any Seller, (ii) any applicable law,
rule or regulation or (iii) except as set forth on Schedule 6.4, any Contract to
which any Service America Company or any Seller is a party, (c) cause any Buyer
Company or Service America Company to become subject to, or to become liable for
the payment of, any Tax, (d) cause any assets of any Service America Company to
be reassessed or revalued by any taxing authority or other Governmental Body or
(e) result in the imposition or creation of any Encumbrance upon or with respect
to any assets owned or used by any Service America Company. Sellers each waive
the provisions of Section 3 of the Stockholders Agreement dated January 17, 1997
among Servam Acquisition Corp. and the stockholders thereto only in connection
with the Contemplated Transactions.
6.5 Governmental Approvals and Consents. Except as set forth in
Schedule 6.5, no Consents of, or filings and registrations with, any
Governmental Body or any third party are required by or on behalf of Sellers or
any Service America Company in connection with the execution, delivery and
performance of this Agreement or the sale of the Service America Capital by
Sellers to Buyer.
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6.6 Financial Statements. Sellers have delivered or made available to
Buyer (i) the audited consolidated balance sheets of Service America and its
Subsidiaries as at December 28, 1996 and December 27, 1997 and the related
audited consolidated statements of operations, stockholders' equity and cash
flows for the 39 weeks ended December 28, 1996 and the 52 weeks ended December
27, 1997, together with the notes thereto and the report thereon of Service
America's independent accountants (collectively, the "Service America Audited
Financial Statements") and (ii) the unaudited condensed consolidated balance
sheet of Service America and its Subsidiaries as at June 27, 1998 (the "1998
Service America Balance Sheet" and, together with the Service America Audited
Financial Statements, the "Service America Financial Statements"). Except as
provided in this Section 6.6 or Schedule 6.6, the Service America Financial
Statements have been prepared in accordance with GAAP consistently applied
throughout the periods indicated, and fairly present the financial position,
results of operations and changes in financial position of Service America and
its Subsidiaries as at the respective dates thereof and for the periods referred
to therein. The 1998 Service America Balance Sheet does not include or reflect
normal year-end adjustments or include the type of notes that would customarily
be included in a financial statement prepared in accordance with GAAP. No
financial statements of any Person other than the Service America and its
Subsidiaries are required by GAAP to be included in the consolidated financial
statements of Service America.
6.7 Books and Records. Except for the books and records of Service
America of Texas, Inc., the books of accounts, minute books, stock record books
and other records of all Service America Companies, all of which have been
delivered or made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practice, including the maintenance
of an adequate system of internal controls. Except as set forth in Schedule 6.7,
the minute books of the Service America Companies contain accurate and complete
records of all meetings held of, and corporate actions taken by, the
stockholders and the board of directors and committees of the board of directors
of the Service America Companies, and no meeting of any such stockholders, board
of directors or committees has been held for which minutes have not been
prepared and are not contained in such minute books.
6.8 Inventory. All food inventory and other supplies and materials used
in the business of the Service America Companies and located at the location of
the Customers of the Service America Companies, to the extent reflected on the
1998 Service America Balance Sheet net of reserves, are in good condition and
usable in the Ordinary Course of Business consistent with industry practice,
subject to normal and customary allowances for spoilage, damage and outdated
items. The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Service America Companies.
6.9 Accounts Receivable. Except as set forth in Schedule 6.9, all
accounts receivable of the Service America Companies, unless paid prior to the
Closing Date, represent valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the accounts receivable are or will be current and
collectible net of reserves not exceeding customary levels (which reserves are
adequate). Subject to such reserves, each of the accounts receivable either has
been or will be collected in full, without any
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setoff, within 90 days after the day on which it first became due and payable.
There is no contest, claim or right of setoff under any Customer Contract of any
Service America Company with any obligor of accounts receivable relating to the
amount or validity of such accounts receivable.
6.10 Title to Property; Encumbrances.
(a) No Service America Company holds title to any real property.
Schedule 6.10(a) sets forth a complete and accurate list of each
lease of real property by the Service America Companies and includes
the name of each current lessor and lessee and the dates and lease
term (including renewal options) of each lease and any amendment
thereto (the "Service America Real Property Leases"). Copies of each
Service America Real Property Lease have heretofore been delivered or
made available to Buyer. Except as set forth in Schedule 6.10(a), (i)
each Service America Real Property Lease is the legal, valid and
binding obligation of the Service America Company party thereto,
enforceable against Service America party thereto in accordance with
its terms, (ii) the Service America Company party thereto has not
received any written notice of any event or condition that
constitutes, or with the passage of time would constitute, a default
by the Service America Company party thereto under any of the Service
America Real Property Leases or by any other party to any such
Service America Real Property Leases and (iii) no Service America
Company party thereto has received from any lessor thereunder any
written notice or other advice of termination or cancellation.
(b) Schedule 6.10(b) contains a list of all material personal
property owned by the Service America Companies as of the date hereof.
Except for Permitted Encumbrances, the Service America Companies have
and will have on the Closing Date the good title to all of their
personal property set forth on Schedule 6.10(b) (except for personal
property sold or otherwise disposed of since June 28, 1998 in the
Ordinary Course of Business) (the "Service America Assets"), free and
clear of all Encumbrances.
(c) All tangible personal property included in the Service America
Assets and owned by or held by any Service America Company pursuant to
the Service America Personal Property Leases is in substantially good
operating condition and repair, subject to ordinary wear and tear and,
except as set forth on Schedule 6.10(c) hereof, is suitable and
appropriate for use consistent with the manner in which such Service
America Assets have been used by the Service America Companies in
their business immediately prior to the date hereof.
6.11 Marks, Software. Schedule 6.11 contains a true and complete list
of all Software and Marks owned by the Service America Companies and used in the
business of the Service America Companies, and all licenses of Software and
Marks used by the Service America Companies in their business. One of the
Service America Companies owns or otherwise has the right to use all Software
and Marks in the manner currently used in connection with the operation of its
business and without infringement of the intellectual property rights of third
parties. There is no Proceeding pending or, to the Best Knowledge of Sellers,
Threatened that challenges the rights of the Service America Companies in
respect of any Service America Company's Software or Marks, and except as
described in Schedule 6.11 hereto, there is no claim of infringement or other
complaint that any Service America Company's use of its Software or Marks
violates or infringes
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the rights of any third party. No Person is infringing in any respect the rights
of any Service America Company with respect to any Software or Mark of the
Service America Companies. No Service America Company has licensed or otherwise
granted to any third party, any rights in any Software or Mark of a Service
America Company.
6.12 Litigation.
(a) Except as disclosed in Schedule 6.12, there is no Proceeding
pending or, to the Best Knowledge of Sellers, Threatened (i) against
any Service America Company or its business or assets, except for
Proceedings that are uninsured and seek only monetary relief in an
amount not exceeding (A) $100,000 in any individual Proceeding and (B)
$500,000 for the aggregate of all such Proceedings or (ii) that
challenges, or that may have the effect of preventing or making
illegal any of the Contemplated Transactions.
(b) There are no existing Orders, writs or decrees of any court or
other Governmental Body against any Service America Company or its
business or Assets. No officer, director, agent or employee of any
Service America Company is subject to any Order, writ or decree of any
court or Governmental Body that prohibits such officer, director,
agent or employee from engaging in or continuing any conduct, activity
or practice relating to the business of the Service America Companies.
6.13 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.13, the Service America Companies have no liabilities or obligations
of any nature, except for (a) liabilities and obligations reflected as reserved
against in the balance sheet included in the Service America Audited Financial
Statements or (b) current liabilities incurred in the Ordinary Course of
Business since the date thereof.
6.14 Tax Matters.
(a) (i) All Tax Returns required to be filed on or before the
date of this Agreement by, or with respect to, any Service America
Company have been timely filed, (ii) all such Tax Returns are true,
correct and complete, (iii) Service America or a Subsidiary of Service
America has timely paid, or made provision for the payment of, all
Taxes attributable to taxable periods ending on or before the Closing
Date except for Taxes that are being contested in good faith by
appropriate Proceedings and (iv) the charges, accruals and reserves
with respect to Taxes (excluding the deferred taxes representing
differences between the book and tax basis in assets and liabilities)
on the books of the Service America Companies are adequate for all
periods up to and including the Closing Date (determined in
accordance with GAAP consistently applied).
(b) No Encumbrances for Taxes exist with respect to any asset or
properties of any Service America Company, except for statutory
Encumbrances for Taxes not yet due.
(c) There is no tax sharing agreement that will require any
payment by any Service America Company after the date of this
Agreement.
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(d) No Service America Company is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the
IRC.
6.15 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as set forth in Schedule 6.15, since December 27, 1997, each
Service America Company has conducted its operations in the Ordinary Course of
Business consistent with past practice and has not:
(a) suffered any Material Adverse Effect (other than any that may
be the result of changes of laws generally), it being understood that
any matter relating to a cancellation or termination of, or the
failure to obtain a Consent disclosed in Section 6.5 with respect to,
any Customer Contract or the breach of any other Contract of the Buyer
Companies due to the Contemplated Transactions subsequent to the date
hereof shall not be deemed a Material Adverse Effect on the Service
America Companies but shall be dealt with as provided in Section 3.4;
(b) incurred any obligation or liability, except liabilities
incurred in the Ordinary Course of Business;
(c) other than in connection with the consummation of the
Contemplated Transactions, issued, sold or otherwise disposed of any
of its capital stock, or created or suffered to be created any
Encumbrance thereon, or reclassified, split up or otherwise changed
any of its capital stock, or granted or entered into any options,
covenants or calls or other rights to purchase or convert any
obligation into any of its capital stock, granted any registration
rights, or purchased, redeemed, retired or otherwise acquired any
shares of any such capital stock;
(d) made or granted any increases in salaries, bonuses or other
remuneration to any employee, except in the Ordinary Course of Business
consistent with past practice, or entered into any employment,
severance or other Contract with any director, officer or employee;
(e) adopted, or increased payments or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of
any Service America Company;
(f) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of any material assets or any other
material right, except in the Ordinary Course of Business consistent
with past practice;
(g) canceled any debts or affirmatively waived any claims or
rights of substantial value;
(h) declared or paid any dividend or made any other payment or
distribution in respect of its capital stock;
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(i) amended any Organizational Documents of any Service America
Company;
(j) made any change in accounting methods, principles or
practices except as required by law;
(k) incurred, assumed or guaranteed any indebtedness for borrowed
money or other obligations, or created or assumed any Encumbrance on
any asset other than in the Ordinary Course of Business consistent
with past practice, but in no event with respect to assets with a
value of, or obligations in an amount of, more than $25,000 in the
aggregate;
(l) made any loan, advance or capital contribution to or
investment in any Person other than in the Ordinary Course of Business
consistent with past practice, but in no event in the amount of more
than $25,000 in the aggregate, and other than investments in cash
equivalents made in the Ordinary Course of Business consistent with
past practice;
(m) entered into any other commitment or transaction material to
the Service America Companies taken as a whole, except in the Ordinary
Course of Business consistent with past practice;
(n) entered into any Contract which provides for required capital
expenditures over its term in excess of $500,000 or guarantee of any
obligation or incurrence of any contingent liability in excess of
$100,000;
(o) made or changed any Tax election, changed any method of
accounting with respect to Taxes or settled or compromised any
liabilities for Taxes; or
(p) made any agreement, commitment, arrangement or undertaking to
perform any action described in the foregoing clauses.
6.16 Employee and Labor Matters. Except as set forth in Schedule 6.16:
(a) no Service America Company is a party to any collective bargaining agreement
applicable to employees of any Service America Company nor is any such contract
or agreement presently being negotiated; (b) no Service America Company is a
party to any employment agreement or consulting agreement with any person or
entity obligating any Service America Company to make payments in excess of
$50,000 per year nor is any such contract or agreement presently being
negotiated; (c) there is no unfair labor practice charge or complaint pending
or, to the Best Knowledge of Sellers, Threatened against or otherwise affecting
any Service America Company which, if adversely determined, would reasonably be
likely to result in a liability having a Material Adverse Effect; (d) there is
no labor strike, slowdown, work stoppage or lockout in effect or, to the Best
Knowledge of Sellers, Threatened against or otherwise affecting any Service
America Company, and no Service America Company has experienced any such labor
controversy within the past three years; (e) no Service America Company is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices; (f) no
Service America Company will have any liability under any benefit or severance
policy, practice, agreement, plan, or
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program which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of the consummation of the Contemplated
Transactions; (g) the Service America Companies are in compliance with their
obligations pursuant to the Worker Adjustment and Retraining Notification Act of
1998 and all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise; and (h) the Service
America Companies are in compliance with all provisions of applicable law
pertaining to the employment of their employees, including, without limitation,
laws relating to labor relations, equal employment, fair employment practices,
prohibited discrimination or other similar employment practices acts. There is
no breach or event of default under, and each Service America Company is in full
compliance with, each employment, severance and consulting Contract to which it
and any of its director, officer or employee is a party.
6.17 Employee Benefit Matters. The Service America Corporation
Retirement and Savings Plan (the "Service America 401(k) Plan") is the only
pension plan sponsored by the Service America Companies on the date hereof
relating to the business of the Service America Companies. Buyer has received or
had made available to it true and correct copies of all documents embodying the
Service America 401(k) Plan. The Service America 401(k) Plan is in substantial
compliance with the provisions of ERISA and the qualification requirements of
Section 401(a) of the IRC. There are no Proceedings pending or, to the Best
Knowledge of Sellers, Threatened with respect to the Service America 401(k) Plan
that would reasonably be expected to materially and adversely affect such
qualifications or result in a materially adverse effect on the Service America.
To the Best Knowledge of Sellers, no "prohibited transaction," as described in
Section 406 (and not exempt under Section 408) of ERISA, has occurred with
respect to the Service America 401(k) Plan.
6.18 Insurance.
(a) Schedule 6.18(a) sets forth a list of all insurance policies
maintained as of the date of this Agreement by or on behalf of the
Service America Companies and relating to their business or assets.
Buyer has received or had made available to them true and correct
copies of such policies together with all riders and amendments
thereto. Such insurance policies are in full force and effect, all
premiums due thereon have been paid (except as described in Schedule
6.18(a)) and such policies are adequate to insure the Service America
Companies' business in such amounts and against such risks as are
customary for companies engaged in businesses similar to that of
Service America.
(b) Schedule 6.18(b) describes:
(i) any self-insurance arrangement by or affecting any
Service America Company, including any reserves established
thereunder;
(ii) any Contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Service
America Company; and
(iii) all obligations of any Service America Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
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under which such coverage is provided, except for such
obligations under Customer Contracts of any Service America
Company.
(c) Neither any Service America Company nor any Seller has
received with respect to any current insurance claim (A) any refusal
of coverage or any notice that a defense will be afforded with
reservation of rights or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(d) The Service America Companies have paid all premiums due, and
have otherwise performed all of their respective obligations, under
each policy to which any Service America Company is a party or that
provides coverage to any Service America Company or any officer,
director or employee thereof.
(e) The Service America Companies have given notice to the
insurer of all claims that may be insured thereby.
6.19 Environmental Matters. Except as set forth in Schedule 6.19:
(a) Each Service America Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. No Seller has with respect to
a Service America Company any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice or other
communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities of the Service America Companies, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities of the Service
America Companies or any other properties or assets (whether real,
personal or mixed) in which any Service America Company has had an
interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by any Service America Company or any
other Person for whose conduct it is or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the Best Knowledge of Sellers,
Threatened claims, Encumbrances or other restrictions of any nature
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to
or affecting any of the Facilities of the Service America Companies or
any other properties and assets (whether real, personal or mixed) in
which any Service America Company has or had an interest.
(c) No Service America Company has any basis to expect nor has any
Service America Company or, to the Best Knowledge of Sellers, any
other Person for whose conduct they are or may be held responsible
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received any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity,
Hazardous Materials or any alleged, actual or potential violation or
failure to comply with any Environmental Law, or of any alleged,
actual or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of
the Facilities of the Service America Companies or any of their
properties or assets (whether real, personal or mixed) in which any
Service America Company had an interest, or with respect to any
property or Facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by
any Service America Company, or any other Person for whose conduct
it is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither any Service America Company nor to the Best
Knowledge of Sellers, any other Person for whose conduct they are or
may be held responsible has any Environmental, Health, and Safety
Liabilities with respect to the Facilities of the Service America
Companies or with respect to any other properties and assets (whether
real, personal or mixed) in which any Service America Company (or any
predecessor) has or had an interest or at any property geologically
or hydrologically adjoining such Facilities or any such other property
or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities of any Service America Company or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps or any other part of
such Facilities or such adjoining property, or incorporated into any
structure therein or thereon. Neither any Service America Company nor,
to the Best Knowledge of any Seller, any other Person for whose
conduct they are or may be held responsible or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in any Service America
Company has or had an interest, except in full compliance with all
applicable Environmental Laws.
(f) There has been no Release or, to the Best Knowledge of
Sellers, Threat of Release of any Hazardous Materials at or from the
Facilities of the Service America Companies or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by such
Facilities, or from or by any other properties and assets (whether
real, personal or mixed) in which any Service America Company has or
had an interest, or any geographically or hydrologically adjoining
such property whether by any Service America Company or any other
Person.
(g) Sellers have delivered or made available to Buyer true and
complete copies and results of any reports, studies, analyses, tests
or monitoring possessed or initiated by any Service America Company
pertaining to Hazardous Materials or Hazardous Activities in, on
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or under the Facilities of the Service America Companies or concerning
compliance by any Service America Company, or any other Person for
whose conduct they are or may be held responsible, with Environmental
Laws.
6.20 Material Agreements.
(a) Schedule 6.20(a) contains a complete and accurate list, and
Sellers have delivered or made available to Buyer, true and complete
copies of, (i) each Contract for the purchase of inventory in excess
of $500,000 per calendar year, (ii) each Customer Contract, (iii) each
Contract pertaining to employment, consulting or severance
arrangements with any officer, director, employee or independent
contractor, (iv) each indenture, mortgage, note, letter of credit or
other instrument relating to the borrowing of money (or the guarantee
thereof), (v) each franchise Contract, (vi) each Contract that was not
entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Service America Companies in
excess of $200,000 over its term, (vii) each lease, rental or
occupancy agreement, license, installment and conditional sale
agreement, and other Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $100,000 and with terms of less than one year)
(with respect to those agreements listed in this clause (vi)
pertaining to personal property, the "Service America Personal
Property Leases"), (viii) each collective bargaining agreement and
other Contract to or with any labor union or other employee
representative of a group of employees, (ix) each joint venture,
partnership and other Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Service America Company
with any other Person, (x) each Contract containing covenants that in
any way purport to restrict the business activity of any Service
America Company or any Affiliate of a Service America Company or
limit the freedom of any Service America Company or any Affiliate of
a Service America Company to engage in any line of business or to
compete with any Person, (xi) each Contract providing for payments to
or by any Person based on sales, purchases or profits, other than
direct payments for goods, (xii) each power of attorney that is
currently effective and outstanding, (xiii) each Contract entered
into other than in the Ordinary Course of Business that contains or
provides for an express undertaking by any Service America Company
to be responsible for consequential damages, (xiv) each Contract for
capital expenditures in excess of $500,000 and (xv) each Contract
between any Service America Company and any Seller (or one of its
Affiliates).
(b) Except as set forth in Schedule 6.20(b), (i) each Contract
required to be set forth in Schedule 6.20(a) hereof is the legal,
valid and binding obligation of the Service America Company
identified in such Schedule and, to the Best Knowledge of Sellers,
each other party thereto, enforceable against it in accordance with
its terms, (ii) no Service America Company nor, to the Best Knowledge
of Sellers, any other party thereto is in material default under any
of the Contracts required to be identified in Schedule 6.20(a), and
(iii) no Service America Company has received from any of its
Customers any written notice or other advice of termination or
cancellation or failure to consent to the Contemplated Transactions
of any of its Customer Contracts required to be identified in
Schedule 6.20(a). Notwithstanding the foregoing or any other provision
of this Agreement to the contrary, Buyer understands that Customer
Contracts may expire or terminate, or the party to a Customer Contract
as to which consent is required as identified in Schedule 6.5 may
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refuse consent to the Contemplated Transactions or a Contract of
Service America Companies may be breached due to the Contemplated
Transactions, in each case, prior to, on or after the Closing Date.
Buyer and VSI Stockholders agree that their exclusive right and remedy
with respect to any of the matters in the foregoing sentence is as
provided in Section 3.4.
6.21 Compliance with Law.
(a) The operation of the business of the Service America
Companies has been conducted in all respects in accordance with all
applicable Legal Requirements and other applicable requirements of all
Governmental Bodies, and no Service America Company has, since the
date of the 1997 Service America Balance Sheet, received any
notification from any Governmental Body of any asserted present or
past failure by it to comply with any such Legal Requirements.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a
violation by any Service America Company of, or a failure on the part
of any Service America Company to comply with, any Legal Requirement,
or (ii) may give rise to any obligation on the part of any Service
America Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(c) Schedule 6.21(c) contains a complete and accurate list of
each Governmental Authorization that is held by the Service America
Companies or that otherwise relates to the business of, or to any of
the assets owned or used by the Service America Companies. Each
Governmental Authorization listed or required to be listed in Schedule
6.21(c) is valid and in full force and effect. Except as set forth in
such Schedule:
(i) each Service America Company is, and at all times since
June, 1993 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or
required to be identified in Schedule 6.21(c);
(ii) the consummation of the Contemplated Transactions will
not and no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Schedule 6.21(c)
or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Schedule 6.21(c);
(iii) no Service America Company has received, at any time
since June 30, 1993, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any term or requirement
of any Governmental Authorization or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to, any
Governmental Authorization; and
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(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to
be listed in Schedule 6.21(c) have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis
with the appropriate Governmental Bodies, except for such
failures to timely file or make such required filings that would
not reasonably be expected to have a Material Adverse Effect.
The Governmental Authorizations listed in Schedule 6.21(c) collectively
constitute all of the Governmental Authorizations necessary to permit the
Service America Companies to lawfully conduct and operate their businesses in
the manner they currently conduct and operate such businesses and to permit the
Service America Companies to own and use their assets in the manner in which
they currently own and use such assets.
6.22 No Brokers or Finders. Except as set forth in Schedule 6.22,
neither any Seller, any Service America Company nor any of their respective
Representatives have not employed any broker or finder or incurred any liability
for any brokerage or finder's fee or commissions or similar payment in
connection with any of the Contemplated Transactions.
6.23 Investment Intent. Each Seller is acquiring the Buyer Common Stock
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Each Seller confirms that (a) it has
such knowledge, sophistication and experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Buyer Common Stock, (b) it can bear the economic risk of an investment in the
Buyer Common Stock and can afford a complete loss of such investment, (c) Buyer
has made available to such Seller and its Representatives the opportunity to ask
questions of the officers and management employees of Buyer and to acquire such
additional information about the business and financial condition of Buyer as
such Seller has requested, and all such information has been received and (iv)
it understands that the Buyer Common Stock have not been registered under the
Securities Act and cannot be sold or transferred unless so registered or an
exemption from registration is available.
6.24 Absence of Certain Business Practices. Since June 30, 1995,
neither any Service America Company nor any officer, employee or agent of any
Service America Company or any other Person acting on its behalf has, directly
or indirectly, given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person who is or may be in a
position to help or hinder the business of any Service America Company (or
assist the Service America Company in connection with any actual or proposed
transaction relating to the business of such Service America Company) (i) which
subjected or might have subjected any Service America Company to any damage or
penalty in any civil, criminal or governmental litigation or Proceeding, (ii)
which if not given in the past, might have had a Material Adverse Effect on any
Service America Company, (iii) which if not continued in the future, might have
a Material Adverse Effect on any Service America Company or subject any Service
America Company to suit or penalty in any private or governmental litigation,
(iv) which, in case of a payment made directly or indirectly to an official or
employee of any government or of an agency or instrumentality of any government,
constitutes an illegal bribe or kickback (or, if made to an official or employee
of a foreign government, is
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unlawful under the Foreign Corrupt Practices Act of 1977) or, in the case of a
payment made directly or indirectly to a Person other than an official or
employee of a government or of an agency or instrumentality of a government,
constitutes an illegal bribe, illegal kickback or other illegal payment under
any law of the United States or under the law of any State which subjects the
payor to a criminal penalty or the loss of license or privilege to engage in a
trade or business.
6.25 Disclosure.
(a) No representation or warranty of any Seller in this Agreement
and no statement in the Sellers Disclosure Schedule omits to state any
fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) There is no fact known to any Seller that has specific
application to any Service America Company (other than general
economic or industry conditions) and that adversely affects the
assets, business, prospects, financial condition or results of
operations of the Service America Companies (on a consolidated basis)
that has not been set forth in this Agreement or the Sellers
Disclosure Schedule.
6.26 Affiliate Transactions. Except as disclosed in Schedule 6.26,
there are no Contracts between any Service America Company and any Seller (or
any of their respective Affiliates).
6.27 Securities and Other Matters. The Offering Memorandum will not
include any untrue statement of a material fact or fail to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made as to information that will be supplied or be required to
be supplied for inclusion therein by Buyer or by any VSI Stockholder regarding
the Buyer Companies and the VSI Stockholders and GE Capital jointly represents
with Buyer and VSI Stockholders as to the accuracy and material completeness of
the description of Contemplated Transaction. Each of Sellers, the Minority
Stockholders who exchange their capital stock in Service America for Buyer
Common Stock and their Financial Representative has been or will be given, and
has availed or will avail itself of, if it so desires, the opportunity to obtain
information or documents from, and to ask questions and receive answers of, the
officers and representatives of Service America to the extent Sellers or a
Minority Stockholder deemed reasonably necessary to evaluate the risk related to
an investment in Buyer as constituted subsequent to the consummation of the
Contemplated Transactions. Assuming the truth and accuracy of the
representations and warranties set forth in Section 5.27, any acquisition by
Buyer of Service America Shares and Service America securities taking place at
the Closing or within three months of the Closing of the Contemplated
Transactions, will not subject the Buyer or any other party hereto to a claim
for damages by any Seller or Minority Stockholder.
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7. FURTHER AGREEMENTS OF THE PARTIES.
7.1 Operation of the Businesses of the Buyer Companies and Service
America Companies. Other than as contemplated by this Agreement, between the
date of this Agreement and the Closing Date, Buyer and the VSI Stockholders
(with respect to the Buyer Companies) and Sellers (with respect to the Service
America Companies) will:
(a) conduct the business of the Service America Companies and the
Buyer Companies only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Service America Companies and the Buyer
Companies, keep available the services of the current officers,
employees and agents of the Service America Companies and the Buyer
Companies, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having
business relationships with the Service America Companies and the
Buyer Companies;
(c) confer with each other concerning operational matters of the
Service America Companies and the Buyer Companies of a material
nature; and
(d) otherwise report periodically to each other concerning the
status of the business, operations and finances of the Buyer Companies
and the Service America Companies.
7.2 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, none of the
parties hereto shall take any affirmative action or fail to take any reasonable
action within their or its control as a result of which any of the changes or
events listed in Sections 5.15 and 6.15, as the case may be, is likely to occur.
7.3 Notification. Between the date of this Agreement and the Closing
Date, each of Buyer and the VSI Stockholders, on the one hand, and Sellers, on
the other hand, will promptly notify the other party in writing if such party
becomes aware of any fact or condition that causes or constitutes a breach of
any of their representations and warranties as of the date of this Agreement, or
if any party becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in a party's Disclosure Schedule if such Disclosure Schedule were
dated the date of the occurrence or discovery of any such fact or condition, a
party will promptly deliver to the other party a supplement to its Disclosure
Schedule specifying such change (but in any event, no later than three Business
Days prior to the Closing Date). Any such supplement shall not be effective to
determine if the conditions to Closing of the party delivering the supplement
have been met but shall be effective for all purposes hereunder after the
Closing. During the same period, a party will promptly notify the other party of
the occurrence of any breach of any covenant of such party in this Agreement or
of the occurrence of any event that may make the satisfaction of the conditions
in this Agreement impossible or unlikely.
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7.4 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 8, each party agrees it will not, and will cause
each of its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person relating to any transaction involving
the sale of the business or assets (other than in the Ordinary Course of
Business) of any Service America Company or Buyer Company, or any of the capital
stock of any Service America Company or Buyer Company, or any merger,
consolidation, business combination or similar transaction involving any Service
America Company or Buyer Company.
7.5 Access Prior to the Closing. Between the date of this Agreement
and the Closing Date, Buyer and the VSI Stockholders shall with respect to the
Buyer Companies, on the one hand, and Sellers shall with respect to the Service
America Companies, on the other hand, (a) give the other party and its
authorized Representatives access to all properties, personnel, facilities and
offices and to the books and records of the Buyer Companies or the Service
America Companies (and permit such party to make copies thereof), as the case
may be, (b) permit the other party to make inspections thereof and (c) furnish
the other party with such financial information and operating data and other
information with respect to the business and properties of the Buyer Companies
or the Service America Companies, as the case may be, and discuss with the Buyer
Companies or the Service America Companies and its authorized Representatives
the affairs of the Buyer Companies or the Service America Companies, as the case
may be, all as such party may from time to time reasonably request for the
purposes of this Agreement during normal business hours, under reasonable
circumstances and with reasonable notice to the other party.
7.6 Director and Officer Liability and Indemnification. The parties
hereto agree that for a period of three years after the Closing, the Buyer
Companies or the Service America Companies shall maintain provisions of their
Organizational Documents relating to exculpation or indemnification of former
officers and directors thereof (unless required by law) such that the officers
and directors of each Buyer Company or Service America Company prior to the
Closing shall continue to be entitled to such exculpation and indemnification as
was in effect prior to the Closing (or any equally favorable arrangement) to the
fullest extent permitted under the laws of the applicable jurisdiction of
incorporation. Each Buyer Company and Service America Company also shall
maintain for a period of three years after the Closing Date directors and
officers liability insurance coverage for purposes of indemnifying and insuring
Persons covered by such insurance of the Buyer Companies or Service America
Companies, as the case may be, immediately prior to the Closing Date, which
coverage shall be on terms and in amounts at least as favorable to such Persons
as they were on the Closing Date; provided, that in satisfying its obligation
under this Section 7.6, neither any Buyer Company or Service America Company
shall be obligated to pay premiums in excess of 150% of the amount per annum
paid by such company in the last such fiscal year preceding the date of
execution of this Agreement, which amounts have been disclosed, and if any such
company is unable to obtain the insurance required by this Section 7.6 for such
premium, it shall use its Best Efforts to obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
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7.7 Third Party Consents; Further Assurances.
(a) Prior to the Closing Date, each party shall use its Best
Efforts to take, or cause to be taken, and to assist and cooperate
with the other party or parties hereto in doing, all actions
necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner
practicable, the Contemplated Transactions, including, without
limitation, (i) obtaining all necessary Consents, approvals or waivers
from third parties and (ii) defending any lawsuits or other legal
Proceedings, whether judicial or administrative and challenging this
Agreement or the consummation of the Contemplated Transactions.
(b) Promptly after the execution of this Agreement, the parties
each shall use their respective Best Efforts to jointly obtain such
Consents as may be required in connection with the Contemplated
Transactions. In connection therewith, no later than one Business Day
after the execution hereof, Buyer (or the applicable Subsidiary
thereof) and Service America (or the applicable Subsidiary thereof)
shall deliver to each third party from whom a Consent is required a
joint request (substantially in the form of Exhibit 7.7(b)) for such
Consent (each, a "Joint Request"). Within a reasonable time period
following the issuance of a Joint Request, the applicable Buyer
Company or Service America Company shall contact, either in person, by
telephone, telecopy or other means, those third parties from whom a
required Consent has not been obtained. Buyer and Sellers agree to
provide such financial or other information as may be requested by any
third party in connection with any consent sought hereunder.
Nothing in this Section 7.7(b) shall obligate any party to furnish any monetary
or other consideration to a third party to obtain such third party's consent to
the Contemplated Transactions. Promptly upon receipt thereof, each party shall
deliver to the other parties copies of any consents or written refusals to
provide consents received in connection with the Contemplated Transactions. To
the extent necessary to obtain or avoid the need to obtain the consent of a
party to a Contract, Buyer agrees to indicate to parties to such Contract that
such Contract will be performed by Buyer and its Subsidiaries after the Closing.
7.8 Offering Memorandum. Sellers shall prepare and distribute as soon
as reasonably practicable an Offering Memorandum with the cooperation and
assistance of Buyer, including, but not limited to, the provision by Buyer to
Sellers of information pertaining to the business and operations of Buyer and
jointly assisting Sellers in the preparation of a description of the
Contemplated Transactions.
7.9 Consent of GE Capital. GE Capital hereby grants the requisite
consent to the Contemplated Transactions under the GE Capital Loan Agreement. GE
Capital agrees that, if an Event of Default occurs under the GE Capital Loan
Agreement prior to the Closing, GE Capital may accelerate the Obligations
thereunder and exercise all rights and remedies against any Seller under the
Borrower Stockholder Pledge Agreement and Borrower Stockholders Guaranty;
provided that (x) for the period commencing on the occurrence of such Event of
Default and ending on the one year anniversary of the Closing GE Capital shall
not exercise any rights or remedies against the Collateral or any other rights
or remedies (including demanding the repayment of any principal of the loan
under the GE Capital Loan Agreement) for the period commencing on the occurrence
of such Event of Default and ending on the one year anniversary of the Closing
and (y) in the event GE Capital acquires the Service America Shares owned by any
Seller as a result of exercising its rights
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under the Borrower Stockholder Pledge Agreement, GE Capital shall comply with
the agreements of such Seller under this Agreement (including consummating the
Contemplated Transactions with respect to such Seller's Service America Shares).
Subsequent to the one year anniversary of the Closing, GE Capital may exercise
all of its rights and remedies against the Collateral and all other rights and
remedies. Capitalized terms used in this Section 7.9 but not defined in this
Agreement shall have the meanings set forth in the GE Capital Loan Agreement.
7.10 Execution of Document. On or prior to the Closing, (a) each Seller
and VSI Stockholder and Buyer shall execute the Stockholders' Agreement and (b)
GE Capital shall enter into the Assignment and Assumption Amendment.
7.11 Buyer Obligation to Obtain Appraisal. As soon as practicable
after the execution of this Agreement, Buyer shall retain a nationally
recognized investment banking firm or appraisal firm that shall perform a
valuation of the assets of Buyer and its Subsidiaries (assuming consummation of
the Contemplated Transactions) and present such valuation to the Board of
Directors of Buyer for its approval. Such Board of Directors shall determine at
that time whether such valuation is sufficient to permit a revaluation of
Buyer's assets pursuant to the Delaware General Corporation Law to permit the
repurchase of Buyer Common Stock pursuant to Section 2.3.
7.12 Service America Preferred Stock Matters. Buyer agrees that it
shall not cancel, amend or modify in any respect or in any fashion alter the
terms of the Service America Preferred Stock prior to the acquisition by Buyer
of 100% of all outstanding Service America Preferred Stock. In addition, Buyer
shall execute on or prior to the Closing Date a written waiver pursuant to which
Buyer shall waive any entitlement to any liquidation redemption or other value
pertaining to or arising from its ownership of the Service America Preferred
Stock. In addition, Buyer further agrees that it shall not sell, exchange or
otherwise transfer any Service America Preferred Stock to any other Person
unless such Person agrees to be bound by the terms of this Section 7.12.
7.13 Other Preferred Stock Matters. The parties acknowledge that a
portion of the Buyer Common Stock allocated to Sellers on Schedule 2.2 will be
reserved for possible issuance to Lawrence Kilfoy.
(a) Buyer agrees, at the request of Sellers after the Closing, to
either issue such shares of Buyer Common Stock to Kilfoy or pay him the
liquidation value plus accrued and unpaid dividends thereon in
exchange for the Service America Preferred Stock held by him (to the
extent such transaction may be legally concluded). Buyer also agrees
after the Closing, to cause Service America to pay Kilfoy, as and when
due, the amount of severance due under his contract with Service
America dated June 9, 1994.
(b) Subject to the foregoing, and to the provisions of Section
9.3(c) hereof, Buyer after the Closing shall (i) permit Sellers to
control the negotiation of any issues outstanding with respect to
termination of Kilfoy's employment with Service America with counsel
of their choosing and (ii) enter into such agreement with Kilfoy as
may be so negotiated (provided it complies with applicable law); and
Sellers shall, after the Closing, indemnify Buyer on the terms and
subject to the basket amount for such claims set forth in Section 9
and Section 7.12 hereof for all amounts above those
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described in Section 7.13(a) incurred by Buyer or its Subsidiaries as
a result of the termination of Kilfoy's employment with Service
America or the purchase, repurchase or redemption of the capital
stock of Service America held by Kilfoy.
7.14 GE Capital Lien. Buyer shall grant GE Capital a valid lien
satisfactory to GE Capital and on terms equivalent to those in effect on the
date hereof and equivalent to those referred to in Section 4.9 on any Service
America capital stock acquired after the date hereof as long as the Loan
Agreement is in effect.
8. TERMINATION.
8.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer and the VSI Stockholders, on the one hand
(the "VSI Parties"), or Sellers, on the other hand, if a material
breach of any provision of this Agreement has been committed by the
other party and such breach has not been waived;
(b) (i) by the VSI Parties if any of the conditions in Section 3
has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of a VSI Party to comply with its obligations under this
Agreement) and the VSI Parties have not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions
in Section 4 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such condition on or
before the Closing Date;
(c) by mutual consent of the VSI Parties and Sellers; or
(d) by either the VSI Parties or Sellers if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before December 31, 1998 or such later date as
the parties may agree upon.
8.2 Effect of Termination. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of this
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
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9. INDEMNIFICATION AND RELATED MATTERS.
9.1 Indemnity.
(a) Subject to the provisions of Section 9.3, GE Capital shall
indemnify and save and hold harmless (but without duplication of
payment) Buyer and the VSI Stockholders and their respective officers,
directors, employees, shareholders, partners, Affiliates, agents,
heirs, successors and assigns (collectively, "VSI Indemnified
Parties") from and against any Losses suffered or incurred by any VSI
Indemnified Party relating to, arising out of or resulting from, (i)
any inaccuracy in, or breach of, any representation, warranty,
covenant or agreement made by any Seller in this Agreement, (ii) the
failure by Sellers to perform or observe any covenant, agreement or
provision to be performed or observed by them pursuant to this
Agreement and (iii) any claim by a Minority Stockholder involving a
breach in the representation contained in Section 6.27.
(b) Subject to the provisions of Section 9.3, the VSI
Stockholders, jointly and severally, shall indemnify and save and
hold harmless (but without duplication of payment) the Service
America Companies and Sellers and their respective officers,
directors, employees, shareholders, Affiliates, agents, successors
and assigns (collectively, the "Service America Indemnified Parties")
from and against any Losses suffered or incurred by any Service America
Indemnified Party relating to, arising out of or resulting from, (i)
any inaccuracy in, or breach of, any representation, warranty,
covenant or agreement made by Buyer or any VSI Stockholder in this
Agreement, (ii) the failure by Buyer or the VSI Stockholders to
perform or observe any covenant, agreement or provision to be
performed or observed by it or them pursuant to this Agreement, and
(iii) any claim by a VSI Stockholder involving a breach of the
representation contained in Section 5.27.
9.2 Indemnification Procedure.
(a) Claims by Indemnified Parties. If any claim for Losses is
made by a VSI Indemnified Party against GE Capital or by a Service
America Indemnified Party against VSI Stockholders (VSI Indemnified
Party or Service America Indemnified Party, as the case may be, an
"Indemnified Party"; VSI Stockholders or GE Capital as the context
requires, the "Indemnifying Party") for which indemnity may be sought
under this Article 9, the Indemnified Party shall deliver to the
Indemnifying Party a detailed statement of such claim and all
requisite documents pertaining thereto (the "Claim Statement"). Such
Claim Statement shall include a good faith estimate of the amount of
such claim, which shall not be binding on the parties. The
Indemnified Party and the Indemnifying Party shall negotiate in good
faith for a period of 30 days a resolution to the claim. If the
Indemnified Party and the Indemnifying Party cannot resolve the claim
within 30 days of delivery of the Claim Statement to the Indemnifying
Party, then either party may submit the matter to arbitration pursuant
to the provisions of Section 11.6. Notwithstanding any provision of
Section 11.6, the fees and expenses of such arbitration shall be
borne by Buyer. The amount of any Loss determined pursuant to this
Section 9.2(a) or arbitration pursuant to Section 11.6 shall be
satisfied in the manner provided for in Section 9.3.
(b) Third Party Claims. If any Proceeding is brought or any claim
is made against an Indemnified Party in respect of which indemnity may
be sought under this Article 9 by a Person who
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is not a party to this Agreement or an Indemnified Party, the
Indemnified Party shall promptly give notice of such Proceeding or
claim to the Indemnifying Party and Buyer, and Buyer shall assume the
defense of such Proceeding or claim (whether or not Buyer is the
Indemnified Party) employing counsel selected by the Indemnifying
Party and reasonably acceptable to the Buyer and the Indemnified
Party. Such counsel shall consult with both Buyer and the Indemnifying
Party but, in the event of a difference of opinion, shall follow the
instructions of the Indemnifying Party. The Indemnifying Party shall
review all fees and expenses of counsel. Buyer shall pay the full
expense of defending such Proceeding or claim and any other Losses
resulting therefrom. Notwithstanding the foregoing, if a claim is
asserted against an Indemnified Party and if, in the good faith
judgment of counsel selected by the Indemnifying Party in such matter,
there is a defense available to the Indemnified Party that cannot
effectively be asserted by common counsel, then Buyer shall, at its
option, pay or reimburse the Indemnified Party's costs and expenses
incurred in defending such claim by counsel reasonably satisfactory
to the Indemnifying Party. No settlement may be entered into without
the consent of the Indemnifying Party, but a Proceeding or claim may
be settled without the consent of the Indemnified Party if such
settlement fully discharges the Indemnified Party from liability to
any other party and is for money damages only. The Indemnifying
Party shall be subrogated to all rights of the Indemnified Party
against any third party with respect to any claim for which indemnity
was paid. The Indemnifying Party shall be liable for any Losses
resulting from such Proceeding or claim in the manner provided in
Section 9.3(d).
9.3 Limits on Indemnification.
(a) The representations and warranties made by Buyer and the VSI
Stockholders and Sellers in this Agreement shall survive until the
first anniversary of the Closing Date. Upon the expiration of such
period, such representations and warranties shall lapse and be of no
further force and effect.
(b) Notwithstanding any provision to the contrary in this
Agreement, neither Buyer nor any VSI Stockholder or Seller shall have
any right to indemnification for breach of a representation or
warranty by the other party if, as a result of the specific
disclosure in this Agreement or in a schedule to this Agreement
(including, without limitation, the Buyer and VSI Stockholders
Disclosure Schedule and Sellers Disclosure Schedule, in each case as
supplemented prior to Closing), of the facts underlying such breach,
the party seeking indemnification hereunder (whether Buyer, the VSI
Stockholders or Sellers) had actual knowledge as of the Closing Date
that such representation or warranty was false.
(c) Notwithstanding any other provision of this Agreement, GE
Capital and the VSI Stockholders shall not have any liability under
Section 9.1, except to the extent that aggregate Losses finally
determined to actually have been suffered or incurred by all VSI
Indemnified Parties (in the case of GE Capital) or Service America
Indemnified Parties (in the case of the VSI Stockholders) under this
Agreement (after reducing such Losses as set forth in Section 9.4),
exceed Two Million Dollars ($2,000,000) (the "Basket Amount") and, in
any case, only to the extent such Losses (as so reduced as set forth
in Section 9.4) exceed the Basket Amount; provided, that the Basket
Amount for purposes of any Losses (i) subject to Section 7.13(a),
arising from any claim made against any Buyer Company as a result of
the termination of the employment of Kilfoy with Service America
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or the purchase, repurchase or redemption of the capital stock of
Service America held by Kilfoy (subject to the occurrence of the
Closing) shall be $200,000 (after reducing such Losses as set forth
in Section 9.4); or (ii) pursuant to Sections 5.27 or 6.27 or under
clause (iii) of Section 9.1(a) or clause (iii) of 9.1(b) shall be
$200,000 (in each case, after reducing such Losses as set forth in
Section 9.4) and, in the case of each of the clauses (i) and (ii) of
this Section 9.3(c), only to the extent such Losses (as so reduced
as set forth in Section 9.4) exceeds $200,000; and (iii) pursuant to
Sections 5.14 or 6.14 shall be $500,000 (after reducing such Losses
as set forth in Section 9.4) and to the extent such Losses (as so
reduced as set forth in Section 9.4) exceeds $500,000, only to the
extent such Losses (as so reduced as set forth in Section 9.4)
exceeds $500,000. In any event, the total liability of either GE
Capital or the VSI Stockholders, respectively, for Losses under
Section 9.1(a), calculated after the reductions set forth in Section
9.4, shall not exceed (whether the VSI Stockholders or GE Capital is
the Indemnifying Party) an amount of the Buyer Common Stock owned by
the VSI Stockholders or GE Capital equal to the amount of Buyer
Common Stock held by GE Capital or the same amount of Buyer Common
Stock held by VSI Stockholders at the completion of the Financing and,
if the Financing does not occur, at the Closing Date (after giving
effect to consummation of the Contemplated Transactions).
(d) Notwithstanding any other provision of this Agreement to the
contrary, in the event that an amount is due to be paid with respect to
indemnification of a Loss by either GE Capital or the VSI
Stockholders, such amount may, at the election of the Indemnifying
Party, be paid in Buyer Common Stock determined as set forth in the
following sentence upon resolution of a claim under Section 9.2(a) or
after a final judgement or an agreement or settlement under Section
9.2(b). The Indemnifying Party shall transfer to Buyer for
cancellation a number of shares of Buyer Common Stock equal to the
product of (i) the total number of shares of Buyer Common Stock held
by the Indemnifying Party at the Closing Date (after giving effect to
the adjustment in Section 2.2(b) and consummation of the Contemplated
Transactions) (as adjusted for any stock split, stock dividend,
combination or reclassification of Buyer Common Stock), times (2) a
fraction, the numerator of which is the amount of the Loss and the
denominator of which is Adjusted Contract Value (as referred to in
Schedule 2.2) of Service America (in the case GE Capital is the
Indemnifying Party) or Buyer (in the case VSI Stockholders are the
Indemnifying Party). In the event a claim under this Section 9
remains outstanding at the conclusion of the one-year period
described in Section 9.3(a), then the number of shares of Buyer
Common Stock sufficient to satisfy such claim (as determined by the
parties or the arbitrators) shall be placed into escrow pending
resolution of the claim or, alternatively, the Indemnifying Party may
agree in writing to extend the term during which no transfer of such
shares will be allowed pursuant to the Stockholders' Agreement. To the
extent that VSI Stockholders are the Indemnifying Party hereunder,
all VSI Stockholders agree that the Service America Indemnified
Parties may resolve any claim hereunder solely with Blackstone
regardless of which VSI Stockholders the claim is brought against.
9.4 Calculation of Damages. The amount of Losses payable by an
Indemnifying Party under this Article 9 shall be (a) reduced by any insurance
proceeds actually received by the Indemnified Party with respect to the claim
for which indemnification is sought, net of retrospective premium adjustments
and similar charges and (b) reduced by the net amount of any tax benefits
actually realized by the Indemnified Party to the extent the claim for which
indemnification is sought gives rise to a deductible loss or expense.
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10. MINORITY STOCKHOLDERS.
Buyer acknowledges that an aggregate of 41,100 shares of Service
America Common Stock have been issued to the employees of Service America listed
on Schedule 6.2(a) (such employees and/or their transferees, other than Buyer,
and its Affiliates, the "Minority Stockholders") pursuant to the Service America
Corporation 1997 Stock Plan. As soon as practicable after execution of this
Agreement, Buyer and Service America shall engage Kaye, Scholer, Fierman, Hays
and Handler, LLP to prepare and distribute as soon as reasonably practicable an
Offering Memorandum with the cooperation and assistance of Buyer and the other
parties hereto, including, but not limited to, the provision by Buyer to Sellers
of information pertaining to the business and operations of the Buyer Companies
and a description of the Contemplated Transactions. Pursuant to such Offering
Memorandum Buyer shall offer to exchange the shares of Service America Common
Stock held by such Minority Stockholders for the same per share consideration to
be received by Sellers under Section 2. Buyer shall purchase from each Minority
Stockholder who elects to exchange such shares within 30 days from the date of
delivery of the Offering Memorandum and who also delivers within such time the
shares of Service America Common Stock owned by him or her. As and to the extent
any Minority Stockholder does not exchange his shares of Service America Common
Stock, Buyer shall have sole responsibility for providing the same consideration
in the exchange or payment of cash consideration to such Minority Stockholder.
Buyer covenants to reserve for issuance the shares allocated to Minority
Stockholders under Section 2.2 to fulfill its obligations hereunder. It shall be
a condition to the exchange that a Minority Stockholder execute the
Stockholders' Agreement (or, if an LLC (as hereinafter defined) is adopted under
Section 11.11, the governing document therefor).
11. GENERAL PROVISIONS.
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other fees and expenses arising in
connection with this Agreement or the Contemplated Transactions that are (a)
incurred by Sellers or Service America shall be borne by Service America and (b)
incurred by VSI Stockholders or Buyer shall be borne by Buyer, in each case
regardless of whether the Contemplated Transactions are consummated. On the
Closing Date, Service America shall pay a mergers and acquisition fee of $1.6
million to Impala Partners and Buyer will pay an advisory fee of $2.4 million to
The Blackstone Group L.P. Service America shall pay one-half and Buyer will pay
one-half of the HSR Act filing fees.
11.2 Public Disclosure or Communications. Between the date of this
Agreement and the Closing Date, except to the extent provided in this Agreement,
(a) neither the Buyer Companies, and the VSI Stockholders, on the one hand, or
Sellers and the Service America Companies, on the other hand, shall issue any
press release or public announcement of any kind concerning the Contemplated
Transactions without the prior written consent of the other, (b) the Buyer
Companies and the VSI Stockholders, on the one hand, and Sellers and the Service
America Companies, on the other hand, shall not, and shall not permit their
respective Representatives to, communicate with Customers, suppliers or
employees of Buyer or employees of Service America, as the case may be, with
respect to the Contemplated Transactions or the business of the Service America
Companies or the Buyer Companies, as the case may be, without the prior written
consent of the other party, and
57
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(c) Buyer and the VSI Stockholders shall not communicate with any Governmental
Body with respect to the Service America Companies or Sellers, and Sellers shall
not communicate with any Governmental Body with regard to the Buyer Companies or
the VSI Stockholders, or the Contemplated Transactions without the prior written
consent of the other.
11.3 Confidentiality. Between the date of this Agreement and the
Closing Date, or if the Closing shall not occur, each party shall hold, in
confidence, and not use to the detriment of the other party, all documents and
any written, oral or other information furnished to such party by the other
party or its respective Representatives in confidence in connection with this
Agreement and the Contemplated Transactions and will not release or disclose
such information to any other Person, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any Consent required for the consummation of the Contemplated
Transactions or (c) the furnishing or use of such information is required by
legal Proceedings. If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request. Notwithstanding anything to the contrary contained
herein, unless and until the Closing Date, the provisions of the Confidentiality
Agreements will remain in full force and effect, except as specifically amended
by the foregoing.
11.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), or regular United States mail in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties)
VSI Stockholders:
c/o The Blackstone Group
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Telecopier No.: (212) 754-8712
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopier No.: (212) 455-2502
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Sellers:
Service America Corporation
300 First Stamford Place
Stamford, Connecticut 06904
Attention: John T. Dee and Janet L. Steinmayer, Esq.
Telecopier No.: (203) 975-5928
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Counsel - Commercial Finance
Telecopier No.: (203) 316-7895
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joseph D. Hansen, Esq.
Telecopier No.: (212) 836-7149
Buyer:
VSI Acquisition II Corporation
201 East Broad Street
Spartanburg, South Carolina 29306
Attention: General Counsel
Telecopier No.: (864) 598-8694
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopier No.: (212) 455-2502
11.5 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
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11.6 Arbitration; Exclusive Remedy. Any and all disputes between the
parties that arise out of or relate to this Agreement or any other agreement
between the parties entered into in connection herewith or the Contemplated
Transactions, and which cannot be amicably settled shall be determined solely
and exclusively by arbitration administered by the American Arbitration
Association ("AAA") under its commercial arbitration rules for such disputes in
its office in New York, New York. The sole remedies available in such
arbitration shall be those provided in Section 9. The parties expressly,
unconditionally and irrevocably waive any right to rescission, repudiation or
similar remedy in any Proceeding hereunder. Within 60 days of receipt by one
party of a demand for arbitration, the arbitration panel (the "Panel") shall be
formed. Such Panel shall consist of three arbitrators, one to be appointed by GE
Capital, one to be appointed by Blackstone and the third to be appointed by the
first two or, in the event of the failure to agree within 30 days, by the
President of the AAA. A decision of the majority of the arbitrators shall be
final and binding on the parties and judgment rendered by the Panel may be
entered in any court having jurisdiction thereof. The fees and expenses of the
arbitrators selected by each party shall be borne by such party and the fees and
expenses of the third arbitrator shall be shared equally by Blackstone and GE
Capital.
11.7 Amendment and Waiver. This Agreement may be amended at any time
only by a written instrument executed by Buyer, VSI Stockholders and Sellers.
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party, (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, contain, and are intended as, a complete statement of all of
the terms and the arrangements between the parties with respect to the matters
provided for herein, supersedes any previous agreements and understandings
between the parties with respect to those matters and cannot be changed or
terminated orally; provided, that the Confidentiality Agreements will remain in
full force and effect to the extent provided herein. Neither party makes, and
each party hereby expressly disclaims reliance upon, any representations or
warranties with respect to the Contemplated Transactions other than those set
forth herein. Buyer acknowledges and agrees that a Seller shall not be liable
for a breach or violation by another Seller of its obligations not to compete
with Buyer that are set forth in an Employment Agreement.
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11.9 Schedules.
(a) Disclosures included on any Disclosure Schedules delivered pursuant
to this Agreement shall be considered to be made for all purposes under this
Agreement (provided that any updates to such Schedules made pursuant to Section
7.3 shall not be effective to satisfy Closing conditions but shall be fully
effective supplements for all purposes of this Agreement after the Closing).
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedules of the respective
parties (other than an exception expressly set forth as such in the respective
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
11.10 Governing Law. This Agreement shall be governed by, and construed
in accordance with the law of the State of New York applicable to agreements
made and to be performed therein without regard to conflicts of laws principles.
11.11 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Except as provided in Section
7.6, nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns. Notwithstanding the foregoing, each Seller shall have
the right to assign all of its rights and obligations hereunder to a limited
liability company of which GE Capital will be the sole managing member (the
"LLC") at or after the Closing and the other parties hereto consent to such
assignment. GE Capital shall (or shall cause the LLC to) advance the amount
necessary for the other Sellers hereunder to pay income tax on the Contemplated
Transaction to the extent that the Sellers do not obtain sufficient proceeds
(from the Financing or otherwise) from the sale of the Buyer Common Stock by the
time such taxes are due (and such advance shall be repaid with the first
proceeds due to such Sellers from any such Financing or otherwise).
11.12 Paoletti. The parties hereto understand that Paoletti must make
an informed investment decision prior to agreeing to exchange his Service
America Capital pursuant to the terms hereof. Accordingly, he may execute this
Agreement at a subsequent date after he has had the requisite time to evaluate
an investment in Buyer.
11.13 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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11.14 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By: /s/ Lawrence A. Hatch
-------------------------------
Name: Lawrence A. Hatch
Title: Chairman and CEO
BCP VOLUME L.P.
By: Blackstone Capital Partners II
Merchant Banking Fund L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ David Blitzer
---------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
BCP OFFSHORE VOLUME L.P.
By: Blackstone Offshore Capital
Partners II L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ David Blitzer
----------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
By: Blackstone Service (Cayman) LDC
as Administrative General Partner
By: /s/ David Blitzer
-----------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
VSI MANAGEMENT DIRECT L.P.
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<PAGE>
By: VSI Management I L.L.C.
By: /s/ Larry A. Hatch
--------------------------
Larry A. Hatch,
as Managing Member
By: Blackstone Management Associates II
L.L.C., as Managing Member
By: /s/ David Blitzer
--------------------------
David Blitzer
as Attorney-in-Fact
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Peter C. Keenoy
---------------------------------
Name: Peter C. Keenoy
Title: Duly Authorized Signatory
DEE FAMILY LIMITED PARTNERSHIP
By: /s/ John T. Dee
---------------------------------
Name: John Dee
Title: General Partner
/s/ John T. Dee
-------------------------------------
John T. Dee
/s/ Michael J. Higgins
-------------------------------------
Michael J. Higgins
/s/ Robert Paoletti
-------------------------------------
Robert Paoletti
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AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated as of
August 24, 1998 (the "Agreement"), among (i) VSI Acquisition II Corporation, a
Delaware corporation (the "Corporation"), (ii) BCP Volume L.P., a Delaware
limited partnership ("BCP Volume"), and BCP Offshore Volume L.P., a Cayman
Islands exempted limited partnership ("BOCP Volume", and together with BCP
Volume, "Blackstone"), (iii) VSI Management Direct L.P., a Delaware limited
partnership ("Management Direct", and together with Blackstone, the "Blackstone
Group"), (iv) General Electric Capital Corporation, a New York corporation
("GECC"), (v) Recreational Services L.L.C., a Delaware limited liability company
("GE LLC"; and together with its members, the "GE Capital Group"), and (vi) the
additional signatories who have entered into the supplementary agreements
referred to in Section 8.15 (collectively, the "Other Stockholders").
WHEREAS, Blackstone, Management Direct and the Corporation are
parties to the Stockholders' Agreement, dated as of December 21, 1995 (the
"Existing Stockholders' Agreement");
WHEREAS, pursuant to a Share Exchange Agreement dated as of
July 27, 1998 among the Corporation, the Blackstone Group and the and the other
members of GE LLC (the "Exchange Agreement"), the GE LLC became a stockholder of
the Corporation on the date hereof;
WHEREAS, pursuant to a limited liability company agreement,
the GE Capital Group transferred their shares to GE LLC; and
WHEREAS, the Blackstone Group and the Corporation have agreed
to amend and restate the Existing Stockholders' Agreement and GE LLC wishes to
enter into the Existing Stockholders' Agreement as so amended and restated;
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. For the purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 1 (defined terms in the
singular to have correlative meaning in the plural and vice versa):
"Acquisition": shall mean any expenditure by the Corporation
or its Subsidiaries to acquire, by purchase or otherwise, the business or fixed
assets of, or stock or other evidence of beneficial ownership of, any other
Person.
<PAGE>
2
"Affiliate": as defined in the Exchange Agreement.
"Beneficial Owner": has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act (as in effect on the Closing Date),
whether or not applicable, except that a "Person" shall be deemed to have
"beneficial ownership" of all Shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
"Business Day": any day that is not a Saturday or Sunday or a
day on which banking institutions are required or permitted to be closed in the
State of New York.
"Capital Expenditures": shall mean expenditures incurred by
the Corporation and its Subsidiaries that, in accordance with generally accepted
accounting principles, are or should be included in "purchase of property and
equipment", "purchase of location contract rights" or similar items reflected in
the statement of cash flows of the Corporation and its Subsidiaries.
"Capital Stock": with respect to any corporation, any and all
shares, interests, rights to purchase, warrants, options, participation or other
equivalents of or interests (however designated) in stock issued by that
corporation including any indebtedness convertible into, or exchangeable for,
stock of such corporation.
"Closing Date": August 24, 1998.
"Code": the United States Internal Revenue Code of 1986, as
amended, and any successor law, in each such case as supplemented or interpreted
by all relevant Treasury Regulations, interpretive opinions of the Internal
Revenue Service and judicial interpretations.
"Commission": the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock": common stock, par value $.01 per share, of
the Corporation.
"Control": (including with correlative meanings, the terms
"controlled by" or "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Controlling Stockholder": Blackstone and, if the percentage
of the outstanding shares of Common Stock owned by Blackstone exceeds the
percentage of the outstanding shares of Common Stock owned by GE LLC by less
than 8%, GE LLC.
"Encumbrance": any charge, claim, lien, community property
interest, condition, option, pledge, security interest, right of first refusal,
equitable interest or restriction of any kind, including any restriction on
voting, transfer, receipt of income or exercise of other attributes of
ownership.
<PAGE>
3
"Exchange Act": the Securities Exchange Act of 1934, as
amended, or any successor law and the regulations and rules issued pursuant to
that Act or any successor law.
"Financing": shall have the meaning set forth in Section 6.1.
"GAAP": generally accepted accounting principles in the
United States of America as from time to time in effect.
"Group": collectively, the Blackstone Group and the GE
Capital Group.
"Initial Public Offering": means an initial underwritten
public offering of Common Stock pursuant to an effective registration statement
under the Securities Act.
"Observer": shall have the meaning set forth in Section 2.1.
"Permitted Transferee":
(a) as to any Stockholder who is a natural Person, (i) the successors in
interest to such Stockholder, in the case of a Transfer upon the death of such
Stockholder, (ii) such Stockholder's spouse, parents and descendants (whether by
blood or adoption, and including stepchildren) and the spouses of such Person,
(iii) such Stockholder, with respect to the disposition of the community
property interest of such Stockholder's spouse in all or any part of the Shares
upon the death of such spouse, and any transferee occasioned by the incompetence
of such Stockholder and (iv) in the case of a Transfer during such Stockholder's
lifetime, any Person in which no Person has any interest (directly or
indirectly) except for any of such Stockholder, such Stockholder's spouse,
parents and descendants (whether by blood or adoption, and including
stepchildren) and the spouses of such Persons; provided that in respect of any
Transfer by a Stockholder during such Stockholder's lifetime pursuant to clause
(ii) or (iv), such Stockholder shall retain voting power over all of the
outstanding Shares being Transferred; and provided further, that, in the case of
a Transfer to a Person (such as a partnership or a trust) as to which a
governing instrument exists, (x) such Stockholder shall furnish a copy of such
governing instrument to the Corporation in advance, (y) the Corporation shall be
reasonably satisfied that the terms of such governing instrument shall not be
inconsistent with the terms of this Agreement and (z) during the period that
such Shares are held by such Person, the relevant Stockholder shall ensure that
the terms of such governing instrument shall not be amended in any manner that
results in such governing instrument being inconsistent with the terms of this
Agreement;
(b) as to any Stockholder that is a trust, all the beneficiaries of which are
natural Persons (i) such beneficiaries or the grantor of the trust, in each case
as of the date the Stockholder became a party to this Agreement or, (ii) any
Person related to such a beneficiary or grantor in the manner described in
clause (a) of this definition;
(c) as to any Stockholder, a bank or other financial institution to whom Shares
are Transferred by way of pledge or to whom Shares are Transferred upon the
foreclosure thereof;
<PAGE>
4
provided, however, that as to any Stockholder, any such pledge must be approved
in advance by Blackstone and GE LLC;
(d) as to any Stockholder that is a corporation or a limited liability company,
all controlled Affiliates of such Stockholder at the date of transfer;
(e) as to GE LLC, any member of such entity on a pro rata basis or on a basis
substantially consistent with such entity's limited liability company agreement
as it exists on the date hereof; and
(f) as to BOCP Volume and BCP Volume, any partner of such entity on the date
hereof, on a pro rata basis or on a basis substantially consistent with such
entity's partnership agreement as it exists on the date hereof.
provided, in each such case, that prior written notice of any such Transfer is
given to the Corporation by such Stockholder and that the Permitted Transferee
shall agree in advance of such Transfer to be designated as a Stockholder and to
be bound by the terms of this Agreement pursuant to a written agreement
reasonably satisfactory to the Corporation.
"Person": any individual, corporation (including any
non-profit corporation), general or limited partnership, partnership, limited
liability company, joint venture, estate, trust, association, organization,
labor union, government or any agency or political subdivision thereof or any
other entity.
"Public Offering": an underwritten public offering of equity
securities pursuant to an effective registration statement under the Securities
Act.
"Registrable Stock": the shares of Common Stock held by the
Stockholders; provided that such shares shall cease to be Registrable Stock when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of under such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144 or Rule 144A, or (iii) they shall
have ceased to be outstanding.
"Rule 144": Rule 144 (or any successor provision) under the
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
Securities Act.
"Securities Act": the Securities Act of 1933, as amended, or
any successor law and the regulations and rules issued pursuant to that Act.
"Shares": the shares of Common Stock, the options and the
warrants hereafter issued to or otherwise acquired by the Stockholders
(including acquisitions of such securities concurrently with the execution of
this Agreement and acquisitions of any such securities after the date hereof
whether or not pursuant to the terms hereof and including issuances of any such
<PAGE>
5
securities pursuant to any option or warrant existing on the date hereof or
issued subsequent to the date hereof) and all shares of Capital Stock or other
securities (including convertible securities and the securities into which such
convertible securities convert) of the Corporation or any successor of the
Corporation issued or issuable in respect thereof as a result of any stock
dividend on, or stock split or reclassification or conversion of, or in exchange
for, any such Common Stock or issued or issuable with respect to such Common
Stock, options or warrants in connection with any merger or reorganization or
similar transaction involving the Corporation.
"Stockholders": Blackstone, Management Direct, GE LLC and the
Other Stockholders and their respective transferees who become subject to this
Agreement.
"Subsidiary": shall have the meaning set forth in the
Exchange Agreement.
"Transfer": any direct or indirect disposition of an interest
whether by sale, exchange, merger, consolidation, transfer, assignment,
conveyance, distribution, pledge, inheritance, gift, mortgage, the creation of
any security interest in, or Encumbrance upon, any other disposition of any kind
and in any manner, by operation of law or otherwise, or any other transfer or
agreement which would result in a change in the percentage of the Corporation's
Capital Stock owned or considered owned by a Stockholder or a Beneficial Owner
as determined for purposes of Section 382 of the Code.
"Treasury Regulations": the regulations adopted under the
Code by the United States Secretary of the Treasury, as in effect from time to
time.
"Voting Stock": capital stock of any class or classes of the
Corporation, the holders of which are entitled, in the absence of contingencies,
to participate generally in the election of the members of the Board of
Directors of the Corporation.
ARTICLE II
CERTAIN VOTING AGREEMENTS
2.1. Board of Directors. So long as this Agreement shall remain in effect:
(a) Each Stockholder agrees that it shall vote all of its Voting Stock at any
regular or special meeting of stockholders or in any written consent executed in
lieu of such meeting of stockholders so as to elect and, during such period, to
continue in office the Board of Directors of the Corporation that consists of:
(A) the Chairman of the Corporation, (B) unless the individual referred to in
clause (A) is a partner of Management Direct, one designee of Management Direct,
provided that Management Direct, prior to designating such director in its sole
discretion, shall consult with Blackstone as to the identity of such designee,
(C) three designees (unless Blackstone is no longer the sole Controlling
Stockholder, in which case two designees) of Blackstone and (D) if Blackstone is
no longer the sole Controlling Stockholder, two designees of GE LLC. Each
Stockholder shall take all action necessary to insure that the Corporation's
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6
Certificate of Incorporation and By-Laws do not, at any time, conflict with the
provisions of this Agreement.
(b) If GE LLC, Blackstone or Management Direct shall notify the other
Stockholders of its desire to remove, with or without cause, any director of the
Corporation previously designated by it, each Stockholder shall vote all of the
Voting Stock owned or held of record by it so as to remove such director.
(c) If any director previously designated by Blackstone, Management Direct or GE
LLC ceases to serve on the Board of Directors of the Corporation (whether by
reason of death, resignation, removal or otherwise), the Stockholders who
designated such director shall be entitled to designate a successor director to
fill the vacancy created thereby.
(d) The Corporation agrees that GE LLC has the right, which
right shall continue until GE LLC has the right to designate directors pursuant
to Section 2.1(a), to appoint one individual to be an observer (an "Observer")
at meetings of the Board of Directors of the Corporation. GE LLC shall deliver a
written notice of such appointment to the Corporation, which notice shall
contain the address of the Observer. The Observer shall have the right to
receive notice of, and attend and participate in, discussions at each regular
and special meeting of the Board of Directors of the Corporation and shall be
entitled to receive at the same time they are provided to the directors of the
Corporation copies of any information concerning the Corporation that is
provided to each of the directors with respect to such meetings, provided that
such Observer acknowledges and agrees that he will be bound to satisfy the same
duties and obligations of loyalty and confidentiality with respect to such
information that the directors must satisfy. The Observer will be reimbursed for
out-of-pocket expenses under the same terms and in the same amounts as provided
to the directors. The Observer will have no voting rights with respect to the
Board of Directors or any other rights relating thereto not expressly set forth
above. The rights pursuant to this Section 2.1(d) may be assigned to a
transferee of GE LLC, provided that such transferee owns on a fully diluted
basis an aggregate number of shares of Common Stock not less than one-third
(1/3) of the number of shares of Common Stock owned by GE LLC on the date hereof
(subject to appropriate adjustment to reflect stock splits and similar events)
and GE LLC owns on a fully diluted basis an aggregate number of shares of Common
Stock less than such transferee.
2.2. Meetings and Consents. In order to effectuate the provisions of Section
2.1, each Stockholder agrees that when any action or vote is required to be
taken by such Stockholder pursuant to this Agreement, such Stockholder shall use
its best efforts to call, or cause the appropriate officers and directors of the
Corporation, to call, a special or annual meeting of stockholders of the
Corporation, or execute or cause to be executed a consent in writing in lieu of
a meeting to effectuate such stockholder action.
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7
ARTICLE III
CERTAIN CORPORATE ACTIONS
3.1. Stockholder Vote. So long as GE LLC owns 20% or more of the outstanding
Common Stock, the Corporation and its Subsidiaries shall not take any of the
following actions without the prior written consent of both Blackstone and GE
LLC:
(a) entering into, amending or waiving the provisions of any agreements or
transactions with Blackstone or its Affiliates except as expressly provided for
in this Agreement or in the Exchange Agreement, and except (i) the execution and
performance of any transaction or agreement contemplated by the Exchange
Agreement, (ii) the payment of reasonable and customary regular fees and
reimbursements of expenses to directors of the Corporation who are not employees
of the Corporation, (iii) transactions which are reasonable and customary in
light of industry practice with regard to portfolio companies owned by Persons
such as Blackstone and its Affiliates, provided that each such transaction is
not in excess of $500,000 individually and $1,000,000 in the aggregate in any
one year period, (iv) the payment of a monitoring fee of $250,000 per year to an
Affiliate of Blackstone and $167,000 per year to GECC and (v) the payment to
Blackstone or any of its Affiliates of any transaction, structuring or similar
fee equal to up to 1% of the total equity value of any company or business
acquired by the Corporation or any of its Subsidiaries so long as GECC is also
paid a proportional fee based on GE LLC's Common Stock ownership relative to
Blackstone's Common Stock ownership.
(b) except as provided in the Exchange Agreement, any redemption or offer to
purchase made by the Corporation for any of Blackstone's Capital Stock, or any
recapitalization, reclassification, consolidation, spin-off, split or
subdivision, or combination of Blackstone's Shares that would not afford to GE
LLC the same type and amount of consideration per Share on a pro rata basis with
Blackstone;
(c) the approval of any amendment to any provision of the
certificate of incorporation or by-laws of the Corporation; provided,
however, that subject to Section 4.7, the Corporation shall have the
right to increase the authorized Shares and to create new specific
series of preferred stock without the prior written consent of GE LLC
pursuant to this Section 3.1;
(e) the dissolution or the adoption of a plan of liquidation
of, or the voluntary election to commence bankruptcy or insolvency
proceedings under applicable laws with respect to, the Corporation;
(f) the appointment of the Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer of the Corporation;
(g) the modification of any stock option or similar incentive
plan, bonus or other compensation or benefit plan existing on the date
hereof;
(h) any material change in the Corporation's principal line of
business; or
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8
(i) any commitment by the Corporation or any of its
Subsidiaries to do any of the foregoing.
3.2. Annual Budget. At least 60 days prior to the commencement of each fiscal
year of the Corporation, the Corporation shall prepare and present to Blackstone
and GE LLC an annual budget for the forthcoming fiscal year.
3.3. Board Approval of Certain Transactions. In addition to
those actions or transactions ordinarily requiring approval of the Boards of
Directors, the following actions of the Corporation and its Subsidiaries, shall
require the affirmative vote of a majority of the respective Boards of
Directors:
(i) the annual budget of each of the Corporation and its
Subsidiaries;
(ii) any expenditure, or related series of expenditures, which
would exceed any provision therefor under the annual budget;
(iii) any Capital Expenditure, or related series of Capital
Expenditures, totalling in excess of $2 million;
(iv) any Acquisition;
(v) the sale or other disposition of all or substantially all
of the assets of the Corporation;
(vi) the consolidation or merger of the Corporation with or
into any other Person, or the consolidation or merger of any Person
with or into the Corporation; and
(vii) a leveraged recapitalization or reorganization.
ARTICLE IV
TRANSFERS
4.1. Limitations on Transfer. (a) Each Stockholder hereby agrees that, except
for Transfers effected pursuant to an effective registration statement filed
under the Securities Act, no Transfer shall occur (other than a Transfer to the
Corporation or another Stockholder as permitted or required by this Agreement or
the Exchange Agreement) unless the Corporation has been furnished with (i)
written notice describing the manner and terms of such Transfer, the identity of
the transferee and such other information as the Corporation may reasonably
request and (ii) an opinion in form and substance reasonably satisfactory to the
Corporation of counsel reasonably satisfactory to the Corporation that (A) such
Transfer is exempt from the provisions of Section 5 under the Securities Act and
(B) that (x) no registration or qualification under the applicable or "blue sky"
laws of any jurisdiction is required in connection with such Transfer or (y)
compliance with applicable state securities or "blue sky" laws has been
effected.
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9
(b) Each Stockholder hereby agrees that, except for Transfers in connection with
a Public Offering, Transfers pursuant to Rule 144 under the Securities Act, and
Transfers pursuant to Section 4.5, no Transfer shall occur unless the transferee
shall agree to become a party to, and be bound to the same extent as its
transferor by the terms of, this Agreement.
(c) Notwithstanding anything contained herein to the contrary, each Stockholder
hereby agrees that no Transfer of Shares owned by it shall occur prior to the
first anniversary of the Closing Date, other than pursuant to Sections 4.4 or
4.5 or pursuant to a Public Offering and other than to a Permitted Transferee.
After the first anniversary of the Closing Date, Shares owned by each
Stockholder may be Transferred subject to Sections 4.1(a) and 4.1(b) and
Sections 4.4, 4.5 or 4.6, as applicable.
4.2. Effect of Void Transfers. In the event of any purported
Transfer of any Shares in violation of the provisions of this Agreement, such
purported Transfer shall be void and of no effect and neither the Corporation
nor any transfer agent shall give effect to such Transfer.
4.3. Legend on Securities. Each certificate representing
Shares issued to any Stockholder shall bear the following legend on the face
thereof (in addition to any legend required by state securities or "blue sky"
laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE AND ARE SUBJECT TO AN AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT AMONG BCP VOLUME, L.P., BCP OFFSHORE VOLUME,
L.P., VSI MANAGEMENT DIRECT, L.P., GENERAL ELECTRIC CAPITAL
CORPORATION, RECREATIONAL SERVICES L.L.C. AND CERTAIN OTHER
STOCKHOLDERS AND VSI ACQUISITION II CORPORATION, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE CORPORATION. A COPY OF SUCH
STOCKHOLDERS' AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
CORPORATION'S PRINCIPAL OFFICES. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS
OF SUCH STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION
STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) IF THE CORPORATION HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS THEREUNDER. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS
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10
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
SUCH STOCKHOLDERS' AGREEMENT."
4.4. Tag-Along Rights. (a) With respect to any proposed
Transfer by either GE LLC or Blackstone (in such capacity, a "Transferring
Stockholder") of Shares permitted hereunder, other than (x) a Public Offering,
(y) in accordance with Rule 144 under the Securities Act or (z) to a Permitted
Transferee, so long as this Agreement shall remain in effect and the
Transferring Stockholder beneficially owns on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-third (1/3) of the number of
shares of Common Stock owned by the Transferring Stockholder on the date hereof
(subject to appropriate adjustment to reflect stock splits and similar events),
the Transferring Stockholder shall have the obligation, and each other
Stockholder shall have the right, to require the proposed transferee to purchase
from such other Stockholder (in such capacity, a "Tagging Stockholder") a number
of Shares (of the same type or class as the Shares proposed to be Transferred by
the Transferring Stockholder) up to the product (rounded up to the nearest whole
number) of (i) the quotient determined by dividing (A) the aggregate number of
Shares owned by such Tagging Stockholder by (B) the aggregate number of Shares
owned by the Transferring Stockholder and all Tagging Stockholders, and (ii) the
total number of Shares proposed to be directly or indirectly Transferred to the
transferee in the contemplated Transfer, and at the same price per Share and
upon the same terms and conditions (including without limitation time of payment
and form of consideration) as to be paid and given to the Transferring
Stockholder; provided, that in order to be entitled to exercise its right to
sell Shares to the proposed transferee pursuant to this Section 4.4, each
Tagging Stockholder must agree to make to the transferee the same
representations, warranties, covenants, indemnities and agreements as the
Transferring Stockholder agrees to make in connection with the proposed Transfer
of the Shares of the Transferring Stockholder; provided further, that all
representations and warranties shall be made by each Tagging Stockholder and the
Transferring Stockholder severally and not jointly and that the liability of the
Transferring Stockholder and each Tagging Stockholder (whether pursuant to a
representation, warranty, covenant, indemnification provision or agreement) for
liabilities in respect of the Corporation shall be evidenced in writings
executed by them and the transferee and shall be borne by each of them on a pro
rata basis; provided further, that the Transferring Stockholder shall consult
with the Tagging Stockholders with respect to the negotiations with the proposed
transferee of the terms of the proposed Transfer.
(b) The Transferring Stockholder shall give notice to each
Tagging Stockholder of each proposed Transfer giving rise to the rights of the
Tagging Stockholder set forth in the first sentence of Section 4.4(a) at least
30 days prior to the proposed consummation of such Transfer, setting forth the
number and type of Shares proposed to be so transferred, the name and address of
the proposed transferee, the proposed amount and form of consideration and other
terms and conditions of payment offered by the proposed transferee, and a
representation that the proposed transferee has been informed of the tag-along
rights provided for in this Section 4.4 and has agreed to purchase Shares in
accordance with the terms hereof. The tag-along rights provided by this Section
4.4 must be exercised by the Tagging Stockholder within 10 Business Days
following receipt of the notice required by the preceding sentence, by delivery
of a written notice to the Transferring Stockholder indicating such Tagging
Stockholder's desire to exercise its rights and specifying the number of Shares
it desires to sell. The Transferring Stockholder
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11
shall be entitled under this Section 4.4 to Transfer to the proposed transferee
the number of Shares equal to the difference between the number referred to in
clause (ii) of paragraph (a) above and the aggregate number of Shares set forth
in the written notices, if any, delivered by the Tagging Stockholders pursuant
to the preceding sentence (up to the maximum number of Shares beneficially owned
by such Tagging Stockholder required to be purchased by the proposed transferee
pursuant to the first sentence of Section 4.4(a)). If the proposed transferee
fails to purchase Shares from any Tagging Stockholder that has properly
exercised its tag-along rights under Section 4.4(a), then the Transferring
Stockholder shall not be permitted to make the proposed Transfer, and any such
attempted Transfer shall be void and of no effect, as provided in Section 4.2
hereof.
(c) If any Tagging Stockholder exercises its rights under
Section 4.4(a), the closing of the purchase of the Shares with respect to which
such rights have been exercised shall take place concurrently with the closing
of the sale of the Transferring Stockholder's Shares.
(d) If a Tagging Stockholder has not complied with the terms
of this Section 4.4, such Tagging Stockholder shall not be permitted to exercise
its rights pursuant to this Section 4.4.
4.5. Drag-Along Rights. If a Controlling Stockholder receives
an offer from a Person other than another Stockholder or its Affiliates (a
"Third Party") to purchase all, but not less than all, of the outstanding Shares
owned by the Stockholders and such offer is accepted by all Controlling
Stockholders, so long as this Agreement shall remain in effect and such
Controlling Stockholder beneficially owns on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-third (1/3) of the number of
shares of Common Stock owned by such Controlling Stockholder on the date hereof
(subject to appropriate adjustment to reflect stock splits and similar events),
then each Stockholder hereby agrees that it will Transfer all Shares owned by it
to such Third Party on the terms of the offer so accepted by such Controlling
Stockholder, including the same per Share consideration; provided, that all
representations and warranties shall be made by each Stockholder severally and
not jointly and that the liability of each Stockholder (whether pursuant to a
representation, warranty, covenant, indemnification provision or agreement) for
liabilities in respect of the Corporation shall be evidenced in writings
executed by them and the transferee and shall be borne by each of them on a pro
rata basis; provided further, that the Controlling Stockholder shall consult
with the other Stockholders with respect to the negotiations with the proposed
transferee of the terms of the proposed Transfer.
4.6. Right of First Offer. (a) If any Stockholder other than a
Controlling Stockholder (such Stockholder, the "ROFO Offeror") desires to sell
all or any portion of the Shares (the "ROFO Shares") then owned by the ROFO
Offeror (other than sales of Shares by the Management Stockholders to GE LLC or
Blackstone or sales pursuant to a Public Offering or transfers to Permitted
Transferees or pursuant to Sections 4.4 or 4.5) the ROFO Offeror shall provide
the Corporation, GE LLC and each Controlling Stockholder with a written notice
(the "ROFO Notice") setting forth: (i) the number and class of Shares to be
offered and (ii) the material terms and conditions of the proposed sale,
including the cash price (the "Offering Price") at which the ROFO Offerer
proposes to sell the ROFO Shares. The ROFO Notice shall also contain an
irrevocable offer to sell the ROFO Shares to the Corporation and, if the
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12
Corporation shall decline to purchase all or any portion of the ROFO Shares, the
Controlling Stockholders (or their assignees) at a cash price equal to the price
contained in, and upon substantially the same terms and conditions as the terms
and conditions contained in, the ROFO Notice. At any time within 45 days after
the date of the receipt by the Corporation and the Controlling Stockholders of
the ROFO Notice, the Corporation shall have the option to exercise its right to
purchase or, if the Corporation shall decline to purchase all or any portion of
the ROFO Shares, each Controlling Stockholder shall have the right to exercise
such option to purchase (or assign its right to any party) the portion of the
ROFO Shares that the Corporation does not wish to purchase, at the same cash
price and on such substantially the same terms and conditions as set forth in
the ROFO Notice (allocated between the Controlling Stockholders in proportion to
the relative number of shares of Common Stock held by each Controlling
Stockholder).
(b) If the option to purchase the ROFO Shares is exercised
pursuant to Section 4.6(a), within 45 days after the date of the receipt by the
Corporation and the Controlling Stockholders of the ROFO Notice, the Corporation
and/or the Controlling Stockholders (or their assignees) shall deliver payment
by wire transfer of immediately available funds to the ROFO Offeror against
delivery of certificates or other instruments representing the ROFO Shares so
purchased free and clear of any Encumbrances, appropriately endorsed by the ROFO
Offeror. If the Corporation and/or the Controlling Stockholders (or their
assignees) have not given notice of its or their intention to exercise such
right to purchase within the 30 day period after the date of the receipt by the
Corporation and the Controlling Stockholders of the ROFO Notice or has not
tendered the purchase price for the ROFO Shares in the manner set forth above
within such 45 day period, the ROFO Offeror shall be free for a period of 120
days from the end of such 30 day or 45 day period, as the case may be, to sell
the ROFO Shares to a Qualified Purchaser (as defined below) on terms which are
no more favorable in any material respect to such Qualified Purchaser than the
terms and conditions set forth in the ROFO Notice. If for any reason such ROFO
Offeror does not sell the ROFO Shares to a Qualified Purchaser on such terms and
conditions or if such ROFO Offeror wishes to sell the ROFO Shares on terms which
are more favorable in any material respect to a Qualified Purchaser than those
set forth in the ROFO Notice, the provisions of this Section 4.6 shall again be
applicable to the ROFO Shares; provided that, such ROFO Offeror may not deliver
another ROFO Notice until 12 months have elapsed since the date of the previous
ROFO Notice. As used in this Section 4.6, "Qualified Purchaser" means any Person
so long as (i) such Person shall not be, directly or indirectly, engaged in any
contract food service business which is in direct competition with the
Corporation and (ii) a Controlling Stockholder shall not have unreasonably
objected to such Person based on the Controlling Stockholder's and its
Affiliates' prior experience with such Person.
4.7. Participation Rights. (a) So long as this Agreement shall remain in effect,
the Corporation shall not issue (an "Issuance") additional shares of Capital
Stock to Blackstone unless, prior to such Issuance, the Corporation notifies
each other Stockholder in writing of the proposed Issuance and grants to each
other Stockholder the right (the "Right") to subscribe for and purchase
additional shares of the same class of Capital Stock at the same price and upon
the same terms and conditions as apply to the Issuance in an amount such that
immediately after giving effect to the Issuance and exercise of the Right, the
shares of Capital Stock of such class owned by such Stockholder (rounded to the
nearest whole share) shall represent the same
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13
percentage of the aggregate number of shares of Common Stock outstanding on a
fully diluted basis as was owned by such Stockholder immediately prior to the
Issuance (without regard to any shares that may be issued to parties other than
Blackstone at the time of the Issuance). The Corporation shall not issue any
Capital Stock to any Affiliate of Blackstone.
(b) The Right may be exercised by a Stockholder at any time by written notice to
the Corporation within 10 Business Days after the date on which such Stockholder
receives notice from the Corporation of the proposed Issuance, and the closing
of the purchase and sale pursuant to the exercise of the Right (the
"Participation Closing") shall occur concurrently with the closing of the
Issuance. Notwithstanding the foregoing, the Right shall not apply to any
Issuance to all holders of Common Stock on a pro rata basis.
(c) In order to enable Management Direct (on behalf of its individual partners
who are employees or directors of the Corporation or its Subsidiaries at such
time only) to exercise the Right and the individual members of GE LLC who are
employees or directors of the Corporation or its Subsidiaries at such time only
and who elect to exercise the Right (the "Individual Members"), the Corporation
shall (subject to applicable contractual obligations, including any provisions
of any credit facility to which the Corporation is a party) lend, concurrent
with the Participation Closing, to Management Direct and each Individual Member
an amount (the "Loan") sufficient to exercise the Right. The Loan shall be
evidenced by a Note (in a form reasonably acceptable to the Corporation) that
(i) shall accrue interest at the applicable federal rate, as defined in Section
1274(d) of the Code, as set from time to time, (ii) shall be without recourse to
Management Direct and each Individual Member and shall be secured by a pledge of
the shares held by Management Direct (on behalf of its individual partners who
are employees or directors of the Corporation or its Subsidiaries at such time
only) and each Individual Member, and (iii) shall provide that principal,
interest and all other amounts due thereon shall be due upon any sale, transfer
or other disposition of such Shares to the extent of the cash proceeds realized
therefrom.
4.8. Cooperation of the Corporation. In the case of any proposed Transfer under
Section 4.1, the Corporation shall use reasonable efforts to comply with any
such applicable state securities or "blue sky" laws, but shall in no event be
required, in connection therewith, to qualify to do business in any jurisdiction
where it is not then qualified or to take any action that would subject it to
tax or to the general service of process in any jurisdiction where it is not
then subject. The restrictions on Transfer contained in Section 4.1 shall be in
addition to, and not by way of limitation of, any other restrictions on Transfer
contained in any other article or section of this Agreement.
4.9. Rule 144 Acknowledgment. Each Stockholder acknowledges that such Person is
familiar with Rule 144 and that such Person has been advised that Rule 144
permits, only under certain circumstances, the resale of restricted securities
such as the Shares subject hereto, but that Rule 144 may not in the future
become available to permit resales by such Person of any Shares. Each
Stockholder understands that, to the extent that Rule 144 is not available, such
Person shall be unable to sell any Shares without either registration under the
Securities Act or the existence of another exemption from such registration
requirement, and that the Corporation has no obligation whatsoever (except as
set forth herein) to any Stockholder to register any Shares.
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14
4.10. Restrictions Cumulative. The restrictions on Transfer
imposed by Section 4.4 on any Stockholder shall be in addition to, and not in
lieu of, the restrictions on transfer imposed by Sections 4.1, 4.2, 4.5 and 4.6
of this Agreement to the extent the same are otherwise applicable to such
Stockholder.
ARTICLE V
REGISTRATION RIGHTS
5.1. Required Registrations. (a) Upon receipt of a written request from
Blackstone requesting that the Corporation effect the registration of its shares
of Common Stock, the Corporation shall as expeditiously as possible use its best
efforts to effect the registration under the Securities Act of all shares of
Common Stock that the Corporation has been so requested to register for sale,
all to the extent required to permit the disposition (in accordance with the
intended method or methods thereof, as aforesaid) of the shares of Common Stock
so registered; provided that, the Corporation shall not be required to effect
more than three registrations pursuant to this paragraph.
(b) Upon receipt of a written request from GE LLC requesting
that the Corporation effect the registration of its shares of Common Stock, the
Corporation shall as expeditiously as possible use its best efforts to effect
the registration under the Securities Act of all shares of Common Stock that the
Corporation has been so requested to register for sale, all to the extent
required to permit the disposition (in accordance with the intended method or
methods thereof, as aforesaid) of the shares of Common Stock so registered;
provided that, (i) such written notice may not be delivered prior to the third
anniversary of the Closing Date and (ii) the Corporation shall not be required
to effect more than one registration pursuant to this paragraph.
5.2. Piggyback Registration. (a) Each time the Corporation is planning to file a
registration statement under the Securities Act in connection with the proposed
offer and sale of Common Stock by Blackstone or GE LLC (the "Requesting
Stockholder"), the Corporation will give prompt written notice thereof to all
Stockholders other than the Requesting Stockholder (the "Piggy-Back
Stockholders") regarding their rights under this Section 5.2, at least 30 days
prior to the anticipated filing date of such registration statement; provided,
however, that any proposed offer and sale of Common Stock solely by the
Corporation shall not trigger the provisions of this Section 5.2. Upon the
written request of any Piggy-Back Stockholder made within 10 Business Days after
the receipt of any such notice from the Corporation, but subject to paragraph
(b) below, the Corporation will include in such registration statement for the
account of such PiggyBack Stockholder a number of shares of Common Stock equal
to the number of shares requested by such Piggy-Back Stockholder to be included
in such registration statement but in no event greater than the number of shares
calculated by multiplying (x) the number of shares of Common Stock owned by such
Piggy-Back Stockholder by (y) a fraction, the numerator of which is the number
of shares of Common Stock being registered for the account of the Requesting
Stockholder in such registration statement and the denominator of which is the
aggregate number of shares of Common Stock owned by the Requesting Stockholder
(the number of shares of such Piggy-Back Stockholder so registered being
referred to as the "Piggy-Back Shares") so as to
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permit the disposition of the Piggy-Back Shares to be registered; provided, that
(i) if, at any time after giving written notice of its intention to register any
Common Stock and prior to the effective date of the registration statement filed
in connection with such registration, either the Corporation or the Requesting
Stockholder, shall determine for any reason not to proceed with the proposed
registration, the Corporation may at its election give written notice of such
determination to the Piggy-Back Stockholders and thereupon shall be relieved of
its obligation to register any Piggy-Back Shares in connection with such
registration, and (ii) if such registration involves an underwritten offering,
each Piggy-Back Stockholder must sell its shares to the underwriters on the same
terms and conditions as apply to the Requesting Stockholder.
(b) If a registration pursuant to this Section 5.2 involves an underwritten
offering and the managing underwriter or underwriters in good faith advise the
Corporation in writing that, in their opinion, the number of shares of Common
Stock which the Corporation, the Stockholders and any other Persons intend to
include in such registration exceeds the largest number of shares of Common
Stock which can be sold in such offering without having an adverse effect on
such offering (including the price at which the shares of Common Stock can be
sold), then the Corporation will include in such registration (i) first, 100% of
the shares of Common Stock the Corporation proposes to sell for its own account,
if any, and (ii) second, to the extent that the number of shares of Common Stock
which the Corporation proposes to sell is less than the number of shares of
Common Stock which the Corporation has been advised can be sold in such offering
without having the adverse effect referred to above, the number of shares of
Common Stock to be included in such offering will be allocated pro rata among
the Piggy-Back Stockholders and the Requesting Stockholder on the basis of the
relative number of shares of Common Stock then held by each such Person.
5.3. Registration Procedures. If the Corporation is required by the provisions
of this Article VI to use its best efforts to effect the registration of any of
its securities under the Securities Act, the Corporation shall, as expeditiously
as possible:
(a) prepare and file with the
Commission a registration statement
with respect to such securities and
use its best efforts to cause such
registration statement to become
and remain effective for a period
of time required for the
disposition of such securities by
the holders thereof;
(b) prepare and file with the
Commission such amendments and
supplements to such registration
statement and the prospectus used
in connection therewith as may be
necessary to keep such registration
statement effective and to comply
with the provisions of the
Securities Act with respect to the
sale or other disposition of all
securities covered by such
registration statement until the
earlier of such time as all of such
securities have been disposed of in
a public offering or the expiration
of 180 days;
<PAGE>
16
(c) furnish to such selling security
holders such number of copies of a
summary prospectus or other
prospectus, including a preliminary
prospectus, in conformity with the
requirements of the Securities Act,
and such other documents, as such
selling security holders may
reasonably request;
(d) use its best efforts to register or
qualify the securities covered by
such registration statement under
such other securities or blue sky
laws of such jurisdictions within
the United States and Puerto Rico
as each holder of such securities
shall request (provided, however,
the Corporation shall not be
obligated to qualify as a foreign
corporation to do business under
the laws of any jurisdiction in
which it is not then qualified or
to file any general consent to
service of process), and do such
other reasonable acts and things as
may be required of it to enable
such holder to consummate the
disposition in such jurisdiction of
the securities covered by such
registration statement;
(e) furnish, at the request of any
holder requesting registration of
the Registrable Stock pursuant to
Section 5.1, on the date that such
shares of Registrable Stock are
delivered to the underwriters for
sale pursuant to such registration
or, if such Registrable Stock is
not being sold through
underwriters, on the date that the
registration statement with respect
to such shares of Registrable Stock
becomes effective, (1) an opinion,
dated such date, of the independent
counsel representing the
Corporation for the purposes of
such registration, addressed to the
underwriters, if any, and if such
Registrable Stock is not being sold
through underwriters, then to the
holders making such request,
stating that such registration
statement has become effective
under the Securities Act and that
(i) the registration statement, the
related prospectus, and each
amendment or supplement thereto,
comply as to form in all material
respects with the requirements of
the Securities Act and the
applicable rules and regulations of
the Commission thereunder (except
that such counsel need express no
opinion as to financial or
statistical information contained
therein), (ii) the descriptions in
the registration statement or the
prospectus, or any amendment or
supplement thereto, of all legal
matters and contracts and other
legal documents or instruments are
accurate and fairly
<PAGE>
17
present the information required to
be shown, and (iii) such counsel has
no reason to believe that either the
registration statement or the
prospectus, or any amendment or
supplement thereto (other than
financial or statistical information
as to which such counsel need make
no statement) contains any untrue
statement of a material fact or
omits to state a material fact
required to be stated therein or
necessary to make the statements
therein, in light of the
circumstances in which made, not
misleading; and (2) a letter dated
such date, from the independent
certified public accountants of the
Corporation, addressed to the
underwriters, if any, and if such
Registrable Stock is not being sold
through underwriters, then to the
holder making such request and, if
such accountants refuse to deliver
such letter to such holder, then to
the Corporation stating that they
are independent certified public
accountants within the meaning of
the Securities Act and that, in the
opinion of such accountants, the
financial statements and other
financial data of the Corporation
included in the registration
statement or the prospectus, or any
amendment or supplement thereto,
comply as to form in all material
respects with the applicable
accounting requirements of the
Securities Act. Such opinion of
counsel shall additionally cover
such other legal matters with
respect to the registration in
respect of which such opinion is
being given as such holders of
Registrable Stock may reasonably
request. Such letter from the
independent certified public
accountants shall additionally cover
such other financial matters
(including information as to the
period ending not more than five
Business Days prior to the date of
such letter) with respect to the
registration in respect of which
such letter is being given as the
holders holding a majority of the
Registrable Stock being so
registered may reasonably request;
(f) enter into customary agreements
(including an underwriting agreement
in customary form) and take such
other actions as are reasonably
required in order to expedite or
facilitate the disposition of such
registrable securities;
(g) use its best efforts to cause appropriate members of
senior management to participate in customary road show presentations;
and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the
<PAGE>
18
registration statement, an earnings statement covering the period of at
least 12 months beginning with the first full month after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the
Corporation to take any action pursuant to this Article V in respect of the
securities which are to be registered at the request of any holder thereof that
such holder shall furnish to the Corporation such information regarding the
securities held by such holder and the intended method of disposition thereof as
the Corporation shall reasonably request and as shall be required in connection
with the action taken by the Corporation.
5.4. Other Registration-Related Matters.
(a) Each Stockholder agrees that it shall not effect any sales of Common Stock
during the 14 days prior to or the 90 day period beginning on the effective date
of a registration statement (whether pursuant to Article V or otherwise, except
as part of such registration) if and to the extent reasonably requested in
writing (with reasonable prior notice) by the managing underwriter of the
underwritten public offering.
(b) The Corporation agrees not to effect any sales of Common Stock during the 14
days prior to and the 90 day period beginning on the effective date of any
registration statement in which any Stockholder is participating in connection
with an underwritten public offering of Common Stock, if and to the extent
reasonably requested in writing (with reasonable prior notice) by the managing
underwriter of the underwritten public offering.
(c) The Corporation may require any Person that is selling shares of Common
Stock in a Public Offering pursuant to Article V to furnish to the Corporation
such information regarding such Person and the distribution of the shares of
Common Stock which are included in a Public Offering as may from time to time
reasonably be requested in writing in order to comply with the Securities Act.
(d) The Corporation will pay all reasonable out-of-pocket costs and expenses
incurred in connection with the registration of Common Stock pursuant to Article
V that are customarily paid by a company providing registration rights.
5.5. Indemnification and Contribution.
(a) In the event of any registration of any of the Registrable Stock under the
Securities Act pursuant to this Article V, the Corporation shall indemnify and
hold harmless the holder of such Registrable Stock, such holder's directors and
officers, and each other Person (including each underwriter) who participated in
the offering of such Registrable Stock and each other Person, if any, who
controls such holder or such participating Person within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or participating
Person or controlling Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims,
<PAGE>
19
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse such holder or such director, officer or participating Person or
controlling Person for any legal or any other expenses reasonably incurred by
such holder or such director, officer or participating Person or controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Corporation shall not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any alleged untrue statement or alleged
omission made in such registration statement, preliminary prospectus, prospectus
or amendment or supplement in reliance upon and in conformity with written
information furnished to the Corporation by such holder specifically for use
therein or so furnished for such purposes by any underwriter. Such indemnity
shall remain in full force and effect regardless of any investigation made by,
or on behalf of, such holder or such director, officer or participating Person
or controlling Person, and shall survive the transfer of such securities by such
holder.
(b) Each holder of any Registrable Stock, by acceptance thereof, agrees to
indemnify and hold harmless the Corporation, its directors and officers and each
other Person, if any, who controls the Corporation within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which the Corporation or any such director or officer or any such
Person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of, or are based upon, information in writing
provided to the Corporation by such holder of such Registrable Stock contained,
on the effective date thereof, in any registration statement under which
securities were registered under the Securities Act at the request of such
holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto; provided, however, that each holder of such
Registrable Stock shall not be liable to the extent that any such loss, claim,
damage or liability, in the aggregate, exceeds such holder's proceeds actually
received in respect of the securities sold by such holder of Registrable Stock.
(c) Subject to Section 5.3, if the indemnification provided for in this Section
5.5 from the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties'
<PAGE>
20
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.5 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
5.6. Selection of Managing Underwriters. The managing underwriter or
underwriters for any offering of Common Stock to be registered pursuant to
Section 5.1 shall be selected by the Stockholder initially requiring such
registration, provided, such managing underwriter or underwriters shall be
reasonably acceptable to the Corporation.
ARTICLE VI
PAYMENT OF FEES, EXPENSES AND INDEBTEDNESS,
AND REDEMPTION OF COMMON STOCK
6.1. Financing. (a) The Corporation shall use its reasonable best efforts as
soon as practicable to consummate a financing on or prior to the first
anniversary of the Closing Date (the "Financing") which shall be sufficient to
pay or redeem the instruments referred to below. If the Financing is effected,
the Corporation shall apply the proceeds thereof (net of expenses) to pay or
redeem as a appropriate the following instruments in the order of priority of
and on the basis set forth below:
(i) all fees and expenses of the Financing and all accrued fees and expenses
incurred in connection with the transactions contemplated by the Exchange
Agreement;
(ii) all indebtedness for borrowed money of the Corporation and its Subsidiaries
incurred on or after June 30, 1998;
(iii) all indebtedness for borrowed money of the Corporation and its
Subsidiaries (other than Service America Corporation and its Subsidiaries)
incurred prior to June 30, 1998;
(iv) indebtedness for borrowed money of Service America Corporation and its
Subsidiaries incurred prior to June 30, 1998 in an amount equal to 66.7% of the
amount of indebtedness repaid pursuant to clause (iii) above;
(v) all other indebtedness for borrowed money of Service America Corporation and
its Subsidiaries; and
<PAGE>
21
(vi) in accordance with the priorities and other terms set forth in Section 2.3
of the Exchange Agreement.
provided, however, that the Corporation shall not consummate the Financing if
the proceeds thereof are not sufficient to pay all of the amounts described in
the foregoing clauses (i), (ii), (iii) and (iv).
(b) If the Financing does occur and the proceeds thereof are
not sufficient to fully pay all of the amounts described or referred to in
clauses (i), (ii), (iii), (iv), (v) and (vi) of paragraph (a), GECC agrees to
convert all indebtedness owed by the Corporation and its Subsidiaries to GECC
and its Affiliates into a subordinated note of the Corporation with market terms
to be agreed between Blackstone and GECC (including the payment of interest at
an initial rate of 10% per year, increasing by .5% every six months, up to a
maximum interest rate of 14% per year), which terms shall be satisfactory to the
financial institutions providing and/or arranging such Financing. Such interest
shall be payable in cash unless objected to by such financial institutions.
ARTICLE VII
TERMINATION
This Agreement shall terminate, and thereby become null and
void, in full on the earliest date on which Blackstone and its Permitted
Transferees who agree to become a party to this Agreement do not collectively
own in the aggregate at least one-third of the number of shares of Common Stock
(subject to appropriate adjustment to reflect stock splits and similar events)
owned by Blackstone on the date hereof. A Stockholder shall cease to be deemed a
Stockholder hereunder, and shall no longer be a party to this Agreement, at such
time as such Stockholder ceases to own any Shares.
ARTICLE VIII
MISCELLANEOUS
8.1. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to principles of conflicts of law, except to the extent that the internal
laws of the State of Delaware are mandatorily applicable.
8.2. Entire Agreement; Amendments. This Agreement (including the exhibits
hereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may be modified or amended by the
affirmative vote of a majority in interest of the Stockholders hereto, provided,
however, that any proposed amendment that purports to treat a Stockholder
differently than the other Stockholders shall require the consent of such
Stockholder, and provided further, however, that this Agreement may not be
modified or amended except with
<PAGE>
22
the prior written consent of any Stockholder who owns on a fully diluted basis
an aggregate number of shares of Common Stock not less than 10% of the
outstanding shares of Common Stock.
8.3. Specific Performance. Due to the fact that the securities of the
Corporation cannot be readily purchased or sold in the open market, and for
other reasons, the parties shall be irreparably damaged in the event that this
Agreement is not specifically enforced. Without intending to limit the remedies
available to any of the parties hereto, each of the parties hereto agrees that
damages at law will be an insufficient remedy in the event such party violates
the terms of Articles IV, and each of the parties hereto further agrees that
each of the other parties hereto may apply for and have injunctive or other
equitable relief in any court of competent jurisdiction to restrain the breach
or threatened breach of, or otherwise specifically to enforce, any of such
party's agreements set forth in such Articles.
8.4. Representations. Each of the parties hereto represents that this Agreement
has been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
8.5. Waiver. No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature. Anything in this
Agreement to the contrary notwithstanding, any waiver, consent or other
instrument under or pursuant to this Agreement signed by, or binding upon, a
Stockholder shall be valid and binding upon any and all persons or entities
(other than the Corporation) who may, at any time, have or claim any rights
under or pursuant to this Agreement in respect of the Shares originally acquired
by such Stockholder.
8.6. Additional Securities Subject to Agreement. Each Stockholder agrees that
any other Shares which it shall hereafter acquire by means of a stock split,
stock dividend, distribution or otherwise (other than pursuant to a Public
Offering) shall be subject to the provisions of this Agreement to the same
extent as if held on the date hereof. If any of the Stockholders is issued any
warrants, rights, calls, options or other securities exchangeable or exercisable
for or convertible into Shares, the Stockholders agree to amend this Agreement
to the extent necessary to reflect such issuance in a manner consistent with the
terms and conditions hereof.
8.7. Other Stockholders' Agreements. None of the Stockholders shall enter into
any stockholder agreement or other arrangement of any kind with any Person with
respect to the Shares, and none of the Stockholders has previously entered into
such an agreement that remains in full force and effect as of the date hereof,
which is inconsistent with the provisions of this Agreement or which may impair
its ability to comply with this Agreement.
8.8. Successors, Assigns and Transferees. Except as otherwise provided herein,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and transferees permitted
hereunder (except for transferees that are transferred Shares pursuant to a
Public Offering, pursuant to Rule 144 under the Securities Act or pursuant to
Section 4.1(d) or 4.5), each of which shall agree in writing to become a party
to this Agreement and be bound to the same extent hereby as the transferor that
has transferred the
<PAGE>
23
Shares to such transferees; provided, that if a Stockholder transfers a portion
of its Shares to a transferee which is entitled to rights of the transferee
hereunder, then such transferee(s) of such transferor shall exercise such rights
as a single group with that transferor and its Affiliates.
8.9. Severability. If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
8.10. Headings. The section headings contained herein are for the purposes of
convenience of reference only and are not intended to define or limit the
contents of said sections.
8.11. Further Assurances. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
8.12. Gender. Whenever the pronouns "he" or "his" are used herein they shall
also be deemed to mean "she" or "hers" or "it" or "its" whenever applicable.
Words in the singular shall be read and construed as though in the plural and
words in the plural shall be construed as though in the singular in all cases
where they would so apply.
8.13. Notices. Any notice or other communication to be given hereunder by any
party to any other party shall be in writing and delivered in person or by
courier or by facsimile transmission or by mail, postage prepaid, as follows:
(a) if to the Corporation, to
VSI Acquisition II Corporation
c/o Volume Services, Inc.
201 East Main Street
Spartanburg, South Carolina 29306
Attention: Chief Operating Officer
Telecopier No.: (864) 598-8694
(b) if to a Stockholder, to the address
of such Stockholder as it appears on
Exhibit A hereto, or at such other
place as such Stockholder shall have
designated by notice as herein
provided to the Corporation.
8.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, but
all of which shall constitute but one and the same instrument.
<PAGE>
24
8.15. Additional Other Stockholder. Any Person who holds Shares or options
exercisable for Shares must become a party to this Agreement as an Other
Stockholder and must become bound hereby by entering into this Agreement or a
supplementary agreement with the Corporation agreeing to be bound by the terms
hereof. Each such supplementary agreement shall become effective upon its
execution by the Corporation and such Person, and it shall not require the
signature or consent of any other party hereto.
<PAGE>
25
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
VSI ACQUISITION II CORPORATION
By: /s/ Lawrence A. Hatch
-----------------------------
Name: Lawrence A. Hatch
Title: Chairman and CEO
RECREATIONAL SERVICES L.L.C.
By: /s/ Peter C. Keenoy
--------------------------------------------
Name: General Electric Capital Corporation,
as Managing Member
GENERAL ELECTRIC CAPITAL CORPORATION
(for purposes of Articles VI and VIII)
By: /s/ Peter C. Keenoy
--------------------------------------------
Name: Peter C. Keenoy
Title: Duly Authorized Signatory
<PAGE>
26
BCP VOLUME L.P.
By: Blackstone Capital Partners II
Merchant Banking Fund L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ Howard A. Lipson
--------------------------
Name: Howard A. Lipson
Title: Attorney-in-Fact
BCP OFFSHORE VOLUME L.P.
By: Blackstone Offshore Capital
Partners II L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ Howard A. Lipson
-------------------------
Name: Howard A. Lipson
Title: Attorney-in-Fact
By: Blackstone Service (Cayman)
LDC, as Administrative
General Partner
By: /s/ Howard A. Lipson
-------------------------
Name: Howard A. Lipson
Title: Attorney-in-Fact
<PAGE>
27
VSI MANAGEMENT DIRECT L.P.
By: VSI Management I L.L.C.
By: /s/ Lawrence A. Hatch
-------------------------------------
Larry A. Hatch,
as Managing Member
By: Blackstone Management Associates II
L.L.C., as Managing Member
By: /s/ Howard A. Lipson
---------------------------------
Howard A. Lipson
as Attorney-in-Fact
<PAGE>
EXHIBIT A
List of Stockholders
Name and Address Class and Number of Shares Owned
General Electric Capital Corporation 0
201 High Ridge Road
Stamford, CT 06927-5100
Attention: Peter Keenoy
Recreational Services L.L.C. 150.074
201 High Ridge Road
Stamford, CT 06927-5100
Attention: Peter Keenoy
BCP Volume L.P. 278.69539
c/o Blackstone Management
Associates II L.P.
118 North Bedford Road
Suite 300
Mount Kisco, New York 10549
Attention: Howard A. Lipson
BCP Offshore Volume L.P. 72.30019
c/o Blackstone Management
Associates II L.P.
118 North Bedford Road
Suite 300
Mount Kisco, New York 10549
Attention: Howard A. Lipson
VSI Management Direct L.P. 25.07772
c/o Volume Services, Inc.
201 East Main Street
Spartanburg, South Carolina 29306
Attention: CEO, Volume Services, Inc.
<PAGE>
Exhibit 10.3
================================================================================
CREDIT AGREEMENT
dated as of December 3, 1998
among
VOLUME SERVICES AMERICA, INC.,
VOLUME SERVICES AMERICA HOLDINGS, INC.,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Joint Lead Arranger and the Syndication Agent,
CHASE SECURITIES INC.,
as a Joint Lead Arranger,
CHASE MANHATTAN BANK DELAWARE,
as the Fronting Bank
and
THE CHASE MANHATTAN BANK,
as the Swing Line Lender and the Administrative Agent
--------------------------------------------------------
$235,000,000 SENIOR SECURED CREDIT FACILITIES
--------------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS.............................. 2
SECTION 1.01. Defined Terms .............................................. 2
SECTION 1.02. Terms Generally............................................. 26
ARTICLE II.
THE CREDITS ............................ 26
SECTION 2.01. Commitments................................................. 26
SECTION 2.02. Loans....................................................... 30
SECTION 2.03. Borrowing Procedure........................................ 31
SECTION 2.04. Evidence of Debt; Repayment of Loans........................ 32
SECTION 2.05. Fees........................................................ 33
SECTION 2.06. Interest on Loans........................................... 34
SECTION 2.07. Default Interest............................................ 34
SECTION 2.08. Alternate Rate of Interest.................................. 35
SECTION 2.09. Termination and Reduction of Commitments.................... 35
SECTION 2.10. Conversion and Continuation of Term Borrowings.............. 36
SECTION 2.11. Repayment of Term Borrowings................................ 37
SECTION 2.12. Prepayment.................................................. 38
SECTION 2.13. Reserve Requirements; Change in Circumstances............... 40
SECTION 2.14. Change in Legality.......................................... 42
SECTION 2.15. Indemnity................................................... 43
SECTION 2.16. Pro Rata Treatment.......................................... 43
SECTION 2.17. Sharing of Setoffs.......................................... 44
SECTION 2.18. Payments.................................................... 44
SECTION 2.19. Taxes....................................................... 45
SECTION 2.20. Letters of Credit; Generally................................ 48
ARTICLE III.
REPRESENTATIONS AND WARRANTIES.................... 53
SECTION 3.01. Organization; Powers........................................ 53
SECTION 3.02. Authorization............................................... 54
SECTION 3.03. Enforceability.............................................. 54
SECTION 3.04. Governmental Approvals...................................... 54
SECTION 3.05. Financial Statements........................................ 55
SECTION 3.06. No Material Adverse Change.................................. 55
SECTION 3.07. Title to Properties; Possession Under Leases................ 55
i
<PAGE>
SECTION 3.08. Subsidiaries................................................ 56
SECTION 3.09. Litigation; Compliance with Laws............................ 56
SECTION 3.10. Agreements.................................................. 56
SECTION 3.11. Federal Reserve Regulations................................. 57
SECTION 3.12. Investment Company; Public Utility Holding Company.......... 57
SECTION 3.13. Use of Proceeds............................................. 57
SECTION 3.14. Tax Returns................................................. 57
SECTION 3.15. No Material Misstatements................................... 58
SECTION 3.16. Employee Benefit Plans...................................... 58
SECTION 3.17. Environmental Matters....................................... 59
SECTION 3.18. Capitalization of Holdings and the Borrower................. 60
SECTION 3.19. Security Documents.......................................... 60
SECTION 3.20. Labor Matters............................................... 61
SECTION 3.21. Insurance................................................... 61
SECTION 3.22. Solvency.................................................... 62
SECTION 3.23. Year 2000 Issues............................................ 62
ARTICLE IV.
CONDITIONS OF LENDING......................... 63
SECTION 4.01. All Credit Events........................................... 63
SECTION 4.02. First Credit Event.......................................... 63
ARTICLE V.
AFFIRMATIVE COVENANTS......................... 67
SECTION 5.01. Existence; Businesses and Properties........................ 67
SECTION 5.02. Insurance................................................... 67
SECTION 5.03. Taxes ...................................................... 68
SECTION 5.04. Financial Statements, Reports, etc.......................... 68
SECTION 5.05. Litigation and Other Notices................................ 70
SECTION 5.06. Employee Benefits .......................................... 70
SECTION 5.07. Maintaining Records; Access; Inspections.................... 71
SECTION 5.08. Use of Proceeds............................................. 71
SECTION 5.09. Compliance with Environmental Laws.......................... 71
SECTION 5.10. Preparation of Environmental Reports........................ 71
SECTION 5.11. Further Assurances.......................................... 72
SECTION 5.12. Fiscal Year; Accounting..................................... 72
SECTION 5.13. Dividends................................................... 73
SECTION 5.14. Interest Rate Protection Agreements......................... 73
ARTICLE VI.
NEGATIVE COVENANTS.......................... 73
ii
<PAGE>
SECTION 6.01. Indebtedness................................................ 73
SECTION 6.02. Liens....................................................... 76
SECTION 6.03. Foreign Revenues............................................ 79
SECTION 6.04. Investments, Loans and Advances............................. 79
SECTION 6.05. Mergers; Consolidations; Sales of Assets; Acquisitions...... 81
SECTION 6.06. Dividends and Distributions................................. 82
SECTION 6.07. Transactions with Affiliates................................ 84
SECTION 6.08. Business of Holdings and its Subsidiaries................... 85
SECTION 6.09. Material Agreements......................................... 85
SECTION 6.10. Minimum Consolidated Cash Net Worth......................... 86
SECTION 6.11. Interest Coverage Ratio..................................... 87
SECTION 6.12. Leverage Ratio.............................................. 89
SECTION 6.13. Capital Stock of the Subsidiaries........................... 90
SECTION 6.14. Sale and Lease-Back Transactions............................ 90
ARTICLE VII.
EVENTS OF DEFAULT........................... 90
ARTICLE VIII.
THE AGENTS............................... 93
ARTICLE IX.
MISCELLANEOUS.............................. 96
SECTION 9.01. Notices..................................................... 96
SECTION 9.02. Survival of Agreement....................................... 96
SECTION 9.03. Binding Effect.............................................. 97
SECTION 9.04. Successors and Assigns...................................... 97
SECTION 9.05. Expenses; Indemnity........................................ 101
SECTION 9.06. Right of Setoff............................................ 103
SECTION 9.07. APPLICABLE LAW............................................. 103
SECTION 9.08. Waivers; Amendment......................................... 103
SECTION 9.09. Interest Rate Limitation................................... 105
SECTION 9.10. Entire Agreement........................................... 105
SECTION 9.11. WAIVER OF JURY TRIAL....................................... 105
SECTION 9.12. Severability............................................... 105
SECTION 9.13. Counterparts............................................... 106
SECTION 9.14. Headings................................................... 106
SECTION 9.15. Jurisdiction; Consent to Service of Process................ 106
SECTION 9.16. Confidentiality............................................ 106
SECTION 9.17. Release of Liens and Guarantees............................ 107
iii
<PAGE>
SCHEDULES
- ---------
1.01 Adjustments to EBITDA
2.20 Certain Existing Letters of Credit
3.08 Subsidiaries
3.09 Certain Litigation
3.14 Taxes
3.17 Certain Environmental Matters
3.18(a) Capitalization of Holdings and the Borrower
3.18(b) Options, etc.
3.20 Certain Labor Matters
3.21 Insurance
6.01 Certain Indebtedness
6.02 Certain Liens
6.04 Certain Investments
6.07 Certain Transactions with Affiliates
6.09 Certain Agreements
EXHIBITS:
- ---------
A Administrative Questionnaire
B Assignment and Acceptance
C Borrowing Request
D Collateral Account Agreement
E Indemnity, Subrogation and Contribution Agreement
F Intellectual Property Security Agreement
G Holdings Guarantee Agreement
H Pledge Agreement
I Security Agreement
J Subsidiary Guarantee Agreement
K-1 Opinion of Counsel of Holdings, the Borrower
and the Subsidiaries (General)
K-2 Opinion of Counsel of Holdings, the Borrower
and the Subsidiaries (Local)
iv
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of December 3, 1998, is
entered into by and among VOLUME SERVICES AMERICA, INC., a Delaware corporation
(the "Borrower"), VOLUME SERVICES AMERICA HOLDINGS, INC., a Delaware corporation
("Holdings"), CERTAIN FINANCIAL INSTITUTIONS, as the Lenders (as defined
herein), GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as a Joint Lead Arranger
and Syndication Agent (in such capacity, the "Syndication Agent"), CHASE
MANHATTAN BANK DELAWARE, as the Fronting Bank (together with its permitted
successors in such capacity, the "Fronting Bank") and THE CHASE MANHATTAN BANK
("Chase") as a Joint Lead Arranger, the Swingline Lender (as defined herein) and
the Administrative Agent (together with its permitted successors in such
capacity, the "Administrative Agent").
RECITALS:
WHEREAS, pursuant to a Share Exchange Agreement, dated as of
July 27, 1998 (the "Share Exchange Agreement"), among Holdings, as Buyer (as
defined therein), VSI Stockholders (as defined therein and as used herein, "VSI
Stockholders"), General Electric Capital Corporation, a New York corporation
("GECC"), as a Seller, and the other Sellers (as such term is defined therein
and as used herein, "Sellers"), Sellers have sold, and Buyer has purchased,
substantially all of the issued and outstanding capital stock, including
substantially all common and preferred stock and all warrants with respect to
the purchase thereof, of Service America Corporation, a Delaware corporation
("SAC") (all such capital stock of SAC, the "SAC Capital");
WHEREAS, in consideration of the sale and transfer of SAC
Capital, on the closing date under the Share Exchange Agreement Buyers paid to
GECC cash consideration of $1,000, issued to GECC the Promissory Note (as such
term is defined in the Share Exchange Agreement and herein referred to as the
"GECC Promissory Note"), and issued to Sellers the shares of Buyer Common Stock
(as such term is defined in the Share Exchange Agreement) as set forth in the
Share Exchange Agreement;
WHEREAS, pursuant to Section 6.1(a) of the Stockholders
Agreement, dated as of August 24, 1998, among Holdings, VSI Stockholders and
Sellers (the "Stockholders Agreement"), the Borrower shall, as of the Closing
Date, consummate certain elements of the Financing (as such term is defined
therein), including the payment of the fees and expenses incurred in connection
with the transactions contemplated by the Share Exchange Agreement (such
transactions are collectively referred to herein as the "Share Exchange") and
the repayment of certain existing Indebtedness of SAC and its Subsidiaries and
certain existing Indebtedness of the Borrower and its Subsidiaries, including
Volume Services, Inc., a Delaware corporation ("VSI"); and
WHEREAS, the Lenders have agreed to extend certain credit
facilities in an aggregate amount not to exceed $235,000,000 to the Borrower,
the proceeds of which will be used to refinance certain existing indebtedness of
VSI and SAC, to pay fees and expenses related
<PAGE>
2
to the Share Exchange and the other transaction contemplated hereby and for
working capital and other general corporate purposes of Holdings, the Borrower
and the Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Holdings, the Borrower,
the Lenders, the Fronting Bank and the Agents agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan, ABR Revolving Loan or
Swingline Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR
Term Loans.
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Borrowing for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Administrative Agent" as defined in the preamble hereto.
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified (it being understood any two or more investment funds that
invest in commercial loans and that are managed or advised by the same
investment advisor or by an Affiliate of such investment advisor shall be deemed
Affiliates).
"Agents" shall have the meaning given such term in Article
VIII.
<PAGE>
3
"Agents Fees" shall have the meaning given such term in
Section 2.05(c).
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate, including the failure of the Federal Reserve Bank of New
York to publish rates or the inability of the Administrative Agent to obtain
quotations in accordance with the terms thereof, the Alternate Base Rate shall
be determined without regard to clause (b) of the preceding sentence until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" shall mean (i) from the Closing Date until
the date of delivery of financial statements for the period ending June 29,
1999, 2.00%, per annum, for Revolving Loans and Tranche A Term Loans that are
ABR Loans and for Swingline Loans; and 3.00%, per annum, for Revolving Loans and
Tranche A Term Loans that are Eurodollar Rate Loans, and (ii) thereafter a
percentage, per annum, determined by reference to the Leverage Ratio in effect
from time to time, as set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Revolving Loans and Tranche A
Term Loans Revolving Loans and
that are ABR Loans; Tranche A Term Loans
Leverage Ratio Swingline Loans that are Eurodollar Loans
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
>3.5:1.00 2.00% 3.00%
- -----------------------------------------------------------=======================================
<3.5:1.00 1.75% 2.75%
-
>3.0:1.00
- --------------------------------------------------------------------------------------------------
<3.0:1.00 1.50% 2.50%
-
>2.5:1.00
- --------------------------------------------------------------------------------------------------
<2.5:1:00 1.25% 2.25%
-
==================================================================================================
</TABLE>
provided, (a) no change in the Applicable Margin shall be effective until three
Business Days after the date on which Administrative Agent receives the
financial statements and a Compliance Certificate pursuant to Section 5.03(c)
calculating the Leverage Ratio, and (b) for so long (but only for so long) as
Borrower has not submitted to Administrative Agent the information described in
the foregoing clause (a) when required under Section 5.03(c), the Applicable
Margin shall be determined as if the Leverage Ratio then in effect was greater
than 3.5:1.00.
"Applicable Percentage" of any Revolving Credit Lender at any
time shall mean the percentage of the Total Revolving Credit Commitment
represented by such Lender's
<PAGE>
4
Revolving Credit Commitment. In the event the Revolving Credit Commitments shall
have expired or been terminated, the Applicable Percentages shall be determined
on the basis of the Revolving Credit Commitments most recently in effect, but
giving effect to any assignments pursuant to Section 9.04.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent and the Borrower, in the form of Exhibit B or such other
form as shall be approved by the Administrative Agent.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" as defined in the preamble hereto.
"Borrowing" shall mean a group of Loans of a single Type under
a single Tranche or consisting solely of Revolving Loans or Swingline Loans and
made on a single date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C.
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which banks in New York City are authorized or required by law
to close; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any person in respect
of any period, the sum of (a) the aggregate of all expenditures incurred by such
person during such period that, in accordance with GAAP, are or should be
included in "purchase of property and equipment", "purchase of location contract
rights" or similar items reflected in the statement of cash flows of such person
and (b) to the extent not covered by clause (a) above, the aggregate of all
expenditures by such person to acquire by purchase or otherwise the business or
fixed assets of, or stock or other evidence of beneficial ownership of, any
other person (other than the Borrower or any person that is a Wholly-Owned
Subsidiary prior to such acquisition); provided, however, that Capital
Expenditures for the Borrower and the Subsidiaries shall not include (i)
expenditures to the extent they are made with the proceeds of the issuance of
Capital Stock of Holdings after the Closing Date (to the extent not previously
used to prepay Indebtedness (other than Revolving Loans or Swingline Loans),
make any investment or capital expenditure or otherwise for any purpose
resulting in a deduction to Excess Cash Flow in any fiscal year) or with funds
that if not so spent would constitute Net Proceeds under clause (a) of the
definition of "Net Proceeds", (ii) expenditures of proceeds of insurance
settlements, condemnation awards and other settlements in respect of lost,
destroyed, damaged or condemned assets, equipment or other property to the
extent such expenditures are made to replace or repair such lost, destroyed,
damaged or condemned assets, equipment or other property or otherwise to acquire
assets or properties useful in the business of the Borrower and the Subsidiaries
within 12 months of
<PAGE>
5
receipt of such proceeds, (iii) expenditures that are accounted for as capital
expenditures of such person and that actually are paid for by a third party
(excluding Holdings or any subsidiary thereof) and for which neither Holdings
nor any subsidiary thereof has provided or is required to provide or incur,
directly or indirectly, any consideration or obligation to such third party or
any other person (whether before, during or after such period), or (iv) the book
value of any asset owned by such person prior to or during such period to the
extent that such book value is included as a capital expenditure during such
period as a result of such person reusing or beginning to reuse such asset
during such period without a corresponding expenditure actually having been made
in such period, provided that any expenditure necessary in order to permit such
asset to be reused shall be included as a Capital Expenditure during the period
that such expenditure actually is made and such book value shall have been
included in Capital Expenditures when such asset was originally acquired.
"Capital Lease Obligations" of any person shall mean the
obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for purposes hereof, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock" of any person shall mean any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest, but excluding any debt
securities convertible into such equity.
"Cash Interest Expense" shall mean, with respect to Holdings,
the Borrower and the Subsidiaries on a consolidated basis for any period,
Interest Expense for such period less the sum of (a) pay-in-kind Interest
Expense, (b) to the extent included in Interest Expense, the amortization of
fees paid by Holdings, the Borrower or any Subsidiary on or prior to the Closing
Date in connection with the Transactions, and (c) the amortization of debt
discounts, if any, or fees in respect of Interest Rate Protection Agreements.
"CERCLA" shall have the meaning given such term in the
definition of "Environmental Law".
A "Change in Control" shall be deemed to have occurred if (a)
Holdings should fail to own directly, beneficially and of record, free and clear
of any and all Liens (other than Liens in favor of the Collateral Agent pursuant
to the Pledge Agreement), 100% of the issued and outstanding Capital Stock of
Borrower; (b) Borrower should fail to own directly, beneficially and of record,
free and clear of any and all Liens (other than Liens in favor of the Collateral
Agent pursuant to the Pledge Agreement), 100% of the issued and outstanding
Capital Stock of either of VSI or SAC (subject to Section 5.01(c)); (c) the
Funds, Fund Affiliates and the Management Investors (collectively, the
"Designated Persons") or any combination of Designated Persons shall cease to
own beneficially, directly or indirectly, in the aggregate shares representing
at least
<PAGE>
6
51% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of Holdings; (d) a majority of the seats (excluding
vacant seats) on the board of directors of Holdings shall at any time after the
Closing Date have been occupied by persons who were neither (i) nominated by any
one or more Designated Persons or by a majority of the board of directors of
Holdings, nor (ii) appointed by directors so nominated; or (e) a change in
control with respect to Holdings, or the Borrower (or similar event, however
denominated) shall occur under and as defined in any indenture or agreement in
respect of Indebtedness in an aggregate outstanding principal amount in excess
of $5,000,000 to which Holdings, the Borrower or any Subsidiary is party. For
purposes of clause (c) of this definition, the term "Designated Person" shall be
deemed to include any other holder or holders of shares of Holdings having
ordinary voting power if Holdings, a Fund or any Fund Affiliate shall have the
power to vote (or cause to be voted at its discretion), pursuant to contract,
irrevocable proxy or otherwise, the shares held by such holder.
"Closing Date" shall mean a single date on which the initial
Credit Event occurs hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document.
"Collateral Account" shall have the meaning given such term in
the Collateral Account Agreement.
"Collateral Account Agreement" shall mean the Collateral
Account Agreement, substantially in the form of Exhibit D, between the Borrower
and the Collateral Agent for the benefit of the Secured Parties.
"Commitments" shall mean, with respect to any Lender, such
Lender's Revolving Credit Commitment, Term Commitments and Swingline Loan
Commitment and, with respect to the Fronting Bank, its Letter of Credit
Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 2.05(a).
"Committed Capital Expenditure Deposit" shall mean any amount
deposited by the Borrower or any Subsidiary party to the Collateral Account
Agreement in the Collateral Account (including, without limitation, amounts
deposited in the Collateral Account under any predecessor credit agreement) for
the sole purpose of funding (a) Capital Expenditures required to be made under a
then existing Service Contract or (b) Capital Expenditures the Borrower or a
Subsidiary intends to make within 12 months of the deposit of such amount and in
respect of which the Administrative Agent shall have received a certificate of a
Responsible Officer to such effect.
<PAGE>
7
"Consolidated Cash Net Worth" shall mean, with respect to
Holdings, the Borrower and the Subsidiaries on a consolidated basis as of the
end of any fiscal quarter, the sum of $60,300,000 plus EBITDA from the first day
of the last fiscal quarter of 1998 through the end of the applicable fiscal
quarter.
"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning given such term in
Article IV.
"Current Assets" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets (other than cash and Permitted Investments or other
cash equivalents) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Holdings, the Borrower and the Subsidiaries as
current assets at such date of determination.
"Current Liabilities" shall mean, with respect to Holdings,
the Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all liabilities that would, in accordance with GAAP, be
classified on a consolidated balance sheet of Holdings, the Borrower and the
Subsidiaries as current liabilities at such date of determination, other than
(a) the current portion of long term debt, (b) accruals of Interest Expense
(excluding Interest Expense that is due and unpaid), (c) Revolving Loans or
Swingline Loans classified as current, (d) accruals of transaction costs
resulting from the Transactions and (e) accruals of any costs or expenses
related to severance or termination of employees prior to the date hereof.
"Cut Off Date" shall have the meaning given such term in
Section 2.12(g).
"Debt Service" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis for any period, Interest
Expense for such period plus scheduled principal amortization of Total Debt for
such period (whether or not such payments are made).
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States
of America.
"EBITDA" shall mean, with respect to Holdings, the Borrower
and the Subsidiaries on a consolidated basis for any period, the consolidated
net income of Holdings, the Borrower and the Subsidiaries for such period plus,
to the extent deducted in computing such consolidated net income, without
duplication, the sum of (a) income tax expense and withholding tax expense
incurred in connection with cross border transactions involving non-domestic
Subsidiaries, (b) interest expense, (c) depreciation and amortization expense,
(d) any fees and
<PAGE>
8
expenses incurred in connection with the Transactions, and any special charges
or extraordinary or non-recurring losses related to the Transactions incurred
within twelve months of the Closing Date, (e) monitoring and management fees
paid to the Funds and/or any Fund Affiliates and GECC or its Affiliates, and (f)
other noncash items reducing consolidated net income, minus, to the extent added
in computing such consolidated net income, without duplication, (i) interest
income, (ii) extraordinary or non-recurring gains and (iii) other noncash items
increasing consolidated net income; provided that, for purposes of calculating
EBITDA for any period ending prior to the end of the first four full fiscal
quarters ending after the Closing Date, the adjustments to EBITDA set forth in
Schedule 1.01 shall be applied except for purposes of calculating Consolidated
Cash Net Worth; provided further, that, for purposes of calculating EBITDA
(other than Pro Forma Contract EBITDA), there shall be excluded therefrom the
income (or loss) of any person other than a Wholly-Owned Subsidiary of the
Borrower, except to the extent of the amount of dividends or other distributions
actually paid to the Borrower or any of its Wholly-Owned Subsidiaries by such
person during the applicable period.
"environment" shall mean ambient air, surface water and
groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any
Environmental Law.
"Environmental Claim" shall mean any written accusation,
allegation, notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the threat,
the existence, or the continuation of the existence of a Release (including
sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to
any Hazardous Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or (d) the violation
or alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present
and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the protection of the environment, preservation or reclamation of natural
resources, the treatment, storage, disposal, Release or threatened Release of
any Hazardous Material or to human health or safety (in either case as relating
to the environment), including the Hazardous Materials Transportation Act, 49
U.S.C. ss.ss. 1801 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 et seq. ("CERCLA"), the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
ss.ss. 6901, et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. ss.ss. 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C.
ss.ss. 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss.
2601 et seq., the Emergency Planning and Community Right-
<PAGE>
9
to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the National Environmental
Policy Act of 1975, 42 U.S.C. ss.ss. 4321 et seq., the Safe Drinking Water Act
of 1974, as amended, 42 U.S.C. ss.ss. 300(f) et seq., and any similar or
implementing state or foreign law, and all amendments or regulations promulgated
thereunder.
"Environmental Permit" shall mean any permit, approval,
authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code, or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Term Loan or
Eurodollar Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Event of Default" shall have the meaning given such term in
Article VII.
"Excess Cash Flow" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis for any fiscal year, the
greater of (x) EBITDA of Holdings, the Borrower and the Subsidiaries on a
consolidated basis for such fiscal year, minus, without duplication, (a) Debt
Service for such fiscal year, (b) Capital Expenditures (including expenditures
paid in cash which are excluded from the definition of "Capital Expenditures"
pursuant to clause (ii) thereof to the extent the applicable settlements were
included in EBITDA) by the Borrower and the Subsidiaries on a consolidated basis
during such fiscal year which are paid in cash, the aggregate amount of
Committed Capital Expenditure Deposits made during such fiscal year and, to the
extent not included in Capital Expenditures, the aggregate consideration paid in
cash during such fiscal year in respect of Permitted Business Acquisitions and
other Investments permitted under Section 6.04 to the extent not otherwise
deducted in calculating EBITDA, (c) taxes paid in cash by Holdings, the Borrower
and the Subsidiaries on a consolidated basis during such fiscal year, including
income tax expense and withholding tax
<PAGE>
10
expense incurred in connection with cross border transactions involving
non-domestic Subsidiaries, (d) an amount equal to any increase in Working
Capital of Holdings, the Borrower and the Subsidiaries for such fiscal year, (e)
monitoring and management fees paid to the Funds and/or any Fund Affiliates
and/or GECC or its Affiliates during such fiscal year, (f) cash expenditures
made in respect of Interest Rate Protection Agreements during such fiscal year,
to the extent not reflected in the computation of EBITDA, (g) permitted
dividends or repurchases of its Capital Stock paid in cash by Holdings or the
Borrower or any Subsidiary during such fiscal year and permitted dividends paid
by any Subsidiary to any person other than the Borrower or any of its other
Subsidiaries during such fiscal year, in each case in accordance with Section
6.06, (h) amounts paid in cash during such fiscal year on account of items that
were accounted for as noncash reductions of consolidated net income of Holdings,
the Borrower and the Subsidiaries in the current or a prior period, (i) special
charges or any extraordinary or non-recurring loss paid in cash during such
fiscal year to the extent not otherwise deducted in calculating EBITDA, (j) to
the extent not deducted in the computation of Net Proceeds in respect of any
asset disposition or condemnation giving rise thereto, mandatory prepayments of
Indebtedness (other than Indebtedness created hereunder or under any other Loan
Document), (k) any voluntary prepayments of Term Loans during such fiscal year
and (l) to the extent included in determining EBITDA, all items that did not
result from a cash payment to Holdings, the Borrower and the Subsidiaries on a
consolidated basis during such fiscal year plus, without duplication, (i) an
amount equal to any decrease in Working Capital for such fiscal year, (ii) all
proceeds received during such fiscal year of Capital Lease Obligations, purchase
money Indebtedness, Sale and Lease-Back Transactions pursuant to Section 6.14
and any other Indebtedness to the extent used to finance any Capital Expenditure
(other than Indebtedness under this Agreement to the extent there is no
corresponding deduction to Excess Cash Flow above in respect of the use of such
Borrowings), (iii) all amounts referred to in (b) above to the extent funded
with the proceeds of the issuance of Capital Stock of Holdings after the Closing
Date (to the extent not previously used to prepay Indebtedness (other than
Revolving Loans or Swingline Loans), make any investment or capital expenditure
or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any
fiscal year) or any amount that would have constituted Net Proceeds under clause
(a) of the definition of "Net Proceeds" if not so spent, in each case to the
extent there is a corresponding deduction to Excess Cash Flow above, (iv) cash
payments received in respect of Interest Rate Protection Agreements during such
fiscal year to the extent not included in the computation of EBITDA, (v) any
extraordinary or non-recurring gain realized in cash during such fiscal year
(except to the extent such gain is subject to Section 2.12(c)), (vi) to the
extent deducted in the computation of EBITDA, interest income, (vii) all
Termination Payments made to any of Holdings, the Borrower or the Subsidiaries
during such fiscal year, (viii) the aggregate amount released to the Borrower
from the Collateral Account during such fiscal year, (ix) the amount of the
Excess Cash Flow Reserve as of the date on which Excess Cash Flow is paid for
such year pursuant to Section 2.12(d), and (x) to the extent subtracted in
determining EBITDA, all items which did not result from a cash payment by
Holdings, the Borrower and the Subsidiaries on a consolidated basis during such
fiscal year and (y) the Excess Cash Flow Reserve as of the date on which Excess
Cash Flow is paid for such year pursuant to Section 2.12(d).
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11
"Excess Cash Flow Reserve" shall mean at any time the
aggregate amount contained in the Collateral Account at such time representing
Committed Capital Expenditure Deposits made under clause (b) of the definition
of Committed Capital Expenditure Deposit but not used to fund Capital
Expenditures within 12 months of deposit.
"Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Fees" shall mean the Commitment Fees, the L/C Participation
Fees, the Fronting Bank Fees and the Agents Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer, Assistant Treasurer
or Controller of such corporation.
"Fronting Bank" as defined in the preamble hereto.
"Fronting Bank Fees" shall have the meaning given to such term
in Section 2.05(b).
"Funds" shall mean Blackstone Capital Partners II Merchant
Banking Fund L.P., a Delaware limited partnership and BCP Offshore Volume L.P.,
a Cayman Island exempted limited partnership.
"Fund Affiliates" shall mean each Affiliate of a Fund that is
not an operating company or Controlled by an operating company and each general
partner of a Fund or any Affiliate of a Fund who is a partner or employee of The
Blackstone Group L.P.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time in the United States or, when reference is made to
another jurisdiction, generally accepted accounting principles in such
jurisdiction applied on a consistent basis.
"GECC" as defined in the recitals hereto.
"GECC Promissory Note " as defined in the recitals hereto.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body or, in the case of references to "Governmental Authority" in
Article II and Section 9.16, the National Association of Insurance
Commissioners.
"GSCP" as defined in the preamble hereto.
<PAGE>
12
"Guarantee" of or by any person shall mean (a) any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay or
otherwise) or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase or lease
property, securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (iii) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or (iv) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; provided, however,
that the term "Guarantee" shall not include (i) endorsements for collection or
deposit, in either case in the ordinary course of business, or customary and
reasonable indemnity obligations in effect on the Closing Date or entered into
in connection with any acquisition or disposition of assets permitted under this
Agreement or (ii) reasonable and customary indemnity obligations arising under
Service Contracts in the ordinary course of business.
"Guarantee Agreements" shall mean the Holdings Guarantee
Agreement and the Subsidiary Guarantee Agreement.
"Guarantors" shall mean Holdings and the Subsidiary
Guarantors.
"Hazardous Materials" shall mean any material meeting the
definition of a "hazardous substance" in CERCLA 42 U.S.C. ss.9601(14) and all
explosive or radioactive substances or wastes, toxic substances or wastes,
pollutants, solid, liquid or gaseous wastes, including petroleum, petroleum
distillates or fractions or residues, asbestos or asbestos-containing materials,
polychlorinated biphenyls ("PCBs") or materials or equipment containing PCBs,
radon gas, infectious or medical wastes and all other substances or wastes of
any nature regulated pursuant to any Environmental Law, or that reasonably could
form the basis of an Environmental Claim.
"Holdings" as defined in the preamble hereto.
"Holdings Guarantee Agreement" shall mean the Holdings
Guarantee Agreement, substantially in the form of Exhibit G, made by Holdings in
favor of the Collateral Agent for the benefit of the Secured Parties.
"Indebtedness" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such person evidenced
by bonds, debentures, notes or similar instruments, (c) all
<PAGE>
13
obligations of such person upon which interest charges are customarily paid
(other than trade payables incurred in the ordinary course of business), (d) all
obligations of such person under conditional sale or other title retention
agreements relating to property or assets purchased by such person, (e) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (other than trade liabilities incurred and outstanding in
the ordinary course of business), (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all payments that such person would have to make
in the event of an early termination, on the date Indebtedness of such person is
being determined, in respect of outstanding interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (j) all obligations of such person as an account party in
respect of letters of credit and bankers' acceptances. The Indebtedness of any
person shall include the Indebtedness of any partnership in which such person is
a general partner, other than to the extent that the instrument or agreement
evidencing such Indebtedness expressly limits the liability of such person in
respect thereof; provided that, if the sole asset of such person is its general
partnership interest in such partnership, the amount of such Indebtedness shall
be deemed equal to the value of such general partnership interest and the amount
of any Indebtedness in respect of any Guarantee of such partnership Indebtedness
shall be limited to the same extent as such Guarantee may be limited.
Indebtedness shall not include any (i) obligation of the Borrower or any of the
Subsidiaries to make minimum payments or to provide minimum or guaranteed
commissions under any Permitted Service Contract or (ii) other reasonable and
customary indemnity obligations.
"Indemnity, Subrogation and Contribution Agreement" shall mean
the Indemnity, Subrogation and Contribution Agreement, substantially in the form
of Exhibit E, among the Borrower, the Subsidiary Guarantors and the Collateral
Agent.
"Information Memorandum" shall have the meaning given such
term in Section 3.15.
"Installment Date" shall have the meaning given such term in
Section 2.11.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement, substantially in the form of Exhibit
F, among Holdings, the Borrower and certain Subsidiaries and the Collateral
Agent for the benefit of the Secured Parties.
"Interest Coverage Ratio" shall have the meaning given such
term in Section 6.11.
"Interest Expense" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis for any period, the sum of
(a) gross interest expense of Holdings, the Borrower and the Subsidiaries for
such period on a consolidated basis, including (i) the amortization of debt
discounts, (ii) the amortization of all fees (including fees with respect to
interest rate protection agreements) payable in connection with the incurrence
of Indebtedness
<PAGE>
14
to the extent included in interest expense and (iii) the portion of any payments
or accruals with respect to Capital Lease Obligations allocable to interest
expense and (b) capitalized interest of Holdings, the Borrower and the
Subsidiaries on a consolidated basis minus (c) gross interest income of Holdings
and its Subsidiaries on a consolidated basis for such period. For purposes of
the foregoing, gross interest expense shall be determined after giving effect to
any net payments made or received by the Borrower and the Subsidiaries with
respect to interest rate protection agreements.
"Interest Payment Date" shall mean, (a) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day that would have
been an Interest Payment Date had successive Interest Periods of three months'
duration been applicable to such Borrowing, and, in addition, the date of any
refinancing or conversion of such Borrowing with or to a Borrowing of a
different Type and (b) with respect to any ABR Loan, the last day of each
calendar quarter, commencing March 31, 1999.
"Interest Period" shall mean as to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter, as the Borrower may elect, and the date any
Eurodollar Borrowing is converted to an ABR Borrowing in accordance with Section
2.10 or repaid or prepaid in accordance with Section 2.11 or 2.12; provided,
however, that if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest
rate agreement or arrangement approved by the Administrative Agent (such
approval not to be unreasonably withheld) entered into by the Borrower or a
Subsidiary and designed to protect against fluctuations in interest rates.
"Investors" shall mean the Funds and certain other investors
designated by the Funds (and consisting principally of Fund Affiliates), GECC
and its Affiliates and the Management Investors (acting directly or through
affiliated entities).
"L/C Participation Fee" shall have the meaning given such term
in Section 2.05(b).
"Lender" means each financial institution listed on the
signature pages hereto as a Lender, together with each such institution's
successors and permitted assigns; provided, the term "Lenders" shall also
include each Swing Line Lender and each Fronting Bank unless the context
otherwise requires.
<PAGE>
15
"Letter of Credit" shall mean any letter of credit issued
pursuant to Section 2.20.
"Letter of Credit Commitment" shall mean the commitment of the
Fronting Bank to issue Letters of Credit pursuant to Section 2.20(a).
"Letter of Credit Disbursement" shall mean a payment or
disbursement made by the Fronting Bank pursuant to a Letter of Credit.
"Letter of Credit Exposure" shall mean at any time the sum of
(a) the aggregate undrawn amount of all outstanding Letters of Credit at such
time plus (b) the aggregate principal amount of all Letter of Credit
Disbursements that have not yet been reimbursed at such time. The Letter of
Credit Exposure of any Revolving Credit Lender at any time shall mean its
Applicable Percentage of the aggregate Letter of Credit Exposure at such time.
"Leverage Ratio" shall have the meaning given such term in
Section 6.12.
"LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at
which dollar deposits approximately equal in principal amount to the
Administrative Agent's portion of such Eurodollar Borrowing (or, if the
Administrative Agent shall not have any portion of such Borrowing, the average
amount of the portions of each Lender having any portion of such Borrowing) and
for a maturity comparable to the Interest Period of such Eurodollar Borrowing
are offered to the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Notes, the
Letters of Credit, the Guarantee Agreements, the Security Documents and the
Indemnity, Subrogation and Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the
Swingline Loans.
"Management Investors" shall mean members of management of the
Borrower, VSI and SAC holding, directly or indirectly, voting stock of Holdings
or options to acquire such stock on the Closing Date.
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16
"Margin Stock" shall have the meaning given such term in
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse
effect on the assets, business, properties, financial condition or results of
operations of Holdings, the Borrower and the Subsidiaries, taken as a whole, (b)
a material impairment of the ability of Holdings, the Borrower or any Subsidiary
to perform any of its material obligations under any Loan Document to which it
is or will be a party or (c) an impairment of the validity or enforceability of,
or a material impairment of the material rights, remedies or benefits available
to the Lenders, the Fronting Bank, the Administrative Agent or the Collateral
Agent under, any Loan Document.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) is making or accruing an obligation
to make contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Net Proceeds" shall mean (a) 100% of the cash proceeds
actually received by Holdings, the Borrower or any Subsidiary (including any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment receivable or
otherwise and including casualty insurance settlements and condemnation awards,
but only as and when received), net of (i) attorneys' fees, accountants' fees,
investment banking fees, survey costs, title insurance premiums, and related
search and recording charges, transfer taxes, deed or mortgage recording taxes,
required debt payments (other than pursuant hereto), other customary expenses
and brokerage, consultant and other customary fees actually incurred in
connection therewith and (ii) taxes paid or payable as a result thereof
(including withholding taxes incurred in connection with cross-border
transactions, if applicable, and including taxes estimated by the Borrower to be
payable as a result thereof or as a result of such transactions), from any loss,
damage, destruction or condemnation of, or any sale, transfer or other
disposition (including any sale and leaseback of assets and any mortgage or
lease of real property) to any person of any asset or assets of Holdings, the
Borrower or any Subsidiary (other than those pursuant to Sections 6.05(a),
6.05(b), 6.05(c), 6.05(d), 6.05(e), 6.05(g), 6.05(h) and 6.14 or any other
financing subject to clause (ii) of the definition of "Excess Cash Flow"),
provided that if the Borrower shall deliver a certificate of a Responsible
Officer to the Administrative Agent promptly following receipt of any such
proceeds setting forth the Borrower's intention to use any portion of such
proceeds to purchase assets useful in the business of the Borrower and the
Subsidiaries (including by way of a purchase of Capital Stock of any person
holding such assets) within 12 months of such receipt, such portion of such
proceeds shall not constitute Net Proceeds except to the extent not so used
within such 12-month period, and provided further that (x) no proceeds realized
in a single transaction or series of related transactions shall constitute Net
Proceeds unless such proceeds shall exceed $250,000 and (y) no such proceeds
shall constitute Net Proceeds until the aggregate amount of all such proceeds
received after the Closing Date shall exceed $1,000,000, (b) 100% of the cash
proceeds from the incurrence, issuance or sale by Holdings, the Borrower or any
Subsidiary of any Indebtedness
<PAGE>
17
(other than Indebtedness permitted pursuant to Section 6.01), net of all taxes
(including withholding taxes incurred in connection with cross-border
transactions, if applicable, and including taxes estimated by the Borrower to be
payable as a result thereof or as a result of such transactions) and fees
(including investment banking fees), commissions, costs and other expenses
incurred in connection with such issuance or sale and (c) 50% of the cash
proceeds from the issuance or the sale by Holdings of any equity security (other
than (i) sales of Capital Stock of Holdings to directors, officers or employees
of Holdings, the Borrower or any Subsidiary in connection with permitted
employee compensation and incentive arrangements and (ii) Capital Stock used to
finance investments permitted by Section 6.04(o) and (iii) sales of Capital
Stock contemplated by Section 6.04(f)), net of all taxes and fees (including
investment banking fees), commissions, costs and other expenses incurred in
connection with such issuance or sale. For purposes of calculating "Net
Proceeds", fees, commissions and other costs and expenses payable to Holdings or
the Borrower or any Affiliate of any of them shall be disregarded, except for
financial advisory fees customary in type and amount paid to Affiliates of The
Blackstone Group L.P. or to GECC or its Affiliates.
"Non-Wholly-Owned Subsidiary" shall mean any Subsidiary other
than a Wholly-Owned Subsidiary.
"Non-Wholly-Owned Subsidiary Expenditures" shall mean any
amount expended pursuant to Section 6.01(g)(iii), 6.04(a)(vii) or 6.05(d)(ii) or
with respect to any acquisition of a Non-Wholly-Owned Subsidiary or joint
venture.
"Notes" shall mean any promissory note of the Borrower issued
pursuant to this Agreement.
"Obligations" shall mean all obligations defined as
"Obligations" in the Guarantee Agreements and the Security Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Permitted Business Acquisition" shall mean any acquisition of
all or substantially all the assets of, or shares or other equity interests in,
a person or division or line of business of a person (or any subsequent
investment made in a previously acquired Permitted Business Acquisition) if
immediately after giving effect thereto: (a) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (b) all
transactions related thereto shall be consummated in accordance with applicable
laws, (c) at least 90% of the Capital Stock of any acquired or newly formed
corporation, partnership, association or other business entity are owned
directly by the Borrower or a domestic Subsidiary and all actions required to be
taken, if any, with respect to such acquired or newly formed subsidiary under
Section 5.11 shall have been taken and (d)(i) Holdings, the Borrower and the
Subsidiaries shall be in compliance, on a pro forma basis after giving effect to
such acquisition or formation, with the covenants contained in Sections 6.10,
6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal
quarter of Holdings, the Borrower and the Subsidiaries as if such acquisition
had occurred on the
<PAGE>
18
first day of each relevant period for testing such compliance, and the Borrower
shall have delivered to the Administrative Agent an officers' certificate to
such effect, together with all relevant financial information for such
subsidiary or assets, and (ii) any acquired or newly formed subsidiary shall not
be liable for any Indebtedness (except for Indebtedness permitted by Section
6.01).
"Permitted Investments" shall mean: (a) direct obligations of
the United States of America or any agency thereof or obligations guaranteed by
the United States of America or any agency thereof; (b) time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250,000,000 (or the
foreign currency equivalent thereof) and whose long-term debt, or whose parent
holding company's long-term debt, is rated A (or such similar equivalent rating
or higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act of 1933, as amended)); (c)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with a bank
meeting the qualifications described in clause (b) above; (d) commercial paper,
maturing not more than 180 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Borrower) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of P-1 (or higher) according to Moody's, or A-1 (or
higher) according to S&P; (e) securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least A by S&P or A by
Moody's; (f) mutual funds whose investment guidelines restrict such funds'
investments to those satisfying the provisions of clauses (a) through (e) above;
and (g) time deposit accounts, certificates of deposit and money market deposits
in an aggregate face amount not in excess of 1/2 of 1% of total assets of the
Borrower and the Subsidiaries, on a consolidated basis, as of the end of the
Borrower's most recently completed fiscal year.
"Permitted Service Contract" shall mean any Service Contract
if, in the case of a new Service Contract, immediately after its becoming
effective or, in the case of a Service Contract being renewed, immediately after
the effectiveness of such renewal: (a) no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (b) all transactions
related thereto and performance thereunder shall be consummated in accordance
with applicable laws, (c) all rights in such Service Contract are owned directly
by the Borrower or a Subsidiary or a joint venture in which the Borrower or a
Subsidiary has at least a 50% interest, (d) if the Subsidiary party thereto
shall not be a domestic Subsidiary or if the obligor under such Service Contract
shall not be a person located in the United States or if substantially all the
activities and obligations under such Service Contract shall not be performed in
the United States, the aggregate amount of Capital Expenditures projected to be
incurred under such Service Contract when taken together with the aggregate
amount of Capital Expenditures incurred or projected to be incurred under all
such Service Contracts and the aggregate amount of all
<PAGE>
19
investments made under Section 6.04(a)(vi) shall not exceed $20,000,000, (e)
Holdings, the Borrower and the Subsidiaries shall be in compliance on a pro
forma basis with the covenants contained in Sections 6.10, 6.11 and 6.12, (i)
recomputed as at the last day of the most recently ended fiscal quarter for
which financial statements shall have been delivered under Section 5.04(a) or
(b) and (ii) computed as at the last day of each of the next three succeeding
fiscal quarters, in each case (A) as if operations had commenced under such
Service Contract on the first day of such four quarter period and all payments
required to be made by any of Holdings, the Borrower and the Subsidiaries under
such Service Contract had been made on such first day and (B) giving effect to
the Borrower's good faith projection of revenues and expenses under such Service
Contract for each of the four quarters commencing with the first full fiscal
quarter during which operations are projected to be conducted under such Service
Contract and the Borrower's good faith projection of its financial position and
results of operations for each of the three fiscal quarters following the most
recently ended fiscal quarter for which financial statements shall have been
delivered under Section 5.04(a) or (b), all of which projections for Service
Contracts involving Capital Expenditures in excess of $1,000,000 shall be
reasonably satisfactory to the Administrative Agent, and, in the case of each
Service Contract involving Capital Expenditures in excess of $5,000,000, the
Borrower shall have delivered to the Administrative Agent an officers'
certificate affirming such compliance, together with all relevant financial
information for such Service Contract, and (f) the first date on which
operations are projected to be conducted under such Service Contract shall not
be later than the first anniversary of (or with respect to Service Contracts
involving Capital Expenditures of up to $5,000,000 in the aggregate, 18 months
after) the date on which the first payment is to be made by any of Holdings, the
Borrower or any Subsidiary under such Service Contract.
"person" shall mean any natural person, corporation, business
trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement,
substantially in the form of Exhibit H, among Holdings, the Borrower, certain
Subsidiaries and the Collateral Agent for the benefit of the Secured Parties.
"Pledged Stock" shall have the meaning given such term in the
Pledge Agreement.
"Prepayment Date" shall have the meaning given such term in
Section 2.12(g).
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective.
<PAGE>
20
"Pro Forma Contract EBITDA" shall mean, as at the last day of
any quarter with respect to any new Permitted Service Contract at a venue with
respect to which neither the Borrower nor any Subsidiary has previously
maintained a Service Contract under which (a) any payment has been made by
Holdings, the Borrower or any Subsidiary funded in whole or in part by the
proceeds of Indebtedness included in Total Debt and (b) operations have not yet
commenced or were commenced in a quarter not earlier than the third quarter
preceding the quarter in which the date of determination shall occur, an amount
equal to the Borrower's good faith projection (which projection shall be made
with respect to each such Service Contract involving Capital Expenditures in
excess of $1,000,000 in connection with the preparation of, and shall be
reflected in, each certificate to be delivered under Section 5.04(c) and shall
be satisfactory to the Administrative Agent) of additional EBITDA to be
generated under such Service Contract during the portion of the first four
fiscal quarters of operations under such Service Contract that has not been
completed as at such last day, provided that (i) in the event not all of the
payments required under such Service Contract by Holdings, the Borrower and the
Subsidiaries have been made as at the date of determination, the amount of Pro
Forma Contract EBITDA at such date in respect of such Service Contract shall be
equal to the amount determined as aforesaid multiplied by a fraction the
numerator of which shall be the amount of such payments that have been made on
or prior to such date and the denominator of which shall be the total amount of
such payments required under such Service Contract and (ii) in the event the
first anniversary of the date on which the first payment under any such Service
Contract is made by any of Holdings, the Borrower or any Subsidiary shall occur
prior to the first date on which operations are conducted under such Service
Contract, Pro Forma Contract EBITDA in respect of such Service Contract shall at
all times thereafter equal zero. Operations shall be deemed not to have been
conducted under any Service Contract at any time that the only operations
conducted thereunder shall have been operations conducted at an interim
location. For purposes of calculating the Interest Coverage Ratio. the first
four fiscal quarters of operations shall commence with the fiscal quarter
following the quarter in which the payment referred to in clause (a) above is
made if such payment is made after the 30th day of such quarter.
"Projections" shall have the meaning given such term in
Section 3.05.
"Register" shall have the meaning given such term in Section
9.04(d).
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Release" shall have the meaning given such term in CERCLA, 42
U.S.C. ss.9601(22).
"Remedial Action" shall mean (a) "remedial action" as such
term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other
actions, including studies and investigations, required by any Governmental
Authority or voluntarily undertaken to: (i) clean
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21
up, remove, treat, abate or in any other way respond to any Hazardous Material
in the environment; or (ii) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having
Loans (other than Swingline Loans), Letter of Credit Exposures, Swingline
Exposures and unused Commitments (excluding commitments to issue Letters of
Credit or make Swingline Loans) representing at least 51% of the sum of all
Loans (other than Swingline Loans) outstanding, Letter of Credit Exposures,
Swingline Exposures and unused Commitments (excluding commitments to issue
Letters of Credit or make Swingline Loans) at such time.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised
of Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth in Section 2.01(b) or in the Assignment and Acceptance pursuant to which
such Lender assumed its Revolving Credit Commitment, as applicable, as the same
may be increased pursuant to Section 2.01(b)(ii) or may be reduced from time to
time pursuant to Section 2.09 and pursuant to assignments by such Lender
pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any
Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans of such Lender plus the amount at such time of such
Lender's Applicable Percentage of the Letter of Credit Exposure plus the amount
at such time of such Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.
"Revolving Credit Maturity Date" shall mean the sixth
anniversary of the Closing Date.
"Revolving Loans" shall mean the revolving loans made by the
Lenders to the Borrower pursuant to Section 2.01(b). Each Revolving Loan shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan.
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22
"SAC" as defined in the recitals hereto.
"SAC Capital" as defined in the recitals hereto.
"Sale and Lease-Back Transaction" shall have the meaning given
such term in Section 6.14.
"S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
"Secured Parties" shall have the meaning given such term in
the Security Agreement.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit I, among Holdings, the Borrower, the
Subsidiaries and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Security Agreement, the
Intellectual Property Security Agreement, the Pledge Agreement, and each of the
security agreements and other instruments and documents executed and delivered
pursuant to any of the foregoing or pursuant to Section 5.11.
"Sellers" as defined in the recitals hereto.
"Service Contract" shall mean any contract for the provision
of services to which the Borrower or any Subsidiary is a party that does not
result in such party engaging in any business activity other than the business
currently conducted by it and business activities reasonably incidental or
related thereto.
"Share Exchange" as defined in the recital hereto.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority, domestic
or foreign, to which the Administrative Agent is subject with respect to
Eurocurrency Liabilities (as defined in Regulation D of the Board) or other
categories of liabilities or deposits by reference to which the LIBO Rate is
determined. Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets which may be available from time to
time to any Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stockholders Agreement" as defined in the recitals hereto.
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23
"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, directly or indirectly, owned, controlled or held,
or (b) which is, at the time any determination is made, otherwise Controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
"Subsidiary" shall mean each subsidiary of the Borrower,
including, without limitation, VSI and SAC.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary
Guarantee Agreement, substantially in the form of Exhibit J, made by the
Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the
Secured Parties.
"Subsidiary Guarantor" shall mean each direct or indirect
domestic Wholly-Owned Subsidiary.
"Swingline Exposure" shall mean at any time the aggregate
principal amount of all outstanding Swingline Loans at such time. The Swingline
Exposure of any Revolving Credit Lender at any time shall mean its Applicable
Percentage of the aggregate Swingline Exposure at such time.
"Swingline Lender" shall mean Chase, in its capacity as
Swingline Lender hereunder.
"Swingline Loan Commitment" shall mean the commitment of the
Swingline Lender to make Swingline Loans as set forth in Section 2.01(c).
"Swingline Loans" shall mean the swingline loans made by the
Swingline Lender to the Borrower pursuant to Section 2.01(c).
"Syndication Agent" as defined in the preamble hereto.
"Term Borrowing" shall mean a Borrowing comprised of Term
Loans.
"Term Commitments" shall mean the Tranche A Term Loan
Commitments and the Tranche B Term Loan Commitments.
"Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(a). Each Term Loan shall be a Eurodollar
Term Loan or an ABR Term Loan.
"Termination Payment" shall mean any payment made to Holdings,
the Borrower or any Subsidiary in respect of the termination of a Service
Contract.
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24
"Total Debt" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis at any time, all Capital
Lease Obligations, Indebtedness for borrowed money and Indebtedness in respect
of the deferred purchase price of property or services of Holdings, the Borrower
and the Subsidiaries at such time less the amount on deposit in the Collateral
Account at such time.
"Total Revolving Credit Commitment" shall mean, at any time,
the aggregate amount of the Revolving Credit Commitments of all Lenders, as in
effect at such time.
"Total Revolving Credit Exposure" shall mean, at any time, the
aggregate amount of the Revolving Credit Exposure of all Lenders.
"Tranche A Maturity Date" shall mean the seventh anniversary
of the Closing Date.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of
Tranche A Term Loans.
"Tranche A Term Loan Commitment" shall mean with respect to
each Lender, the commitment of such Lender to make Tranche A Term Loans
hereunder as set forth in Section 2.01(a)(i), as the same may be reduced from
time to time pursuant to Section 2.09.
"Tranche A Term Loans" shall mean the term loans made by the
Lenders to the Borrower pursuant to Section 2.01(a)(i).
"Tranche B Maturity Date" shall mean the eighth anniversary of
the Closing Date.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of
Tranche B Term Loans.
"Tranche B Term Loan Commitment" shall mean with respect to
each Lender, the commitment of such Lender to make Tranche B Term Loans
hereunder as set forth in Section 2.01(a)(ii), as the same may be reduced from
time to time pursuant to Section 2.09.
"Tranche B Term Loans" shall mean the term loans made by the
Lenders to the Borrower pursuant to Section 2.01(a)(ii).
"Transactions" shall have the meaning given such term pursuant
to Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, the term "Rate"
shall include the Adjusted LIBO Rate and the Alternate Base Rate.
"VSI " as defined in the recitals hereto.
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25
"VSI Stockholders" as defined in the recitals hereto.
"Waivable Prepayment" shall have the meaning given such term
in Section 2.12(g).
"Wholly-Owned Subsidiary" means a Subsidiary of the Borrower,
at least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Borrower or another Wholly-Owned Subsidiary; provided
that, so long as Borrower complies with the provisions of Section 5.01(c), SAC
shall be treated as a Wholly-Owned Subsidiary for the period commencing on the
Closing Date and ending ninety days thereafter.
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital" shall mean, with respect to Holdings, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, Current Assets at such date of determination minus Current
Liabilities at such date of determination.
"Year 2000 Issues" shall mean limitations in the capacity or
readiness to handle date information for the Year 1999 or years beginning
January 1, 2000 of any Systems.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Section 2.12(d) and Article VI all accounting
terms herein shall be interpreted and all accounting determinations hereunder
(in each case, unless otherwise provided for or defined herein) shall be made
in accordance with GAAP as in effect on the date of this Agreement and applied
on a basis consistent with the application used in the financial statements
referred to in Section 3.05; and provided further that if the Borrower notifies
the Administrative Agent that the Borrower wishes to amend any covenant in
Section 2.12(d) or Article VI or any related definition to eliminate the effect
of any change in GAAP occurring after the date of this Agreement on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Section 2.12(d) or Article VI
or any related definition for such purpose), then (i) the Borrower and the
Administrative Agent shall negotiate in good faith to agree upon an appropriate
amendment to such covenant and (ii) the Borrower's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
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26
the relevant change in GAAP became effective until such covenant is amended in
a manner satisfactory to the Borrower and the Required Lenders.
ARTICLE II.
THE CREDITS
SECTION 2.01. Commitments . Subject to the terms and conditions and
relying upon the representations and warranties of Holdings and the Borrower
herein set forth, each Lender agrees, severally and not jointly:
(i) to make a Tranche A Term Loan to the Borrower on the
Closing Date in a principal amount not to exceed the Tranche A Term
Loan Commitment set forth on its signature page hereto, as the same may
be reduced from time to time pursuant to Section 2.09; and
(ii) to make a Tranche B Term Loan to the Borrower on the
Closing Date in a principal amount not to exceed the Tranche B Term
Loan Commitment set forth on its signature page hereto, as the same may
be reduced from time to time pursuant to Section 2.09.
(b) Subject to the terms and conditions and relying upon the
representations and warranties of Holdings and the Borrower herein set
forth, each Lender agrees, severally and not jointly, to make Revolving
Loans to the Borrower, at any time and from time to time on or after
the date hereof, and until the earlier of the Revolving Credit Maturity
Date and the termination of the Revolving Credit Commitment of such
Lender in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in such Lender's
Revolving Credit Exposure at such time exceeding such Lender's
Revolving Credit Commitment set forth on its signature page hereto, as
the same may be reduced from time to time pursuant to Section 2.09.
(c)(i) The Swingline Lender hereby agrees, subject to the
terms and conditions and relying upon the representations and
warranties of Holdings, and the Borrower herein set forth, and subject
to the limitations set forth below with respect to the maximum amount
of Swingline Loans permitted to be outstanding from time to time, to
make a portion of the Revolving Credit Commitments available to the
Borrower from time to time during the period from the Closing Date
through and excluding the earlier of the Revolving Credit Maturity Date
and the termination of the Revolving Credit Commitments in an aggregate
principal amount not to exceed the Swingline Loan Commitment, by making
Swingline Loans to the Borrower. Swingline Loans may be made
notwithstanding the fact that such Swingline Loans, when aggregated
with the Swingline Lender's outstanding Revolving Loans, Letter of
Credit Exposure and outstanding Swingline Loans, may exceed the
Swingline Lender's Revolving Credit Commitment. The original amount of
the Swingline Loan Commitment is $5,000,000. The Swingline Loan
Commitment shall expire on the date the Revolving Credit
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27
Commitments are terminated and all Swingline Loans and all other
amounts owed hereunder with respect to Swingline Loans shall be paid in
full no later than that date. The Borrower shall give the Swingline
Lender telephonic, written or telecopy notice (in the case of
telephonic notice, such notice shall be promptly confirmed in writing
or by telecopy) not later than 12:00 (noon), New York City time, on the
day of a proposed borrowing. Such notice shall be delivered on a
Business Day, shall be irrevocable, shall refer to this Agreement and
shall specify the requested date (which shall be a Business Day) and
amount of such Swingline Loan. The Swingline Lender shall give the
Administrative Agent, which shall in turn give to each Lender, prompt
written or telecopy advice of any notice received from the Borrower
pursuant to this paragraph.
(ii) In no event shall (A) the aggregate principal amount of
Swingline Loans outstanding at any time exceed the aggregate Swingline
Loan Commitment in effect at such time, (B) the Total Revolving Credit
Exposure at any time exceed the Total Revolving Credit Commitment at
such time or (C) the aggregate Swingline Loan Commitment exceed at any
time the Total Revolving Credit Commitment in effect at such time.
Swingline Loans may only be made as ABR Loans.
(iii) With respect to any Swingline Loans that have not been
voluntarily prepaid by the Borrower, the Swingline Lender (by request
to the Administrative Agent) or Administrative Agent at any time may,
and shall at any time Swingline Loans in an amount not less than
$1,000,000 shall have been outstanding for more than 10 days, on one
Business Day's notice, require each Revolving Credit Lender, including
the Swingline Lender, and each Lender hereby agrees, subject to the
provisions of this Section 2.01(c), to make a Revolving Loan (which
shall be funded as an ABR loan) in an amount equal to such Lender's
Applicable Percentage of the amount of the Swingline Loans ("Refunded
Swingline Loans") outstanding on the date notice is given that the
Swingline Lender requests the Lenders to prepay, provided that so long
as no Default or Event of Default shall have occurred and be
continuing, the Lenders shall not be required to make such Revolving
Loans if the aggregate principal amount of Swingline Loans outstanding
as of any Tuesday of any week (or the first Business Day occurring
after any such Tuesday if such Tuesday is not a Business Day) is less
than $500,000.
(iv) In the case of Revolving Loans made by Lenders other than
the Swingline Lender under the immediately preceding paragraph (iii),
each such Lender shall make the amount of its Revolving Loan available
to the Administrative Agent, in same day funds, at the office of the
Administrative Agent located at 270 Park Avenue, New York, New York,
not later than 1:00 p.m., New York City time, on the Business Day next
succeeding the date such notice is given. The proceeds of such
Revolving Loans shall be immediately delivered to the Swingline Lender
(and not to the Borrower) and applied to repay the Refunded Swingline
Loans. On the day such Revolving Loans are made, the Swingline Lender's
Applicable Percentage of the Refunded Swingline Loans shall be deemed
to be paid with the proceeds of a Revolving Loan made by the Swingline
Lender and such portion of the Swingline Loans deemed to be so paid
shall no longer be
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28
outstanding as Swingline Loans and shall be outstanding as Revolving
Loans of Lenders. The Borrower authorizes the Administrative Agent and
the Swingline Lender to charge the Borrower's account with the
Administrative Agent (up to the amount available in such account) in
order to pay immediately to the Swingline Lender the amount of such
Refunded Swingline Loans to the extent amounts received from Lenders,
including amounts deemed to be received from the Swingline Lender, are
not sufficient to repay in full such Refunded Swingline Loans. If any
portion of any such amount paid (or deemed to be paid) to the Swingline
Lender should be recovered by or on behalf of the Borrower from the
Swingline Lender in bankruptcy, by assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be
ratably shared among all Lenders in the manner contemplated by Section
2.17. Subject to the proviso contained in the first sentence of the
preceding paragraph and to the compliance by the Swingline Lender with
the provisions of subparagraph (vii) below, each Lender's obligation to
make the Revolving Loans referred to in this paragraph shall be
absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment,
defense or other right which such Lender may have against the Swingline
Lender, the Borrower or any other Person for any reason whatsoever; (B)
the occurrence or continuance of an Event of Default or a Default; (C)
any adverse change in the condition (financial or otherwise) of
Holdings or any of its subsidiaries; (D) any breach of this Agreement
by Holdings, the Borrower or any other Lender; or (E) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing. Nothing in this Section 2.01(c) shall be deemed
to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that the Borrower or the Swingline
Lender may have against any Lender as a result of any default by such
Lender hereunder.
(v) A copy of each notice given by the Swingline Lender or the
Administrative Agent pursuant to this Section 2.01(c) shall be promptly
delivered by the Swingline Lender to the Administrative Agent and the
Borrower. Upon the making of a Revolving Loan by a Lender pursuant to
this Section 2.01(c), the amount so funded shall no longer be owed in
respect of Swingline Loans.
(vi) If as a result of any bankruptcy or similar proceeding,
Revolving Loans are not made pursuant to this Section 2.01(c)
sufficient to repay any amounts owed to the Swingline Lender as a
result of a nonpayment of outstanding Swingline Loans, each Revolving
Credit Lender agrees to purchase, and shall be deemed to have
purchased, a participation in such outstanding Swingline Loans in an
amount equal to its Applicable Percentage of the unpaid amount together
with accrued interest thereon. Upon one Business Day's notice from the
Swingline Lender, each Revolving Credit Lender shall deliver to the
Swingline Lender an amount equal to its respective participation in
same day funds at the office of the Swingline Lender in New York, New
York. In order to evidence such participation each Revolving Credit
Lender agrees to enter into a participation agreement at the request of
the Swingline Lender in form and substance reasonably satisfactory to
all parties. In the event any Lender fails to make available to the
Swingline Lender the amount of such Revolving Credit Lender's
participation as
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29
provided in this Section 2.01(c), the Swingline Lender shall be
entitled to recover such amount on demand from such Revolving Credit
Lender together with interest at the customary rate set by the
Swingline Lender for correction of errors among banks in New York City
for one Business Day and thereafter at the Alternate Base Rate plus
2.0%.
(vii) Notwithstanding anything herein to the contrary, the
Swingline Lender shall not make any Swingline Loans at any time the
Swingline Lender is aware that the conditions to the making of such
Swingline Loan set forth in Section 4.01 have not been satisfied unless
such conditions shall have been waived in accordance with this
Agreement.
(d) Within the limits set forth in paragraphs (b) and (c) above, the
Borrower may borrow, pay or prepay and reborrow Revolving Loans and Swingline
Loans on or after the Closing Date and prior to the Revolving Credit Maturity
Date, subject to the terms, conditions and limitations set forth herein. Amounts
paid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Commitments; provided, however, that the failure of any Lender to
make any Loan shall not relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible for
the failure of any other Lender to make any Loan required to be made by such
other Lender). The Loans comprising any Borrowing shall be in an aggregate
principal amount which is (i) an integral multiple of $1,000,000 (or, in the
case of Swingline Loans, $250,000) and not less than $1,000,000 (or, in the case
of Swingline Loans, $250,000) or (ii) equal to the remaining available balance
of the applicable Commitments; provided that Revolving Loans used to pay
Refunded Swingline Loans may be in the amount of such Refunded Swingline Loans.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be
comprised entirely of ABR Loans or (except in the case of Swingline Loans)
Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each
Lender may at its option make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement and such Lender shall
not be entitled to any amounts payable under Section 2.13 or Section 2.19 in
respect of increased costs arising as a result of such exercise. Borrowings of
more than one Type may be outstanding at the same time; provided, however, that
the Borrower shall not be entitled to request any Borrowing that, if made, would
result in more than six Eurodollar Borrowings outstanding hereunder at any time.
For purposes of the foregoing, Borrowings having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Borrowings.
(c) Subject to paragraph (f) below, each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer to such
account as the
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30
Administrative Agent may designate in federal funds not later than 1:00 p.m.,
New York City time, and the Administrative Agent shall by 12:00 (noon), New York
City time, (a) in the case of any Loan made to reimburse any L/C Disbursement or
to refund any Swingline Loan, apply the amounts so received to effect such
reimbursement or refund as contemplated by Section 2.20 or Section 2.01(c) and
(b) in the case of each Loan the proceeds of which are to be received by the
Borrower, credit the amounts so received to an account designated by the
Borrower in the applicable Borrowing Request; provided, however, that if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, the Administrative Agent shall return the
amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If the
Administrative Agent shall have so made funds available then, to the extent that
such Lender shall not have made such portion available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate
determined by the Administrative Agent to represent its cost of overnight or
short-term funds (which determination shall be conclusive absent manifest
error). If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Revolving Credit Borrowing if the Interest
Period requested with respect thereto would end after the Revolving Credit
Maturity Date.
(f) The Borrower may refinance all or any part of a Revolving Credit
Borrowing with another Revolving Credit Borrowing. Any Revolving Credit
Borrowing or part thereof so refinanced shall be deemed to be repaid or prepaid
in accordance with the applicable provisions of this Agreement with the proceeds
of the new Revolving Credit Borrowing and the proceeds of such new Borrowing, to
the extent they do not exceed the principal amount of the Borrowing being
refinanced, shall not be paid by the Lenders to the Administrative Agent or by
the Administrative Agent to the Borrower pursuant to paragraph (c) above.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing, the
Borrower shall hand deliver or telecopy to the Administrative Agent a duly
completed Borrowing Request substantially in the form of Exhibit C (a) in the
case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time,
three Business Days before a proposed Borrowing, and (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one
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31
Business Day before a proposed Borrowing; provided, however, that Borrowing
Requests with respect to Borrowings to be made on the Closing Date may, at the
discretion of the Administrative Agent, be delivered later than the times
specified above. Each Borrowing Request shall be irrevocable, shall be signed by
or on behalf of the Borrower and shall specify the following information: (i)
whether the Borrowing then being requested is to be a Term Borrowing or a
Revolving Credit Borrowing and whether such Borrowing is to be a Eurodollar
Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a
Business Day), (iii) the amount of such Borrowing; and (iv) if such Borrowing is
to be a Eurodollar Borrowing, the Interest Period with respect thereto;
provided, however, that, notwithstanding any contrary specification in any
Borrowing Request, each requested Borrowing shall comply with the requirements
set forth in Section 2.02. If no election as to the Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is
specified in any such notice, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration. The Administrative Agent shall
promptly (and in any event on the same day that the Administrative Agent
receives such notice, if received by 1:00 p.m., New York City time, on such day)
advise the applicable Lenders of any notice given pursuant to this Section 2.03
and of each Lender's portion of the requested Borrowing.
If the Borrower shall not have delivered a Borrowing Request
in accordance with this Section 2.03 prior to the end of the Interest Period
then in effect for any Revolving Credit Borrowing requesting that such Borrowing
be refinanced, then the Borrower shall (unless the Borrower has notified the
Administrative Agent, not less than three Business Days prior to the end of such
Interest Period, that such Borrowing is to be repaid at the end of such Interest
Period) be deemed to have delivered a Borrowing Request requesting that such
Borrowing be refinanced with a new Borrowing of equivalent amount, and such new
Borrowing shall be an ABR Borrowing.
SECTION 2.04. Evidence of Debt; Repaymentof Loans. The outstanding
principal balance of each Loan shall be payable (i) in the case of a Revolving
Loan or a Swingline Loan, on the Revolving Credit Maturity Date and (ii) in the
case of a Term Loan, as provided in Section 2.11. Each Loan shall bear interest
from the date of the first Borrowing hereunder on the outstanding principal
balance thereof as set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness to such Lender resulting from
each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
(c) The Administrative Agent, in this regard on behalf of the Borrower,
shall maintain the Register pursuant to Section 9.04(d) and an account for each
Lender in which it will record (i) the amount of each Loan made hereunder
whether or not evidenced by a Note, the Type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender
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32
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts maintained
pursuant to paragraph (b) and (c) of this Section 2.04 shall be prima facie
evidence of the existence and amounts of the obligations therein recorded;
provided, however, that the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a Note as provided in Section 9.04(h) or
otherwise, the interests represented by that Note shall at all times (including
after any assignment of all or part of such interests pursuant to Section 9.04)
be represented by one or more Notes payable to the payee named therein or its
registered assigns.
SECTION 2.05. Fees. The Borrower agrees to pay to each Lender, through
the Administrative Agent, on the Closing Date, on the last day of March, June,
September and December in each year, commencing March 31, 1999, and on the date
on which the Commitments of all the Lenders shall be terminated as provided
herein, a commitment fee (a "Commitment Fee") on the average daily unused amount
of the Revolving Credit Commitments of such Lender during the preceding quarter
(or other period commencing with the date of acceptance by the Borrower of the
Commitments of such Lender or ending with the date on which the last of the
Commitments of such Lender shall be terminated) at a rate per annum equal to
0.50%. All Commitment Fees shall be computed on the basis of the actual number
of days elapsed in a year of 365 or 366 days, as applicable. For the purpose of
calculating any Lender's Commitment Fee, the outstanding Swingline Loans during
the period for which such Lender's Commitment Fee is calculated shall be deemed
to be zero. The Commitment Fee due to each Lender shall commence to accrue on
the date of acceptance by the Borrower of the Revolving Credit Commitments of
such Lender and shall cease to accrue on the date on which the last of the
Revolving Credit Commitments of such Lender shall be terminated as provided
herein.
(b) The Borrower from time to time agrees to pay (i) to each Revolving
Credit Lender, through the Administrative Agent, on the last day of March, June,
September and December of each year, commencing March 31, 1999, and on the date
on which the Revolving Credit Commitments of all the Lenders shall be terminated
as provided herein, a fee (an "L/C Participation Fee") on such Lender's
Applicable Percentage of the average daily aggregate Letter of Credit Exposure
(excluding in each case the portion thereof attributable to unreimbursed Letter
of Credit Disbursements), during the preceding quarter (or shorter period
commencing with the date hereof or ending with the Revolving Credit Maturity
Date or the date on which the Revolving Credit Commitments shall be terminated)
at a rate per annum, calculated on a daily basis, equal to the Applicable Margin
for Revolving Loans that are Eurodollar Loans and (ii) to the Fronting Bank, the
fees separately agreed upon by the Borrower and the Fronting Bank plus, in
connection with the issuance, amendment or transfer of any such Letter of Credit
or any Letter of Credit Disbursement thereunder, the Fronting Bank's customary
documentary and processing charges (collectively, the "Fronting Bank Fees"). All
L/C Participation Fees and Fronting Bank
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33
Fees that are payable on a per annum basis shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
(c) The Borrower agrees to pay to the Syndication Agent and the
Administrative Agent, for their respective accounts, the fees set forth in the
letter agreement dated October 27, 1998, between Holdings, the Syndication Agent
and the Administrative Agent at the times and in the amounts set forth therein
(the "Agents Fees").
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Fronting Bank Fees shall be paid directly to
the Fronting Bank. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, when determined by reference to the Prime Rate and over a
year of 360 days at all other times) at a rate per annum equal to the Alternate
Base Rate plus, in the case of (i) Revolving Loans, Swingline Loans and the
Tranche A Term Loans, the Applicable Margin or (ii) Tranche B Term Loans, 2.75%.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus, in the case of (i) Revolving Loans and the Tranche A Term Loans, the
Applicable Margin, or (ii) Tranche B Term Loans, 3.75%.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error. The Administrative Agent shall give the Borrower prompt notice
of each such determination.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, the Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount for the period beginning on the date of such default up to (but not
including) the date of actual payment (after as well as before judgment) at a
rate per annum (the "Default Rate") (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to (a) in the case of (i) overdue
Loans, overdue interest thereon, overdue Commitment Fees, overdue L/C
Participation Fees or other overdue amounts owing in respect of Loans or other
obligations (or the related Commitments) under a particular Tranche or in
respect of the Revolving Credit Commitments or (ii) other overdue amounts owing
to a Lender participating in no more than one of the Tranches or the Revolving
Credit Commitments, the rate
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34
that would otherwise be applicable to ABR Loans under such Tranche or to ABR
Revolving Loans, as applicable, pursuant to Section 2.06 plus 2.00% or (b) in
the case of any other overdue amount, the Alternate Base Rate plus the then
Applicable Margin for Revolving Loans which are ABR Loans.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. The Term
Commitments shall be automatically and permanently terminated at 5:00 p.m., New
York City time, on the Closing Date. The Revolving Credit Commitments shall be
automatically and permanently terminated at 5:00 p.m., New York City time, on
the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
any of the Term Commitments or the Revolving Credit Commitments; provided,
however, that (i) each partial reduction of any Commitments shall be in an
integral multiple of $500,000 (or, if less, the remaining amount of the
applicable Commitments) and (ii) in the case of any reduction of Revolving
Credit Commitments, after giving effect to such reduction, the Total Revolving
Credit Commitment shall not be reduced to an amount that is less than the Total
Revolving Credit Exposure at any time.
(c) The Revolving Credit Commitments shall be automatically and
permanently reduced by an amount equal to any amount applied under paragraph (c)
or (d) of Section 2.12 to prepay Revolving Credit Borrowings (or that would have
been required to be so applied if Revolving Credit Borrowings equal to such
amount had been outstanding).
(d) Each reduction in the Commitments hereunder shall be made ratably
among the Lenders in accordance with their respective applicable Commitments.
The Borrower shall pay to the Administrative Agent for the account of the
Lenders, on the date of each termination or reduction, the Commitment Fees and,
to the extent applicable, L/C Participation
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35
Fees on the amount of the Commitments so terminated or reduced accrued to but
excluding the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Term Borrowings. The
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Term Borrowing into
an ABR Term Borrowing, (b) not later than 10:00 a.m., New York City time, three
Business Days prior to conversion or continuation, to convert any ABR Term
Borrowing into a Eurodollar Term Borrowing or to continue any Eurodollar Term
Borrowing as a Eurodollar Term Borrowing for an additional Interest Period, and
(c) not later than 10:00 a.m., New York City time, three Business Days prior to
conversion, to convert the Interest Period with respect to any Eurodollar Term
Borrowing to another permissible Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata
among the relevant Lenders in accordance with the respective principal
amounts of the Loans comprising the converted or continued Term
Borrowing;
(ii) if less than all the outstanding principal amount of any
Term Borrowing shall be converted or continued, then each resulting
Term Borrowing shall satisfy the limitations specified in Sections
2.02(a) and (b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender by
recording for the account of such Lender the new Term Loan of such
Lender resulting from such conversion and reducing the Term Loan (or
portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on a Term Loan (or portion thereof)
being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Term Borrowing is converted at a time
other than the end of the Interest Period applicable thereto, the
Borrower shall pay, upon demand, any amounts due to the Lenders
pursuant to Section 2.15;
(v) any portion of a Term Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Eurodollar Term Borrowing;
(vi) any portion of a Eurodollar Term Borrowing that cannot be
converted into or continued as a Eurodollar Term Borrowing by reason of
the immediately preceding clause shall be automatically converted at
the end of the Interest Period in effect for such Borrowing into an ABR
Term Borrowing; and
(vii) no Interest Period may be selected for any Eurodollar
Term Borrowing that would end later than an Installment Date occurring
on or after the first day of such Interest Period if, after giving
effect to such selection, the aggregate outstanding amount of (A) the
Eurodollar Term Borrowings made pursuant to the same Commitments with
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36
Interest Periods ending on or prior to such Installment Date and (B)
the ABR Term Borrowings made pursuant to the same Commitments would not
be at least equal to the principal amount of Term Borrowings to be paid
on such Installment Date.
Each notice pursuant to this Section 2.10 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Term Borrowing that the Borrower requests be converted or continued, (ii)
whether such Term Borrowing is to be converted to or continued as a Eurodollar
Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (iv) if such Term
Borrowing is to be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or continuation as a Eurodollar
Borrowing, the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall advise the other Lenders of
any notice given pursuant to this Section 2.10 and of each Lender's portion of
any converted or continued Term Borrowing. If the Borrower shall not have given
notice in accordance with this Section 2.10 to continue any Term Borrowing into
a subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.10 to convert such Term Borrowing), such Term
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be converted into an ABR
Borrowing.
SECTION 2.11. Repayment of Term Borrowings. The Term Borrowings shall
be payable as to principal in the aggregate annual amounts set forth below in
consecutive quarterly installments on the last day of each fiscal quarter (each
an "Installment Date"), commencing March 30, 1999 with 25% of each annual amount
being paid on each Installment Date (provided, the entire outstanding amount of
each Term Loan shall be due and payable on the applicable final maturity date
thereof):
Tranche A Tranche B
Fiscal Year Term Loan Amount Term Loan Amount
1999 $3,000,000 $1,200,000
2000 $4,000,000 $1,200,000
2001 $5,000,000 $1,200,000
2002 $7,000,000 $1,200,000
2003 $7,000,000 $1,200,000
2004 $7,000,000 $1,200,000
2005 $7,000,000 $1,200,000
2006 ________ $111,600,000
(b) Each prepayment of principal of the Term Borrowings pursuant to
Section 2.12 shall be applied to (i) the Tranche A Term Borrowings and (ii) the
Tranche B Term Borrowings ratably in accordance with the respective amounts
thereof, and shall reduce scheduled payments and reductions required under
paragraph (a) above after the date of such prepayment or reduction ratably in
accordance with the respective amounts thereof.
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(c) To the extent not previously paid or reduced, (i) all Tranche A
Term Borrowings shall be due and payable on the Tranche A Maturity Date and
(ii) all Tranche B Term Borrowings shall be due and payable on the Tranche B
Maturity Date. Each repayment of Term Borrowings pursuant to this Section 2.11
shall be subject to Section 2.15 but shall otherwise be without premium or
penalty. Each payment of Borrowings pursuant to this Section 2.11 shall be
accompanied by accrued interest on the principal amount paid to but excluding
the date of payment.
SECTION 2.12. Prepayment. The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days' prior written or telecopy notice (or telephone notice
promptly confirmed by written or telecopy notice) to the Administrative Agent;
provided, however, that (i) each partial prepayment (other than of a Swingline
Loan) shall be in an amount which is an integral multiple of $500,000 and not
less than $1,000,000 (or, if less, the aggregate outstanding amount under the
applicable Tranche), and (ii) each prepayment of Term Borrowings shall be
applied as set forth in paragraph (b) of Section 2.11.
(b) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall on the date of such termination repay or prepay
all its outstanding Swingline Loans and Revolving Credit Borrowings, reduce the
Letter of Credit Exposure to zero and cause all Letters of Credit to be canceled
and returned to the Fronting Bank. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrower, the Swingline
Lender and the Revolving Credit Lenders of the Total Revolving Credit Exposure
and (ii) if after giving effect to such reduction, the Total Revolving Credit
Exposure would exceed the Total Revolving Credit Commitment, then the Borrower
shall, on the date of such reduction, as applicable, repay or prepay Revolving
Borrowings or repay or prepay Swingline Loans or reduce the Letter of Credit
Exposure (which for purposes of this clause (ii) may include cash
collateralization of Letter of Credit Exposure pursuant to arrangements
satisfactory to Administrative Agent), in an aggregate amount sufficient to
eliminate such excess. Notwithstanding the foregoing, on the date of any
termination or reduction of the Revolving Credit Commitments pursuant to Section
2.09, the Borrower shall pay or prepay so much of the Revolving Credit
Borrowings and Swingline Loans as shall be necessary in order that the Total
Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment
after giving effect to such termination or reduction.
(c) The Borrower shall apply all Net Proceeds promptly upon receipt
thereof by Holdings, the Borrower or any Subsidiary to prepay Term Borrowings
(and, after the Term Loans have been paid in full, to prepay Revolving Loans).
(d) Not later than 90 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending December 31, 1999, the Borrower
shall calculate Excess Cash Flow for such fiscal year and shall apply 100% of
such Excess Cash Flow to prepay Term Borrowings (and, after the Term Loans have
been paid in full, to prepay Revolving Loans). Not later than the date on which
the Borrower is required to deliver financial statements with respect to the end
of each fiscal year under Section 5.04(a), the Borrower will deliver to the
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38
Administrative Agent a certificate signed by a Financial Officer of the Borrower
setting forth the amount, if any, of Excess Cash Flow for such fiscal year and
the calculation thereof in reasonable detail. The Borrower may make prepayments
of amounts required to be applied pursuant to this paragraph (d).
(e) Each notice of prepayment or reduction pursuant to this Section
2.12 shall specify the prepayment date and the principal amount of each
Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall
commit the Borrower to prepay such Borrowing by the amount stated therein on the
date stated therein. All prepayments and reductions under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 shall be accompanied by accrued interest on
the principal amount being prepaid to but excluding the date of payment.
(f) In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the ABR Loans outstanding under
the Tranches required to be prepaid (the amount of any such excess being called
the "Excess Amount"), the Borrower shall have the right, in lieu of making such
prepayment in full, to prepay all the outstanding applicable ABR Loans and to
deposit an amount equal to the Excess Amount with the Collateral Agent in a cash
collateral account maintained (pursuant to documentation reasonably satisfactory
to the Administrative Agent) by and in the sole dominion and control of the
Collateral Agent. Any amounts so deposited shall be held by the Collateral Agent
as collateral for the Obligations and applied to the prepayment of the
applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto. On any Business Day on which (i) collected amounts remain on
deposit in or to the credit of such cash collateral account after giving effect
to the payments made on such day pursuant to this Section 2.12(f) and (ii) the
Borrower shall have delivered to the Collateral Agent a written request or a
telephonic request (which shall be promptly confirmed in writing) that such
remaining collected amounts be invested in the Permitted Investments specified
in such request, the Collateral Agent shall use its reasonable efforts to invest
such remaining collected amounts in such Permitted Investments; provided,
however, that the Collateral Agent shall have continuous dominion and full
control over any such investments (and over any interest that accrues thereon)
to the same extent that it has dominion and control over such cash collateral
account and no Permitted Investment shall mature after the end of the Interest
Period for which it is to be applied. The Borrower shall not have the right to
withdraw any amount from such cash collateral account until the applicable
Eurodollar Loans and accrued interest thereon are paid in full or if a Default
or Event of Default then exists or would result.
(g) Anything contained herein to the contrary notwithstanding, so long
as any Tranche A Term Loans are outstanding, in the event the Borrower makes any
voluntary prepayment or is required to make any prepayment (a "Waivable
Prepayment") of the Tranche B Term Loans pursuant to Section 2.12(a), 2.12(c) or
2.12(d), not less than three Business Days prior to the date (the "Prepayment
Date") on which the Borrower makes or is required to make such Waivable
Prepayment, the Borrower shall notify the Administrative Agent of the amount of
such prepayment, and Administrative Agent will promptly thereafter notify each
Lender holding an outstanding Tranche B Term Loan of the amount of such Lender's
pro rata share of such
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39
Waivable Prepayment and such Lender's option to refuse such amount. Each such
Lender may exercise such option by giving written notice to the Borrower and
Administrative Agent of its election to do so on or before the first Business
Day (the "Cutoff Date") prior to the Prepayment Date (it being understood that
any Lender which does not notify the Borrower and Administrative Agent of its
election to exercise such option on or before the Cutoff Date shall be deemed to
have elected, as of the Cutoff Date, not to exercise such option). On the
Prepayment Date, the Borrower shall pay to Administrative Agent the amount of
the Waivable Prepayment, which amount shall be applied in an amount equal to
that portion of the Waivable Prepayment payable to those Lenders that have
elected not to exercise such option, to prepay the Tranche B Term Loans of such
Lenders (which prepayment shall be applied to the scheduled installments of
principal of the Tranche B Term Loans in accordance with Section 2.12(a)), and
in an amount equal to that portion of the Waivable Prepayment otherwise payable
to those Lenders that have elected to exercise such option, to prepay the
Tranche A Term Loans (which prepayment shall be applied to the scheduled
installments of principal of the Tranche A Term Loans in accordance with Section
2.12(a)).
SECTION 2.13. Reserve Requirements; Change in Circumstances.
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the
Fronting Bank in respect of any Letter of Credit or of the principal of or
interest on any Eurodollar Loan made by such Lender or any Fees or other amounts
payable hereunder (other than changes in respect of (i) taxes imposed on the
overall net income of such Lender or the Fronting Bank and (ii) any Taxes
described in Section 2.19), or shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets or deposits with
or for the account of or credit extended by or, in the case of the Letters of
Credit, participated in by such Lender (except any such reserve requirement
which is reflected in the Adjusted LIBO Rate) or the Fronting Bank or shall
impose on such Lender or the Fronting Bank or the interbank eurodollar market
any other condition affecting this Agreement, any Letter of Credit (or any
participation with respect thereto), the Letter of Credit Exposure, the Letter
of Credit Commitment or any Eurodollar Loans of such Lender or the Fronting
Bank, and the result of any of the foregoing shall be to increase the cost to
such Lender or the Fronting Bank of making or maintaining its Letter of Credit
Exposure, its Letter of Credit Commitment or any Eurodollar Loan (or, in the
case of the Fronting Bank, of making any payment under any Letter of Credit) or
to reduce the amount of any sum received or receivable by such Lender or the
Fronting Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Fronting Bank to be material, then from time
to time the Borrower will pay to such Lender or the Fronting Bank upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank for such additional costs incurred or reduction suffered.
(b) If any Lender or the Fronting Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the date hereof in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any Governmental Authority, central bank or comparable agency charged
<PAGE>
40
with the interpretation or administration thereof, or compliance by any
Lender (or any lending office of such Lender) or the Fronting Bank or any
Lender's or the Fronting Bank's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) made or
issued after the date hereof by any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's or the Fronting Bank's capital or on the capital of such Lender's or
the Fronting Bank's holding company, if any, as a consequence of this Agreement
or its obligations pursuant hereto to a level below that which such Lender or
the Fronting Bank or such Lender's or the Fronting Bank's holding company would
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or the Fronting Bank's policies and the policies of
such Lender's or the Fronting Bank's holding company with respect to capital
adequacy) by an amount deemed by such Lender or the Fronting Bank to be
material, then from time to time the Borrower shall pay to such Lender or the
Fronting Bank upon demand such additional amount or amounts as will compensate
such Lender or the Fronting Bank or such Lender's or the Fronting Bank's holding
company for any such reduction suffered.
(c) A certificate of each Lender or the Fronting Bank setting forth
such amount or amounts as shall be necessary to compensate such Lender or the
Fronting Bank or its holding company as specified in paragraph (a) or (b) above,
as the case may be, shall be delivered to the Borrower through the
Administrative Agent and shall be conclusive absent manifest error. The Borrower
shall pay each Lender or the Fronting Bank the amount shown as due on any such
certificate delivered by it within 10 days after its receipt of the same.
(d) In the event any Lender or the Fronting Bank delivers a notice
pursuant to paragraph (e) below, the Borrower may require, at the Borrower's
expense and subject to Section 2.15, such Lender or the Fronting Bank to assign,
at par plus accrued interest and fees, without recourse (in accordance with
Section 9.04) all its interests, rights and obligations hereunder (including, in
the case of a Lender, all of its Commitments and the Loans at the time owing to
it and participations in Letters of Credit held by it and its obligations to
acquire such participations) to a financial institution specified by the
Borrower; provided that (i) such assignment shall not conflict with or violate
any law, rule or regulation or order of any court or other Governmental
Authority, (ii) the Borrower shall have received the written consent of the
Administrative Agent (which consent shall not be unreasonably withheld) and each
applicable the Fronting Bank to such assignment, (iii) the Borrower shall have
paid to the assigning Lender or the Fronting Bank all monies accrued and owing
hereunder to it (including pursuant to this Section 2.13) and (iv) in the case
of a required assignment by the Fronting Bank, all outstanding Letters of Credit
issued by the Fronting Bank shall be canceled and returned to the Fronting Bank.
(e) Promptly after any Lender or the Fronting Bank has determined, in
its sole judgment, that it will make a request for increased compensation
pursuant to this Section 2.13, such Lender or the Fronting Bank will notify the
Borrower thereof. Failure on the part of any Lender or the Fronting Bank so to
notify the Borrower or to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such Lender's or the
Fronting Bank's
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41
right to demand compensation with respect to such period or any other period;
provided that the Borrower shall not be under any obligation to compensate any
Lender or the Fronting Bank under paragraph (b) above with respect to increased
costs or reductions with respect to any period prior to the date that is six
months prior to such request if such Lender or the Fronting Bank knew or could
reasonably have been expected to be aware of the circumstances giving rise to
such increased costs or reductions and of the fact that such circumstances would
in fact result in a claim for increased compensation by reason of such increased
costs or reductions; provided further that the foregoing limitation shall not
apply to any increased costs or reductions arising out of the retroactive
application of any law, regulation, rule, guideline or directive as aforesaid
within such six month period. The protection of this Section 2.13 shall be
available to each Lender and the Fronting Bank regardless of any possible
contention as to the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition which shall have occurred or been
imposed.
SECTION 2.14. Change in Legality. Notwithstanding any other provision
herein, if the adoption of or any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon any request by the Borrower for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request
for an ABR Loan unless such declaration shall be subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective date
of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under subparagraphs (i) and
(ii) above, all payments and prepayments of principal which would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense (other than taxes) that such Lender may sustain or
incur as a consequence of (a) any failure by the Borrower to fulfill on the date
of any Borrowing or proposed Borrowing hereunder the applicable conditions set
forth in Article IV, (b) any failure by the Borrower to
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42
borrow or to refinance, convert or continue any Loan hereunder after irrevocable
notice of such Borrowing, refinancing, conversion or continuation has been given
pursuant to Section 2.03 or 2.10, (c) any payment, prepayment or conversion of a
Eurodollar Loan required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto, (d) any default in payment or prepayment of the principal
amount of any Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, whether by scheduled maturity,
acceleration, irrevocable notice of prepayment or otherwise) or (e) the
occurrence of any Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall exclude loss of margin hereunder but shall include an
amount equal to the excess, if any, as reasonably determined by such Lender, of
(i) its cost of obtaining the funds for the Loan being paid, prepaid, converted
or not borrowed, converted or continued (assumed to be the Adjusted LIBO Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow, convert or continue to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the Interest Period for such Loan which would have commenced on the
date of such failure) over (ii) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in reemploying the funds
so paid, prepaid, converted or not borrowed, converted or continued for such
period or Interest Period, as the case may be. A certificate of any Lender
setting forth any amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.15 (and the reasons therefor) shall be delivered to
the Borrower through the Administrative Agent and shall be conclusive absent
manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14
and subject to Section 2.11, each Borrowing, each payment or prepayment of
principal of any Borrowing, each payment of interest on the Loans, each
reimbursement of Letter of Credit Disbursements, each payment of the Commitment
Fees or L/C Participation Fees, each reduction of the Term Commitments or the
Revolving Credit Commitments and each refinancing of any Borrowing with,
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated (except in the case of Swingline Loans) pro rata
among the Lenders in accordance with their respective applicable Commitments
(or, if such Commitments shall have expired or been terminated, in accordance
with the respective principal amounts of their applicable outstanding Loans or
participations in Letter of Credit Disbursements, as applicable). Each Lender
agrees that in computing such Lender's portion of any Borrowing or Letter of
Credit Disbursement, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing or Letter of Credit Disbursement, computed
in accordance with Section 2.01, to the next higher or lower whole dollar
amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means,
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43
obtain payment (voluntary or involuntary) in respect of any Loan or Letter of
Credit Disbursement as a result of which the unpaid principal portion of its
Loans or Letter of Credit Disbursements made pursuant to any Commitment (or,
after acceleration of the Loans pursuant to Article VII, applicable to any Loan
or Letter of Credit Disbursement) shall be proportionately less than the unpaid
principal portion of the Loans or Letter of Credit Disbursements of any other
Lender made pursuant to such Commitments (or, after acceleration of the Loans
pursuant to Article VII, applicable to any Loan or Letter of Credit
Disbursement), it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, an interest in the Loans or Letter of Credit Disbursements
of such other Lender, so that the aggregate unpaid principal amount of the Loans
or Letter of Credit Disbursements and interests in Loans or Letter of Credit
Disbursements held by each such Lender shall be in the same proportion to the
aggregate unpaid principal amount of all Loans or Letter of Credit Disbursements
then outstanding under such Commitments as the principal amount of its Loans or
Letter of Credit Disbursements under such Commitments prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the principal amount
of all such Loans or Letter of Credit Disbursements outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Lender holding an interest in a Loan
or Letter of Credit Disbursement deemed to have been so purchased may exercise
any and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing by the Borrower to such Lender by reason thereof as fully
as if such Lender had made a Loan directly to, or Letter of Credit Disbursement
directly for the benefit of, the Borrower in the amount of such interest.
SECTION 2.18. Payments. The Borrower shall make each payment without
set-off or counterclaim (including principal of or interest on any Borrowing or
Letter of Credit Disbursement or any Fees or other amounts) required to be made
by it hereunder and under any other Loan Document not later than 12:00 noon, New
York City time, on the date when due in Dollars to the Administrative Agent at
its offices at 270 Park Avenue, New York, New York, Attention of Agent Bank
Services, in immediately available funds, for credit to Chase, ABA Number
021000021, Account Number 323208665. The Administrative Agent shall distribute
such payments to the Lenders and the Fronting Bank promptly upon receipt in like
funds as received.
(b) Whenever any payment (including principal of or interest on any
Borrowing or Letter of Credit Disbursement or any Fees or other amounts)
hereunder or under any other Loan Document shall become due, or otherwise would
occur, on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day (except in the case of payment of principal of a
Eurodollar Borrowing if the effect of such extension would be to extend such
payment into the next succeeding month, in which event such payment shall be due
on the immediately preceding Business Day), and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.
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44
SECTION 2.19. Taxes. Any and all payments by the Borrower to the
Administrative Agent, the Fronting Bank or the Lenders hereunder or under the
other Loan Documents shall be made, in accordance with Section 2.18, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding (i) in the case of each Lender, the Fronting Bank and the
Administrative Agent, taxes that would not be imposed but for a connection
between such Lender, the Fronting Bank or the Administrative Agent (as the case
may be) and the jurisdiction imposing such tax, other than a connection arising
solely by virtue of the activities of such Lender, the Fronting Bank or the
Administrative Agent (as the case may be) pursuant to or in respect of this
Agreement or under any other Loan Document, including entering into, lending
money or extending credit pursuant to, receiving payments under, or enforcing,
this Agreement or any other Loan Document, and (ii) in the case of each Lender,
the Fronting Bank and the Administrative Agent, any United States withholding
taxes payable with respect to any payments made hereunder or under the other
Loan Documents under laws (including any statute, treaty, ruling, determination
or regulation) in effect on the Initial Date (as hereinafter defined) applicable
to such Lender, the Fronting Bank or the Administrative Agent, as the case may
be, but not excluding any United States withholding taxes payable solely as a
result of any change in such laws occurring after the Initial Date (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). For purposes of this
Section 2.19, the term "Initial Date" shall mean (i) in the case of the
Administrative Agent, the Fronting Bank or any Lender, the date on which such
person became a party to this Agreement and (ii) in the case of any assignment,
including any assignment by a Lender or the Fronting Bank to a new lending
office, the date of such assignment. If any Taxes shall be required by law to be
deducted from or in respect of any sum payable hereunder or under any other Loan
Document to any Lender, the Fronting Bank or the Administrative Agent, (i) the
sum payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.19) such Lender, the Fronting Bank or the
Administrative Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. The Borrower shall not, however, be required to pay any amounts
pursuant to clause (i) of the preceding sentence to any Lender, the Fronting
Bank or the Administrative Agent that is not a United States person as defined
in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") if such Lender, the
Fronting Bank or the Administrative Agent fails to comply with the requirements
of paragraph (f) and paragraph (g) of this Section 2.19.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "Other Taxes").
(c) The Borrower will indemnify each Lender, the Fronting Bank and the
Administrative Agent for the full amount of Taxes and Other Taxes (including any
Taxes or
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45
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.19) paid by such Lender, the Fronting Bank or the Administrative Agent, as the
case may be, and any liability (including penalties, interest and expenses
including reasonable attorney's fees and expenses) arising therefrom or with
respect thereto whether or not such Taxes or Other Taxes were correctly or
legally asserted. A certificate as to the amount of such payment or liability
prepared by a Lender (or Transferee), the Fronting Bank or the Administrative
Agent, absent manifest error, shall be final, conclusive and binding for all
purposes; provided, that if the Borrower reasonably believes that such Taxes
were not correctly or legally asserted, such Lender, the Fronting Bank or the
Administrative Agent, as the case may be shall use reasonable efforts to
cooperate with the Borrower to obtain a refund of such Taxes or Other Taxes.
Such indemnification shall be made within 10 days after the date any Lender, the
Fronting Bank or the Administrative Agent, as the case may be, makes written
demand therefor. If a Lender, the Fronting Bank or the Administrative Agent
shall become aware that it is entitled to receive a refund in respect of Taxes
or Other Taxes, it shall promptly notify the Borrower of the availability of
such refund and shall, within 30 days after receipt of a request by the
Borrower, pursue or timely claim such refund at the Borrower's expense. If any
Lender, the Fronting Bank or the Administrative Agent receives a refund in
respect of any Taxes or Other Taxes for which such Lender, the Fronting Bank or
the Administrative Agent has received payment from the Borrower hereunder, it
shall promptly repay such refund (plus any interest received) to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes
giving rise to such refund); provided that the Borrower, upon the request of
such Lender, the Fronting Bank or the Administrative Agent, agrees to return
such refund (plus any penalties, interest or other charges required to be paid)
to such Lender, the Fronting Bank or the Administrative Agent in the event such
Lender, the Fronting Bank or the Administrative Agent is required to repay such
refund to the relevant taxing authority.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect of any payment to any Lender, the
Fronting Bank or the Administrative Agent, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.19 shall
survive the payment in full of principal and interest hereunder, the expiration
of the Letters of Credit and the termination of the Commitments.
(f) Each Non-U.S. Lender agrees that at least 10 days prior to the
first Interest Payment Date following the Initial Date in respect of the
Fronting Bank or such Lender, it will (i) deliver to the Borrower and the
Administrative Agent (if appropriate) two duly completed copies of either United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, certifying in each case that the Fronting Bank, such Lender
or the Administrative Agent, as the case may be, is entitled to receive payments
under this Agreement and the other Loan Documents payable to it without
deduction or withholding of any
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46
United States federal income taxes and backup withholding taxes or is entitled
to receive such payments at a reduced rate pursuant to a treaty provision or
(ii) in the case of a Lender that is not a "bank" within the meaning of Section
881(c)(3) of the Code, (A) deliver to the Borrower and the Administrative Agent
(I) a statement under penalties of perjury that such Lender (w) is not a "bank"
under Section 881(c)(3)(A) of the Code, is not subject to regulatory or other
legal requirements as a bank in any jurisdiction, and has not been treated as a
bank for purposes of any tax, securities law or other filing or submission made
to any Governmental Authority, any application made to a rating agency or
qualification for any exemption from tax, securities law or other legal
requirements, (x) is not a 10-percent shareholder within the meaning of Section
881(c)(3)(B) of the Code, and (y) is not a controlled foreign corporation
receiving interest from a related person within the meaning of Section
881(c)(3)(c) of the Code, (II) such factual representations as the Borrower may
reasonably request to allow the Borrower to conclude that such Lender is not a
"conduit entity" within the meaning of U.S. Treasury Regulations Section 1.881-3
and (III) an Internal Revenue Service Form W-8; (B) deliver to the Borrower and
the Administrative Agent a further copy of said Form W-8, or any successor
applicable form or other manner of certification on or before the date that any
such Form W-8 expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by such Lender;
and (C) obtain such extensions of time for filing and complete such forms or
certifications as may be reasonably requested by the Borrower or the
Administrative Agent; unless in any such case an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. In the case of a Lender providing a Form 1001 or 4224,
such Lender also agrees to provide a Form W-8 or W-9, certifying that it is
entitled to an exemption from United States backup withholding tax. Each Person
that shall become a participant pursuant to Section 9.04 shall, upon the
effectiveness of the related transfer, be required to provide all the forms and
statements required pursuant to this paragraph (f) to the Lender from which the
related participation shall have been purchased. Unless the Borrower and the
Administrative Agent have received forms, certificates and other documents
required by this Section 2.19(f) indicating that payments hereunder or under
this Agreement, any other Loan Document or the Letters of Credit to or for the
Fronting Bank or Lender not incorporated under the laws of the United States or
a state thereof are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, the Borrower or the
Administrative Agent shall withhold such taxes from such payments at the
applicable statutory rate.
(g) The Fronting Bank and any Lender claiming any additional amounts
payable pursuant to this Section 2.19 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or document
requested in writing by the Borrower or to change the jurisdiction of its
applicable lending office, if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which would be
payable or may thereafter accrue and would not, in the sole determination of the
Fronting Bank or such Lender, be otherwise disadvantageous to the Fronting Bank
or such Lender.
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47
(h) Nothing contained in this Section 2.19 shall require any Lender or
the Fronting Bank or the Administrative Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Letters of Credit; Generally. The Borrower may request
the issuance of a Letter of Credit, in a form reasonably acceptable to the
Administrative Agent and the Fronting Bank, appropriately completed, for the
account of the Borrower at any time and from time to time while the Revolving
Credit Commitments remain in effect. This Section 2.20(a) shall not be construed
to impose an obligation upon the Fronting Bank to issue any Letter of Credit
that is inconsistent with the terms and conditions of this Agreement or that
would result in there existing Letters of Credit in an aggregate stated amount
at any time in excess of $35,000,000. Notwithstanding anything herein to the
contrary, each of the letters of credit outstanding on the Closing Date that are
identified on Schedule 2.20 shall be deemed to be a Letter of Credit issued and
outstanding under this Agreement as of the Closing Date.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to
request that the Fronting Bank amend, renew or extend an existing Letter of
Credit), the Borrower shall hand deliver or telecopy to the Fronting Bank and
the Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of
such Letter of Credit, or identifying any Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount of such Letter of Credit to be
issued, amended, renewed or extended, the name and address of the beneficiary
thereof and such other information as shall be necessary to prepare such Letter
of Credit or grant such issuance, amendment, renewal or extension. Following
receipt of such notice and prior to the issuance, amendment, renewal or
extension of any Letter of Credit the Administrative Agent shall notify the
Borrower and the Fronting Bank of the amount of the Total Revolving Credit
Exposure after giving effect to (i) the issuance, amendment, renewal or
extension of such Letter of Credit, (ii) the issuance or expiration of any other
Letter of Credit that is to be issued or will expire prior to the requested date
of issuance of such Letter of Credit and (iii) the borrowing or repayment of any
Revolving Loans and Swingline Loans that (based upon notices delivered to the
Administrative Agent by the Borrower) are to be borrowed or repaid prior to the
requested date of issuance, amendment, renewal or extension of such Letter of
Credit. Each Letter of Credit shall be issued, amended, renewed or extended
subject to the terms and conditions and relying on the representations and
warranties of Holdings and the Borrower set forth herein, and in any case only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension the Total Revolving Credit
Exposure shall not exceed the Total Revolving Credit Commitment in effect at
such time. Any Letter of Credit may be issued by the Fronting Bank through its
affiliate, Chase, and in the event of any such issuance, all references herein
and in the other Loan Documents to the term "Fronting Bank" shall, with respect
to such Letter of Credit, be deemed to refer to Chase, in such capacity, as the
context shall require.
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48
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is three Business Days prior to the
Revolving Credit Maturity Date, unless such Letter of Credit expires by its
terms on an earlier date; provided that a Letter of Credit shall not be issued
(nor shall a Letter of Credit be amended, renewed or extended) that would result
in the Total Revolving Credit Exposure exceeding the Total Revolving Credit
Commitment in effect at such time. Compliance with the foregoing proviso shall
be determined based upon the assumption that (i) each Letter of Credit remains
outstanding and undrawn in accordance with its terms until its expiration date
(taking into account any rights of renewal or extension that do not require
written notice by or consent of the Fronting Bank, in its sole discretion, in
order to effect such renewal or extension) and (ii) the Revolving Credit
Commitments will not be reduced pursuant to Section 2.09.
(d) Participations. By the issuance of a Letter of Credit and without
any further action on the part of the Fronting Bank or the Revolving Credit
Lenders, the Fronting Bank will grant to each Revolving Credit Lender, and each
such Lender will acquire from the Fronting Bank, a participation in such Letter
of Credit equal to such Revolving Credit Lender's Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit, effective
upon the issuance of such Letter of Credit. In consideration and in furtherance
of the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Fronting Bank, such Revolving Credit Lender's Applicable Percentage of each
Letter of Credit Disbursement made by the Fronting Bank under such Letter of
Credit and not reimbursed by the Borrower (or, if applicable, another party
pursuant to its obligations under any other Loan Document) on or before the next
Business Day as provided in paragraph (e) below. Each Revolving Credit Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit which were issued upon
satisfaction of all applicable conditions precedent is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If the Fronting Bank shall make any Letter of Credit
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Administrative Agent, on or before the Business Day immediately following the
date of such Letter of Credit Disbursement, an amount equal to such Letter of
Credit Disbursement. If the Borrower shall fail to pay any amount required to be
paid under this paragraph on or before such Business Day (or to cause payment
thereof when due pursuant to a Revolving Credit Borrowing), then (i) such unpaid
amount shall bear interest, for each day from and including such Business Day to
but excluding the date of payment, at a rate per annum equal to the interest
rate applicable to overdue ABR Loans that are Revolving Loans pursuant to
Section 2.07 (provided that the 2.00% margin applicable to overdue Loans shall
not be applicable until the first Business Day after the Borrower receives
notice from the Administrative Agent that such Letter of Credit Disbursement has
been or will be made), (ii) the Administrative Agent shall notify the Fronting
Bank and the Revolving Credit Lenders thereof, (iii) each Revolving Credit
Lender shall comply with its obligation under paragraph (d) above by wire
transfer of immediately available funds, in the
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49
same manner as provided in Section 2.02(c) with respect to Loans made by such
Revolving Credit Lender (and Section 2.02(d) shall apply, mutatis mutandis, to
the payment obligations of the Revolving Credit Lenders) and (iv) the
Administrative Agent shall promptly pay to the Fronting Bank amounts so received
by it from the Revolving Credit Lenders. The Administrative Agent shall promptly
pay to the Fronting Bank on a pro rata basis with respect to outstanding Letter
of Credit Disbursements any amounts received by it from the Borrower pursuant to
this paragraph prior to the time that any Revolving Credit Lender makes any
payment pursuant to paragraph (d) above; any such amounts received by the
Administrative Agent thereafter shall be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Fronting Bank, as their interests may appear.
(f) Obligations Absolute. The Borrower's obligations to reimburse
Letter of Credit Disbursements as provided in paragraph (e) above shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under any and all circumstances
whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower, any Subsidiary or other Affiliate thereof
or any other person may at any time have against the beneficiary under
any Letter of Credit, the Fronting Bank, the Administrative Agent or
any Lender (other than the defense of payment in accordance with the
terms of this Agreement or a defense based on the gross negligence or
wilful misconduct of the Fronting Bank) or any other person, whether in
connection with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect, provided that payment by the Fronting Bank shall not have
constituted gross negligence or wilful misconduct of the Fronting Bank;
(v) payment by the Fronting Bank under a Letter of Credit
against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, provided that payment by the
Fronting Bank shall not have constituted gross negligence or wilful
misconduct of the Fronting Bank; and
(vi) any other act or omission to act or delay of any kind of
the Fronting Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section 2.20(c), constitute a legal or equitable discharge of the
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Borrower's obligations hereunder, provided that such act or omission
shall not have constituted gross negligence or wilful misconduct of the
Fronting Bank.
(g) Disbursement Procedures. The Fronting Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Fronting Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Fronting Bank has made or will make a Letter of Credit Disbursement thereunder,
provided that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the Fronting Bank and the
Lenders with respect to any such Letter of Credit Disbursement. The
Administrative Agent shall promptly give each Revolving Credit Lender notice
thereof.
(h) Interim Interest. If the Fronting Bank shall make any Letter of
Credit Disbursement in respect of a Letter of Credit, then, unless the Borrower
shall reimburse such Letter of Credit Disbursement in full on such date, the
unpaid amount shall bear interest for the account of the Fronting Bank, for each
day from and including the date of such Letter of Credit Disbursement, to but
excluding the earlier of the date of payment or the date on which interest shall
commence to accrue thereon as provided in subparagraph (e) above, at the rate
per annum that would apply to such amount if such amount were an ABR Loan.
(i) Liability of the Fronting Bank. Without limiting the generality of
paragraph (f) above, it is expressly understood and agreed that the absolute and
unconditional obligation of the Borrower hereunder to reimburse Letter of Credit
Disbursements will not be excused by the gross negligence or wilful misconduct
of the Fronting Bank, except as otherwise expressly provided in said paragraph
(f). However, nothing in this Agreement shall be construed to excuse the
Fronting Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Fronting Bank's gross negligence or wilful
misconduct in determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. It is understood that the
Fronting Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation in making any payment under any
Letter of Credit and, except as otherwise expressly provided in said paragraph
(f), (i) the Fronting Bank's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
the Fronting Bank.
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51
(j) Resignation or Removal of the Fronting Bank. The Fronting Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Fronting Bank, the Administrative Agent
and the Lenders, subject in each case to the appointment by the Borrower of a
replacement Fronting Bank reasonably satisfactory to the Administrative Agent,
provided, that the Fronting Bank may not resign as to any Letter of Credit
previously issued by it. Subject to the next succeeding sentences of this
paragraph (j), upon the acceptance of any appointment as the Fronting Bank
hereunder by a successor Fronting Bank (which shall be a Lender), such successor
shall succeed to and become vested with all the interests, rights and
obligations of the retiring Fronting Bank and the retiring Fronting Bank shall
be discharged from its obligations to issue additional Letters of Credit
hereunder. At the time such removal or resignation shall become effective, the
Borrower shall pay all accrued and unpaid fees of the Fronting Bank pursuant to
Section 2.05(b)(ii). The acceptance of any appointment as the Fronting Bank
hereunder by a successor Fronting Bank shall be evidenced by an agreement
entered into by such successor, in a form satisfactory to the Borrower and the
Administrative Agent, and, from and after the effective date of such agreement,
(i) such successor Fronting Bank shall have all the rights and obligations of
the previous Fronting Bank under this Agreement and the other Loan Documents and
(ii) references herein and in the other Loan Documents to the term "Fronting
Bank" shall be deemed to refer to such successor or to any previous Fronting
Bank, or to such successor and all previous Fronting Banks, as the context shall
require. After the resignation or removal of the Fronting Bank hereunder, the
retiring Fronting Bank shall remain a party hereto and shall continue to have
all the rights and obligations of a Fronting Bank under this Agreement and the
other Loan Documents with respect to Letters of Credit issued by it prior to
such resignation or removal (including the right to receive accrued and unpaid
fees pursuant to Section 2.05(b)(ii)), but shall not be required to issue
additional Letters of Credit.
(k) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Credit Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit) of such Event of Default
and the amount to be deposited, deposit in an account with the Collateral Agent,
for the benefit of the Lenders, an amount in cash equal to the Letter of Credit
Exposure as of such date. Such deposit shall be held by the Collateral Agent as
collateral for the payment and performance of the Obligations. The Collateral
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Collateral Agent (provided that
the Collateral Agent shall use reasonable efforts to make such investments),
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall (i)
automatically be applied by the Administrative Agent to reimburse the Fronting
Bank for Letter of Credit Disbursements for which it has not been reimbursed,
(ii) be held for the satisfaction of the reimbursement obligations of the
Borrower for the Letter of Credit Exposure at such time and (iii) if the
maturity of the Loans has been accelerated (but subject to the consent of
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52
Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit), be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of Holdings and the Borrower represents and warrants to each of
the Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower and
each of the Subsidiaries (a) is duly organized, validly existing and in good
standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent
status under the laws of any jurisdiction of organization outside the United
States) under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, (c) is qualified to
do business in every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (d) has the power and authority to execute, deliver
and perform its obligations under each of the Loan Documents and each other
agreement or instrument contemplated thereby to which it is or will be a party
and, in the case of the Borrower, to borrow and otherwise obtain credit
hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
Holdings, the Borrower and the Subsidiaries of each of the Loan Documents to
which they are a party and the borrowings hereunder, the Share Exchange and the
other transactions contemplated hereby and thereby (collectively, the
"Transactions") (a) have been duly authorized by all corporate, partnership or
stockholder action, as the case may be, required to be obtained by Holdings, the
Borrower and the Subsidiaries and, except to the extent failure to obtain such
action could not reasonably be expected to result in a Material Adverse Effect,
by any corporate, partnership or stockholder action required of any other party
to the Share Exchange and (b) do not and will not (i) violate (A) any provision
of law, statute, rule or regulation, or of the certificate or articles of
incorporation or partnership agreement, other constitutive documents or by-laws
of Holdings, the Borrower or any Subsidiary, (B) any applicable order of any
court or any rule, regulation or order of any Governmental Authority or (C) any
provision of any indenture, certificate of designation for preferred stock,
agreement or other instrument to which Holdings, the Borrower or any Subsidiary
is a party or by which any of them or any of their property is or may be bound,
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any such indenture, certificate
of designation for preferred stock, agreement or other instrument, where any
such conflict, violation, breach or default referred to in clause (i) or (ii) of
this Section 3.02, individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, or (iii) result in the creation or imposition
of any Lien upon or with respect to any property or assets now owned or
hereafter
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53
acquired by Holdings, the Borrower or any Subsidiary, other than the Liens
created by the Loan Documents.
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Holdings and the Borrower and constitutes, and each other Loan
Document when executed and delivered by Holdings, the Borrower and each other
Loan Party which is party thereto will constitute, a legal, valid and binding
obligation of Holdings, the Borrower and such Loan Party enforceable against
Holdings, the Borrower and such Loan Party in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) the filing of Uniform Commercial Code financing statements and filings with
the United States Patent and Trademark Office and the United States Copyright
Office, (b) such as have been made or obtained and are in full force and effect
and (c) such actions, consents and approvals the failure to obtain or make which
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Financial Statements. Each of Holdings and its
subsidiaries and SAC and its subsidiaries has heretofore furnished to the
Lenders (a) its consolidated balance sheets and consolidated statements of
operations and of cash flows, audited by and accompanied by the opinion of
Deloitte & Touche L.L.P. as of and for the fiscal year ended December 30, 1997,
in the case of Holdings, and PriceWaterhouse Coopers as of and for the fiscal
year ended December 27, 1997, in the case of SAC, and (b) its unaudited
condensed consolidated balance sheet and condensed consolidated statements of
operations and of cash flows as of and for the fiscal period ended September 30,
1998. Such financial statements present fairly the financial condition and
results of operations of each of Holdings and its subsidiaries and SAC and its
subsidiaries and their respective consolidated subsidiaries as of such dates and
for such periods. Except as disclosed in the Information Memorandum, none of
Holdings, the Borrower and the Subsidiaries has or shall have as of the Closing
Date any material Guarantee, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment that is not reflected
in the foregoing statements or the notes thereto. Such financial statements were
prepared in accordance with GAAP applied on a consistent basis. On and as of the
Closing Date, the financial projections of Holdings, the Borrower and the
Subsidiaries for the period from January 1, 1998 through the last day of Fiscal
Year 2006 (giving effect to the Transactions) previously delivered to Lenders
(the "Projections") are based on good faith estimates and assumptions made by
the management of the Borrower, it being recognized, however, that projections
as to future events are not to be viewed as facts and that the actual results
during the period or periods covered by the Projections may differ from the
projected results and that the differences may be material. Notwithstanding the
foregoing, as of the Effective Date, management of the Borrower believed that
the Projections were reasonable and attainable.
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54
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the assets, business, properties, financial condition or
results of operations of Holdings, the Borrower and the Subsidiaries, taken as a
whole, since December 31, 1997
SECTION 3.07. Title to Properties; Possession Under Leases. Each of
Holdings, the Borrower and the Subsidiaries has good and marketable title to, or
valid leasehold interests in, or easements or other limited property interests
in, all its material properties and assets, except for minor defects in title
that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties and assets for their intended purposes.
All such material properties and assets are free and clear of Liens, other than
Liens expressly permitted by Section 6.02.
(b) Each of Holdings, the Borrower and the Subsidiaries has complied
with all obligations under all material leases to which it is a party, except
where the failure to comply would not have a Material Adverse Effect, and all
such leases are in full force and effect, except leases in respect of which the
failure to be in full force and effect could not reasonably be expected to have
a Material Adverse Effect. Each of Holdings, the Borrower and the Subsidiaries
enjoys peaceful and undisturbed possession under all such material leases, other
than leases which, individually or in the aggregate, are not material to the
Borrower and the Subsidiaries, taken as a whole, and in respect of which the
failure to enjoy peaceful and undisturbed possession could not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect.
(c) After giving effect to the Share Exchange, each of Holdings, the
Borrower and the Subsidiaries owns or possesses, or could obtain ownership or
possession of, on terms not materially adverse to it, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect thereto
necessary for the present conduct of its business, without any known conflict
with the rights of others, and free from any burdensome restrictions, except
where such conflicts and restrictions could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.08 Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date the name and jurisdiction of organization of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by the
Borrower or by any Subsidiary.
SECTION 3.09. Litigation; Compliance with Laws. Except as set forth in
Schedule 3.09, there are not any material actions, suits or proceedings at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting Holdings, the
Borrower or any Subsidiary or any business, property or rights of any such
person (i) that involve any Loan Document or, as of the Closing Date, the
Transactions or (ii) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
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(b) None of Holdings, the Borrower, the Subsidiaries and their
respective material properties or assets is in violation of (nor will the
continued operation of their material properties and assets as currently
conducted violate) any law, rule or regulation (including any Environmental
Law), or is in default with respect to any judgment, writ, injunction or decree
of any Governmental Authority, where such violation or default could reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.10. Agreements. None of Holdings, the Borrower and the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of Holdings, the Borrower and the Subsidiaries is in default
in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, in either case where such default could reasonably
be expected to result in a Material Adverse Effect. Immediately after giving
effect to the Transactions, no Default or Event of Default shall have occurred
and be continuing.
SECTION 3.11. Federal Reserve Regulations. None of Holdings, the
Borrower and the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, (i) to
purchase or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation U or X.
SECTION 3.12. Investment Company; Public Utility Holding Company. None
of Holdings, the Borrower and the Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of Letters of Credit only to refinance
certain existing indebtedness of VSI and SAC, to finance capital expenditures
and for working capital and other general corporate purposes of Holdings, the
Borrower and the Subsidiaries.
SECTION 3.14. Tax Returns. Each of Holdings, the Borrower and the
Subsidiaries has timely filed or caused to be timely filed all Federal, and all
material state and local tax returns required to have been filed by it and has
paid or caused to be paid all taxes shown thereon to be due and payable by it
and all assessments received by it, except taxes or assessments that are being
contested in good faith by appropriate proceedings in accordance with Section
5.03 and for which Holdings, the Borrower or such Subsidiary has set aside on
its books
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adequate reserves in accordance with GAAP. Each of Holdings, the Borrower and
the Subsidiaries has paid in full or made adequate provision (in accordance with
GAAP) for the payment of all taxes due with respect to all periods ending on or
before the Closing Date, which taxes, if not paid or adequately provided for,
could reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 3.14, as of the Closing Date, with respect to each of
Holdings, the Borrower, and the Subsidiaries, (a) no material claims are being
asserted in writing with respect to any taxes, (b) no presently effective
waivers or extensions of statutes of limitation with respect to taxes have been
given or requested, (c) no tax returns are being examined by, and no written
notification of intention to examine has been received from, the Internal
Revenue Service or, with respect to any material potential tax liability, any
other taxing authority and (d) no currently pending issues have been raised in
writing by the Internal Revenue Service or, with respect to any material
potential tax liability, any other taxing authority. For purposes hereof,
"taxes" shall mean any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any Governmental Authority.
SECTION 3.15. No Material Misstatements. The written information,
reports, financial statements, exhibits and schedules furnished by or on behalf
of Holdings, the Borrower or any of the Subsidiaries to the Syndication Agent,
the Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto (including the
Confidential Information Memorandum (the "Information Memorandum") dated October
1998 relating to the Borrower), when taken as a whole, did not contain, and as
they may be amended, supplemented or modified from time to time, will not
contain, as of the Closing Date any material misstatement of fact and did not
omit, and as they may be amended, supplemented or modified from time to time,
will not omit, to state as of the Closing Date any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were, are or will be made, not materially misleading in their presentation of
the Transactions or of Holdings, the Borrower, and the Subsidiaries taken as a
whole.
(b) All financial projections delivered after the Closing Date
concerning Holdings, the Borrower and the Subsidiaries that are or have been
made available to the Syndication Agent, the Administrative Agent or any Lender
by Holdings, the Borrower or any Subsidiary, including those contained in the
Information Memorandum, have been or will be prepared in good faith based upon
assumptions believed by Holdings and the Borrower to be reasonable.
SECTION 3.16. Employee Benefit Plans. Each of Holdings, the Borrower
and its ERISA Affiliates is in compliance with the applicable provisions of
ERISA and the provisions of the Code relating to ERISA and the regulations and
published interpretations thereunder except for such noncompliance which could
not reasonably be expected to result in a Material Adverse Effect. No Reportable
Event has occurred as to which Holdings, the Borrower or any ERISA Affiliate was
required to file a report with the PBGC, other than reports for which the 30 day
notice requirement is waived, reports that have been filed and reports the
failure of which to file could not reasonably be expected to result in a
Material Adverse Effect. As of the Closing Date,
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the present value of all benefit liabilities under each Plan (on a termination
basis and based on those assumptions used to fund such Plan) did not, as of the
last annual valuation date applicable thereto for which a valuation is
available, exceed by more than $2,000,000 the value of the assets of such Plan,
and the present value of all benefit liabilities of all underfunded Plans (based
on those assumptions used to fund each such Plan) did not, as of the last annual
valuation dates applicable thereto for which valuations are available, exceed by
more than $4,000,000 the value of the assets of all such underfunded Plans. None
of Holdings, the Borrower and the ERISA Affiliates has incurred or could
reasonably be expected to incur any Withdrawal Liability that could reasonably
be expected to result in a Material Adverse Effect. None of Holdings, the
Borrower and the ERISA Affiliates have received any written notification that
any Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected
to be in reorganization or to be terminated, where such reorganization or
termination has resulted or could reasonably be expected to result, through
increases in the contributions required to be made to such Plan or otherwise, in
a Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule
3.17:
(a) There has not been a Release or threatened Release of Hazardous
Materials at, on, under or around the properties currently owned or currently or
formerly operated by Holdings, the Borrower and the Subsidiaries (the
"Properties") in amounts or concentrations which (i) constitute or constituted a
violation of Environmental Laws, except as could not reasonably be expected to
have a Material Adverse Effect; (ii) would reasonably be expected to give rise
to an Environmental Claim which, in any such case or in the aggregate, is
reasonably likely to result in a Material Adverse Effect; or (iii) could
reasonably be expected to impair materially the fair saleable value of any
material currently owned Property;
(b) The Properties and all operations of Holdings, the Borrower and the
Subsidiaries are in compliance, and in the last five years have been in
compliance, with all Environmental Laws, and all necessary Environmental Permits
required to be obtained by Holdings and its Subsidiaries have been obtained and
are in effect, except to the extent that such non-compliance or failure to
obtain any necessary permits, in the aggregate, are not reasonably likely to
result in a Material Adverse Effect;
(c) None of Holdings, the Borrower and the Subsidiaries has received
any written notice of an Environmental Claim in connection with the Properties
or the operations of the Borrower or the Subsidiaries or with regard to any
person whose liabilities for environmental matters Holdings, the Borrower or the
Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in either such case or in the aggregate,
is reasonably likely to result in a Material Adverse Effect;
(d) Hazardous Materials have not been transported from the Properties,
nor have Hazardous Materials been generated, treated, stored or disposed of at,
on, under or around any of the Properties in a manner that could reasonably give
rise to liability to Holdings, the Borrower or any Subsidiary under any
Environmental Law, nor have any of Holdings, the
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Borrower and the Subsidiaries retained or assumed any liability, contractually,
by operation of law or otherwise, with respect to the generation, treatment,
storage or disposal of Hazardous Materials, which, in each case, individually or
in the aggregate, is reasonably likely to result in a Material Adverse Effect;
(e) No Lien in favor of any Governmental Authority for (i) any
liability under any Environmental Law or (ii) damages arising from or costs
incurred by such Governmental Authority in response to a Release or threatened
Release of Hazardous Materials into the environment has been recorded with
respect to currently owned or leased properties except for Liens permitted by
Section 6.02; and
(f) The representations and warranties in this Section 3.17 with
respect to those portions of the Properties not actually controlled by the
Borrower and its Subsidiaries are made to the knowledge of Holdings and the
Borrower.
SECTION 3.18. Capitalization of Holdings and the Borrower. The
authorized Capital Stock, the par value thereof and the amount of such
authorized Capital Stock issued and outstanding for each of Holdings and the
Borrower is set forth on Schedule 3.18(a) as of the Closing Date. All
outstanding shares of Capital Stock of the Borrower are fully paid and
nonassessable, are owned beneficially and of record by Holdings, and are free
and clear of all Liens and encumbrances whatsoever other than the Liens created
by the Loan Documents.
(b) As of the Closing Date, except as set forth on Schedule 3.18(b),
there are no outstanding subscriptions, options, warrants, calls, rights
(including preemptive rights) or other agreements or commitments (including
pursuant to management or employee stock plans or similar plans) of any nature
relating to any Capital Stock of Holdings, the Borrower or any Subsidiary.
SECTION 3.19. Security Documents. The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, when the Pledged Stock, together with duly
executed stock transfer powers, is delivered to the Collateral Agent (or, as
applicable in the case of Capital Stock of foreign Subsidiaries, the requisite
filings or registrations are made), the Pledge Agreement will constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Pledged Stock, in each case prior
and superior in right to any other person.
(b) Each of the Security Agreement and the Collateral Account Agreement
is effective to create in favor of the Collateral Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral subject thereto (as defined, respectively, in the Security Agreement
and the Collateral Account Agreement) and, when financing statements in
appropriate form are filed in the offices specified on the schedules to the
Security Agreement and, in the case of cash included in the Collateral under the
Collateral Account Agreement, when such cash is deposited in the Collateral
Account, each of the Security Agreement and the Collateral Account Agreement
will constitute a fully perfected Lien on, and
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security interest in, all right, title and interest of the grantors thereunder
in such Collateral, to the extent contemplated therein and subject to Section
9-306 of the Uniform Commercial Code, and the proceeds thereof, in each case
prior and superior in right to any other person, other than with respect to
Liens expressly permitted by Section 6.02, it being understood that (i) no
financing statement will be required to be filed hereunder in the State of
Tennessee unless the Borrower or any Subsidiary shall acquire or have assets in
Tennessee having a value in an aggregate amount in excess of $1,000,000, in
which case the Borrower shall promptly notify the Collateral Agent of such
amount, and shall file such financing statements as the Collateral Agent shall
reasonably request and (ii) the Borrower and its Subsidiaries shall not be
required to grant a Lien under the Loan Documents on any property to the extent
that the grant of such Lien is prohibited by a Service Contract which was not
created in anticipation of this Agreement; provided, however, that the aggregate
amount of Capital Expenditures made pursuant to Service Contracts entered into
after the Closing Date (excluding renewals of Service Contracts existing on the
Closing Date) prohibiting the grant of such a Lien (other than with respect to
tangible assets located on the property that is the subject of such Service
Contract) shall not exceed $15,000,000 in the aggregate.
(c) The Intellectual Property Security Agreement is effective to create
in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Intellectual Property Security Agreement), and when financing
statements in appropriate form are filed in the offices specified on the
schedules to the Security Agreement and the Intellectual Property Security
Agreement is filed in the United States Patent and Trademark Office and the
United States Copyright Office, the Intellectual Property Security Agreement
will constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Collateral and, to the extent
contemplated therein and subject to Section 9-306 of the Uniform Commercial
Code, the proceeds thereof, in each case prior and superior in right to any
other person (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the date hereof), other than with
respect to the rights of persons pursuant to Liens expressly permitted by
Section 6.02.
SECTION 3.20. Labor Matters. Except as set forth in Schedule 3.20,
there are no strikes, lockouts or slowdowns pending or threatened against
Holdings, the Borrower or any Subsidiary which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
The hours worked by and payments made to employees of Holdings, the Borrower and
the Subsidiaries have not been in violation in any material respect of the Fair
Labor Standards Act or any other applicable law dealing with such matters,
except as could not reasonably be expected to result in a Material Adverse
Effect. All material payments due from Holdings, the Borrower or any Subsidiary
or for which any claim may be made against Holdings, the Borrower or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits have been paid or accrued as a liability on the books of
Holdings, the Borrower or such Subsidiary to the extent required by GAAP, except
as could not reasonably be expected to result in a Material Adverse Effect. The
consummation of the Transactions will not give rise to a right of termination or
right of renegotiation on the part of any union under any
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collective bargaining agreement to which Holdings, the Borrower or any
Subsidiary (or any predecessor) is a party or by which Holdings, the Borrower or
any Subsidiary (or any predecessor) is bound, other than collective bargaining
agreements which, individually or in the aggregate, are not material to
Holdings, the Borrower and the Subsidiaries taken as a whole.
SECTION 3.21. Insurance. Schedule 3.21 sets forth a true, complete and
correct description of all insurance maintained by Holdings or the Borrower or
by Holdings or the Borrower for its Subsidiaries as of the Closing Date. As of
such date, such insurance is in full force and effect and all premiums have been
duly paid. Holdings or the Borrower and its Subsidiaries have insurance in such
amounts and covering such risks and liabilities (and with such deductibles and
exclusions) as are in accordance with normal industry practice.
SECTION 3.22. Solvency. Immediately after the consummation of the
transactions to occur on the Closing Date and immediately following the making
of each Loan made on the Closing Date and after giving effect to the application
of the proceeds of such Loans, (i) the fair value of the assets of Holdings, the
Borrower and the Subsidiaries on a consolidated basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or otherwise, of
Holdings, the Borrower and the Subsidiaries on a consolidated basis; (ii) the
present fair saleable value of the property of Holdings, the Borrower and the
Subsidiaries on a consolidated basis will be greater than the amount that will
be required to pay the probable liability of Holdings, the Borrower and the
Subsidiaries on a consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) Holdings, the Borrower and the Subsidiaries
on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) Holdings, the Borrower and the Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are
conducted and are proposed to be conducted following the Closing Date.
(b) None of Holdings and the Borrower intends to, none will permit any
Subsidiary to, and none believes that it or any Subsidiary will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it or any such Subsidiary and
the timing of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.23. Year 2000 Issues. Any reprogramming required to permit
the proper functioning (but only to the extent that such proper functioning
would otherwise be impaired by the occurrence of the year 2000) in and following
the year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by Holdings, the Borrower or any of
its Subsidiaries or used or relied upon in the conduct of their business
(including any such systems and other equipment supplied by others or with which
the computer systems of Holdings, the Borrower or any of its Subsidiaries
interface), and the testing of all such systems and other equipment as so
reprogrammed, will be completed by September 30, 1999 except where failure to
reprogram or test would not reasonably be expected to have a Material Adverse
Effect. The costs to Holdings, the Borrower and its Subsidiaries that have not
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been incurred as of the date hereof for such reprogramming and testing and for
other reasonably foreseeable consequences to them of any improper functioning of
other computer systems and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected to have a Material
Adverse Effect. At the request of the Administrative Agent, Borrower shall
provide to the Administrative Agent true and correct copies of its written plans
relating to Year 2000 Issues as Borrower may have available and related
implementation budgets.
ARTICLE IV.
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the
Fronting Bank to issue Letters of Credit hereunder (each, a "Credit Event") are
subject to the satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing and on
the date of each issuance or renewal of a Letter of Credit (other than a
Borrowing in which Revolving Loans are refinanced with new Revolving Loans as
contemplated by Section 2.02(f) without any increase in the aggregate principal
amount of Revolving Loans outstanding and any extension or renewal of any Letter
of Credit without any increase in the stated amount of such Letter of Credit):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with the last paragraph of Section 2.03) or, in the case of
the issuance of a Letter of Credit, the Fronting Bank and the Administrative
Agent shall have received a notice requesting the issuance of such Letter of
Credit as required by Section 2.20(b).
(b) The representations and warranties set forth in each Loan Document
shall be true and correct in all material respects on and as of the date of such
Borrowing with the same effect as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an earlier
date.
(c) At the time of and immediately after such Borrowing or issuance of
such Letter of Credit, as the case may be, no Event of Default or Default shall
have occurred and be continuing.
Each Borrowing and each issuance of a Letter of Credit (except those specified
in the parenthetical contained in the introductory paragraph of this Section
4.01) shall be deemed to constitute a representation and warranty by the
Borrower on the date of such Borrowing or issuance, as the case may be, as to
the matters specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
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(a) The Syndication Agent and the Administrative Agent shall have
received, on behalf of itself, the Lenders and the Fronting Bank, a favorable
written opinion of (i) Simpson Thacher & Bartlett and (ii) counsel for Holdings
and the Borrower in South Carolina, California and Connecticut, in each case
substantially to the effect set forth in Exhibit K-2, in each case (A) dated the
Closing Date, (B) addressed to the Syndication Agent, the Fronting Bank, the
Administrative Agent and the Lenders, and (C) covering such other matters
relating to the Loan Documents and the Transactions as the Syndication Agent or
the Administrative Agent may reasonably request. Each of Holdings and the
Borrower hereby instructs its counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the borrowings and
extensions of credit hereunder and the other Loan Documents shall be reasonably
satisfactory to the Lenders, to the Fronting Bank and to Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Syndication Agent and the Administrative
Agent.
(c) The Syndication Agent and the Administrative Agent shall have
received (i) a copy of the certificate or articles of incorporation, including
all amendments thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as to the
good standing of each Loan Party as of a recent date from such Secretary of
State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan
Party dated the Closing Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws of such Loan Party as in effect on the Closing
Date and at all times since a date prior to the date of the resolutions
described in clause (B) below, (B) that attached thereto is a true and complete
copy of resolutions or other authorizing action duly adopted by the Board of
Directors of such Loan Party authorizing the execution, delivery and performance
of the Loan Documents to which such person is a party and, in the case of the
Borrower, the borrowings hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C) that the
certificate or articles of incorporation of such Loan Party have not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing any Loan Document or
any other document delivered in connection herewith on behalf of such Loan
Party; (iii) a certificate of another officer as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the certificate
pursuant to (ii) above; and (iv) such other documents as the Syndication Agent,
the Administrative Agent, the Lenders, the Fronting Bank or Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for Syndication Agent and the Administrative
Agent, may reasonably request.
(d) The Syndication Agent and the Administrative Agent shall have
received a certificate of the Borrower, dated the Closing Date and signed by a
Financial Officer of and on behalf of the Borrower, confirming compliance with
the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01.
(e) The Syndication Agent and the Administrative Agent shall have
received all Fees and other amounts due and payable on or prior to the Closing
Date, including, to the
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extent invoiced, reimbursement or other payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder or under any other
Loan Document.
(f) Each of the Guarantee Agreements and the Indemnity, Subrogation and
Contribution Agreement shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and effect.
(g) The Pledge Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be in full force and
effect, and all the outstanding Capital Stock of the Borrower and each domestic
Subsidiary owned by Holdings or a Wholly-Owned Subsidiary and 65% of each
foreign Subsidiary shall have been duly and validly pledged thereunder to the
Collateral Agent for the ratable benefit of the Secured Parties and certificates
representing such shares, accompanied by instruments of transfer and stock
powers endorsed in blank, shall be in the actual possession of the Collateral
Agent.
(h) The Security Agreement, the Intellectual Property Security
Agreement and the Collateral Account Agreement shall have been duly executed by
the Loan Parties thereto and shall have been delivered to the Collateral Agent
and shall be in full force and effect on such date and each document (including
each Uniform Commercial Code financing statement) required by law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Collateral Agent for the benefit of the Secured
Parties a valid, legal and perfected first-priority security interest in and
lien on the Collateral described in each such agreement (subject to any Lien
expressly permitted by Section 6.02 and other than goods located in the State of
Tennessee) shall have been delivered to the Collateral Agent.
(i) The Collateral Agent shall have received the results of a search of
the Uniform Commercial Code filings made with respect to Holdings, the Borrower
and each other Loan Party in the states in which the chief executive office of
each such person is located together with copies of the financing statements
disclosed by such search, accompanied by evidence satisfactory to the
Administrative Agent that the Liens indicated in any such financing statement
would be permitted under Section 6.02 or have been released. The Administrative
Agent shall have received duly executed documentation evidencing the termination
of all the security interests granted in the Pledged Stock and in any other
Collateral in connection with existing Indebtedness of the Borrower or any of
the Subsidiaries or any other Person (other than security interests permitted by
Section 6.02).
(j) The Administrative Agent shall have received copies of, or an
insurance broker's or agent's certificate as to coverage under, the insurance
policies required by Section 5.02 and the applicable provisions of the Security
Documents, each of which shall be endorsed or otherwise amended to include a
"standard" or "New York" lender's loss payable endorsement and to name the
Collateral Agent as additional insured, in form and substance reasonably
satisfactory to the Administrative Agent.
(k) The Transactions shall have been consummated prior to or
simultaneously with the initial Credit Event hereunder in accordance with
applicable law and the Share
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Exchange Agreement and all related documentation and otherwise on terms
reasonably satisfactory to the Lenders; and the conditions to Holdings'
obligations set forth in the Share Exchange Agreement shall have been satisfied
without giving effect to any waiver or amendment in any manner materially
adverse to the Lenders that was not approved by the Lenders.
(l) After giving effect to the Transactions, (i) the Borrower, VSI and
SAC and the Subsidiaries shall have outstanding no preferred stock (other than
with respect to SAC preferred stock which will be redeemed or repaid in
accordance with Section 5.01(c) and preferred stock owned by Wholly-Owned
Subsidiaries) and no Indebtedness other than the Loans hereunder and
Indebtedness otherwise permitted under Section 6.01, (ii) Holdings shall have
outstanding no equity interest or Indebtedness other than its common equity, all
of which shall be owned, directly or indirectly by the Investors and former
management and (iii) the Funds and Fund Affiliates shall own directly or
indirectly not less than 66% of the outstanding common stock of Holdings.
(m) There shall have been no material adverse change in the assets,
business, properties, financial condition or results of operations of the
Borrower and the Subsidiaries on a consolidated basis since December 31, 1997.
(n) The Lenders shall have received (x) a reasonably satisfactory pro
forma consolidated balance sheet of Holdings as of September 29, 1998, together
with a certificate of Holdings, dated the Closing Date and signed by a Financial
Officer of the Borrower, to the effect that such statement fairly presents the
pro forma financial position of Holdings, the Borrower and the Subsidiaries in
accordance with GAAP (except to the extent otherwise noted) after giving effect
to the initial Credit Events and the Transactions, and the Lenders shall be
reasonably satisfied that such balance sheet and the transactions in connection
with the Share Exchange and the financing arrangements contemplated hereby are
not materially inconsistent with the Information Memorandum and the information,
the projections and the model contained therein. The Borrower shall also have
provided such other financial information as the Lenders shall reasonably have
requested in connection with the Share Exchange, (y) the Projections and (z) a
certificate of the Chief Financial Officer of the Borrower confirming that
EBITDA (giving effect to adjustments permitted to be made after the Closing Date
in accordance with the definition of such term), determined on a pro forma
consolidated basis for the Borrower and its subsidiaries for the twelve-month
period most recently ended prior to the Closing Date (adjusted to give effect to
the Share Exchange and other transactions contemplated on or about the Closing
Date as if such transactions occurred on the first day of such twelve-month
period), shall not be less than $42,000,000, such certificate to be in form and
substance reasonably satisfactory to Agents..
(o) All requisite material Governmental Authorities and all material
third parties shall have approved or consented to the Transactions to the extent
required, all applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that has or could have a
reasonable likelihood of restraining, preventing or imposing burdensome
conditions on the Share Exchange or the consummation of the other Transactions.
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(p) The Lenders shall have received a solvency letter in form and
substance satisfactory to the Lenders from Murray, Devine & Co. as to the
solvency of Holdings, the Borrower and the Subsidiaries on a consolidated basis,
after giving effect to the consummation of the other Transactions.
ARTICLE V.
AFFIRMATIVE COVENANTS
Each of Holdings and the Borrower covenants and agrees with
each Lender that so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document shall
have been paid in full and all Letters of Credit have been cancelled or have
expired and all amounts drawn thereunder have been reimbursed in full, unless
the Required Lenders shall otherwise consent in writing, each of Holdings and
the Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05,
and except for the liquidation or dissolution of Subsidiaries if the assets of
such corporations to the extent they exceed estimated liabilities are acquired
by the Borrower or a Subsidiary in such liquidation or dissolution, provided
that Subsidiaries that are Guarantors may not be liquidated into Subsidiaries
that are not Guarantors.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
all material applicable laws, rules, regulations (including any Environmental
Law) and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith, if any,
may be properly conducted at all times (in each case except as expressly
permitted by this Agreement).
(c) Within 90 days of the Closing Date, Borrower shall take, and/or
cause the Subsidiaries to take, all such actions as may be necessary in order
for SAC to become a Wholly-Owned Subsidiary of the Borrower.
SECTION 5.02. Insurance. Keep its insurable properties insured at all
times by financially sound and reputable insurers in such amounts as shall be
customary for similar businesses; maintain such other insurance (including, to
the extent consistent with past practices, self-insurance), of such types, to
such extent and against such risks, as is customary with
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companies in the same or similar businesses, including general liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties owned,
occupied or controlled by it; and maintain such other insurance as may be
required by law or any other Loan Document.
SECTION 5.03. Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as (a) the validity or amount thereof shall be
contested in good faith by appropriate proceedings and Holdings, the Borrower or
the affected Subsidiary, as applicable, shall have set aside on its books
adequate reserves with respect thereto, (b) such tax, assessment, charge, levy
or claim is in respect of property taxes for property that Holdings, the
Borrower or one of the Subsidiaries has determined to abandon and the sole
recourse for such tax, assessment, charge, levy or claim is to such property or
(c) the amount of such taxes, assessments, charges, levies and claims and
interest and penalties thereon does not exceed $500,000 in the aggregate.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, a consolidated
balance sheet and related statements of operations, cash flows and stockholders'
equity showing the financial condition of Holdings, the Borrower and the
Subsidiaries as of the close of such fiscal year and the consolidated results of
their operations during such year, all audited by Deloitte & Touche L.L.P. or
other independent public accountants of recognized national standing reasonably
acceptable to the Administrative Agent and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect, provided that
disclosures by such accountants of changes in accounting principles shall not be
deemed such a qualification) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations of
Holdings, the Borrower and the Subsidiaries on a consolidated basis in
accordance with GAAP, together with a written discussion by management of annual
results compared to prior year results;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, a consolidated balance sheet and related
statements of operations, cash flows and stockholders' equity showing the
financial condition of Holdings, the Borrower and the Subsidiaries as of the
close of such fiscal quarter and the consolidated results of their operations
during such fiscal quarter and the then-elapsed portion of the fiscal year, all
certified by one of its Financial Officers on behalf of the Borrower as fairly
presenting the financial condition and results of operations of Holdings, the
Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP
(except for the absence of footnotes), subject to normal year-end audit
adjustments, together with a written discussion by management of quarterly
results and year-to-date results compared to prior year results;
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(c) concurrently with any delivery of financial statements under (a) or
(b) above, a certificate of the accounting firm or Financial Officer on behalf
of the Borrower opining on or certifying such statements (which certificate,
when furnished by an accounting firm, may be limited to accounting matters and
disclaim responsibility for legal interpretations) (i) certifying that no Event
of Default or Default has occurred or, if such an Event of Default or Default
has occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto and (ii) setting forth
computations in reasonable detail satisfactory to the Administrative Agent
demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and
6.12 (it being understood that the information required by this clause (ii) may
be provided in a certificate of a Financial Officer on behalf of the Borrower
instead of from such accounting firm);
(d) promptly after the same become publicly available, copies of all
periodic and other publicly available reports, proxy statements and, to the
extent reasonably requested by the Administrative Agent, other materials filed
by Holdings, the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any governmental authority succeeding to any of or all the
functions of said Commission, or with any national securities exchange;
(e) if, as a result of any change in accounting principles and policies
from those as in effect on the date of this Agreement, the consolidated
financial statements of Holdings, the Borrower and the Subsidiaries delivered
pursuant to paragraph (a) or (b) above will differ in any material respect from
the consolidated financial statements that would have been delivered pursuant to
such clauses had no such change in accounting principles and policies been made,
then, together with the first delivery of financial statements pursuant to
paragraph (a) and (b) above following such change, a schedule prepared by a
Financial Officer on behalf of the Borrower reconciling such changes to what the
financial statements would have been without such changes;
(f) within 90 days after the beginning of each fiscal year, a copy of
an operating and capital expenditure budget for such fiscal year;
(g) promptly following the creation or acquisition of any Subsidiary, a
certificate from a Responsible Officer identifying such new Subsidiary and the
ownership interest of the Borrower and the Subsidiaries therein;
(h) promptly following entry into any Service Contract or Permitted
Business Acquisition involving Capital Expenditures in excess of $5,000,000, a
certificate from a Responsible Officer identifying such Service Contract or
Permitted Business Acquisition and confirming that it is a Permitted Service
Contract or Permitted Business Acquisition, as the case may be;
(i) simultaneously with the delivery of any financial statements
pursuant to paragraph (a) or (b) above, a balance sheet and related statements
of operations, cash flows and stockholder's equity for each unconsolidated
Subsidiary for the applicable period;
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(j) promptly, a copy of all reports submitted in connection with any
material interim or special audit made by independent accountants of the books
of Holdings, the Borrower or any Subsidiary; and
(k) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Holdings, the Borrower
or any Subsidiary, or compliance with the terms of any Loan Document, or such
consolidating financial statements, as in each case the Administrative Agent or
any Lender, acting through the Administrative Agent, may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent and each Lender written notice of the following promptly
after any Responsible Officer of the Borrower obtains actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with respect
thereto;
(b) the filing or commencement of, or any written threat or notice of
intention of any person to file or commence, any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority, against
Holdings, the Borrower or any Subsidiary thereof in respect of which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, could reasonably be expected to result in a Material Adverse Effect
and a notice of any material adverse development in such action, suit or
proceeding; and
(c) any other development specific to Holdings, the Borrower or any
Subsidiary that is not a matter of general public knowledge and that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.
SECTION 5.06. Employee Benefits. Comply in all material respects with
the applicable provisions of ERISA and the provisions of the Code relating to
ERISA and any applicable similar non-U.S. law, except to the extent that the
failure to comply with this subsection could not reasonably be expected to have
a Material Adverse Effect and (b) furnish to the Administrative Agent (i) as
soon as possible after, and in any event within 30 days after any Responsible
Officer of Holdings, the Borrower or any ERISA Affiliate knows or has reason to
know that, any Reportable Event has occurred, a statement of a Financial Officer
setting forth details as to such Reportable Event and the action proposed to be
taken with respect thereto, together with a copy of the notice, if any, of such
Reportable Event given to the PBGC, (ii) promptly after any Responsible Officer
learns of receipt thereof, a copy of any notice that the Borrower or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Code Section 414) or to appoint a trustee to administer any such Plan, (iii)
within 30 days after the due date for filing with the PBGC pursuant to Section
412(n) of the Code a notice of failure to make a required installment or other
payment with respect to a Plan, a statement of a Financial Officer setting forth
details as to such failure and the action proposed to be taken with respect
thereto, together
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with a copy of any such notice given to the PBGC and (iv) promptly after any
Responsible Officer learns thereof and in any event within 30 days after receipt
thereof by Holdings, the Borrower or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by Holdings, the Borrower or
any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B)
a determination that a Multiemployer Plan is, or is expected to be, terminated
or in reorganization, in each case within the meaning of Title IV of ERISA;
provided that in the case of each of clauses (i) through (iv) above, notice to
the Administrative Agent shall only be required if such event or condition,
together with all other events or conditions referred to in clauses (i) through
(iv) above, could reasonably be expected to result in liability of Holdings, the
Borrower or any Subsidiary in an aggregate amount exceeding $4,000,000.
SECTION 5.07. Maintaining Records; Access; Inspections. Maintain all
financial records in accordance with GAAP and permit any persons designated by
the Administrative Agent or any Lender to visit and inspect the financial
records and the properties of Holdings, the Borrower or any Subsidiary at
reasonable times, upon reasonable prior notice to Holdings or the Borrower, and
as often as reasonably requested and to make extracts from and copies of such
financial records, and permit any persons designated by the Administrative Agent
or any Lender upon reasonable prior notice to Holdings or the Borrower to
discuss the affairs, finances and condition of, Holdings, the Borrower or any
Subsidiary with the officers thereof and independent accountants therefor
(subject to reasonable requirements of confidentiality, including requirements
imposed by law or by contract).
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in the
recitals to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and make
reasonable best efforts to cause all lessees and other persons occupying its
currently owned or leased properties to comply, with all Environmental Laws and
Environmental Permits applicable to its operations and Properties, except in the
case of such noncompliance as could not reasonably be expected to result in a
Material Adverse Effect; obtain and renew all material Environmental Permits
necessary for its operations and currently owned or leased properties, and
conduct, to the extent required under Environmental Laws, any material Remedial
Action in accordance with Environmental Laws except, in each of the foregoing,
as could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. Preparation of Environmental Reports. If a default caused
by reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to Lenders within 90 days after such request, at the expense of
the Borrower, an environmental site assessment report for the properties that
are the subject of such default prepared by an environmental consulting firm
reasonably acceptable to the Administrative Agent, indicating the presence or
absence of Hazardous Materials and the estimated cost of any Remedial Action
required under any applicable Environmental Law in connection with such
properties.
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SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements) that may be required under applicable law, or that the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority (subject to Liens permitted by Section
6.02) of the security interests created or intended to be created by the
Security Documents. In addition, from time to time, Holdings, the Borrower and
the Subsidiaries will, at their cost and expense, on or promptly (but in any
event within 10 Business Days) following the date of acquisition by the Borrower
or any Subsidiary of any new Wholly-Owned Subsidiary (subject to the receipt of
required consents from Governmental Authorities), promptly secure the
Obligations by causing the following to occur: (i) promptly upon creating or
acquiring any additional subsidiary, the Capital Stock of such subsidiary
(unless such subsidiary is a subsidiary of a foreign Subsidiary) will be pledged
pursuant to the Pledge Agreement; provided that no more than 65% of the Capital
Stock of any foreign subsidiary shall be required to be pledged pursuant to this
Section 5.11, and (ii) such subsidiary (unless such subsidiary is a foreign
Subsidiary) will become a party to the Security Agreement, the Intellectual
Property Security Agreement, the Pledge Agreement (if such subsidiary owns
Capital Stock of any subsidiary), the Subsidiary Guarantee Agreement and the
Indemnity, Subrogation and Contribution Agreement as contemplated under each
such agreement and will, if such subsidiary owns any material real property
located in the United States, enter into and deliver to the Collateral Agent a
mortgage or deed of trust, as applicable, in respect of such property in such
form as may reasonably be specified by the Collateral Agent. All such security
interests and Liens will be created under the Security Documents and other
instruments and documents in form and substance reasonably satisfactory to the
Collateral Agent, and Holdings, the Borrower and the Subsidiaries shall deliver
or cause to be delivered to the Administrative Agent all such instruments and
documents (including legal opinions and lien searches) as the Required Lenders
shall reasonably request to evidence compliance with this Section 5.11. Holdings
and the Borrower agree to provide, and to cause each Subsidiary to provide, such
evidence as the Collateral Agent shall reasonably request as to the perfection
and priority status of each such security interest and Lien. Notwithstanding the
foregoing, the Borrower and its Subsidiaries shall not be required to grant a
Lien on any property to the extent that the granting of such Lien would violate
any Permitted Service Contract to which the Borrower or a Subsidiary is party
and which was not created in anticipation of this Agreement; provided that any
such prohibition shall apply only to (i) tangible assets located on the property
that is the subject of such Permitted Service Contract and (ii) Permitted
Service Contracts entered into after the Closing Date (excluding renewals of
Permitted Service Contracts in effect on the Closing Date) involving Capital
Expenditures by Borrower or a Subsidiary not in excess of $15,000,000 in the
aggregate.
SECTION 5.12. Fiscal Year; Accounting. In the case of each of Holdings,
the Borrower and the Subsidiaries, cause its respective fiscal year to end on
the Tuesday closest to December 31 of such fiscal year and its respective first,
second and third fiscal quarters to end on the Tuesday closest to March 31, June
30 and September 30, respectively, of such fiscal year.
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SECTION 5.13. Dividends. In the case of the Borrower, permit its
Subsidiaries to pay dividends and cause such dividends to be paid to the extent
required to pay the monetary Obligations, subject to prohibitions imposed by
applicable requirements of law.
SECTION 5.14. Interest Rate Protection Agreements. As promptly as
practicable and in any event within 90 days after the Closing Date, enter into,
and thereafter maintain in effect, one or more Interest Rate Protection
Agreements with any of the Lenders or other financial institutions reasonably
satisfactory to the Administrative Agent, the effect of which shall be to limit
at all times the interest payable in connection with Indebtedness having an
aggregate outstanding principal amount not less than an amount equal to 50% of
the aggregate principal amount of Term Borrowings projected to be outstanding at
such time to a maximum rate and on terms and conditions otherwise reasonably
acceptable, taking into account current market conditions, to the Administrative
Agent, and deliver evidence of the execution and delivery thereof to the
Administrative Agent.
ARTICLE VI.
NEGATIVE COVENANTS
Each of Holdings and the Borrower covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been cancelled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, none of Holdings and the Borrower
will, and none of them will cause or permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness of the Borrower and its Subsidiaries existing on the
date hereof and set forth in Schedule 6.01, but not any extensions, renewals or
replacements of such Indebtedness except (i) renewals and extensions expressly
provided for in the agreements evidencing any such Indebtedness as the same are
in effect on the date of this Agreement and (ii) refinancings and extensions of
any such Indebtedness if the average life to maturity thereof is greater than or
equal to that of the Indebtedness being refinanced or extended, provided that
such Indebtedness permitted under clause (i) or clause (ii) above shall not be
(A) Indebtedness of an obligor that was not an obligor with respect to the
Indebtedness being extended, renewed or refinanced, (B) in a principal amount
which exceeds the Indebtedness (plus accrued interest and premiums thereon)
being renewed, extended or refinanced or (C) incurred, created or assumed if any
Default or Event of Default has occurred and is continuing or would result
therefrom;
(b) Indebtedness created hereunder and under the other Loan Documents;
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(c) in the case of the Guarantors, the Guarantees under the Guarantee
Agreements;
(d) Indebtedness of the Borrower pursuant to Interest Rate Protection
Agreements entered into in order to fix the effective rate of interest on the
Loans and other Indebtedness (provided that such transactions shall be entered
into for business purposes and not for the purpose of speculation);
(e) Indebtedness of the Borrower and the Subsidiaries owed to
(including obligations in respect of letters of credit for the benefit of) any
person providing worker's compensation, health, disability or other employee
benefits or property, casualty or liability insurance to the Borrower or any
Subsidiary, pursuant to reimbursement or indemnification obligations to such
person and Indebtedness in respect of insurance premiums;
(f) in the case of the Borrower, Indebtedness in respect of Letters of
Credit issued hereunder;
(g) (i) Indebtedness of Holdings, Borrower or any Subsidiary that is a
Guarantor to any Subsidiary, (ii) Indebtedness of any Wholly-Owned Subsidiary
that is a Subsidiary Guarantor to the Borrower or Holdings, (iii) Indebtedness
of any Non-Wholly-Owned Subsidiary to the Borrower and the other Subsidiaries in
an aggregate principal amount, together with all other Non-Wholly-Owned
Subsidiary Expenditures, not to exceed $5,000,000 in any fiscal year or
$10,000,000 in the aggregate at any time (net of any return of principal of (but
not return on) any such amount) and (iv) Indebtedness arising out of Investments
permitted by Section 6.04(a) and (i);
(h) Indebtedness of the Borrower or a Subsidiary that represents the
assumption by the Borrower or such Subsidiary of Indebtedness of a Subsidiary or
existing Indebtedness of an acquired Subsidiary in connection with the permitted
merger of such Subsidiary with or into the assuming person or the permitted
purchase of all or substantially all the assets of such Subsidiary by the
Borrower or a Subsidiary so long as such Indebtedness is not incurred in
contemplation of such merger or purchase and is not in excess of $5,000,000 in
the aggregate and refinancings and renewals thereof as long as (i) the
refinancing or renewal Indebtedness has an average life to maturity greater than
or equal to that of the Indebtedness being refinanced, (ii) the obligor on such
refinancing Indebtedness is the same obligor as on the Indebtedness being
refinanced, (iii) the amount of the refinancing Indebtedness does not exceed the
principal amount of the refinanced Indebtedness (plus unpaid accrued interest
and premium thereon);
(i) Indebtedness of the Borrower in respect of performance bonds, bid
bonds, appeal bonds, completion guaranties, surety bonds and similar obligations
and trade related letters of credit, in each case provided in the ordinary
course of business, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business, and any extension,
renewal or refinancing thereof to the extent not provided to secure the
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repayment of other Indebtedness and to the extent that the amount of refinancing
Indebtedness is not greater than the amount of Indebtedness being refinanced;
(j) Indebtedness of Borrower or its Subsidiaries arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within two Business Days of its
incurrence;
(k) Capital Lease Obligations, mortgage financings and purchase money
Indebtedness in an aggregate principal amount outstanding at any time not in
excess of $2,500,000 incurred by the Borrower or any Subsidiary prior to or
within 270 days after a Capital Expenditure in order to finance such Capital
Expenditure, and extensions, renewals and refinancings thereof if the interest
rate with respect thereto and other terms thereof are no less favorable to the
Borrower or such Subsidiary than the Indebtedness being refinanced and the
average life to maturity thereof is greater than or equal to that of the
Indebtedness being refinanced, provided that such refinancing Indebtedness shall
not be (i) Indebtedness of an obligor that was not an obligor with respect to
the Indebtedness (plus unpaid accrued interest and premiums thereon) being
extended, renewed or refinanced, (ii) in a principal amount that exceeds the
Indebtedness being renewed, extended or refinanced or (iii) incurred, created or
assumed if any Default or Event of Default has occurred and is continuing or
would result therefrom;
(l) Indebtedness of the Borrower or any Subsidiary supported by a
Letter of Credit, in a principal amount not in excess of the stated amount of
such Letter of Credit;
(m) Capital Lease Obligations (i) arising out of leases of automobiles
to be used by employees and directors of the Borrower and the Subsidiaries
entered into in the ordinary course of business or (ii) incurred by the Borrower
or any Subsidiary in respect of any Sale and Lease-Back Transaction that is
permitted under Section 6.14;
(n) other Indebtedness of the Borrower and its Subsidiaries in an
aggregate principal amount at any time outstanding that is not in excess of
$5,000,000;
(o) Indebtedness under the GECC Promissory Note;
(p) Indebtedness arising from agreements of the Borrower or a
Subsidiary providing for reasonable and customary indemnification, adjustment of
purchase price or similar obligations, in each case incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary;
(q) Indebtedness incurred by the Borrower constituting reimbursement
obligations with respect to letters of credit issued in the ordinary course of
business, including, without limitation, letters of credit in respect of
workers' compensation claims or self insurance and other similar statutory
requirements, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation in an aggregate principal amount not
to exceed $1,000,000 at any time;
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(r) Indebtedness of Holdings to Borrower, provided that such
Indebtedness shall (i) not exceed $65,000,000 in the aggregate at any time, (ii)
be subordinated to Lenders on terms and conditions satisfactory to
Administrative Agent in its sole discretion and (iii) in the case of such
Indebtedness incurred after the Closing Date, any cash proceeds thereof shall be
immediately contributed by Holdings to Borrower or used to repay or service
existing Indebtedness of Holdings to Borrower;
(s) Indebtedness representing the issuance of a promissory note of up
to $750,000 principal amount pursuant to Section 2.3(f) of the Share Exchange
Agreement; and
(t) all premium (if any), interest (including post-petition interest),
fees, expenses, indemnities, charges and additional or contingent interest on
obligations described in clauses (a) through (s) above.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien
on any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, or sell or transfer any account
receivable or any right in respect thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in Schedule 6.02, provided that such
Liens shall secure only those obligations that they secure on the date hereof
(and extensions, renewals and refinancings of such obligations permitted by
Section 6.01(a)) and shall not subsequently apply to any other property or
assets of Holdings, the Borrower or any Subsidiary;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset of the Borrower or any
Subsidiary prior to the acquisition thereof by the Borrower or any Subsidiary,
provided that (i) such Lien is not created in contemplation of or in connection
with such acquisition and (ii) such Lien does not apply to any other property or
asset of the Borrower or any Subsidiary (other than pursuant to then existing
after-acquired property clauses);
(d) any Lien on any property or asset of a Subsidiary securing
Indebtedness permitted by Section 6.01(h), provided that such Lien does not
apply to any other property or assets of Holdings, the Borrower or any
Subsidiary not securing such Indebtedness (or permitted refinancings thereof) at
the date of acquisition of such property or asset (other than after acquired
property subjected to a Lien securing Indebtedness incurred prior to such date
and permitted hereunder which contains a requirement for the pledging of after
acquired property);
(e) Liens for taxes, assessments or other governmental charges or
levies not yet delinquent, or that are for less than $500,000 in the aggregate,
or that are being contested in compliance with Section 5.03 or for property
taxes on property that Holdings, the Borrower or one of the Subsidiaries has
determined to abandon if the sole recourse for such tax, assessment, charge,
levy or claim is to such property;
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(f) carriers', warehousemen's, mechanic's, materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or that are being contested in good
faith by appropriate proceedings and in respect of which, if applicable,
Holdings, the Borrower or the relevant Subsidiary shall have set aside on its
books reserves in accordance with GAAP;
(g) pledges and deposits made in the ordinary course of business in
compliance with the Federal Employers Liability Act or any other workmen's
compensation, unemployment insurance and other social security laws or
regulations and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements in respect of such obligations;
(h) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations), statutory
obligations, surety and appeal bonds, performance bonds, completion guarantees
and other obligations of a like nature incurred in the ordinary course of
business, including those incurred to secure health, safety and environmental
obligations in the ordinary course of business;
(i) zoning restrictions, easements, trackage rights, leases (other than
Capital Lease Obligations), licenses, special assessments, rights-of-way,
restrictions on use of real property and other similar encumbrances incurred in
the ordinary course of business which, in the aggregate, are not substantial in
amount and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of Holdings, the
Borrower or any of the Subsidiaries;
(j) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by the Borrower or any Subsidiary (including the interests of
vendors and lessors under conditional sale and title retention agreements),
provided that (i) such security interests secure Indebtedness or Sale and
Lease-Back Transactions permitted by Section 6.01 or 6.14, (ii) such security
interests are incurred, and the Indebtedness secured thereby is created, within
270 days after such acquisition (or construction), (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of such real property,
improvements or equipment at the time of such acquisition (or construction),
(iv) such expenditures are permitted by this Agreement and (v) such security
interests do not apply to any other property or assets of the Borrower or any
Subsidiary (other than to accessions to such real property, improvements or
equipment and provided that individual financings of equipment provided by a
single lender may be cross-collateralized to other financings of equipment
provided solely by such lender);
(k) (i) the sale of accounts receivable in connection with collection
in the ordinary course of business and (ii) Liens securing reimbursement
obligations in respect of trade related letters of credit permitted under
Section 6.01 and covering the goods (or the documents of title in respect of
such goods) financed by such letters of credit;
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(l) Liens arising out of capitalized or operating lease transactions
permitted under Section 6.01 or 6.14, so long as such Liens (i) attach only to
the property sold in such transaction and any accessions thereto and (ii) do not
interfere with the business of Holdings, the Borrower or any Subsidiary in any
material respect;
(m) Liens consisting of interests of lessors under capital leases
permitted by Section 6.01;
(n) Liens securing judgments for the payment of money in an aggregate
amount not in excess of $5,000,000 (except to the extent covered by insurance as
to which the insurer has acknowledged in writing its obligation to cover),
unless such judgments shall remain undischarged for a period of more than 30
consecutive days during which execution shall not be effectively stayed;
(o) any Lien arising by operation of law pursuant to Section 107(1) of
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9607(1), or pursuant to analogous state law, for costs or damages
which are not yet due (by virtue of a written demand for payment by a
Governmental Authority) or which are being contested in compliance with the
standard set forth in Section 5.03(a) of such Act, or on property that the
Borrower or a Subsidiary has determined to abandon if the sole recourse for such
costs or damages is to such property, provided that the liability of the
Borrower and the Subsidiaries with respect to the matters giving rise to all
such Liens shall not, in the reasonable estimate of the Borrower (in light of
all attendant circumstances, including the likelihood of contribution by third
parties), exceed $2,000,000;
(p) any leases or subleases to other persons of properties or assets
owned or leased by the Borrower or a Subsidiary;
(q) Liens that are contractual rights of set-off (i) relating to the
establishment of depository relations with banks not given in connection with
the issuance of Indebtedness or (ii) pertaining to pooled deposit and/or sweep
accounts of the Borrower and/or any Subsidiary to permit satisfaction of
overdraft or similar obligations incurred in the ordinary course of business of
the Borrower and its Subsidiaries;
(r) Liens on assets consisting of the Borrower's or a Subsidiary's
obligation to return or resell such assets at the termination of, or to perform
under the terms of, a Service Contract;
(s) other Liens securing up to $2,000,000 of obligations at any time;
(t) the replacement, extension or renewal of any Lien permitted by
clause (c), (d), (j) or (l) above, provided that such replacement, extension or
renewal Lien shall not cover any property other than the property that was
subject to such Lien prior to such replacement,
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extension or renewal; and provided further that the Indebtedness and other
obligations secured by such replacement, extension or renewal Lien are permitted
by this Agreement;
(u) Liens required to be created pursuant to the terms of any
Permitted Service Contract; provided, that such Liens shall (i) apply only to
tangible property located at the property subject to such Permitted Service
Contract and (ii) be limited to $2,000,000 in the aggregate at any time; and
(v) any Lien arising as a result of a transaction permitted under
Section 6.05(i) or 6.13.
SECTION 6.03. Foreign Revenues. Permit revenues of foreign Subsidiaries or
attributable to foreign operations in any fiscal year to be greater than 50% of
the consolidated revenues of the Borrower and the Subsidiaries in such fiscal
year.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments (i) existing on the date hereof in the capital stock of
the Subsidiaries; (ii) by Holdings in the capital stock of the Borrower; (iii)
by the Borrower or any Subsidiary in any Subsidiary that is a Subsidiary
Guarantor (so long as such Guarantor shall remain a Wholly-Owned Subsidiary
after giving effect to such investment); (iv) by any Subsidiary in any
Subsidiary that is a Guarantor; (v) by any Subsidiary that is not a Guarantor in
any Wholly-Owned Subsidiary that is not a Guarantor (so long as such Subsidiary
shall remain a Wholly-Owned Subsidiary after giving effect to such investment);
and (vi) investments in foreign Subsidiaries, provided that the sum of the
aggregate amount of the consideration (whether cash or property, as valued at
the time each such investment is made) for all investments made pursuant to this
clause (vi) plus the aggregate amount of Capital Expenditures incurred or
projected to be incurred as permitted under clause (d) of the definition of
"Permitted Service Contract" shall not exceed (net of any return of capital of
(but not return on) any such investment) $20,000,000 at any time and (vii) by
the Borrower and its Subsidiaries in Non-Wholly-Owned Subsidiaries in an
aggregate principal amount that, together with all other Non-Wholly-Owned
Subsidiary Expenditures does not exceed $5,000,000 in any fiscal year or
$10,000,000 in the aggregate at any time (in each case net of any return of
capital of (but not return on) any such amount);
(b) Permitted Investments and investments that were Permitted
Investments when made;
(c) investments arising out of the receipt by the Borrower or any
Subsidiary of noncash consideration for the sale of assets permitted under
Section 6.05 provided that such consideration (if the stated amount or value
thereof is in excess of $500,000) is pledged upon receipt pursuant to the Pledge
Agreement to the extent required thereby;
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(d) intercompany loans permitted to be incurred as Indebtedness under
Section 6.01;
(e) (i) loans and advances to employees of Holdings, the Borrower or
the Subsidiaries to be used to pay taxes and (ii) other advances and loans to
employees and (ii) advances to employees of payroll and expenses in the ordinary
course of business; provided, however, that the aggregate amount of such loans
and advances under clause (i) at any time outstanding shall not exceed
$2,000,000
(f) (i) loans by the Borrower to VSI Management Direct LP and/or
Recreational Services, LLC and other former or current members of management not
to exceed $3,000,000 in aggregate principal amount at any time the proceeds of
which will be used to purchase or redeem shares of Capital Stock of Holdings
pursuant to their anti-dilution rights and will immediately be contributed by
Holdings in cash to the Borrower as common equity and (ii) loans by the Borrower
to VSI Management Direct LP and/or Recreational Services, LLC and other former
or current members of management the proceeds of which will be used to purchase
limited partnership interests in VSI Management Direct LP and/or Recreational
Services, LLC and Holdings held by present or former officers or employees of
the Borrower or any of its Subsidiaries in an aggregate amount not in excess of
$3,000,000 (plus the aggregate amount paid by VSI Management Direct LP,
Recreational Services, LLC and other former or current members of management
(using funds other than funds borrowed from the Borrower under clause (i)) after
the Closing Date to Holdings to purchase shares of Capital Stock of Holdings and
contributed by Holdings and contributed to the Borrower as common equity less
the aggregate amount of dividends paid pursuant to Section 6.06(d)) at any time;
(g) (i) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss and (ii)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of Holdings, the Borrower and the
Subsidiaries;
(h) Interest Rate Protection Agreements permitted pursuant to Section
6.01(d);
(i) investments, other than investments listed in paragraphs (a)
through (h) of this Section 6.04, existing on the Closing Date and set forth on
Schedule 6.04;
(j) investments resulting from pledges and deposits referred to in
Section 6.02(g) or (h);
(k) investments constituting Permitted Business Acquisitions and
subsequent investments in previously acquired Permitted Business Acquisitions;
provided that, the aggregate amount expended pursuant to a Permitted Business
Acquisition to acquire any person or an interest in any person other than a
Wholly-Owned Subsidiary, together with all other Non Wholly-Owned Subsidiary
Expenditures shall not exceed $5,000,000 in any fiscal year or $10,000,000 in
the aggregate at any time (and in each case net of any return of capital of (but
not
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return on) any such amount); provided further, that any investment made pursuant
to this subparagraph (k) in a Non Wholly-Owned Subsidiary that provides a
guaranty pursuant to the Subsidiary Guaranty Agreement shall not be subject to
the foregoing proviso;
(l) investments constituting the purchase or redemption of minority
shareholders or equity holders of Subsidiaries in an aggregate amount not to
exceed $1,000,000 in the aggregate (exclusive of any Capital Stock of Holdings,
VSI Management Direct LP or Recreational Services, LLC);
(m) investments permitted by Section 6.05;
(n) loans by the Borrower or any of its Wholly-Owned Subsidiaries to
customers made in connection with entering into a Permitted Service Contract;
provided, however, that such loans may not exceed $10,000,000 in any fiscal year
or $20,000,000 in aggregate amount outstanding at any time; and
(o) investments made from time to time with Capital Stock (or the
proceeds thereof) of Holdings.
SECTION 6.05. Mergers; Consolidations; Sales of Assets; Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any substantial
part of its assets (whether now owned or hereafter acquired), or purchase, lease
or otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other person, except that this Section
6.05 shall not prohibit:
(a) the purchase and sale of inventory in the ordinary course of
business by the Borrower or any Subsidiary or the acquisition of any asset of
any person in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto
no Event of Default or Default shall have occurred and be continuing (i) the
merger of any Subsidiary into the Borrower in a transaction in which the
Borrower is the surviving corporation, (ii) the merger or consolidation of any
Subsidiary into or with any other Subsidiary and, in the case of each clauses
(i) and (ii), no person other than the Borrower or a Subsidiary or minority
shareholders referenced in Section 6.04(l) receives any consideration and (iii)
the merger or consolidation of any joint venture in which the Borrower or a
Subsidiary owns 50% of the Capital Stock so long as the surviving entity is a
Wholly-Owned Subsidiary of the Borrower;
(c) investments permitted by Section 6.04;
(d) (i) subject to Section 6.07, sales, leases or transfers from the
Borrower or any Subsidiary to the Borrower or any domestic Wholly-Owned
Subsidiary and (ii) sales, leases or transfers from the Borrower or any
Subsidiary to any Non-Wholly-Owned Subsidiary provided that the aggregate net
value (after giving effect to any consideration received) of the property to
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be sold, leased or transferred pursuant to this clause (ii) together with all
other Non-Wholly-Owned Subsidiary Expenditures does not exceed $5,000,000 in any
fiscal year or $10,000,000 in the aggregate at any time (net of any return of
capital (but not return on any such amount));
(e) sales, leases or other dispositions of equipment, leasehold
improvements or real property of the Borrower or the Subsidiaries determined by
the Board of Directors or senior management of the Borrower to be no longer
useful or necessary in the operation of the business of the Borrower or the
Subsidiaries, provided that the Net Proceeds thereof shall be applied in
accordance with Section 2.12(c);
(f) sales, leases or other dispositions of property of the Borrower and
the Subsidiaries determined by the Board of Directors or senior management of
the Borrower to be no longer useful or necessary in the operation of the
business of the Borrower and the Subsidiaries, provided that the Net Proceeds
thereof shall be applied in accordance with Section 2.12(c);
(g) sales, leases or other dispositions of property having a net book
value not in excess of $2,000,000 in any fiscal year, provided that the Net
Proceeds thereof are applied in accordance with Section 2.12(c) or are used
within one year of the date of receipt thereof to purchase assets useful in the
business of the Borrower and the Subsidiaries, and provided further that no sale
may be made of the Capital Stock of any Subsidiary except in connection with the
sale of all its outstanding Capital Stock that is held by the Borrower and any
other Subsidiary;
(h) the sale of any Capital Stock of any Non-Wholly-Owned Subsidiary or
joint venture provided that the Net Proceeds thereof are applied in accordance
with Section 2.12(c);
(i) transactions permitted by Section 6.14; and
(j) sales and transfers of property at the termination of a Service
Contract as required by the terms of such Service Contract.
SECTION 6.06. Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its Capital Stock (other than dividends and
distributions on the common stock of Holdings payable solely by the issuance of
additional shares of common stock of Holdings) or directly or indirectly redeem,
purchase, retire or otherwise acquire for value (or permit any Subsidiary to
purchase or acquire) any shares of any class of its Capital Stock or set aside
any amount for any such purpose; provided, however, that: (a) any Subsidiary may
declare and pay dividends to, repurchase its Capital Stock from or make other
distributions to the Borrower or to any Wholly-Owned Subsidiary (or, in the case
of Non-Wholly-Owned Subsidiaries, to the Borrower or any Subsidiary and to each
other owner of Capital Stock of such Subsidiary on a pro rata basis (or more
favorable basis from the perspective of the Borrower or such Subsidiary) based
on their relative ownership interests); (b) the Borrower may declare and pay
dividends or make other
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distributions to Holdings, in respect of overhead, tax liabilities and tax
planning programs, legal, accounting and other professional fees and expenses
and any fees and expenses associated with registration statements filed with the
Securities and Exchange Commission and subsequent ongoing public reporting
requirements, in each case to the extent actually incurred by Holdings, in
connection with the business of its ownership of the Capital Stock of the
Borrower and the Subsidiaries, as applicable; provided, that all such dividends
and distributions, other than those made with respect to tax liabilities and tax
planning programs, shall not exceed $500,000 in any fiscal year; (c) the
Borrower may declare and pay dividends to or make other distributions to
Holdings, and Holdings may declare and pay dividends or make other distributions
to Recreational Services, LLC, VSI Management Direct LP, BCP Volume L.P., GECC
and BCP Offshore Volume L.P., in respect of tax liabilities and legal,
accounting and other professional fees and expenses, in each case to the extent
actually incurred by Recreational Services, LLC, VSI Management Direct LP, BCP
Volume L.P., GECC and BCP Offshore Volume L.P., as applicable, solely in
connection with the business of its ownership of the Capital Stock of Holdings ;
(d) the Borrower may declare and pay dividends or make distributions to
Holdings, in order to permit Holdings to purchase or redeem shares of its
Capital Stock held by VSI Management Direct LP or Recreational Services, LLC and
other current or former members of management in an aggregate amount not in
excess of $3,000,000 (plus the aggregate amount paid by VSI Management Direct LP
or Recreational Services, LLC and other current or former members of management
(using funds other than the funds borrowed pursuant to Section 6.04(f)(ii))
after the Closing Date to Holdings to purchase shares of Capital Stock of
Holdings and contributed by Holdings to the Borrower as common equity less the
aggregate amount of outstanding loans pursuant to Section 6.04(f)(ii)); (e) the
Borrower may declare and pay dividends to or make other distributions to and
issue Capital Stock to Holdings, the proceeds of which will be used to purchase
or redeem the Capital Stock of SAC not owned by the Borrower on the Closing
Date; (f) the Borrower or any Subsidiary may purchase or redeem the Capital
Stock of any minority shareholder of a Subsidiary whose purpose is to hold
liquor licenses provided that the aggregate amount of purchases and redemptions
pursuant to this clause shall not exceed $250,000; (g) the Borrower and its
Subsidiaries may transfer to Holdings trademarks and servicemarks and may make
license payments to Holdings in respect of such trademarks and servicemarks;
provided, however, that all such license payments are immediately contributed by
Holdings to Borrower or used to repay or service existing Indebtedness of
Holdings to Borrower; (h) in addition to transactions permitted by clause (f)
above, the Borrower or any Subsidiary may purchase or redeem the Capital Stock
of any equity holder of Capital Stock in any joint venture in which the Borrower
or any Subsidiary owns Capital Stock, provided that the aggregate amount of
purchases and redemptions pursuant to this clause shall not exceed $1,000,000;
provided further that such purchase or redemption results in such joint venture
entity becoming a Wholly-Owned Subsidiary; (i) Borrower and its Subsidiaries may
make distributions pursuant to Section 6.04(l); and (j) Holdings may repurchase
or redeem its shares to the extent required by Section 2.3(f) of the Share
Exchange Agreement.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transaction with, any of its Affiliates or any
known direct or indirect holder of 10% or more of any class of capital stock of
Holdings, unless such transaction is (i) otherwise permitted under
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this Agreement and (ii) upon terms no less favorable to Holdings, the Borrower
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's-length transaction with a person that was not an Affiliate, provided that
the foregoing restriction shall not apply to (A) the payment to the Funds and/or
any Fund Affiliates and/or GECC of the monitoring and management fees referred
to in paragraph (b) below or fees payable on the Closing Date or (B) the
indemnification of directors of Holdings, the Borrower and the Subsidiaries in
accordance with customary practice; provided, however, that none of the
foregoing shall prohibit, to the extent otherwise permitted under this
Agreement, (i) loans or advances to employees of Holdings, the Borrower or any
Subsidiary in accordance with Section 6.04(e), (ii) transactions among Holdings,
the Borrower and Subsidiaries otherwise permitted by this Agreement, (iii) the
payment of fees and indemnities to directors, officers and employees of
Holdings, the Borrower and the Subsidiaries in the ordinary course of business,
(iv) transactions pursuant to permitted agreements in existence on the Closing
Date and set forth on Schedule 6.07 and transactions pursuant to the Share
Exchange Agreement, (v) any employment agreements entered into by the Borrower
or any of the Subsidiaries in the ordinary course of business, (vi) dividends
and repurchases permitted under Section 6.06, (vii) any purchase by Holdings of
Capital Stock of the Borrower, or any contribution by Holdings to the equity
capital of the Borrower, (viii) any of the transactions contemplated by Section
6.04 or (ix) the payment of investment banking fees to The Blackstone Group and
its affiliates and GECC and its affiliates to the extent such fees are no
greater than the investment banking fees that a third party could have obtained
for the same services after negotiation at arm's-length.
(b) Make any payment of or on account of monitoring or management fees
payable to the Funds and/or any Fund Affiliates and/or GECC if a Default or
Event of Default shall have occurred and be continuing or would result
therefrom, provided that the aggregate amount of monitoring and management fees
paid or payable to the Funds, Fund Affiliates and GECC or its Affiliates in any
fiscal year shall not exceed $417,000 for 1998 and for any subsequent year an
amount equal to 105% of the maximum allowable aggregate monitoring and
management fee for the immediately preceding year, provided that in the event
that the maximum amount allowable for such monitoring and management fee is not
paid in any such year (the "Fee Shortfall") the maximum amount allowable for
such monitoring and management fee shall be an amount equal to 105% of the
maximum allowable aggregate monitoring and management fee for the immediately
preceding year plus the Fee Shortfall.
SECTION 6.08. Business of Holdings and its Subsidiaries. (a) In the
case of each of the Borrower and the Subsidiaries, engage at any time in any
business or business activity other than the business currently conducted by it
and business activities reasonably incidental or related thereto and any other
business or business activity acquired as part of a Permitted Business
Acquisition if such other business or business activity constitutes less than
25% of the business acquired in such Permitted Business Acquisition at the time
of acquisition and (b) in the case of Holdings, engage at any time in any
business or business activity other than (i) the ownership of all the
outstanding capital stock of Borrower, together with activities directly related
thereto, (ii) performance of its obligations under the Loan Documents and under
inter company Indebtedness, (iii) actions required by law to maintain its status
as a corporation, (iv) actions incidental to the consummation of the Share
Exchange.
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SECTION 6.09. Material Agreements. (i) Enter into any Service Contract
other than a Permitted Service Contract, (ii) sell, assign, transfer or
otherwise dispose of any right under or interest in any Service Contract (other
than under the Security Documents or to an Affiliate) except in connection with
a transaction permitted by Section 6.04 or 6.05 or (iii) amend or modify any
Service Contract in any way if such Service Contract as amended would not
constitute a Permitted Service Contract if it were entered into on the date of
such amendment or modification.
(b) (i) Directly or indirectly, make any payment, retirement,
repurchase or redemption on account of the principal of or directly or
indirectly prepay or defease any Indebtedness having a principal amount in
excess of $1,000,000 in the aggregate prior to the stated maturity date of such
Indebtedness (other than Indebtedness under the Loan Documents), (ii) make any
payment or prepayment of any such Indebtedness that would violate the terms of
this Agreement or of such Indebtedness, any agreement or document evidencing,
related to or securing the payment or performance of such Indebtedness or any
subordination agreement or provision applicable to such Indebtedness or (iii)
pay in cash any amount in respect of such Indebtedness that may at the
Borrower's option be paid in kind thereunder.
(c) Amend or modify in any manner adverse to the Lenders, or grant any
waiver or release under or terminate in any manner (if such action shall be
adverse to the Lenders), the certificate of incorporation or bylaws in any
material respect of Holdings, the Borrower or any Subsidiary or the Share
Exchange Agreement.
(d) Permit any Subsidiary to enter into any agreement or instrument
that by its terms restricts the payment of dividends or the making of cash
advances by such Subsidiary to the Borrower or any Subsidiary that is a direct
or indirect parent of such Subsidiary other than those set forth in the Loan
Documents and those in effect on the Closing Date and set forth on Schedule 6.09
(or replacements of such agreements on terms no less favorable to the Lenders)
and other than customary restrictions entered into by Non-Wholly-Owned
Subsidiaries (other than SAC for the period of time during which it is a
Non-Wholly-Owned Subsidiary) with respect to revenues and other property
generated by or related to a Service Contract.
SECTION 6.10. Minimum Consolidated Cash Net Worth. Permit Consolidated
Cash Net Worth as of the last day of each fiscal quarter set forth below to be
less than the amount set forth below for such period:
Fiscal Quarter:
Amount:
Fourth fiscal quarter 1998 $ 66,800,000
First fiscal quarter 1999 $ 66,800,000
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Second fiscal quarter 1999 $ 66,800,000
Third fiscal quarter 1999 $ 66,800,000
Fourth fiscal quarter 1999 $ 105,300,000
First fiscal quarter 2000 $ 105,300,000
Second fiscal quarter 2000 $ 105,300,000
Third fiscal quarter 2000 $ 105,300,000
Fourth fiscal quarter 2000 $ 141,800,000
First fiscal quarter 2001 $ 141,800,000
Second fiscal quarter 2001 $ 141,800,000
Third fiscal quarter 2001 $ 141,800,000
Fourth fiscal quarter 2001 $ 181,800,000
First fiscal quarter 2002 $ 181,800,000
Second fiscal quarter 2002 $ 181,800,000
Third fiscal quarter 2002 $ 181,800,000
Fourth fiscal quarter 2002 $ 221,800,000
First fiscal quarter 2003 $ 221,800,000
Second fiscal quarter 2003 $ 221,800,000
Third fiscal quarter 2003 $ 221,800,000
Fourth fiscal quarter 2003 $ 256,800,000
First fiscal quarter 2004 $ 256,800,000
Second fiscal quarter 2004 $ 256,800,000
Third fiscal quarter 2004 $ 256,800,000
Fourth fiscal quarter 2004 $ 291,800,000
First fiscal quarter 2005 $ 291,800,000
Second fiscal quarter 2005 $ 291,800,000
Third fiscal quarter 2005 $ 291,800,000
Fourth fiscal quarter 2005 $ 325,800,000
First fiscal quarter 2006 $ 325,800,000
Second fiscal quarter 2006 $ 325,800,000
Third fiscal quarter 2006 $ 325,800,000
Fourth fiscal quarter 2006 $ 361,800,000
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SECTION 6.11. Interest Coverage Ratio. Permit the ratio (the "Interest
Coverage Ratio") as of the last day of any fiscal quarter set forth below for
the four quarter period ended as of such day of (a) EBITDA plus for each Service
Contract having Pro Forma Contract EBITDA as at such day, such Pro Forma
Contract EBITDA multiplied by a fraction the numerator of which shall be equal
to the number of full fiscal quarters since the quarter during which the first
payment was made by Holdings, the Borrower or any Subsidiary under such Service
Contract funded in whole or in part by the proceeds of Indebtedness included in
Total Debt (which number of full fiscal quarters shall include such quarter if
payment is made on or prior to the 30th day thereof) and the denominator of
which shall be the number four to (b) Cash Interest Expense to be less than the
ratio set forth below for such period; provided that for purposes of calculating
Cash Interest Expense as of the last day of each of the first, second and third
fiscal quarters occurring after the Closing Date, the amount determined pursuant
to clause (b) above shall be determined by multiplying Cash Interest Expense for
the period commencing on the first day of the first full fiscal quarter
following the Closing Date, and ending as of the end of such fiscal period by
(i) 4, in the case of the first fiscal quarter, (ii) 2, in the case of the
second fiscal quarter, and (iii) 4/3, in the case of the third fiscal quarter;
provided that for purposes of making the foregoing calculation for any period
the aggregate amount of Pro Forma Contract EBITDA shall not exceed 20% of the
sum of EBITDA plus Pro Forma Contract EBITDA for such period:
Fiscal Quarter: Amount:
First fiscal quarter 1999 2.25:100
Second fiscal quarter 1999 2.25:100
Third fiscal quarter 1999 2.35:100
Fourth fiscal quarter 1999 2.35:100
First fiscal quarter 2000 2.35:100
Second fiscal quarter 2000 2.35:100
Third fiscal quarter 2000 2.75:100
Fourth fiscal quarter 2000 2.75:100
First fiscal quarter 2001 2.75:100
Second fiscal quarter 2001 3.00:100
Third fiscal quarter 2001 3.00:100
Fourth fiscal quarter 2001 3.00:100
First fiscal quarter 2002 3.00:100
Second fiscal quarter 2002 3.00:100
Third fiscal quarter 2002 3.00:100
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Fourth fiscal quarter 2002 3.00:100
First fiscal quarter 2003 3.00:100
Second fiscal quarter 2003 3.00:100
Third fiscal quarter 2003 3.00:100
Fourth fiscal quarter 2003 3.00:100
First fiscal quarter 2004 3.00:100
Second fiscal quarter 2004 3.00:100
Third fiscal quarter 2004 3.00:100
Fourth fiscal quarter 2004 3.00:100
First fiscal quarter 2005 3.00:100
Second fiscal quarter 2005 3.00:100
Third fiscal quarter 2005 3.00:100
Fourth fiscal quarter 2005 3.00:100
First fiscal quarter 2006 3.00:100
Second fiscal quarter 2006 3.00:100
Third fiscal quarter 2006 3.00:100
Fourth fiscal quarter 2006 3.00:100
SECTION 6.12. Leverage Ratio. Permit the ratio (the "Leverage Ratio")
of (a) Total Debt as of the last day of each fiscal quarter ending on or about
the dates set forth below to (b) (i) EBITDA for the four quarter period ended as
of such day plus (ii) the aggregate amount of Pro Forma Contract EBITDA for all
Service Contracts having Pro Forma Contract EBITDA as of such day to be in
excess of the ratio set forth below for such period; provided that for purposes
of making the foregoing calculation for any period the aggregate amount of Pro
Forma Contract EBITDA shall not exceed 20% of the sum of EBITDA plus Pro Forma
Contract EBITDA for such period:
Fiscal Quarter: Amount:
First fiscal quarter 1999 4.25:100
Second fiscal quarter 1999 4.25:100
Third fiscal quarter 1999 4.00:100
Fourth fiscal quarter 1999 4.00:100
First fiscal quarter 2000 4.00:100
Second fiscal quarter 2000 4.00:100
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Third fiscal quarter 2000 3.75:100
Fourth fiscal quarter 2000 3.75:100
First fiscal quarter 2001 3.75:100
Second fiscal quarter 2001 3.50:100
Third fiscal quarter 2001 3.50:100
Fourth fiscal quarter 2001 3.50:100
First fiscal quarter 2002 3.50:100
Second fiscal quarter 2002 3.25:100
Third fiscal quarter 2002 3.25:100
Fourth fiscal quarter 2002 3.25:100
First fiscal quarter 2003 3.25:100
Second fiscal quarter 2003 3.25:100
Third fiscal quarter 2003 3.25:100
Fourth fiscal quarter 2003 3.25:100
First fiscal quarter 2004 3.25:100
Second fiscal quarter 2004 3.25:100
Third fiscal quarter 2004 3.25:100
Fourth fiscal quarter 2004 3.25:100
First fiscal quarter 2005 3.25:100
Second fiscal quarter 2005 3.25:100
Third fiscal quarter 2005 3.25:100
Fourth fiscal quarter 2005 3.25:100
First fiscal quarter 2006 3.25:100
Second fiscal quarter 2006 3.25:100
Third fiscal quarter 2006 3.25:100
Fourth fiscal quarter 2006 3.25:100
SECTION 6.13 Capital Stock of the Subsidiaries. Sell, transfer, lease
or otherwise dispose of, or make subject to any subscription, option, warrant,
call, right or other agreement or commitment of any nature, the Capital Stock of
any Subsidiary, other than (a) pursuant to the Loan Documents or pursuant to a
transaction permitted pursuant to Section 6.04 or 6.05 and (b) directors'
qualifying shares.
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SECTION 6.14. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a "Sale and Lease-Back
Transaction"), other than any Sale and Lease-Back Transaction that involves a
sale by the Borrower or a Subsidiary on terms not less favorable than would
prevail in an arm's-length transaction; provided that, the aggregate amount of
lease payments made pursuant to all such Sale and Lease-Back Transactions shall
not exceed $5,000,000 or the resulting Indebtedness is permitted under Section
6.01.
ARTICLE VII.
EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) any representation or warranty made or deemed made by Holdings, the
Borrower or any Loan Party in any Loan Document, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or pursuant
to any Loan Document, shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished by Holdings, the
Borrower or any other Loan Party;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any Letter of Credit Disbursement when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or
on any Letter of Credit Disbursement or in the payment of any Fee or any other
amount (other than an amount referred to in (b) above) due under any Loan
Document, when and as the same shall become due and payable, and such default
shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by
Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement
contained in Section 5.01(a) (with respect to the Borrower), 5.05(a) or 5.08 or
in Article VI;
(e) default shall be made in the due observance or performance by
Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c) or (d)
above) and such default shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent or the Required Lenders to the
Borrower;
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(f) Holdings, the Borrower or any Subsidiary shall fail to observe or
perform any term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any Indebtedness (other than any Indebtedness
under any Loan Document) having an aggregate principal or notional amount in
excess of $5,000,000, if the effect of any such failure is to cause, or to
permit the holder or holders of such Indebtedness or a trustee on its or their
behalf (with or without the giving of notice, the lapse of time or both) to
cause, such Indebtedness to become due prior to its stated maturity, or
Holdings, the Borrower or any Subsidiary shall fail to pay any principal in
respect of any such Indebtedness at the stated maturity thereof;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of Holdings, the Borrower or any Subsidiary, or of a substantial part
of the property or assets of Holdings, the Borrower or a Subsidiary, under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any Subsidiary or
for a substantial part of the property or assets of Holdings, the Borrower or a
Subsidiary or (iii) the winding-up or liquidation of Holdings, the Borrower or
any Subsidiary; and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing shall
be entered;
(h) Holdings, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code, as now constituted or hereafter amended, or any other
Federal, state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Holdings, the
Borrower or any Subsidiary or for a substantial part of the property or assets
of the Borrower or any Subsidiary, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due or
(vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 (except to the extent covered by insurance as to
which the insurer has acknowledged in writing its obligation to cover) shall be
rendered against Holdings, the Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties of
Holdings, the Borrower or any Subsidiary to enforce any such judgment;
(j) (i) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section 412(n)(1)
of the Code),
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shall have occurred with respect to any Plan or Plans, (ii) a trustee shall be
appointed by a United States district court to administer any Plan or Plans,
(iii) the PBGC shall institute proceedings (including giving notice of intent
thereof) to terminate any Plan or Plans, (iv) the Borrower or any ERISA
Affiliate shall have been notified by the sponsor of a Multiemployer Plan that
it has incurred Withdrawal Liability to such Multiemployer Plan and the Borrower
or such ERISA Affiliate does not have reasonable grounds for contesting such
Withdrawal Liability or is not contesting such Withdrawal Liability in a timely
and appropriate manner, (v) the Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (vii) any other similar event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vii)
above, such event or condition, together with all other such events or
conditions, if any, could reasonably be expected to have a Material Adverse
Effect;
(k) (i) any Loan Document shall for any reason be asserted by Holdings,
the Borrower or any Subsidiary not to be a legal, valid and binding obligation
of any party thereto, or (ii) any security interest purported to be created by
any Security Document and to extend to assets that are not immaterial to
Holdings, the Borrower and the Subsidiaries on a consolidated basis shall cease
to be, or shall be asserted by the Borrower or any other Loan Party not to be, a
valid, perfected, first priority (except as otherwise expressly provided in this
Agreement or such Security Document) security interest in the securities, assets
or properties covered thereby, except to the extent that any such loss of
perfection or priority results from the failure of the Collateral Agent to
maintain possession of certificates representing securities pledged under the
Pledge Agreement or to file UCC continuation statements; or
(l) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent, at the request of the
Required Lenders, shall, by notice to the Borrower, take any or all of the
following actions, at the same or different times: (i) terminate forthwith the
Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part and (iii) demand cash collateral pursuant to Section
2.20(k), whereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate, the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable and the Administrative Agent shall be
deemed to have made a demand for cash collateral to the full extent permitted
under Section 2.20(k), without
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presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in any
other Loan Document to the contrary notwithstanding.
ARTICLE VIII.
THE AGENTS
In order to expedite the transactions contemplated by this
Agreement, (i) GSCP is hereby appointed to act as the Syndication Agent, and
(ii) Chase is hereby appointed to act as the Administrative Agent and the
Collateral Agent on behalf of the Lenders and the Fronting Bank (for purposes of
this Article VIII, the Syndication Agent, the Administrative Agent and the
Collateral Agent are referred to collectively as the "Agents"). Each of the
Lenders and each assignee of any such Lender hereby irrevocably authorizes the
Agents to take such actions on behalf of such Lender or assignee or the Fronting
Bank and to exercise such powers as are specifically delegated to the Agents by
the terms and provisions hereof and of the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Fronting Bank,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Fronting Bank all payments of principal of and interest on the
Loans, all payments in respect of Letter of Credit Disbursements and all other
amounts due to the Lenders and the Fronting Bank hereunder, and promptly to
distribute to each Lender or the Fronting Bank its proper share of each payment
so received; (b) to give notice on behalf of each of the Lenders to the Borrower
of any Event of Default specified in this Agreement of which the Administrative
Agent has actual knowledge acquired in connection with its agency hereunder; and
(c) to distribute to each Lender copies of all notices, financial statements and
other materials delivered by the Borrower pursuant to this Agreement as received
by the Administrative Agent. Without limiting the generality of the foregoing,
the Agents are hereby expressly authorized to execute any and all documents
(including releases) with respect to the Collateral and the rights of the
Secured Parties with respect thereto, as contemplated by and in accordance with
the provisions of this Agreement and the Security Documents. In the event that
any party other than the Lenders and the Agents shall participate in all or any
portion of the Collateral pursuant to the Security Documents, all rights and
remedies in respect of such Collateral shall be controlled by the Collateral
Agent. The Syndication Agent, without consent of or notice to any party hereto,
may assign any and all of its rights or obligations hereunder to any of its
Affiliates. As of the Closing Date, all the obligations of the Syndication
Agent, shall terminate. Chase Securities Inc. shall have no obligations under
this Agreement.
None of the Agents nor any of their respective directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower or any other Loan Party of any of the terms,
conditions, covenants or agreements contained in any Loan Document. The Agents
shall not be responsible to the Lenders for the due
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execution, genuineness, validity, enforceability or effectiveness of this
Agreement or any other Loan Documents or other instruments or agreements. The
Agents shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required Lenders
and, except as otherwise specifically provided herein, such instructions and any
action or inaction pursuant thereto shall be binding on all the Lenders. Each
Agent shall, in the absence of knowledge to the contrary, be entitled to rely on
any instrument or document believed by it in good faith to be genuine and
correct and to have been signed or sent by the proper person or persons. Neither
the Agents nor any of their respective directors, officers, employees or agents
shall have any responsibility to the Borrower or any other Loan Party on account
of the failure of or delay in performance or breach by any Lender or the
Fronting Bank of any of its obligations hereunder or to any Lender or the
Fronting Bank on account of the failure of or delay in performance or breach by
any other Lender or the Fronting Bank or the Borrower or any other Loan Party of
any of their respective obligations hereunder or under any other Loan Document
or in connection herewith or therewith. Each of the Agents may execute any and
all duties hereunder by or through agents or employees and shall be entitled to
rely upon the advice of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that none of the Agents shall
be under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders. The Lenders further acknowledge and
agree that so long as an Agent shall make any determination to be made by it
hereunder or under any other Loan Document in good faith, such Agent shall have
no liability in respect of such determination to any person.
Subject to the appointment and acceptance of a successor
Administrative Agent and Collateral Agent as provided below, either
Administrative Agent or Collateral Agent may resign at any time by notifying the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor with the consent of the Borrower (not to
be unreasonably withheld). If no successor shall have been so appointed by the
Required Lenders and approved by the Borrower and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders with the
consent of the Borrower (not to be unreasonably withheld), appoint a successor
Agent which shall be a bank with an office in New York, New York, having a
combined capital and surplus of at least $500,000,000 or an Affiliate of any
such bank. Upon the acceptance of any appointment as Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
such Agent's resignation hereunder, the provisions of this Article and Section
9.05 shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not an Agent,
and the Agents and their Affiliates may accept
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deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if it were not an
Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in
the amount of its pro rata share (based on its Commitments hereunder (or if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of its applicable outstanding Loans or
participations in Letter of Credit Disbursements, as applicable)) of any
reasonable expenses incurred for the benefit of the Lenders by the Agents,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been reimbursed
by the Borrower and (b) to indemnify and hold harmless each Agent and any of its
directors, officers, employees or agents, on demand, in the amount of such pro
rata share, from and against any and all liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against it in its capacity as Agent or any of them in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by it or any of them under this Agreement or any other
Loan Document, to the extent the same shall not have been reimbursed by the
Borrower, provided that no Lender shall be liable to an Agent for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
wilful misconduct of such Agent or any of its directors, officers, employees or
agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
As soon as practicable after it becomes aware of an Event of
Default that has occurred and is continuing, the Administrative Agent shall
notify each Lender thereof.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, (a) in the
case of Holdings, the Borrower, the Subsidiaries or any Agent, to their
respective addresses set forth on their respective signature pages hereto, and
(b) if to a Lender, to it at its address (or telecopy number) set forth in the
Administrative Questionnaire delivered to the Administrative Agent by such
Lender in connection with the execution of this Agreement or in the Assignment
and Acceptance pursuant to which such
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Lender shall have become a party hereto. All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt if delivered by hand
or overnight courier service or sent by telecopy or on the date five Business
Days after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by Holdings, the Borrower and the Guarantors
herein, in the other Loan Documents and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the Lenders
and the Fronting Bank and shall survive the making by the Lenders of the Loans,
the execution and delivery to the Lenders of the Loan Documents and the issuance
of the Letters of Credit, regardless of any investigation made by the Lenders or
on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or Letter of Credit
Disbursement or any Fee or any other amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not been terminated. Without
prejudice to the survival of any other agreements contained herein,
indemnification and reimbursement obligations contained herein (including
pursuant to Sections 2.13, 2.15, 2.19 and 9.05) shall survive the payment in
full of the principal and interest hereunder, the expiration of the Letters of
Credit and the termination of the Commitments or this Agreement.
SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by Holdings, the Borrower, the Fronting Bank
and the Agents and when the Administrative Agent shall have received copies
hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of
Holdings, the Borrower, the Fronting Bank, the Agents and each Lender and their
respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of Holdings, the Borrower, the Administrative Agent,
the Fronting Bank or the Lenders that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations as a Lender under this Agreement
(including all or a portion of its Commitments, the Loans at the time owing to
it and participations in Letters of Credit held by it (it being understood that
Revolving Credit Commitments, Revolving Loans, Letter of Credit Disbursements
and participations in Letters of Credit may only be assigned in pro rata
amounts)); provided, however, that (i) except in the case of an assignment to
another Lender or an Affiliate of such Lender and with respect to any assignment
by GSCP or Chase made prior to the
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termination of the primary syndication of the Commitments (as determined by the
Syndication Agent and the Administrative Agent), in each case, (A) the Borrower
and the Administrative Agent must each give its prior written consent to such
assignment (which consent shall not in either case be unreasonably withheld or
delayed) and (B) in the case of participations in Letters of Credit, Letter of
Credit Disbursements or Revolving Credit Commitments, the Fronting Bank must
give its prior written consent to such assignment (which consent shall not be
unreasonably withheld or delayed), (ii) except in the case of an assignment to
another Lender or an Affiliate of such Lender, the amount of the Loans or
Commitments of the assigning Lender subject to such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall be an amount not less than
$2,500,000 and integral multiples of $500,000 in excess thereof or shall be the
entire remaining amount of such Loans or Commitments of such assigning Lender,
(iii) the parties to each such assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500 (or with respect to any assignment by or to GSCP
or between the Lenders or Affiliates thereof, a fee of $500) and (iv) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an Administrative Questionnaire. Upon acceptance and recording pursuant to
paragraph (e) of this Section 9.04, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof unless agreed otherwise by the
Administrative Agent, (i) the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement and (ii) the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to
any Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Commitments and Revolving Credit Commitment, and the outstanding
balances of its Loans and Letter of Credit Disbursements and its participations
in Letters of Credit, in each case without giving effect to assignments thereof
that have not become effective, are as set forth in such Assignment and
Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any other Loan Document or
any other instrument or document furnished pursuant hereto or thereto, or the
financial condition of the Borrower or any Guarantor or the performance or
observance by the Borrower or any Guarantor of any of its obligations under this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance; (iv) such
assignee confirms that it has received copies of
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this Agreement and the other Loan Documents, together with copies of the most
recent financial statements delivered pursuant to this Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
the Fronting Bank, such assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (vi) such assignee appoints and authorizes the Administrative Agent
and the Collateral Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Administrative Agent by the terms hereof or thereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.
(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at its address referred to in subsection 9.01 a
copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans and Letter of Credit
Disbursements (whether or not evidenced by a Note) owing to, each Lender from
time to time. The Administrative Agent shall also record the Letter of Credit
Exposure of each Lender in the Register. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent, the Fronting Bank and the Lenders shall treat each person
whose name is recorded in the Register as the owner of Commitments and the Loans
and Letter of Credit Exposures recorded therein for all purposes of this
Agreement. An assignment of any Loan whether or not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in the
Register. Any Assignment or transfer of all or part of a Loan evidenced by a
Note shall be registered on the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such Loan, accompanied by a duly
executed Assignment and Acceptance, and thereupon one or more new Notes in the
same aggregate principal amount shall be issued to the designated Assignee and
the old Notes shall be returned by the Administrative Agent to the Borrower
marked "cancelled". The Register shall be available for inspection by the
Borrower, the Fronting Bank, any Lender and their representatives (including
counsel and accountants), at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Fronting
Bank and the Administrative Agent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Lenders. Notwithstanding anything to the contrary contained herein, no
assignment under Section 9.04(b) of any rights or obligations shall be effective
unless and until the Administrative Agent shall have recorded such assignment in
the Register. The Administrative Agent shall record the name
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of the transferor, the name of the transferee, and the amount of the transfer in
the Register after receipt of all documents required pursuant to this Section
9.04 and such other documents as the Administrative Agent may reasonably
request.
(f) Each Lender may without the consent of the Borrower, the Fronting
Bank or the Administrative Agent sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitments, the Loans owing to it,
its Letter of Credit Exposure and the participations in Letters of Credit held
by it); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the benefit
of the cost protection provisions contained in Sections 2.13, 2.15, 2.19 and
9.06 to the same extent as if they were Lenders, provided that no such
participating bank or entity shall be entitled to receive any greater amount
pursuant to such Sections than a Lender would have been entitled to receive in
respect of the amount of the participation sold by such Lender to such
participating bank or entity had no sale occurred, and (iv) the Borrower, the
Administrative Agent, the Fronting Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower or any other Loan Party,
as the case may be, relating to its Loans, Letter of Credit Exposure and
participations in Letters of Credit and Fees and to approve any amendment,
modification or waiver of any provision of this Agreement or any other Loan
Document (other than amendments, modifications or waivers decreasing any Fee
payable hereunder or the amount of principal of or the rate at which interest is
payable on the Loans or Letter of Credit Disbursements, extending any final
maturity date or increasing any Commitment, in each case in respect of an
Obligation in which the relevant participating bank or entity is participating,
or releasing all or substantially all of the Collateral or any Guarantor from
its Guarantee Agreement unless all or substantially all the Capital Stock of
such Guarantor is sold in a transaction permitted by this Agreement or as
provided in Section 9.17). Each Lender will disclose the identity of its
participants to the Borrower and Administrative Agent if requested by the
Borrower or the Administrative Agent.
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower or any Guarantor furnished
to such Lender by or on behalf of the Borrower or any Guarantor, provided that,
prior to any such disclosure, each such assignee or participant or proposed
assignee or participant shall execute an agreement whereby such assignee or
participant shall agree to be bound by Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank and, any Lender which is an
investment fund may pledge all or any portion of its Notes or Loans to its
trustee in support of its obligations to such trustee; provided, (i) no Lender
shall, as between Borrower and such Lender, be relieved of any of its
obligations hereunder as a result of any such assignment and pledge and (ii) in
no event
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shall such Federal Reserve Bank or trustee be considered to be a "Lender" or be
entitled to require the assigning Lender to take or omit to take any action
hereunder. In order to facilitate such an assignment to a Federal Reserve Bank,
the Borrower shall, at the request of the assigning Lender, duly execute and
deliver to the assigning Lender a promissory note or notes evidencing the Loans
made to the Borrower by the assigning Lender hereunder.
(i) In the event that S&P or Moody's shall, after the date that any
Lender becomes a Lender, downgrade the long-term certificate deposit ratings or
long-term senior unsecured debt ratings of such Lender (or the parent company
thereof), and the resulting ratings shall be BBB+ or Baa1 or lower, then the
Fronting Bank shall have the right, but not the obligation, at its own expense,
upon notice to such Lender and the Administrative Agent, to replace (or to
request the Borrower, at the sole expense of the Fronting Bank, to use its
reasonable efforts to replace) such Lender with respect to such Lender's
Revolving Credit Commitment with an assignee (in accordance with and subject to
the restrictions contained in paragraph (b) above), and such Lender hereby
agrees to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in paragraph (b) above) all its interests, rights
and obligations in respect of its Revolving Credit Commitment to such assignee;
provided, however, that (i) no such assignment shall conflict with any law, rule
and regulation or order of any Governmental Authority and (ii) such assignee
shall pay to such Lender in immediately available funds on the date of such
assignment the principal of and interest accrued to the date of payment on the
Loans and Letter of Credit Disbursements of such Lender hereunder and all other
amounts accrued for such Lender's account or owed to it hereunder.
(j) Neither Holdings nor the Borrower shall assign or delegate any of
its rights or duties hereunder and any attempted assignment shall be null and
void.
(k) Except as provided in Section 2.13(d), the Fronting Bank shall not
assign or delegate any of its interests, rights or obligations as a Fronting
Bank under this Agreement without the prior written consent of the Borrower and
the Administrative Agent.
SECTION 9.05. Expenses; Indemnity. The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Agents in connection with the
preparation of this Agreement and the other Loan Documents, or by any Agent in
connection with the syndication of the Commitments or the administration of this
Agreement (including expenses incurred in connection with ongoing Collateral
examination to the extent incurred with the reasonable prior approval of the
Borrower) or in connection with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Administrative Agent, the
Collateral Agent or any Lender in connection with the enforcement or protection
of their rights in connection with this Agreement and the other Loan Documents
or in connection with the Loans made or the Letters of Credit issued hereunder,
including the reasonable fees, charges and disbursements of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Agents, and, in connection with any
such enforcement or protection, the reasonable fees, charges and disbursements
of any other counsel (including the reasonable allocated costs of internal
counsel
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if a Lender elects to use internal counsel in lieu of outside counsel) for the
Administrative Agent, the Fronting Bank or any Lender (but no more than one such
counsel for any Lender).
(b) The Borrower agrees to indemnify each Agent, the Fronting Bank,
each Lender and each of their respective directors, trustees, officers,
employees, investment advisors and agents (each such person being called an
"Indemnitee") against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, charges and disbursements, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result of (i) the
execution or delivery of this Agreement or any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto and thereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions contemplated hereby
and thereby, (ii) the use of the proceeds of the Loans or the use of any Letter
of Credit or (iii) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee (treating, for this purpose only, the Administrative Agent, the
Fronting Bank or any Lender that is such Indemnitee and its directors, trustees,
officers and employees as a single Indemnitee). Subject to and without limiting
the generality of the foregoing sentence, the Borrower agrees to indemnify each
Indemnitee against, and hold each Indemnitee harmless from, any Environmental
Claim, and any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel or consultant fees, charges and
disbursements, incurred by or asserted against any Indemnitee (and arising out
of, or in any way connected with or as a result of, any of the events described
in clause (i), (ii) or (iii) of the preceding sentence) arising out of, in any
way connected with, or as a result of any actual or alleged presence or Release
of Hazardous Materials on any of the Properties, or any Environmental Claim
related in any way to Holdings, the Borrower or any Subsidiary, provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such Environmental Claim is, or such losses, claims, damages, liabilities or
related expenses are, determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee or any of its directors, trustees, officers or
employees. The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Obligations, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of any Agent, the Fronting Bank or any
Lender. All amounts due under this Section 9.05 shall be payable on written
demand therefor.
(c) Unless an Event of Default shall have occurred and be continuing,
the Borrower shall be entitled to assume the defense of any action for which
indemnification is sought hereunder with counsel of its choice at its expense
(in which case the Borrower shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by an Indemnitee except as set forth
below); provided, however, that such counsel shall be reasonably
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satisfactory to each such Indemnitee. Notwithstanding the Borrower's election to
assume the defense of such action, each Indemnitee shall have the right to
employ separate counsel and to participate in the defense of such action, and
the Borrower shall bear the reasonable fees, costs and expenses of such separate
counsel, if (i) the use of counsel chosen by the Borrower to represent such
Indemnitee would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both
the Borrower and such Indemnitee and such Indemnitee shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the Borrower (in which case the
Borrower shall not have the right to assume the defense or such action on behalf
of such Indemnitee); (iii) the Borrower shall not have employed counsel
reasonably satisfactory to such Indemnitee to represent it within a reasonable
time after notice of the institution of such action; or (iv) the Borrower shall
authorize such Indemnitee to employ separate counsel at the Borrower's expense.
The Borrower will not be liable under this Agreement for any amount paid by an
Indemnitee to settle any claims or actions if the settlement is entered into
without the Borrower's consent, which consent may not be withheld or delayed
unless such settlement is unreasonable in light of such claims or actions
against, and defenses available to, such Indemnitee.
(d) Notwithstanding anything to the contrary in this Section 9.05, this
Section 9.05 shall not apply to taxes, it being understood that the Borrower's
only obligations with respect to taxes shall arise under Sections 2.13 and 2.19.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and the Fronting Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or the Fronting Bank to or for the credit or the
account of the Borrower against any of and all the obligations of the Borrower
now or hereafter existing under this Agreement or any other Loan Document held
by such Lender or Fronting Bank, irrespective of whether or not such Lender or
the Fronting Bank shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. The rights of each
Lender and Fronting Bank under this Section 9.06 are in addition to other rights
and remedies (including other rights of setoff) which such Lender or the
Fronting Bank may have.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE
<PAGE>
101
"UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE
LAWS OF THE STATE OF NEW YORK.
(a) SECTION 9.08. Waivers; Amendment . No failure or delay of any
Agent, the Fronting Bank or any Lender in exercising any right or power
hereunder or under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each Agent, the Fronting Bank and
the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or any other Loan Document or
consent to any departure by Holdings, the Borrower or any Guarantor therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice or
demand on Holdings, the Borrower or any Guarantor in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by Holdings, the Borrower and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by each party thereto and the Collateral Agent and consented to by
the Required Lenders; provided, however, that no such agreement shall (i)
decrease the principal amount of, or extend the final maturity of, or decrease
the rate of interest on, any Loan or any Letter of Credit Disbursement, without
the prior written consent of each Lender directly affected thereby, or extend ,
waive or forgive any other payment (other than a mandatory or optional
prepayment) required hereunder without the consent of each Lender directly
affected thereby, (ii) extend any Installment Date or extend any date on which
payment of interest on any Loan or any Letter of Credit Disbursement is due
without the prior written consent of each Lender directly affected thereby,
(iii) advance any Installment Date without the prior written consent of each
Lender directly affected thereby, (iv) increase or extend the Commitment of any
Lender or decrease the Commitment Fees or L/C Participation Fees or other fees
of any Lender without the prior written consent of such Lender, (v) effect any
waiver, amendment or modification that by its terms adversely affects the rights
in respect of mandatory or optional prepayments or Collateral of Lenders
participating in any Tranche differently from those of Lenders participating in
the other Tranche, without the consent of a majority in interest of the Lenders
participating in the adversely affected Tranche, or change the relative rights
in respect of payments or Collateral of the Lenders participating in different
Tranches without the consent of a majority in interest of Lenders participating
in each affected Tranche, or (vi) amend or modify the provisions of Section
2.09(d), Section 2.11(b) or Section 2.16, the provisions of this Section or the
definition of "Required Lenders" (it being understood that, with the consent of
Required Lenders, additional extensions of credit pursuant hereto may be
included in the determination of "Required Lenders" on substantially the same
basis as the other extensions of credit under this Agreement are included on the
Closing Date), or release all or substantially all the Collateral or release any
Guarantor from its Guarantee Agreement unless all or substantially all the
Capital
<PAGE>
102
Stock of such Guarantor is sold in a transaction permitted by this Agreement or
as provided in Section 9.17, without the prior written consent of each Lender
adversely affected thereby; provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the any Agent or the Fronting
Bank hereunder without the prior written consent of such Agent or the Fronting
Bank acting as such at the effective date of such agreement, as the case may be.
Each Lender shall be bound by any waiver, amendment or modification authorized
by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08
shall bind any assignee of such Lender.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the applicable interest rate, together with all
fees and charges which are treated as interest under applicable law
(collectively the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged, received,
taken or reserved by any Lender or Fronting Bank, shall exceed the maximum
lawful rate (the "Maximum Rate") that may be contracted for, charged, taken,
received or reserved by such Lender in accordance with applicable law, the rate
of interest payable hereunder, together with all Charges payable to such Lender
or the Fronting Bank, shall be limited to the Maximum Rate, provided that such
excess amount shall be paid to such Lender or the Fronting Bank on subsequent
payment dates to the extent not exceeding the legal limitation.
SECTION 9.10. Entire Agreement. This Agreement, the other Loan
Documents and the agreements regarding certain Fees referred to herein
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among or representations from the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or
<PAGE>
103
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective as provided in Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. Each of
Holdings and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any Lender or the Fronting Bank may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against Holdings, the Borrower or any Guarantor or their properties in the
courts of any jurisdiction.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Confidentiality. Each of the Lenders, the Fronting Bank
and each Agent agrees that it shall maintain in confidence any information
relating to Holdings, the Borrower and the other Loan Parties furnished to it by
or on behalf of Holdings, the Borrower or
<PAGE>
104
the other Loan Parties (other than information that (a) has become generally
available to the public other than as a result of a disclosure by such party,
(b) has been independently developed by such Lender, the Fronting Bank or an
Agent without violating this Section 9.16 or (c) was available to such Lender,
the Fronting Bank or an Agent from a third party having, to such person's
knowledge, no obligations of confidentiality to Holdings, the Borrower or any
other Loan Party) and shall not reveal the same other than (i) to its directors,
trustees, officers, employees and advisors with a need to know (so long as each
such person shall have been instructed to keep the same confidential in
accordance with this Section 9.16) and (ii) as contemplated by Section 9.04(g),
except: (A) to the extent necessary to comply with law or any legal process or
the requirements of any Governmental Authority or of any securities exchange on
which securities of the disclosing party or any Affiliate of the disclosing
party are listed or traded, (B) as part of normal reporting or review procedures
to Governmental Authorities, (C) to its parent companies, Affiliates or auditors
(so long as each such person shall have been instructed to keep the same
confidential in accordance with this Section 9.16) and (D) in order to enforce
its rights under any Loan Document in a legal proceeding.
SECTION 9.17. Release of Liens and Guarantees. In the event that
Holdings, the Borrower or any Subsidiary conveys, sells, leases, assigns,
transfers or otherwise disposes of all or any portion of any of the Capital
Stock, assets or property of Holdings, the Borrower or any of the Subsidiaries
in a transaction not prohibited by Section 6.05 or Section 6.13, the
Administrative Agent and the Collateral Agent shall promptly (and the Lenders
hereby authorize the Administrative Agent and the Collateral Agent to) take such
action and execute any such documents as may be reasonably requested by the
Borrower and at the Borrower's expense to release any Liens created by any Loan
Document in respect of such Capital Stock, assets or property, and, in the case
of a disposition of all or substantially all the Capital Stock or assets of any
Subsidiary Guarantor, terminate such Subsidiary Guarantor's obligations under
the Subsidiary Guarantee Agreement. In addition, the Administrative Agent and
the Collateral Agent agree to take such actions as are reasonably requested by
the Borrower and at the Borrower's expense to terminate the Liens and security
interests created by the Loan Documents when all the Obligations are paid in
full and all Letters of Credit and Commitments are terminated. Any
representation, warranty or covenant contained in any Loan Document relating to
any such Capital Stock, assets, property or Subsidiary shall no longer be deemed
to be made once such Capital Stock, assets or property is conveyed, sold,
leased, assigned, transferred or disposed of.
<PAGE>
105
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
VOLUME SERVICES AMERICA
HOLDINGS, INC.
By /s/ John T. Dee
--------------------------------
Name: John T. Dee
Title:
VOLUME SERVICES AMERICA, INC.
By /s/ John T. Dee
--------------------------------
Name: John T. Dee
Title:
Address for Notices:
Volume Services America, Inc.
201 East Broad Street
Spartanburg, SC 29306-0001
Attention: President
Telecopier: (864) 598-8695
with a copy to:
The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Attention: Howard A. Lipson
Telecopier: (212) 754-8703
<PAGE>
106
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender and as a Joint Lead
Arranger and the Syndication Agent
By /s/ Goldman Sachs Credit Partners L.P.
------------------------------------------
Authorized Signatory
Revolving Credit Commitment: $9,057,971.02
Tranche A Term Loan Commitment: $4,830,917.87
Tranche B Term Loan Commitment: $3,111,111.11
Address for Notices:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Elizabeth Fischer
Telecopier: (212) 357-3000
with a copy to:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: John Makrinos
Telecopier: (212) 357-4597
<PAGE>
107
CHASE MANHATTAN BANK
DELAWARE,
as the Fronting Bank
By /s/ Michael P. Handago
-----------------------------
Name: Michael P. Handago
Title: Vice President
Address for Notices:
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Michael Handago
Telecopier: (302) 428-3390
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Kathryn Duncan
Telecopier: (212) 972-0009
<PAGE>
108
THE CHASE MANHATTAN BANK,
as a Lender, the Swing Line Lender
and the Administrative Agent
By /s/ Kathryn A. Duncan
-----------------------------
Name: Kathryn A. Duncan
Title: Vice President
Revolving Credit Commitment: $ 9,057,971.02
Tranche A Term Loan Commitment: $ 4,830,917.87
Tranche B Term Loan Commitment: $100,111,111.11
Address for Notices:
The Chase Manhattan Bank Agency Services Corporation
One Chase Manhattan Plaza, 8th Fl.
New York, New York 10081
Attention: Janet Belden
Telecopier: (212)552-5658
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Kathryn Duncan
Telecopier: (212) 972-0009
<PAGE>
109
FIRST UNION NATIONAL BANK,
As a Lender
By /s/ Jorge Gonzalez
-------------------------------
Name: Jorge Gonzalez
Title: Senior Vice President
Revolving Credit Commitment: $8,333,333.34
Tranche A Term Loan Commitment: $4,444,444.44
Tranche B Term Loan Commitment: $2,222,222.22
Address for Notices:
First Union National Bank
301 South College Street, DC-5,
Charlotte, N.C. 28288-0737
Attention: David Sharp/Lisa White
Telecopier: (704) 374-3300/2802
<PAGE>
110
UNION BANK OF CALIFORNIA, N.A.
By /s/ Michael A. Ross
--------------------------------
Name: Michael A. Ross
Title: Vice President
Revolving Credit Commitment: $9,130,434.78
Tranche A Term Loan Commitment: $4,869,565.22
Tranche B Term Loan Commitment: $1,000,000.00
Address for Notices:
Union Bank of California, N.A.
445 S. Figueroa Street, 15th Floor
Los Angeles, CA 90071
<PAGE>
111
BANKBOSTON N.A.
By /s/ C. Andrew Tieulelo
------------------------------
Name: C. Andrew Tieulelo
Title: Vice President
Revolving Credit Commitment: $6,521,739.13
Tranche A Term Loan Commitment: $3,478,260.87
Tranche B Term Loan Commitment: $2,000,000.00
Address for Notices:
BankBoston N.A.
100 Federal Street
Boston, MA 02110
<PAGE>
112
BHF-BANK Aktiengesellschaft
By /s/ Hans J. Schultz
----------------------------
Name: Hans J. Schultz
Title: Assistant Vice President
Revolving Loan Commitment: $6,666,666.66
Tranche A Term Loan Commitment: $3,555,555.56
Tranche B Term Loan Commitment: $1,777,777.78
Address for Notices:
BHF-BANK Aktiengesellschaft
590 Madison Avenue, 30th Floor
NY, NY 10022
<PAGE>
113
CREDIT LYONNAIS,
NEW YORK BRANCH
By /s/ Attila Koc
--------------------------------
Name: Attila Koc
Title: First Vice President
Revolving Loan Commitment: $6,666,666.66
Tranche A Term Loan Commitment: $3,555,555.56
Tranche B Term Loan Commitment: $1,777,777.78
Address for Notices:
Credit Lyonnais, New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attention: Attila Koc
Leveraged Finance Group
Telecopier: (212) 459-3176
<PAGE>
114
THE BANK OF NOVA SCOTIA
By /s/ Robert Ganiylio
------------------------------
Name: Robert Ganiylio
Title: Senior Relationship Manager
Revolving Credit Commitment: $6,521,739.13
Tranche A Term Loan Commitment: $3,478,260.87
Tranche B Term Loan Commitment: $------------
Address for Notices:
The Bank of Nova Scotia
1 Liberty Plaza, 26th Floor
NY NY 10006
Attention: Mr. Robert Gavigilo
<PAGE>
115
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By /s/ Teiji Teramoto
--------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
Revolving Loan Commitment: $6,521,739.13
Tranche A Term Loan Commitment: $3,478,260.87
Tranche B Term Loan Commitment: $------------
Address for Notices:
The Fuji Bank, Limited, New York Branch
Leveraged Finance Group
Two World Trade Center, 79th Floor
NY, NY 10048
<PAGE>
116
NATIONSBANK, N.A.
By /s/ Mark S. Trembly
---------------------------------
Name: Mark S. Trembly
Title: Senior Vice President
Revolving Loan Commitment: $6,521,739.13
Tranche A Term Loan Commitment: $3,478,260.87
Tranche B Term Loan Commitment: $------------
Address for Notices:
NationsBank, N.A.
7 North Laurens Street
4th Floor
Greenville, S.C. 29601
Attention: Mark S. Trembly
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
ENROLLMENT INFORMATION
AND FORMS
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Questions & Answers
- --------------------------------------------------------------------------------
The following is a list of questions contained in the Questions & Answers
section:
HOW THE PROGRAM WORKS
1. What is the Volume Services, Inc. Deferred Compensation Plan? (An Overview)
2. What are the advantages of the Plan?
3. What are the trade-offs if I participate?
4. Does my participation affect my other Volume Services, Inc. benefit plans?
ELIGIBILITY/DEFERRAL ELECTIONS
5. Who is eligible to participate in the Plan?
6. How much can I defer?
7. When do I make my election to defer?
8. Can I change my deferral election?
9. What elections can I make?
DEFERRAL CREDITING OPTIONS
10. What are my Deferral Crediting Options?
ACCESS TO YOUR MONEY
11. Can I get money from my account prior to the date I elect for deferral
payments to begin?
12. When do I receive distribution of my deferral account balance?
13. Can I transfer, pledge or assign my deferral account balance?
EXCEPTIONAL CONDITIONS
14. What happens in the event of a Change in Control or a Change in
Financial Condition at Volume Services, Inc.?
15. Can the Plan be amended or discontinued?
TAX CONSIDERATIONS
16. What are some of the more common tax related questions for this Plan?
ENROLLMENT AND ADMINISTRATION
17. How do I sign up for the Plan?
18. Who can I talk to if I have questions about the Plan or the enrollment
package?
19. Can I reallocate my money between the Deferral Crediting Options?
20. How do I check my account balance?
21. What types of services can I expect from the Deferral Service Center at BPS?
22. What can I expect when I call the Deferral Service Center?
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
The Volume Services, Inc. Deferred Compensation Plan ("the Plan") provides a
significant tax-advantaged opportunity for you to accumulate wealth to help meet
your retirement income needs and other future income needs, such as college
expenses or a home purchase. You are encouraged to review the Plan with your
financial advisors to determine how it can help in meeting your personal
financial goals.
The following is a summary of the main provisions of the Plan in a Question and
Answer format. As with any plan summary, the official and controlling provisions
of the Plan are contained in the Plan document, which you may obtain on request
from the Vice President of Human Resources at The Support Center in Spartanburg,
SC. In the case of any differences, the official Plan document will always
govern. The Plan is subject to continued compliance with Internal Revenue Code
of 1986, as amended (the "Code") and certain reporting, disclosure and
enforcement provisions of Employee Retirement Security Act of 1974, as amended
("ERISA").
HOW THE PROGRAM WORKS
1. What is the Volume Services, Inc. Deferred Compensation Plan ("the
Plan")? - An Overview
The Plan is a nonqualified (unfunded) deferred compensation plan that
allows you to make a pre-tax deferral of base salary and bonus
compensation, allocate it to various financial growth options, and have
it paid to you in the future. You may also receive certain Company
matching contributions, solely at the discretion of the Committee.
Generally speaking, your funds under this Plan will not become
available to you until retirement, death, disability, termination of
your employment, or in a specific future year you select. You may defer
up to 50% of your base salary and 100% of bonus, or both, in increments
of 1%. A minimum combined (salary and bonus) annual deferral of 1% of
salary is required.
You may choose to have your deferral accrue earnings as if held in the
following Funds: Stable Investment Fund, Enhanced Stock Market Fund,
Evergreen Short Intermediate Bond Fund, Invesco Dynamics Fund or the
Tomorrow Fund.
As a nonqualified plan, your deferral cannot and will not actually be
invested in these funds in your name. But, your deferral account will
reflect the results of the crediting option(s) you select as if the
account were invested in these options. The Company retains the right
to change the crediting options, and to amend or terminate the Plan in
its sole discretion at any time. You are a unsecured general creditor
of the Company as to your funds.
2. What are the advantages of the Plan?
A. Reduced Current Income Taxes.
Your current federal taxable income is reduced by the amount
you elect to defer. However, you will be taxed at the ordinary
income rates in effect at the time of distribution of your
account to you. All states with income taxes, except
Pennsylvania and New Jersey, follow the federal tax law and
exclude the amount you defer from current taxable income.
Please consult with your personal tax advisor regarding the
specific laws for your particular state.
1
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
B. More Dollars Available for Investment.
Deferrals into this Plan can be more efficient than most other outside
investments because the deferral puts to work pre-tax rather than
after-tax dollars. For example:
Outside This
Investment Plan
- ------------------------------------------------------
Compensation $1.00 $1.00
- ------------------------------------------------------
Current Income
Tax @ 36% - .36 - .00
- ------------------------------------------------------
Net Funds Invested $ .64 $1.00
- ------------------------------------------------------
C. Tax-Deferred Accumulation.
Pre-tax dollars can generate much higher results than after-tax
investment dollars, even assuming identical rates of return. The
following hypothetical example illustrates this principle.
[Bar Chart Appears Here]
Taxable Investment ($112,650)
Tax Deferred Investment ($247,115)
Taxable vs. Deferred Investment
After-Tax Lump Sum Payout after 20 years of deferrals
This hypothetical example assumes:
o You make 20 annual investments of:
- $3,200 (after-tax equivalent of $5,000) to the outside
investment
- $5,000 pre-tax to the Volume Services, Inc. plan
o Both programs earn 8%
o Your tax bracket is 36%
o Actual results will vary based on the actual yield of the
investment and your tax bracket. This example only illustrates the
benefit of investing pre-tax dollars.
It does not illustrate the Plan's provisions or investment returns
on amounts deferred under the Plan.
You can do your own benefit estimates using the "Sample Benefit
Calculation Worksheet" in the "Benefit Calculator" section
contained in your enrollment booklet. Based on your own
assumptions as to the investment rate and deferral period, you can
estimate your accumulation of pre-tax investment on either a
single year's contribution or a series of contributions over a
specified number of years.
D. Possible Future Tax Savings
You may achieve additional income tax savings when you receive
your deferral account, provided that you are in a lower tax
bracket at that time.
E. Company Matching Contribution
You must defer salary into this Plan to receive a Company match.
At the sole discretion of the Committee, Volume Services, Inc. may
match some of your deferral within this Plan.
2
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
3. What are the trade-offs if I participate?
A. Reduced Current Cash Flow.
By deferring your compensation, you reduce your current cash flow.
Therefore, if you require a greater amount of current income,
deferral may not be appropriate for you. However, the cash flow
reduction may be significantly less than the amount deferred,
since your deferral is in pre-tax dollars. For example, if your
tax rate is 36%, deferring $10,000 only reduces your after-tax
income by $6,400, but you have $10,000 working for you in your
deferral account.
B. The Plan Is Unfunded.
Based on current IRS regulations, your deferred account must be
hypothetical in nature and therefore cannot hold any actual funds
or assets. As a participant, your right to receive payments under
the Plan in the event of Volume Services, Inc.'s bankruptcy or
insolvency (as remote as that may seem) or that of a subsidiary
offering this Plan, will be the same as any other unsecured
general creditor. Note that the Plan does not create a trust
relationship between you, or any other person, and Volume
Services, Inc. In connection with the program, Volume Services,
Inc. may acquire a life insurance policy on your life, and may
manage an asset pool or assets within an insurance policy in a
manner similar to the aggregate allocations of the participant
group in the plan, but you will not have an ownership or
beneficial interest in it, nor in any asset Volume Services, Inc.
may acquire in connection with the Plan.
C. Restricted Access To Your Money.
In general, you do not have access to your deferrals and earnings
until retirement or the specific year you specify on your election
form except as noted.
D. Possible Higher Tax Rate.
The benefits of your deferral tax may be smaller than you would
otherwise expect if, at the time of distribution, you are in a
higher tax bracket than when you deferred.
E. Investment Risk
Based upon your selection of the various Deferral Crediting
Options offered, and the performance of those choices, the value
of your deferred account may be greater or smaller than your
initial deferral.
4. Does my participation affect my other Volume Services, Inc. benefit
plans?
Your participation has no effect on most of your other benefits, such
as life and disability insurance. However, your base salary and bonus
compensation deferred under this Plan will not be calculated as part of
your pay for purposes of the 401(k) plan for applicable employees of
Volume Services, Inc.
3
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
ELIGIBILITY/DEFERRAL ELECTIONS
5. Who is eligible to participate in the Plan?
You are eligible to participate in the Plan on an annual basis if you
are an employee of Volume Services, Inc. or a wholly-owned subsidiary
thereof and are designated an equity owner of the company. In addition,
you are eligible if you are an employee and are deemed a highly
compensated employee of Volume Services, Inc. by the Committee.
6. How much can I defer?
You may defer a portion of your annual base salary and bonus
compensation, in increments of 1%. You may defer up to 50% of your base
salary and up to 100% of your bonus compensation. The minimum annual
deferral is 1% of salary.
You should think of your election to defer as irrevocable and carefully
assess the impact on your personal financial situation.
7. When do I make my election to defer?
Normally, the deferral election must be made on or before December 31
prior to the year in which the income is earned, unless you are a newly
eligible employee. Newly eligible employees must make deferral
elections during the first 30 days after becoming eligible. For 1997,
however, your election to defer 1998 base salary and bonus compensation
payable in 1999, must be made by December 31, 1997.
8. Can I change my deferral election?
Once you have made your annual deferral election, you may not change it
until the next annual deferral election period, except that you may
discontinue a base salary deferral election at any time which will
become effective on the next pay period. However, you will not be able
to elect to defer base salary again until the next annual deferral
enrollment period if you stop your base salary deferral mid-year. Bonus
deferral elections can only be discontinued based upon a financial
hardship. The distribution date you elect cannot be changed.
Although the distribution date you elect cannot be changed, the form
can be changed. In the calendar year prior to your year of distribution
(but no less than 60 days prior to that date) you will have an
opportunity to change the form of payment (how many installments will
be made to you).
9. What elections can I make?
Each year you will be able to elect to defer both base salary and bonus
compensation. Each deferral item will be treated as a separate
election. For each, you will select how much you wish to defer, how you
want it paid (lump sum or installments), and when you wish to receive
it in the future. You have two elective options as to when you may
receive payment: (1) at retirement; or (2) a specific future year. This
specific future year may not be less than 3 years from your year of
deferral (1 year if you are age 55 or older by the expiration of the
annual election period), and not be later than the year in which you
turn age 70.
When you make an election to defer, you will also determine how you
want your deferral amounts allocated among the various Deferral
Crediting Options available to you (See the section entitled "Deferral
Crediting Options"). These allocations can be changed later.
You will also have the opportunity to elect to have your deferral
accounts automatically distributed to you within 45 days following a
Change in Control or a Change in Financial Condition of Volume
Services, Inc., or a wholly-owned subsidiary for which you work.
4
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
You will also designate a beneficiary(ies) to receive all of your
deferral accounts in the event of your death. Beneficiary(ies) can be
changed later.
DEFERRAL CREDITING OPTIONS
10. What are my Deferral Crediting Options?
Your deferral account will accrue earnings, according to your election
in the following Funds: Stable Investment Fund, Enhanced Stock Market
Fund, Evergreen Short Intermediate Bond Fund, Invesco Dynamics Fund,
and the Tomorrow Retirement Funds. Your deferrals will be credited to
the Stable Value Fund if you should somehow fail to provide an
allocation election. You continue to accrue earnings until your account
is fully distributed. Deferrals allocated to as if held in Funds will
track the value (both up and down) of the Funds you select. Refer to
the section entitled "Deferral Crediting Options" of this enrollment
booklet for details on these Deferral Crediting Options. You will also
be able to make a reallocation once per calendar month. The Company
retains the right to change these Deferral Crediting Options as it may
determine in its sole discretion.
ACCESS TO YOUR MONEY
11. Can I get money from my account prior to the date I elect for deferral
payments to begin.?
At any time, you may withdraw all or part of your deferral account
balance only under the following circumstances.
A. Financial Hardship Distributions
In the event of unusual, extraordinary expenses or unforeseen
financial hardship, you may petition the Volume Services, Inc.
Deferred Compensation Plan Committee for a distribution of the
amount reasonably necessary to meet your financial need. This
definition of hardship is more stringent than the hardship
provision in the 401(k) plan, and does not, for instance, include
college expenses or costs in connection with a home purchase. It
does encompass hardship generated by unforeseen circumstances,
such as medical expenses, family loss of income by layoff, etc.
The Plan Committee may approve or deny the request in its sole
discretion, and distribution is limited to the amount necessary to
resolve the hardship plus your income tax liability on the
distribution. If approved, this distribution is not subject to any
penalty income taxes, but is ordinary income for federal and state
income tax purposes.
B. Withdrawals Subject to Partial Forfeiture
Any request to the Plan Committee for an unscheduled distribution
which is not due to financial hardship requires Plan Committee
approval, and is subject to a 10% permanent forfeiture on the
amount withdrawn. In addition, you will be prohibited from
deferring under the Plan at the next annual enrollment, but may
resume deferring the following Plan year. This forfeiture
provision is necessary to prevent constructive receipt and the
resulting income tax consequences for the other Plan participants.
The distribution you receive (net of the forfeiture) is not
subject to any penalty income taxes, but will be taxed as ordinary
income for federal and state income taxes.
5
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
C. Loans
Unlike the 401(k) plan, loans are not permitted under this Plan.
Current law would not provide favorable income tax treatment for
the Plan if loans were permitted.
12. When do I receive distribution of my deferral account balance?
You can elect when you wish to receive distribution of your deferral
account balance, selecting: (1) a specific future year of your choice
(not less than 3 years from the year of deferral if you are under age
55, 1 year if you are over, and not later than the year you turn age
70); or (2) retirement, which means full retirement or disability
retirement under a Volume Services, Inc. qualified plan. Each year and
each element of compensation (base salary or bonus compensation) will
be a separate election.
Normal distributions will be made annually, or in quarterly
installments. Annual payments will be made as of the first business day
of January. Quarterly payments will be made as of the first business
day of each quarter. Total distribution of an account must be made by
age 85. Each annual or quarterly installment will be equal to a
fraction of the account balance as of the date the installment is paid,
the numerator of the fraction being 1 and the denominator being the
number of years (or quarters) remaining in the payment schedule. For
example, the respective fractions for a five (5) year annual
installment schedule are 1/5 for the first installment; 1/4 for the
second; 1/3 for the third; 1/2 for the fourth; and 1/1 (balance) for
the fifth and final installment.
Distributions may also occur at termination of employment, disability,
death or a Change in Control or a Change in Financial Condition. Refer
to Exhibit B for a summary of the Plan's distribution provisions.
A. Retirement
You can elect to receive distribution of your deferral account
beginning at full retirement or disability retirement under a
Volume Services, Inc. qualified plan. You will elect to have your
account paid in a lump sum or installments over not more than 15
years. You may elect a different schedule in the calendar year
prior to retirement or the date distribution is scheduled to begin
(but at least sixty days prior to the date of the first
distribution). Installments may not continue beyond age 85. If you
are already receiving payments based upon a Specific Future Year
election at the time you retire, those payments will continue as
scheduled.
B. Specific Future Year
You can elect to receive distribution of your deferral account
starting in a specific future year of your choice, either before
or after your anticipated retirement (but no later than the year
in which you turn age 70). If you are age 55 or older, the
deferral must be for a minimum period of one calendar tax year. If
you are under age 55 the deferral must be for a minimum period of
3 calendar tax years.
A Specific Future Year election might be appropriate if you know
you will have a need for income at a specific future time. For
example, if your child will enter college 10 years from now, you
might decide to defer current salary and/or bonus compensation and
to have it paid beginning in your child's freshman college year in
4 annual installments. Thus, if the amount of your deferral was
6
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
$10,000 and it grew to $20,000, you might expect to receive four
annual payments of approximately $5,000. As another use, you might
determine to pick a specific future year after your anticipated
retirement (but not later than the year you turn age 70) to begin
distribution of your deferral account in order to help provide
yourself with income in the later years of your retirement. The
amounts deferred could be paid out in installments not to exceed
15 years of annual installments.
C. Disability
If you become totally and permanently disabled while actively
employed at Volume Services, Inc., you will receive the entire
balance of your account paid out in five (5) annual installments
with the first to begin within ninety (90) days following the date
of disability. However, you may petition the Committee for a
shorter distribution schedule, including lump sum, based upon
hardship.
D. Death
In the event of your death while actively employed by the Company,
your beneficiary(ies) will receive distribution of your remaining
account balance in five (5) annual installments with the first to
begin within ninety (90) days of your date of death. However, your
beneficiary(ies) may petition the Committee for a shorter
distribution schedule, including lump sum, based upon hardship.
E. Any Termination Other Than Retirement, Death or Disability
In the event you terminate from the Company for any reason other
than retirement, death, or disability, you will receive your
account balance in (5) annual installments with the first to begin
within ninety (90) days of your date of termination of employment.
However, you may petition the Committee for a shorter distribution
schedule including lump sum, based upon hardship.
7
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
F. Small Accounts
Upon your death, permanent disability or termination of
employment, the Plan Committee in its sole discretion may decide
to distribute your entire account balance in a lump sum if your
account balance is less than $200,000.
G. Change in Control
At the time you make your annual deferral election, you may also
elect to receive your entire deferral account balance in a lump
sum within 45 days after a Change in Control of the company as
determined by the Committee.
H. Change in Company's Financial Condition
At the time you make your annual deferral election, you may also
elect to receive your entire deferral account balance in a lump
sum within 45 days after a Change in Financial Condition of the
company as determined by the Committee or resulting from the loss
of the company's bank line of credit.
13. Can I transfer, pledge or assign my deferral account balance?
No. Your rights to your account balance cannot be assigned to another,
nor can you pledge or assign your account balance to secure a bank loan
or other indebtedness. Such a transaction could make your account
subject to current taxation.
EXCEPTIONAL CONDITIONS
14. What happens in the event of a Change in Control or a Change in
Financial Condition at Volume Services, Inc.?
At the time you make your normal deferral election, you may also elect
to receive your entire deferral account balance in a lump sum within 45
days after a Change in Control.
15. Can the Plan be amended or discontinued?
The Volume Services, Inc. Board of Directors retains the right to amend
or terminate the Plan at any time. However, your accrued benefits at
the time of any amendment, suspension or termination of the Plan cannot
be reduced (subject to investment risk changes in value).
TAX CONSIDERATIONS
16. What are some of the more common tax-related questions for this Plan?
Am I taxed on my deferrals or earnings credited to them?
Under current tax law, neither your deferral nor the earnings on them
are subject to federal income tax prior to withdrawal from the Plan, as
long as you make a timely election. All states (in states with income
taxes), except Pennsylvania and New Jersey, follow the federal law and
exclude the amount you defer from current taxable income. Under current
law, there will be no income tax liability until you actually receive a
payment. Check with your legal counsel concerning your specific state
or local (city, county) tax laws.
8
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
What about Social Security and Medicare Taxes?
Deferred amounts (both salary and bonus) are subject to these taxes at
the time of deferral. These amounts will be deducted from salary not
deferred. The eventual payment of your deferral accounts, including
earnings, will not be subject to these taxes under current law.
Likewise, distribution payments from the Plan will not reduce your
Social Security benefits after retirement under current law.
How will my distributions be taxed?
Under current law, distributions from your account are taxed as
ordinary income when received and no special tax advantages or
penalties apply. Federal, state and local income taxes will be withheld
from your payments when they are actually made.
Based upon Federal law effective January 1, 1997, it may also be
possible to avoid state income taxes on your distribution. In general,
to be exempt from state income tax on your distribution you must:
1. Be a resident in a state (e.g., Florida, Texas) which does not
impose an income tax, prior to the time you begin receiving
distribution of your account, and
2. Have elected to receive your account distribution in a minimum of
ten (10) annual installments. If you plan to elect to defer until
retirement or later, you may wish to elect distribution of the
(10) annual installments or more initially even if you have no
idea where you plan to live after retirement. Or, prior to
severance from the Company for any reason, you may wish to review
your prior distribution elections (to the extent they may be
changed) to determine if a change might assist you to qualify for
an exemption.
9
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
Here again, we recommend you consult with your personal financial
or tax advisor as to the arrangement most appropriate for your
situation.
How will my distribution payments be reported?
Payments made to you will be reported on a W-2 Form. Payments to
survivors, in the event of your death, will be reported on Form 1099-R.
Is my distribution eligible to be rolled over to an IRA?
No, because this is not a tax-qualified plan under the Internal Revenue
Code. When electing a Plan distribution, we encourage you to seek
professional tax advice to determine the best course of action in light
of your financial circumstances.
Will the Plan benefits paid to my beneficiaries be included in my gross
estate for federal tax purposes?
Yes. The cumulative amounts in your account at the time of death will
be included in your estate. However, the amount in your account may not
increase your taxable estate if your beneficiary is your spouse and the
benefit qualifies for the estate tax marital deduction. You should
consult with your own legal counsel concerning beneficiary designations
and planning for the benefits in the event of your death to obtain the
most appropriate result for your personal situation.
ENROLLMENT & ADMINISTRATION
17. How do I sign up for the Plan?
In order to enroll in this Plan, you must complete the Participation
and Deferral Election Form, Beneficiary Designation Form(s), and
Acknowledgment Form for Insurance. Please return the forms postmarked
no later than December 31, 1997 to Benefit Plan Services (BPS), Volume
Services, Inc.'s third party administrator of this Plan, using the
enclosed prepaid self-addressed envelope.
18. Who can I talk to if I have questions about the Plan or the enrollment
package?
During or following this enrollment period, you should address your
questions to the Deferral Service Center at BPS, at 1-800-340-8151,
during normal business hours (8:30 a.m. - 5:00 p.m. Eastern Time,
Mon.-Fri.).
The address for communication with BPS is:
Deferral Service Center
c/o Benefit Plan Services
One Securities Centre, Suite 1300
3490 Piedmont Road, N.E.
Atlanta, Georgia 30305
19. Can I reallocate my money between the Deferral Crediting Options?
Yes. once each calendar month (after your deferrals have begun), you
may reallocate among the various Deferral Crediting Options available
under the Plan. Unless you indicate otherwise, your reallocation will
change all your current allocations to your new allocation. Daily
valuations will be made on all accounts so no particular day is
advantaged or disadvantaged. You do this by calling the Deferral
Service Center at 1-800-340-8151 during normal business hours.
10
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Questions & Answers
Please note, neither BPS nor Volume Services, Inc. will give you advice
concerning your deferral allocations. You must consult your personal
financial advisor or planner for such advice.
20. How do I check my account balance?
You may call the Deferral Service Center Voice Response Unit at
1-800-340-8151 if you want to determine the balance in your account.
The Voice Response System is available 24 hours a day and can handle
many common inquiries like your account balance 24 hours a day. You
will need your Personal Identification Number (PIN) that was previously
assigned to you in order to access the system.
21. What types of services can I expect from the Deferral Service Center at
BPS?
As manager of the Deferral Service Center, BPS will provide the
following: allocation among Deferral Crediting Options, account
balances and statements; beneficiary election and payout change forms;
processing of hardship withdrawals; and W-2 reports. BPS will also
handle inquiries related to account balances, reallocation among
Deferral Crediting Options, payout checks, tax withholding and will
provide information directly to financial planners (if authorized by
participants). A $14.50 annual fee will be charged for these services,
but the Company will pay the annual fee for these services until and
unless you are notified otherwise. Participants may call BPS at
1-800-340-8151.
22. What can I expect when I call the Service Center?
All calls during normal business hours (8:30 a.m. - 5:00 p.m., Eastern
Time, Mon. - Fri.) will be handled by an administrative operator fully
trained in Plan provisions, who will handle your request (e.g., balance
inquiries, reallocation). You may leave a message on voice mail after
normal business hours.
11
<PAGE>
Exhibit A
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Comparison of Nonqualified Deferral and Qualified 401(k) plan
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Nonqualified Deferral
Plan Principal Characteristics Qualified
401(k) plan
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Yes Deferral on Pre-Tax Basis Yes
- --------------------------------------------------------------------------------------------------------------------
Yes FICA/Medicare Withheld on Deferrals Yes
- --------------------------------------------------------------------------------------------------------------------
Yes FICA/Medicare Withheld on Company Match No
- --------------------------------------------------------------------------------------------------------------------
Yes Earnings Accumulate Tax Deferred Yes
- --------------------------------------------------------------------------------------------------------------------
No Actual Funds or Assets Held in Participant Accounts Yes
- --------------------------------------------------------------------------------------------------------------------
No Funds or Assets avoid the claims of Company's general creditors Yes
in bankruptcy
- --------------------------------------------------------------------------------------------------------------------
Yes Distributions Subject to Income Taxes Yes
- --------------------------------------------------------------------------------------------------------------------
Yes Federal Income Tax Statutory Withholding on Yes(1)
Lump Sum Payments
- --------------------------------------------------------------------------------------------------------------------
No Rollover into an IRA Allowed Yes
- --------------------------------------------------------------------------------------------------------------------
No 5 or 10 Year Income Tax Averaging Yes(2)
- --------------------------------------------------------------------------------------------------------------------
Yes(3) Hardship Withdrawals Available Yes
- --------------------------------------------------------------------------------------------------------------------
No Loans Against Accounts Available Yes
- --------------------------------------------------------------------------------------------------------------------
No 10% penalty tax for pre-age 59 1/2 distribution Yes
- --------------------------------------------------------------------------------------------------------------------
No Change in deferral amount during plan year Yes
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If not rolled over.
(2) Under recent legislation, five year forward averaging will be
eliminated on lump sum qualified plan distributions beginning in
taxable years after 1999.
(3) "Hardship" definition is more stringent than in the 401(k) plan. See
Question 11A.
12
<PAGE>
Exhibit B
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
PAYOUTS & DISTRIBUTIONS
================================================================================
<TABLE>
<CAPTION>
EVENT DISTRIBUTION
OF ACCOUNT BALANCE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PARTICIPANT Retirement Up to 15 annual installments
ELECTION
OPTIONS
------------------------------------------------------------------------------------
Fixed Future Year (Not less than 3 Up to 15 annual installments
years from year of deferral) and
not later than the year you turn
age 70
- -------------------------------------------------------------------------------------------------------------------------
OTHER Termination or Disability 5 annual installments
OCCURRENCES
----------------------------------------------------------------------------------
Death No distribution begun: 5 annual
installments.
Distribution begun: Balance of
payments due.
----------------------------------------------------------------------------------
Loans Are prohibited in nonqualified plans
----------------------------------------------------------------------------------
Financial Hardship Amount necessary to relieve hardship
only
(Plan Committee Approval)
----------------------------------------------------------------------------------
Non-hardship Withdrawal Amount less 10%, and loss of
participation for one Plan Year
----------------------------------------------------------------------------------
Small Accounts Lump Sum at Plan Committee's
(Less than $200,000 balance) discretion upon death, disability or
termination of employment.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The timing and form of your distribution election will be made prior to
income being earned. However, you will be given the ability to change
the form of distribution (but not the timing) in the calendar year
prior to (but not less than 60 days prior to) the year of distribution.
Under your two election options you can select up to 15 annual
installments. Retirement means separation from full-time service with
the Company under a Company qualified Plan, including a disability
retirement. In the event of your termination, or disability, you will
be paid in 5 annual installments, except the distribution may be
accelerated upon request for reason of financial hardship. In the event
of your death, your beneficiary can select up to 5 annual installments
if no distribution of your account is underway, your beneficiary will
receive the balance of the payments due.
13
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Benefit Calculator
================================================================================
Instructions
The Sample Benefit Calculation Worksheet offers a way for you to project the
potential benefit provided by the Volume Services, Inc. Deferred Compensation
Plan. This worksheet is only an aid for helping you determine how much you might
like to defer, and is not intended to suggest or guarantee the actual
performance of your deferral. Please note: For ease of calculation, the
schedules are based on "per $1,000".
There are two calculation schedules in this section. Use Version A along with
Schedule A to estimate the benefit associated with a single year's deferral to
the payout date. Use Version B along with Schedule B to estimate the benefit
associated with a continuous series of deferrals to the payout date.
The calculation schedules show benefits assuming various long-term interest
rates from 8 to 12%. If you want to assume retirement, or benefit payment,
beginning at age 65, use the row showing your current age in the Age column on
the schedules. If you want to assume retirement, or benefit payment, beginning
at a time other than age 65, you must calculate the number of years to that date
and use the row corresponding to that number of years in the "years to benefit
payout" column. For each deferral scenario, benefits for a lump sum and a ten
(10) year annual payout are provided.
Please note that this estimator illustrates installment payments in equal level
amounts when, in fact, they will actually be distributed as a fraction of the
account based upon the number of installments you select. For example, if you
select 10 years of annual payments you will receive 1/10, 1/9, 1/8, 1/7, 1/6,
1/5, 1/4, 1/3, 1/2 and finally 1/1 of the balance of your account in a year.
Thus, your first year installment will be equal to about 70% of the account and
grow each year, assuming the interest crediting rate remains level over the
entire time period.
To use either of the benefit calculation worksheets, follow the outlined steps.
14
<PAGE>
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Benefit Calculator
================================================================================
Sample Benefit Calculation Worksheet
<TABLE>
<CAPTION>
Version A: Sample Benefit Calculation - For a single year's Illustration of Participant's
contribution Sample Own Account
Assumptions
<S> <C> <C>
1 Approximate the amount you expect to defer in a single year. $ 50,000 $
----------
2 Since the benefit schedule is calculated based on a deferral of
$1,000, divide the deferred amount in line 1 by 1,000. 50
----------
3 Look up the benefits on Schedule A, using the investment rate you want to
assume and your current age or years to benefit payment.
o Lump Sum (Assumes Schedule A, 8% rate, and 15 years to payment) $ 3,058 $
---------
OR
o 10 Annual Installments (Assumes 8% rate, and 15 years to payment) $ 422 $
---------
4 Multiply the number in (2) by the amount(s) in (3) to estimate payout in
either lump sum or installments.
o Lump Sum $ 152,900 $
---------
OR
o 10 Annual Installments (The initial annual installment will equal
approximately 70% of this amount and grow over the remaining $ 21,150 $
installments) ---------
</TABLE>
15
<PAGE>
VOLUME SERVICES AMERICA
1999 BONUS PLAN
1. Bonus entitlement is a function of position level and normal earnings or
the year.
2. Bonus eligible persons are general managers, vice presidents and selected
key personnel (approximately 130 people).
3. A bonus pool is generated using an increasing percentage of attainment of
EBITDA over 95% of forecast (budget).
4. The numerical constants were developed from those of previous plans.
Plan Positives:
1. There is no value to an individual to delay profits in any year.
2. Since one factor in determining the value of the bonus is actual earnings,
there is no pro rata problem.
3. Calculations of the accruals and actual bonuses are simple.
4. There is no complication in calculating bonuses for managers of fee
accounts.
5. There is a fail safe for demonstrably weak performance.
Plan Negative:
1. Should the corporation be projecting a significant decrement to forecasted
budget, some may hold back profitability for the following year.
<PAGE>
2
VOLUME SERVICES AMERICA
1999 BONUS PLAN
EBITDA POOL EBITDA* POOL WTD. SAL**
ATTAINMENT FACTOR (000) AMOUNT UNIT
$ VALUE
95% .0100 47,500 475,000 .032
100% .0174 50,000 875,000 .058
105% .0248 52,500 1,302,000 .087
110% .0322 55,000 1,771,000 .118
115% .0396 57,500 2,277,000 .152
120% .0470 60,000 2,820,000 .188
o ASSUMES BUDGET FOR $50M EBITDA.
** ESTIMATED WEIGHTED SALARY UNIT VALUE.
EXAMPLE:
Assume a general manager with earnings of $60,000 and a factor of 1.5.
At 100% of EBITDA, bonus would be $ 5,220
At 110% of EBITDA, bonus would be $10,620
At 120% of EBITDA, bonus would be $16,920
Assume a vice president with earnings of $120,000 and a factor of 2.00.
At 100% of EBITDA, bonus would be $13,920
At 110% of EBITDA, bonus would be $28,320
At 120% of EBITDA, bonus would be $45,120
<PAGE>
3
VOLUME SERVICES AMERICA
"THANK YOU" BONUS PLAN
1999
I. Purpose
The purpose of the "Thank You" Bonus Plan ("The Plan") is to encourage and
reward achievement in support of the highest standards of operation and
profitability. The achievement of Volume Services America is to be
considered the achievement of all of its members.
II. Participation
Participation is limited to incumbents in the positions listed below who
have been employed by Volume Services America, Inc. ("Volume Services
America" or the "Corporation") for at least six months during the Plan
year.
o Personnel in Grade 40 and above
o General Managers at Grade 25 and above
The participant(s) must be actively employed by Volume Services America,
Inc. on the date awards are paid to qualify for an award. The
participant's failure to be so employed shall disqualify the employee from
receiving any award, regardless of the reason, with the following limited
exceptions:
a. The award may be granted to employees who elect normal retirement or are
granted approved early retirement.
b. The award may be granted to employees who are on approved leave of
absence.
c. Participant(s) hired, transferred or promoted into or out of an eligible
position during the fiscal year may be granted their pro-rata award.
in a., b. and c. above, the decision to grant an award shall be made
solely at the discretion of the Chief Executive Officer ("CEO"). Any such
decision shall be final and binding and not subject to review.
III. Terms of the Plan
<PAGE>
4
This plan is effective as of January 1, 1999, and will remain in effect
until written notification of modification, amendment or cancellation has
been issued. This Plan supersedes all previous incentive compensation
plans for Volume Services America.
The CEO and/or the Board of Directors of Volume Services America may
modify, amend or cancel this Plan, in whole or in part, at any time.
IV. Attainment Incentives
Bonus awards will be determined as indicated in Appendix A. Basically, the
eligible participant's earned salary for the fiscal year will be
multiplied by a factor to derive "weighted salary units." The factor is a
function of the salary grade.
The value of each unit ("weighted salary unit value") is determined by
summing the weighted salary units of all participants and dividing that
sum into the total bonus pool as determined by the CEO.
Each participant's award is determined by multiplying the unit value by
the number of weighted salary units.
The total bonus pool is to be determined by the CEO and will be announced
to participants during the first quarter of the plan year. The right to
modify the amount of the pool or its method of determination remains with
the CEO or Board of Directors of Volume Services America at their sole
discretion.
V. Definition of Terms
Earned Salary. In this plan, Earned Salary is defined as the total of the
wages derived from salary excluding bonuses and special payments. This
includes work time, holidays, vacations, jury duty and military
obligation. It does not include paid leaves of absence for illness,
disability, and workman's compensation. Payments not indicated above will
be accepted or excluded by approval of the CEO through the Corporate Vice
President of Human Resources.
Weighted Salary Units. This is the total of the 1999 Earned Salary times
the factor for the specific grades as shown in Appendix A.
Unit Value or Weighted Salary Unit Value. This is the monetary amount
determined for each weighted salary unit. It is determined by dividing the
Bonus Pool by the sum of all bonus eligible persons weighted salaries.
<PAGE>
5
VI. Payment of Awards
Awards will be calculated and paid in a lump sum as soon as practicable
after the fiscal year end of the Corporation. Applicable Federal, State
and Local taxes will be withheld from the gross amount paid.
VII. Determination and Approval of Awards
The Plan will be administered by the Corporate Human Resources Department.
Notwithstanding anything to the contrary contained herein, Volume Services
America reserves the right, in its sole discretion, to adjust or eliminate
any compensation which would otherwise be earned hereunder, based on such
grounds as the CEO or Board of Directors may determine.
The determination of the amount of award to each Plan participant is the
final decision of the CEO at his sole discretion. The CEO and the
Corporate Vice President of Human Resources will make the interpretations
concerning the conditions and qualifications covered under this Plan. Any
decision made hereunder shall be final and binding and not subject to
review.
VIII. Interpretation of the Plan
This Plan does not confer or create any rights for employees or any duties
upon Volume Services America. The CEO or the Board of Directors of Volume
Services America reserves the right to modify, amend or cancel the Plan at
any time, for any reason.
<PAGE>
6
Appendix A
"Thank you"
Profit Sharing Concept
THE "THANK YOU" PROFIT SHARING PLAN
Introduction
Most important to the value of any bonus, incentive or profit-sharing plan is
the basis from which its equitability is perceived. To the degree that any such
plan may be carried out through the use of objective measures recorded under
equitable conditions, the plan will be seen as fair. Regrettably, both of those
arguments, objective and equitable conditions, are hard to come by under any
circumstance and even less so in managerial positions.
Basis
This profit-shoring plan is based on the following arguments:
1. Employees are to be rewarded as a function of the economic health of the
organization.
2. The most significant effort for equitable compensation is applied in the
organization's compensation plan. Despite its limitation, salary grading
and related pay structures are the pivotal basis of the company's reward
system.
3. There is a positively accelerated curve of pay distribution as related to
the perceived value of an individual position within the organizational
hierarchy.
Plan
1. The pool of money to be distributed will be a function of a profitability
measure as determined by the CEO in consultation with the corporate staff.
2. The payoff would be determined by the eligible employee's actual pay and
level in the organization. Each eligible person would receive a portion of
the pool from a "Weighted Salary." To determine that value, the
individual's actual earnings from salary for the bonus year would be
multiplied by a factor derived from the salary grade of that individual.
<PAGE>
7
Appendix A
"Thank you"
Profit Sharing Concept
Factors for the salary grades are listed below:
Grade __ Factor
65 2.75
60 VP's 2.50
55 2.25
50 ____ 2.00
45 1.75
40 GM's 1.50
35 1.25
30 1.00
25 ____ 0.75
The determination of the profit-sharing unit value would be the result of
dividing the profit-sharing pool by the sum of the weighted salary ("WS") units
for all bonus eligible employees to determine the monetary value of each unit.
Then each individual's WS would be multiplied by that unit value to determine
the actual profit sharing entitlement.
Controversy
1. The singular disagreement with this plan is that it does not differentiate
among "good" and "poor" performers.
Can we establish clearly who are good and poor performers in light of the
limited objectivity of our measures and the reality, especially in our
industry, of controlling the factors affecting objective measures?
If we can't, the argument is moot. If we can, then demote the poorly
performing person, terminate that person, or advise that person three
months prior to year end, that he/she will not be part of the profit
sharing pool unless certain objective requirements are met.
<PAGE>
8
Appendix A
"Thank you"
Profit Sharing Concept
2. What about pro rata share?
Since the actual wages are the basic determinant of the WSV units, pro rata
for part year employment is automatically considered. For those promoted to
a higher factor, the higher factor may be used, or the entitlement under
each of the factors may be summed.
3. What about individual performance?
The concept underlying the "Thank You" prior is that the organization is
the result of all employees contributing to the good of the whole. The
salary received is a reflection of individual contributions, but all
members are to share in the health of the organization. This does
facilitate performance by the group.
4. Does it pay to manage the profitability to maximize the bonus?
This is minimized since any profit contribution yields to the distribution
pool, no matter the year in which it is recorded.
5. Are calculations too complex?
To the degree that the earned salary of the plan participants can be
determined, then it appears to be a simple calculation. In addition, each
person may calculate his/her own expectancy.
6. Where do the factors come from?
These factors are simply based on the common maximum bonus percentages with
the base of 1.0 equivalent to a value of 20%. These may be modified by any
reasonable judgment.
7. What about the managers in fee accounts?
This method clearly removes the classic question of how do you determine
the bonus for fixed fees, etc. Only the overall earnings and individual
grade level enter into the equation, hence, the determination for "fee"
managers is the same as for the others.
<PAGE>
ARTICLE - INTRODUCTION
- --------------------------------------------------------------------------------
1.1 Name of Plan.
Service America Corporation (the "Company") hereby adopts the Service
America Corporation Deferred Compensation Plan (the "Plan").
1.2 Purposes of Plan.
The purposes of the Plan are in provide certain eligible employees of the
Company the opportunity to defer elements of their compensation which might
not otherwise be deferrable under other Company plans, including the
Service America Corporation Retirement and Savings Plan (the "Savings
Plan") and to receive the benefit of additions to their deferral comparable
to those obtainable under the Savings Plan In the absence of certain
restrictions and limitations in the Internal Revenue Code.
1.3 "Top Hat" Pension Benefit Plan.
The Plan is an "employee pension benefit plan" within the meaning of ERISA.
However, the Plan is unfunded and maintained for a select group of
management or highly compensated employees and, therefore, it is intended
that the Plan will be exempt from Parts 2, 3 and 4 of Title 1 of ERISA. The
Plan is not intended to qualify under Code section 401(a).
1.4 Funding.
The Plan is unfunded. All benefits will be paid from the general assets of
the Company.
1.5 Effective Date.
The Plan is effective as of February 9, 1999.
1.6 Administration.
The Plan shall be administered by the Committee.
<PAGE>
2
ARTICLE - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
2.1 Definitions.
For purposes of the Plan, the following words and phrases shall have the
respective meanings set forth below, unless their context clearly requires
a different meaning:
(a) "Account" means the bookkeeping account maintained by the Company on
behalf of each Participant pursuant to Article VI that is credited
with Base Salary Deferrals, Bonus Deferrals and Matching Contributions
made by the Company on behalf of each Participant pursuant to Article
IV, and the earnings and losses on such amounts as determined in
accordance with Article V. As of any Valuation Date, a Participant's
benefit under the Plan shall be equal to the amount credited to his
Account as of such date.
(b) "Base Salary" means the base rate of cash compensation paid by the
Company to or for the benefit of a Participant for services rendered
or labor performed while a Participant, including base pay a
Participant could have received in cash in lieu of (A) deferrals
pursuant to Section 4.1 and (B) contributions made on his behalf to
any qualified plan maintained by the Company or to any cafeteria plan
under Section 125 of the Code maintained by the Company.
(c) "Base Salary Deferral" means the amount of a Participant's Base Salary
which the Participant elects to have withheld on a pre-tax basis from
his Base Salary and credited to his Account pursuant to Section 4.1.
(d) "Beneficiary" means the person or persons designated by the
Participant in accordance with Section 7.4.
(e) "Bonus Compensation" means the amount awarded to a Participant for a
Plan Year under any bonus plan maintained by the Company.
(f) "Bonus Deferral" means the amount of a Participant's Bonus
Compensation which the Participant elects to have withheld on a
pre-tax basis from his Bonus Compensation and credited to his account
pursuant to Section 4.1
(g) "Change in Control" means the happening of any of the following
events;
<PAGE>
3
(i) An acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (1) the then outstanding shares of common stock (the
"Outstanding Common Stock") of the Company, Volume Services
America, Inc., the company's immediate parent, or Volume Services
America Holdings, Inc., the company's ultimate parent
(collectively "The Affiliated Companies") or (2) the combined
voting power of the then outstanding voting securities entitled
to vote generally in the election of directors (the "Outstanding
Voting Securities of any of The Affiliated Companies"): provided,
however, that the following acquisitions shall not constitute a
Change of Control:
(A) any acquisition directly from any of The Affiliated Companies
(excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by any of The
Affiliated Companies, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by any of The
Affiliated Companies or (D) any acquisition of any of The
Affiliated Companies by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described
in clauses (1), (2) and (3) of subsection (iii) of this Section
2.1 (e) are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to continue at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election
or nomination for election by any of The Affiliated Companies'
shareholders, was approved, by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
<PAGE>
4
(iii) Approval by the shareholders of any of The Affiliated Companies
of a reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or consolidation,
(1) all or substantially all of the individuals and entities who
were beneficial owners, respectively, of the Outstanding Common
Stock and Outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such reorganization, merger or
consolidation of the outstanding Common Stock and Outstanding
Voting Securities, as the case may be, (2) no Person, excluding
any of The Affiliated Companies and any employee benefit plan (or
related trust) thereof, or of the corporation resulting from such
reorganization, merger or consolidation and any Person
beneficially owning immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Common Stock or Outstanding Voting Securities, as
the case may be, beneficially owns, directly or indirectly, 20%
or more of. respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation and (3) at
least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger of consolidation; or
(iv) The approval by the shareholders of any of The Affiliated
Companies of (1) a complete liquidation or dissolution of any of
The Affiliated Companies or (2) the sale or other disposition of
all or substantially all of the assets of any of The Affiliated
Companies, excluding however, such a sale or other disposition to
a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the outstanding
shares of common stock of such corporation and the combined
voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of
directors will be beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the
<PAGE>
5
beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Voting Securities immediately prior to such sale
or other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, (B) no Person, other than
any of The Affiliated Companies and any employee benefit plan (or
related trust) thereof, or of such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Common Stock or
Outstanding Voting Securities, as the case may be, then
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors and (C) individuals who were members
of the Incumbent Board will constitute at least a majority of the
members of the board of directors of such corporation.
(h) "Change in Financial Condition" means the date of determination by the
Committee that the Company's financial condition has materially
deteriorated or means the date the Company is informed that its bank
line of credit has been canceled.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means the administrative committee appointed by the Board
of Directors (or the Compensation Committee thereof if such Committee
is established and in existence) to administer the Plan in accordance
with Article VIII.
(k) "Company" means Service America Corporation and any successor thereto.
(l) [Reserved]
(m) "Deferral Period" means the period of time for which a Participant
elects to defer receipt of the Base Salary Deferrals, Bonus Deferrals
and Matching Contributions credited to such Participant's Account and
shall be either the Retirement Date, a period of years to a Specific
Future Year as specified in Section 5.2 or upon a Change in Control.
Deferral Periods shall be measured on the basis of Plan Years,
beginning with the Plan Year
<PAGE>
6
that commences immediately following the Plan Year for which the
applicable Base Salary Deferrals, Bonus Deferrals and/or Matching
Contributions are credited to the Participant's Account.
(n) "Deferred Compensation Agreement" means the written agreement
(regardless of how they may be titled) as prescribed by the Committee
and entered into between the Company and a Participant pursuant to
which the Participant elects the amount of his Base Salary and/or his
Bonus Compensation to be deferred into the Plan, and the form of
payment for such amounts, the Deferral Period and the deemed
investment.
(o) "Directors" means the Board of Directors of the Company.
(p) "Effective Date" means February 9, 1999.
(q) "Employee" means any common-law employee of the Company.
(r) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(s) "Matching Contribution" means the amount, as determined by the Company
on an annual basis, credited by the Company to the Account of each
Participant based on such Participant's Base Salary Deferrals.
(t) "Participant" means each Employee who has been selected for
participation in the Plan and who has become a Participant pursuant to
Article III.
(u) "Plan" means the Service America Corporation Deferred Compensation
Plan, as amended from time to time.
(v) "Plan Year" means the twelve consecutive month period commencing
January 1 of each year ending on December 31.
(w) "Retirement Date" means the date the Participant is eligible for and
retires under any qualified retirement plan maintained by the Company.
(x) "Savings Plan" means the Service America Corporation Retirement and
Savings Plan.
(y) "Specific Future Year" means a calendar year in the future voluntarily
elected by a participant to begin distribution of Base Salary
Deferrals,
<PAGE>
7
Bonus Deferrals and Matching Contributions, limited only by the
minimum and maximum Deferral Periods.
(z) "Valuation Date" means the last business day of each calendar month
and each special valuation date designated by the Committee.
2.2 Number and Gender.
Wherever appropriate herein, words used in the singular shall be considered
to include the plural and words used in the plural shall be considered to
include the singular. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender.
2.3 Headings.
The headings of Articles and Sections herein are included solely for
convenience, and if there is any conflict between such headings and the
text of the Plan, the text shall control.
<PAGE>
8
ARTICLE - PARTICIPATION AND ELIGIBILITY
- --------------------------------------------------------------------------------
3.1 Participation.
Participants in the Plan are those employees who are a select group of
highly compensated or management Employees of the Company and selected by
the Committee, in its sole discretion, as Participants. The Committee shall
notify each Participant of his selection as a Participant. Subject to the
provisions of Section 3.3, a Participant shall remain eligible to continue
participation in the Plan for each Plan Year following his initial year of
participation in the Plan.
3.2 Commencement of Participation.
An Employee shall become a Participant effective as of the date the
Committee determines, which date shall be on or after the date his Deferred
Compensation Agreement becomes effective.
3.3 Cessation of Active Participation.
Notwithstanding any provision herein to the contrary, an individual who has
become a Participant in the Plan shall cease to be a Participant hereunder
effective as of any date designated by the Committee. Any such Committee
action shall be communicated to such Participant prior to the effective
date of such action.
<PAGE>
9
ARTICLE - DEFERRALS & MATCHING CONTRIBUTIONS
- -------------------------------------------------------------------------------
4.1 Deferrals by Participants.
Before the first day of each Plan Year (or the remaining portion thereof
for an Employee who commences participation in the Plan other than on the
first day of a Plan Year), a Participant may file with the Committee a
Deferred Compensation Agreement pursuant to which such Participant elects
to make Base Salary Deferrals and/or Bonus Deferrals. Any such Participant
election shall be subject to any maximum or minimum percentage or dollar
amount limitations and to any other rules prescribed by the Committee in
its sole discretion. Base Salary Deferrals will be credited to the Account
of each Participant as of the last day of each calendar month, provided
that such Participant is an Employee on the last day of such calendar
month. A Participant whose employment terminates during the calendar month
shall be paid the amount of his Bass Salary Deferrals for such month in
cash. Bonus Compensation Deferrals will be credited to the account of each
Participant as of the last day of the month in which such Bonus
Compensation otherwise would have been paid to the Participant in cash
provided the Participant is an Employee on the last day of such month. A
Participant whose employment terminates during the calendar month in which
his bonus compensation would have been paid to him in cash will be paid his
bonus deferral in cash.
4.2 Effective Date of Deferred Compensation Agreement.
A Participant's initial Deferred Compensation Agreement shall be effective
as of the first payroll period after the date the Participant commences
participation in the Plan. Each subsequent Deferred Compensation Agreement
shall become effective on the first day of the Plan Year to which it
relates. If a Participant fails to complete a Deferred Compensation
Agreement on or before the date the Participant commences participation in
the Plan or the first day of any Plan Year, the Participant shall be deemed
to have elected not to make Base Salary Deferrals and/or Bonus Compensation
Deferrals for such Plan Year (or remaining portion thereof if the
Participant enters the Plan other than on the first day of a Plan Year).
4.3 Modification or Revocation of Election by Participant.
A Participant may not change the amount of his Base Salary or Bonus
Deferrals during a Plan Year. However, a Participant may discontinue a Base
Salary Deferral election at any time, by filing on such forms and subject
to such limitations and restrictions as the committee may prescribe in its
discretion, a revised Deferred Compensation Agreement with the Committee.
If approved by
<PAGE>
10
the Committee, revocation shall take effect as of the first payroll period
next following his filing. If a Participant discontinues a Base Salary
Deferral election during a Plan Year, he will not be permitted to elect to
make Base Salary Deferrals again until the next Plan Year. A Participant
may discontinue his Bonus Compensation Deferral only if approved by the
Committee following a showing of Financial Hardship. Under no circumstances
may a Participant's Deferred Compensation Agreement be amended, modified or
revoked retroactively.
4.4 Matching Contributions.
The Committee, in its sole discretion may provide for a Company Match
Contribution on any portion of the amount deferred. Included in the
Committee's discretion is the ability to name specific individuals to whom
a match applies and the amount and timing of that match.
<PAGE>
11
ARTICLE - VESTING, DEFERRAL PERIODS AND
EARNINGS ELECTION
- --------------------------------------------------------------------------------
5.1 Vesting.
A Participant shall be 100% vested in his Account, including Matching
Contributions, at all times.
5.2 Deferral Periods.
A Deferral Period shall, at the Participant's election, be until (i)
Retirement Date, or (ii) a Specific Future Year and upon (iii) a Change in
Control or Change in Financial Condition. In the case of an election to
defer until a Specific Future Year, the Deferral Period must be for any
period of at least three (3) years or more, but may not end later than the
year in which the Participant attains age 70, unless a Participant is over
age 55 as of the date such Deferred Compensation Agreement is made with
respect to such amount in which case the Deferral Period need only be for
one (1) calendar tax year. A Participant must specify on the Deferred
Compensation Agreement the Deferral Period for the Base Salary Deferrals,
Bonus Compensation Deferrals and Matching Contributions to be made to the
Plan for the Plan Year (or the remaining portion thereof for a Participant
who enters the Plan other that on the first day of a Plan Year) to which
the Deferred Compensation Agreement relates, subject to certain rules as
determined by the Committee from time to time. In the event a Participant
does not elect a Deferral Period for any such Base Salary Deferrals and
Matching Contributions for a Plan Year, such Participant shall be deemed to
have elected a Deferral Period of three (3) years.
5.3 Earnings Elections.
Amounts credited to a Participants' Account shall be credited with earnings
and losses based on hypothetical investment directions made by the
Participant, in accordance with investment deferral crediting options and
procedures adopted by the Committee from time to time. The Company
specifically retains the right in its sole discretion to change the
investment deferral crediting options and procedures. Any amounts credited
to a Participant's Account with respect to which a Participant does not
provide investment direction shall be credited with earnings in an amount
determined by the Committee in its sole discretion. A Participant's Account
shall be adjusted as of each Valuation Date to reflect investment gains and
losses.
<PAGE>
12
ARTICLE - ACCOUNTS
- --------------------------------------------------------------------------------
6.1 Establishment of Bookkeeping Accounts.
A separate bookkeeping account shall be maintained for each Participant. Such
account shall be credited with the Base Salary Deferrals and/or Bonus
Compensation Deferrals made by the Participant pursuant to Section 4.1, and
Matching Contributions made by the Company pursuant to Section 4.4 and
credited (or charged, as the case may be) with the hypothetical investment
results determined pursuant to Section 5.3.
6.2 Subaccounts.
Within each Participant's bookkeeping account, separate subaccounts shall
be maintained to the extent necessary for the administration of the Plan.
For example, it may be necessary to maintain separate subaccounts where the
Participant has specified different Deferral Periods, methods of payment or
investment directions with respect to his Base Salary Deferrals, Bonus
Compensation Deferrals and Matching Contributions for different Plan Years.
6.3 Hypothetical Nature of Accounts.
The account established under this Article VI shall be hypothetical in
nature and shall be maintained for bookkeeping purposes only so that
earnings and losses on the Base Salary Deferrals, Bonus Compensation
Deferrals and Matching Contributions made to the Plan can be credited (or
charged, as the case may be). Neither the Plan nor any of the accounts (or
subaccounts) established hereunder shall hold any actual funds or assets.
The right of any person to receive one or more payments under the Plan
shall be an unsecured claim against the general assets of the Company. Any
liability of the Company to any Participant, former Participant or
Beneficiary with respect to a right to payment shall be based solely upon
contractual obligations created by the Plan. Neither the Company, the
Directors, nor any other person shall be deemed to be a trustee of any
amounts to be paid under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the
Company and a Participant or any other Person.
<PAGE>
13
ARTICLE - PAYMENT OF ACCOUNT
- --------------------------------------------------------------------------------
7.1 Timing of Distribution of Benefits.
Distribution of Base Salary Deferrals, Bonus Compensation Deferrals and
Matching Contributions to a Participant shall be made as soon as
practicable following the date the Deferral Period for such amounts ends.
If the Participant elects to receive a distribution in the event of a
Change in Control or Change in Financial Condition, distribution shall be
made within 45 days of the Change in Control or Change in Financial
Condition. Notwithstanding the foregoing, the Participant's entire Account
shall be distributed to him (or his Beneficiary in the event of his death)
in five (5) annual installments if the account balance is $200,000 or
greater following the earlier to occur of the following: (i) the
Participant's death; (ii) the Participant's permanent disability (as
defined in the Company's long-term disability program); or (iii) the
Participant's termination of employment. If the Participant's account
balance is less than $200,000, the account balance for subsections 7.1(i),
(ii) or (iii) will be paid as a lump sum. This distribution may be
accelerated, including a lump sum, based upon a showing of severe financial
hardship in accordance with Section 7.6 by the Participant or his
beneficiary.
7.2 Adjustment for Investment Gains and Losses Upon a Distribution.
Upon a distribution pursuant to this Article VII, the balance of a
Participant's Account shall be determined as of the Valuation Date
immediately preceding We date of the distribution to be made and shall be
adjusted for investment gains and losses which have accrued to the date of
distribution but which have not been credited to his Account.
7.3 Form of Payment or Payments.
Base Salary Deferrals, Bonus Compensation Deferrals and Matching
Contributions shall be distributed in accordance with the form of payment
elected by the Participant on the Deferred Compensation Agreement to which
such amounts relate. The form of payment with respect to amounts and the
earnings credited thereon may be in any of the following forms:
(a) A lump sum; or
(b) Installment payments for a period not to exceed fifteen years.
Installment payments shall be paid annually on the first business day of
January of each Plan Year or quarterly on the first business day of each
calendar quarter as
<PAGE>
14
elected by the Participant. Each installment payment shall be determined by
multiplying the amounts to be distributed by a fraction, the numerator of
which is one and the denominator of which is the number of remaining
installment payments to be mode to Participant. Anything contained herein
to the contrary notwithstanding, total distribution of a Participant's
Account must be made by the date such Participant attains age 85. In the
tax year prior to the year in which a distribution of a Participant's
Account is scheduled to begin distribution (but no less than 60 days prior
to the distribution date in all events), a Participant may request a change
in form of payment which may be approved or disapproved by the Committee in
its sole discretion.
7.4 Designation of Beneficiaries.
Each Participant shall have the right to designate the beneficiary or
beneficiaries to receive payment of his benefit in the event of his death.
A beneficiary designation shall be made by executing the beneficiary
designation form prescribed by the Committee and filing the same with the
Committee. Any such designation may be changed at any time by execution of
a new designation in accordance with this Section. If no such designation
is on file with the Committee at the time of the death of the Participant
or such designation is not effective for any reason as determined by the
Committee, then the designated beneficiary or beneficiaries to receive such
benefit shall be the Participant's surviving spouse, if any, or if none,
the Participant's executor or administrator, or his heirs at law if there
is no administration of such Participant's estate.
7.5 Unclaimed Benefits.
In the case of a benefit payable on behalf of such Participant, if the
committee is unable to locate the Participant or beneficiary to whom such
benefit is payable, such benefit may be forfeited to the Company, upon the
Committee's determination. Notwithstanding the foregoing, if subsequent to
any such forfeiture the Participant or beneficiary to whom such benefit is
payable makes a valid claim for such benefit, such forfeited benefit shall
be paid by the Company or restored to the Plan by the Company.
7.6 Hardship Withdrawals.
A Participant may apply in writing to the Committee for, and the Committee
may permit, a hardship withdrawal of all or any part of a Participant's
Account. If the Committee, in its sole discretion, determines that the
Participant has incurred a severe financial hardship resulting from a
sudden and unexpected illness or accident of the Participant or of a
dependent (as defined in section 152(a) of the
<PAGE>
15
Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant, as
determined by the Committee, in its sole and absolute discretion. The
amount that may be withdrawn shall be limited to the amount reasonably
necessary to relieve the hardship or financial emergency upon which the
request is based, plus the federal and state taxes due on the withdrawal,
as determined by the Committee. The Committee may require a Participant who
requests a hardship withdrawal to submit such evidence as the Committee, in
its sole discretion, deems necessary or appropriate to substantiate the
circumstances upon which the request is based.
7. Other Withdrawals.
At any time, a Participant may request that 90% of all (or a designated
portion of) his account balance may be paid to him. The Committee in its
sole discretion may approve or disapprove such a request. If it approves
the request and a Participant receives a payment under this Section, he
shall (1) permanently forfeit the remaining 10% of the entire account
balance (or designated portion of it) and this amount shall not be paid to,
or in respect of, the Participant; and (2) the Participant shall lose the
right to participate in the Plan for 1 full Plan Year after receiving a
distribution under this Section.
<PAGE>
16
ARTICLE - ADMINISTRATION
- --------------------------------------------------------------------------------
8.1 Committee.
The Plan shall be administered by a Committee appointed by the Board of
Directors (or the Compensation Committee thereof if such Committee is
established and in existence). The Committee shall be responsible for the
general operation and administration of the Plan and for carrying out the
provisions thereof. The Committee may delegate to others certain aspects of
the management and operational responsibilities of the Plan including the
employment of advisors and the delegation of ministerial duties to
qualified individuals, provided that such delegation is in writing.
8.2 General Powers of Administration.
The Committee shall have all powers necessary or appropriate to enable it
to carry out its administrative duties. Not in limitation, but in
application of the foregoing, the Committee shall have the duty and power
to interpret the Plan and determine all questions that may arise hereunder
as to the status and rights of Employees, Participants and Beneficiaries.
The Committee may exercise their powers hereby granted in its sole and
absolute discretion. No member of the committee shall be personally liable
for any actions taken by the Committee unless the member's action involves
willful misconduct.
8.3 Costs of Administration.
The costs of administering the Plan shall be borne by the Company unless
and until the Participant receives written notice of the imposition of such
administrative costs, with such costs to begin with the next Plan Year and
none may be assessed retroactively for prior Plan Years. Such costs shall
be charged against the Participant's Account and shall be uniform for all
Plan Participants. Such costs shall not exceed the standard rates for
similarly designed nonqualified plans under administration by high quality
third party administrators at the time such costs are initially imposed and
thereafter.
8.4 Indemnification of Committee.
The Company shall indemnify the members of the Committee against any and
all claims, losses, damages, expenses, including attorney's fees, incurred
by them, and any liability, including any amounts paid in settlement with
their approval, arising from their action or failure to act, except when
the same is judicially determined to be attributable to their gross
negligence or wilful misconduct.
<PAGE>
17
<PAGE>
18
ARTICLE - DETERMINATION OF BENEFITS,
CLAIMS PROCEDURE AND ADMINISTRATION
- --------------------------------------------------------------------------------
9.1 Claims.
A person who believes that he is being denied a benefit to which he is
entitled under the Plan (hereinafter referred to as "Claimant") may file a
written request for such benefit with the Committee, setting forth his
claim. The request must be addressed to the Committee at the Company at its
then principal place of business.
9.2 Claim Decision.
Upon receipt of a claim, the Company shall advise the Claimant that a reply
will be forthcoming within ninety (90) days and shall, in fact, deliver
such reply within such period. The Company may, however, extend the reply
period for an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Committee shall adopt a
written opinion, using language calculated to be understood by the
Claimant, setting forth:
(1) The specific reason or reasons for such denial;
(2) The specific reference to pertinent provisions of the Plan on which
such denial is based;
(3) A description of any additional material or information necessary for
the Claimant to perfect his claim and an explanation why such material
or such information is necessary;
(4) Appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review; and
(5) The time limits for requesting a review under Section 9.3 and for
review under Section 9.4 hereof.
9.3 Request for Review.
Within sixty (60) days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the
Company review the determination of the Committee. Such request must be
addressed to the Secretary of the Company, at its then principal place of
business. The Claimant or his duly authorized representative may, but need
not, review the pertinent
<PAGE>
19
documents and submit issues and comments in writing for consideration by
the Company. If the Claimant does not request a review of the Corporation's
determination by the Secretary of the Company within such sixty (60) day
period he shall be barred and estopped from challenging the Company's
determination.
9.4 Review of Decision.
Within sixty (60) days after the Secretary's receipt of a request for
review, such secretary will review the Company's determination. After
considering all materials presented by the Claimant, the Secretary will
render a written opinion, written in a manner calculated to be understood
by the Claimant setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions of this
Agreement on which the decision is based. If special circumstances require
that the sixty (60) day time period be extended, the Secretary will so
notify the Claimant and will render the decision as soon as possible, but
no later than one hundred twenty (120) days after receipt of the request
for review.
<PAGE>
20
ARTICLE - MISCELLANEOUS
- --------------------------------------------------------------------------------
10.1 Not Contract of Employment.
The adoption and maintenance of the Plan shall not be deemed to be a
contract between the Company and any person or to be consideration for the
employment of any person. Nothing herein contained shall be deemed to give
any person the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge any person at any time nor
shall the Plan be deemed to give the Company the right to require any
person to remain in the employ of the Company or to restrict any person's
right to terminate his employment at any time.
10.2 Non-Assignability of Benefits.
No Participant, Beneficiary or distributee of benefits under the Plan
shall have any power or right to transfer, assign, anticipate, hypothecate
or otherwise encumber any part or all of the amounts payable hereunder,
which are expressly declared to be unassignable and non-transferable. Any
such attempted assignment or transfer shall be void. Except as provided by
applicable law, no amount payable hereunder shall, prior to actual payment
thereof, be subject to seizure by any creditor of any such Participant,
Beneficiary or other distributee for the payment of any debt judgment or
other obligation, by a proceeding at law or in equity, nor transferable by
operation of law in the event of the bankruptcy, insolvency or death of
such Participant, Beneficiary or other distributee hereunder.
10.3 Withholding.
All deferrals and payments provided for hereunder shall be subject to
applicable withholding and other deductions as shall be required of the
Company under any applicable local, state or federal law.
10.4 Amendment and Termination.
The Board of Directors (or the Compensation Committee thereof if such
Committee is established and in existence) may from time to time, in its
discretion, amend, in whole or in part, any or all of the provisions of
the Plan; provided, however, that no amendment may be made that would
impair the rights of a Participant with respect to amounts already
allocated to his Account. The Board of Directors (or the Compensation
Committee thereof if such Committee is established and in existence) may
terminate the Plan at any time. In the event that the Plan is terminated,
the balance in a Participant's Account shall be paid to such
<PAGE>
21
Participant or his Beneficiary in a single cash lump sum in full
satisfaction of all such Participant's or Beneficiary's benefits
hereunder. Any such amendment to or termination of the Plan shall be in
writing and signed by a member of the Board of Directors (or the
Compensation Committee thereof if such Committee is established and in
existence).
10.5 No Trust Created.
Nothing contained in this Agreement, and no action taken pursuant to its
provisions by either party hereto, shall create, nor be construed to
create, a trust of any kind or a fiduciary relationship between the
Company and the Participant, his beneficiary, or any other person.
10.6 Unsecured General Creditor Status of Employee.
The payments to Participant, his Beneficiary or any other distributee
hereunder shall be made from assets which shall continue, for all
purposes, to be a part of the general, unrestricted assets of the Company;
no person shall have nor acquire any interest in any such assets by virtue
of the provisions of this Agreement. The Company's obligation hereunder
shall be an unfunded and unsecured promise to pay money in the future. To
the extent that the Participant, Beneficiary or other distributee acquires
a right to receive payments from the Company under the provisions hereof,
such right shall be no greater than the right of any unsecured general
creditor of the Company; no such persons shall have nor require any legal
or equitable right, interest or claim in or to any property or assets of
the Company.
In the event that, in its discretion, the Company purchases an insurance
policy or policies insuring the life of the Employees (or any other
property) to allow the Company to recover the cost of providing the
benefit, in whole, or in part, hereunder, neither the Participant,
Beneficiary or other distributee shall have nor acquire any rights
whatsoever therein or in the proceeds therefrom. The Company shall be the
sole owner and beneficiary of any such policy or policies and, as such,
shall possess and, may exercise all incidents of ownership therein. No
such policy, policies or other property shall be held in any trust for a
Participant, Beneficiary or other distributee or held as collateral
security for any obligation of the Company hereunder. An Employee's
participation in the underwriting or other steps necessary to acquire such
policy or policies may be required by the Company and, if required. shall
not be a suggestion of any beneficial interest in such policy or policies
to a Participant.
<PAGE>
22
10.7 Severability.
If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining
provisions hereof; instead, each provision shall be fully severable and
the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.8 Governing Laws.
All provisions of the Plan shall be construed in accordance with the laws
of South Carolina except to the extent preempted by federal law.
10.9 Binding Effect.
This Plan shall be binding on each Participant and his heirs and legal
representatives and on the Company and its successors and assigns.
10.10 Entire Agreement.
This document and any amendments contain all the terms and provisions of
the Plan and shall constitute the entire Plan, any other alleged terms or
provisions being of no effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be properly
executed on the 9th day of February, 1999.
SERVICE AMERICA CORPORATION
By:
--------------------------------------
Its: Corporate Vice President & Controller
(Corporate Seal)
Attested to:
- ----------------------------------
Secretary
<PAGE>
SERVICE AMERICA CORPORATION
DEFERRED COMPENSATION PLAN
Effective as of February 9, 1999
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
Employment Agreement (this "Agreement"), dated as of August
24, 1998, by and between VSI Acquisition II Corporation, a Delaware
corporation (the "Company"), and John T. Dee (the "Executive").
The Company and the Executive wish to provide for the terms
of his employment as a senior executive of the Company.
It is therefore agreed as follows:
1. Term. The employment of the Executive under this
Agreement shall commence as of August 24, 1998 (the "Effective Date") and
shall continue through the fifth anniversary of the Effective Date (the
"Term"), subject to earlier termination as provided for in Section 4.
2. Duties; Place of Employment.
(a) During the Term, the Executive shall serve as Chief
Executive Officer of the Company, in which capacity he shall devote all of his
business time, effort and energies to the business of the Company. In
addition, during the Term, the Executive shall be nominated and, when elected,
serve as a member and Chairman of the Board of Directors of the Company (the
"Board"). The Executive shall have such authority and responsibility, and
shall serve in such capacities with the Company's majority-owned subsidiaries
and affiliates, as are consistent with the duties of a senior executive as may
from time to time be assigned to him by the Board.
(b) The principal place of employment of the Executive shall
be within 25 miles of Stamford, Connecticut and shall not be changed without
the Executive's prior written consent; provided, however, the Executive may be
required to travel to South Carolina on a regular basis.
3. Compensation and Benefits.
(a) Base Salary. During the Term, the Company shall pay the
Executive an annual salary of $465,000, payable in accordance with the
Company's salary payment policies governing senior executives.
(b) Bonuses. In the sole discretion of the Board, the
Executive also shall receive such bonus compensation, if any, determined by
the Board, and shall be entitled to participate in any executive bonus plan
that the Board shall establish for the senior executives of the Company.
(c) Expense Reimbursement. The Company shall reimburse the
Executive for ordinary and necessary business expenses incurred by him in the
performance of his duties as an employee of the Company in accordance with the
Company's policies governing reimbursement
1
<PAGE>
of expenses of senior executives; provided that the Executive accounts to the
Company for such expenses in the manner customarily prescribed by the Company
for its senior executives.
(d) Benefit Plans, Fringe Benefits and Vacation.
(i) During the Term, the Executive shall be
entitled to the coverage or benefits under any and all employee
benefit plans maintained by the Company (including, without
limitation, medical insurance, life insurance, split dollar life
insurance, long-term disability insurance and pension plans, if any)
to the extent permissible under the terms of the plans and to all
fringe benefits for which his status and level of employment qualify
him in accordance with the Company's benefits policies governing
senior executives.
(ii) The Executive shall be entitled to paid
vacations (taken consecutively or in segments), in accordance with
the Company standard vacation policies governing senior executives,
but in no event less than four weeks each calendar year during the
Term. Such vacations shall be taken at times consistent with the
effective discharge of the Executive's duties.
(iii) It is recognized that the services of the
Executive hereunder will require the use of a suitable automobile and
the Company agrees to supply and maintain the same at its expense in
accordance with the Company's policies with respect thereto for
senior executives. The Executive shall be entitled to continue the
use of his current business automobile or to be provided with at
least an equivalent new vehicle at such intervals as apply to other
senior executives of the Company.
(iv) The Executive shall be reimbursed for up to
$10,000 for the fees and expenses related to membership in two clubs
designated by the Executive and such other organizations consistent
with the Company's policies pertaining thereto governing senior
executives.
4. Termination.
(a) Death and Disability. The Executive's employment under
this Agreement shall terminate upon his death. The Company may terminate the
Executive's employment under this Agreement by written notice to the Executive
or his representative if the Executive has a Disability. For purposes of this
agreement, the Executive shall be deemed to have a "Disability" if, for
physical or mental reasons, the Executive is unable to perform the essential
functions of the Executive's duties hereunder in accordance with this
Agreement, for 120 consecutive days, or 180 days during any twelve month
period, as determined in accordance herewith. The Disability of the Executive
shall be determined by a medical doctor selected by agreement of the Company
and the Executive and upon the request of either party by notice to the other.
If the Company and the Executive cannot agree on the selection of a medical
doctor, each of them will select a medical doctor and the two medical doctors
will select a third medical doctor who shall determine whether the Executive
has a Disability. The determination of such medical doctor shall be binding on
both parties. The Executive shall submit to a reasonable number of
examinations by the medical doctor making the determination of Disability. If
the Executive is
2
<PAGE>
not legally competent, the Executive's legal guardian or duly authorized
attorney-in-fact shall act in the Executive's stead for the purposes of
submitting the Executive to the examinations and for all other purposes
hereunder.
(b) Termination by the Company for Cause. The Company may
terminate the Executive's employment under this Agreement for Cause by written
notice to the Executive. "Cause" shall mean termination by action of at least
a majority of the members of the Board (excluding the Executive) upon (i) the
Executive's breach of Section 6 of this Agreement; (ii) the Executive's
material breach of any other provision of this Agreement; (iii) the
Executive's willful failure to adhere to any written Company policy if the
Executive has been given written notice and a reasonable opportunity to comply
with such policy or cure his failure to comply; (iv) serious wilful misconduct
by the Executive in connection with his employment; or (v) the commission of a
felony or the equivalent thereof or a misdemeanor including moral turpitude.
Such action shall take place at a meeting duly called and held upon at least
15 days' prior written notice to the Executive specifying the particulars of
the action or inaction alleged to constitute "Cause" (and at which meeting the
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard). Action or inaction by that Executive shall not be
considered "willful" unless done or omitted by him intentionally and not in
good faith and without his reasonable belief that his action or inaction was
in the best interests of the Company, and shall not include failure to act by
reason of total or partial incapacity due to physical or mental illness.
(c) Termination by the Company Without Cause. The Company
may terminate the Executive's employment under this Agreement at any time by
written notice to the Executive, whether or not in accordance with Section
4(a) or 4(b).
(d) Termination by the Executive for Good Reason. The
Executive may terminate his employment under this Agreement for "Good Reason"
by written notice to the Company within a reasonable period following the
event giving rise to such Good Reason; provided, however, that the Company
shall have the right to cure the action that constitutes "Good Reason" within
five business days of the date of such notice. For purposes of this Agreement,
"Good Reason" shall mean: (i) the Company's material breach of this Agreement;
(ii) the assignment of the Executive, without his consent, to a position,
responsibilities or duties of a materially lesser status or degree of
responsibility than his position, responsibilities or duties at the Effective
Date; provided, that the Executive has agreed to relinquish the title of Chief
Executive Officer of the Company on January 1, 2001; (iii) the Company's
breach of Section 3(b); or (iv) the failure to elect the Executive to serve as
a member and Chairman of the Board.
5. Consequences of Termination.
(a) Cause or Absence of Good Reason. If the Executive's
employment under this Agreement is terminated (i) by the Company pursuant to
Section 4(b) or (ii) by the Executive other than pursuant to Section 4(d), the
Executive shall not thereafter be entitled to receive any salary, bonus or
other payments or benefits under this Agreement, other than the payments
3
<PAGE>
pursuant to Section 3(a) of salary earned, accrued vacation and the
reimbursement pursuant to Section 3(c) of expenses incurred, in each case,
through the date of termination.
(b) Death or Disability. If the Executive's employment under
this Agreement is terminated pursuant to Section 4(a) due to his death or
Disability, the Executive shall not thereafter be entitled to receive any
salary, bonus or other payments or benefits under this Agreement, other than
the following: (a) payments pursuant to Section 3(a) of salary earned, accrued
vacation and the reimbursement pursuant to Section 3(c) of expenses incurred,
in each case, through the date of termination and (b) an amount equal to the
Executive's one year's base salary at the annual rate in effect on the date of
his death or Disability. In addition, if the Executive's employment is
terminated due to his death, the Company shall continue to provide, for a
period of one year from the date of the Executive's death, the Executive's
spouse and minor children with medical, hospitalization and dental insurance
comparable to that provided by the Company prior to such termination.
(c) Other Terminations. If the Executive's employment under
this Agreement is terminated (i) by the Company pursuant to Section 4(c) or
(ii) by the Executive pursuant to Section 4(d), the Executive shall not
thereafter be entitled to receive any salary, bonus or other payments or
benefits under this Agreement, other than the following: (a) payments pursuant
to Section 3(a) of salary for the balance of the Term at the annual rate in
effect immediately prior to such termination; (b) reimbursement pursuant to
Section 3(c) of expenses incurred through the date of termination; (c)
benefits pursuant to Section 3(d)(i) for the earlier of the balance of the
Term and the date the Executive receives comparable coverage from a subsequent
employer to the extent permissible under the terms of the plans providing such
benefits; (d) accrued vacation; and (e) assignment of title to any life
insurance policy covering the life of the Executive after which time the
Executive shall be fully responsible for all costs of such policy due and
payable after the Term (and provided that, in the event such policy is a
"split dollar" policy or otherwise evidences an ownership interest by the
Company, the Company shall be entitled to recover its interest therein before
any such assignment is effective).
(d) Mitigation. The Executive shall have no duty or
obligation to seek or accept other employment under this Agreement and shall
not be required to mitigate the amount of any cash payments or benefits
provided for by this Agreement by seeking or accepting employment.
6. Certain Restrictions.
(a) Confidentiality. The Executive acknowledges that he has
acquired and will acquire information respecting the business and affairs of
the Company, its subsidiaries and affiliates that is non-public, confidential
and/or proprietary in nature ("Confidential Information"). Accordingly, the
Executive shall keep confidential and not disclose to any person or use
(except as required in the conduct of the business of the Company in the
ordinary course and consistent with past practice) all such Confidential
Information, except as required by law (provided prior written notice thereof
is given by the Executive to the Company) or with the Company's written
consent, unless such information is known generally to the public or the trade
(through sources other than the Executive's unauthorized disclosure). Upon
termination of his
4
<PAGE>
employment for any reason, the Executive shall deliver to the Company all
Confidential Information (in any form, including, but not limited to,
electronic media) in his possession or subject to his control that belongs to
the Company.
(b) Competitive Activity.
(i) During the period of his employment hereunder
and for two years thereafter, Executive agrees that, without the
prior written consent of the Company, (A) he will not, directly or
indirectly, either as principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee or in any other
capacity, carry on, be engaged in or have any financial interest in,
any business which is in competition with the business of the Company
or any of its affiliates and (B) he shall not, on his own behalf or
on behalf of any person, firm or company, directly or indirectly,
solicit or offer employment to any person who has been employed by
the Company or any of its affiliates at any time during the 12 months
immediately preceding such solicitation.
(ii) For purposes of this Section 6(b), a business
shall be deemed to be in competition with the Company and its
affiliates if it is involved in the sale or provision of dining
services or vending services at stadiums, ballparks, convention
centers, concert halls, theaters, seaports, golf courses, arenas,
race tracks, parks, bandstands, or other recreational venues.
(iii) Executive and the Company agree that this
covenant not to compete is a reasonable covenant under the
circumstances, and further agree that if in the opinion of any court
of competent jurisdiction such restraint is not reasonable in any
respect, such court shall have the right, power and authority to
excise or modify such provision or provisions of this covenant as to
the court shall appear not reasonable and to enforce the remainder of
the covenant contained in this Section 6(b) would irreparably injure
the Company. Accordingly, Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in
equity, cease making any payments otherwise required by this
Agreement and obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation
of this Agreement by Executive.
(iv) Nothing in this Section 6(b) shall prohibit
the Executive from acquiring or holding not more than five percent
(5%) of any class of publicly traded securities of any business.
7. Miscellaneous.
(a) Notices. Any notice or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, sent by nationally recognized
overnight courier service or mailed by registered mail, return receipt
requested, to a party at his or its address set forth below or at such other
address as a party may specify by notice to the other in accordance herewith:
5
<PAGE>
To the Executive:
John T. Dee
99 Cross Country Trail
Stamford, Connecticut 06903
To the Company:
VSI Acquisition II Corporation
201 East Broad Street
Spartenburg, SC 29306
Attention: General Counsel
Notices on behalf of a party may be signed and sent by an attorney for that
party.
(b) Entire Agreement; Amendment. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
and is intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement between the parties with
respect thereto and cannot be changed or terminated orally.
(c) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing.
(d) Indemnification. The Executive shall be entitled to be
indemnified for acting as an officer and director in accordance with the
Company's Certificate of Incorporation and By-Laws. The Company agrees
specifically that it shall maintain provisions in its Certificate of
Incorporation and By-laws relating to exculpation or indemnification of
officers and directors thereof (unless required by law) such that the
Executive shall continue to be entitled to such exculpation and
indemnification as was in effect immediately prior to the date hereof under
the Certificate of Incorporation and By-Laws of Service America Corporation
(or any equally favorable arrangement) to the fullest extent permitted under
the laws of the applicable jurisdiction of incorporation. The Company also
shall maintain directors and officers liability insurance coverage for the
Executive which coverage shall be on terms and in amounts at least as
favorable to such Executive as they were under insurance maintained by Service
America Corporation immediately prior to the date herein.
(e) Assignment. Except as otherwise provided in this
paragraph, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, representatives, successors and
permitted assigns.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original, but all of
which together shall constitute the same instrument.
6
<PAGE>
(g) Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement.
(h) Governing Law. This Agreement shall, in accordance with
Section 51 1401 of the General Obligation Law of the State of New York, be
governed by the laws of the State of New York, without regard to any conflicts
of laws principles thereof that would call for the application of the laws of
any other jurisdiction.
(i) Arbitration. Any and all disputes or controversies
arising out of or relating to this Agreement, other than claims brought
pursuant to Section 6, shall be resolved by arbitration at the American
Arbitration Association (the "AAA") at its New York City offices before a
panel of three arbitrators under the then existing rules of the AAA. The
parties agree that in any such arbitration, the arbitrators shall not have the
power to reform or modify this Agreement in any way and to that extent their
powers are so limited. The determination of the arbitrators shall be final and
binding on the parties and judgment on it may be entered in any court of
competent jurisdiction. The prevailing party in arbitration in connection with
the enforcement of this Agreement shall be entitled to recover from the other
party all reasonable out-of-pocket costs and disbursements and any and all
charges that may be made in the cost of the arbitration and the fees of the
arbitrator or any other enforcement thereof.
(j) Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By:
--------------------------
Name:
Title:
--------------------------
John T. Dee
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By: /s/ David Blitzer
-----------------------------
Name: David Blitzer
Title: Director
----------------------------
John T. Dee
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By:
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Name:
Title:
/s/ John T. Dee
--------------------------
John T. Dee
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Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made this 17th November 1995, by
and between Volume Services, Inc. a Delaware corporation ("Employer" or
"Company"), together with its successors and assigns, and Kenneth R. Frick,
("Executive") together with his heirs and assigns.
WHEREAS, the Company desires to employ the Executive and the Executive desires
to be employed to provide his services to the Company, all on the terms and
subject to the conditions as hereinafter set forth;
WHEREAS, Employer and Executive wish to provide for Executive's continued
employment if the Company is sold;
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good anti valuable consideration, the parties hereto agree as follows:
1. Stock Sale. This Agreement is contingent upon the sale of the outstanding
stock of the Company to VSI Acquisition Corporation ("the Stock Sale"). If the
Stock Sale does not occur, this Agreement shall be unenforceable by either
party. If the Stock sale does occur, this Agreement shall be binding upon the
Executive and the Company, and neither party may cancel or terminate this
Agreement prior to the Stock Sale without the express written consent of the
other party, it being expressly understood that the Company and the purchaser of
the stock of the Company are relying upon this Agreement to complete the Stock
Sale.
2. Employment Term. The Executive shall be employed for a period beginning on
the date of the Stock Sale and continuing for a term which does not end until
this Agreement is terminated pursuant to Section 5, Termination. This shall be
ref erred to as "the Employment Term" or "the Term of Employment."
3. Employment, Position and Duties. Employer hereby employs and engages the
services of Executive during the Term of Employment as an executive of Employer
in the position of Chief Financial Officer of Volume Services, Inc. Executive's
employment with Employer under this Agreement shall be in a capacity
commensurate with the status, authority, duties and responsibilities of a chief
Financial officer for a similarly-sized company. The scope of Executive's
responsibilities as Chief Financial officer will include, but not be limited to,
overall responsibility for insuring that proper accounting and financial
practices and standards are maintained at both the corporate level and in the
operations. In addition, Executive's responsibilities will include financial and
accounting support for new sales and marketing efforts and the development of
management employees in accordance with the succession plans of volume services.
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Executive agrees to serve Employer in such position and capacity for the Term of
Employment, to devote the reasonable and necessary attention and time to the
business affairs of Employer, and to expend his reasonable efforts to discharge
the responsibilities he is assigned.
4. Terms and Conditions of Employment
4.1 Base Salary. During the Term of Employment, Executive shall be
entitled to be paid a Base Annual Salary. Executive shall continue to receive
the Base Annual Salary he is receiving on the day of the Stock Sale. The base
annual salary shall be reviewed at least annually, and may be increased in the
Company's discretion.
4.2 Bonus. The Board of Directors of the Company shall, from time to
time, develop a management incentive compensation plan that will provide for the
possibility of cash bonuses for the Executive and other executives of the
Company, provided certain performance targets are met. The Executive shall be
entitled to participate in the management incentive compensation plan and,
assuming the prescribed performance targets are achieved, to receive a cash
bonus payable at the end of the second month following the end of the fiscal
year in an amount calculated in accordance with the terms of the plan. The
amount of any accrued but unpaid bonus at the time of termination of the
Employment Term shall be calculated in accordance with the terms of the plan.
Notwithstanding the foregoing, Executive shall not be entitled to a bonus if
there is a Termination for Just Cause as defined below.
4.3 Vacation. During each calendar year of the Employment Term, the
Executive shall be entitled to four (4) weeks of paid vacation.
4.4 Other Benefits. During the Employment Term, the Executive shall be
entitled to participate in all retirement and/or savings plans, mall incentive
compensation plans, and all group health, hospitalization and disability
insurance plan, and other employee welfare benefit plans in which other key
executives of the company participate.
4.5 Relocation. Should the Company request that Executive relocate
during the Employment Term, then the Company shall reimburse the Executive for
necessary and reasonable moving expenses in accordance with the then relocation
policy applicable to key executives.
4.6 Reimbursement of Expenses Incurred in Performance of Employment. In
addition to the compensation provided for under Section 2 hereof, upon
submission of proper vouchers, the Company shall pay or reimburse the Executive
f or all normal and reasonable expenses, including travel expenses (which
includes reimbursement for business use on a per-mile basis of Executive's
personal automobile)f incurred by the Executive during the Employment Term in
connection with the Executive's responsibilities to the Company.
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5. Termination.
5. (a) The Employment Term shall terminate immediately upon the
occurrence of any of the following events:
(1) immediately upon the death of the Executive;
(2) Upon the one hundred eightieth (180th) day following
the Permanent Disability of the Executive (as defined
below);
(3) upon the effective date of Resignation by the
Executive (as defined below);
(4) upon the sixtieth (60th) day following notice given
by the Company of Termination Without Cause (as
defined below); or,
(5) upon the close of business on the date the Company
gives the Executive notice of Termination for Just
Cause (as defined below).
5. (b) For purposes of this Agreement:
(1) "Permanent Disability" shall mean the Executive is unable
to perform the essential functions of his job with or without
reasonable accommodation by reason of a physical or mental
disability or infirmity which has continued for more than one
hundred eighty (180) consecutive days. The Executive agrees to
submit such medical evidence regarding such disability or
infirmity as is reasonably requested by the Company.
(2) "Resignation by the Executive" shall mean any voluntary
termination or resignation by the Executive. Executive is
required to give at least thirty (30) days written notice of
Resignation and the Company is entitled, upon receiving such
notice, to accept such Resignation any time prior to the
Resignation date proposed by the Executive. The effective date
of the Resignation shall be the day the resignation is
accepted by the Company. However, Executive shall be paid
through the notice period so long as the Executive has given
thirty (30) calendar days notice of Resignation.
(3) "Termination Without Cause" shall mean any termination by
the Company for any reason other than termination due to
"Permanent Disability" or "Termination for Just Cause."
(4) "Termination for Just Cause" shall mean termination of the
employment of the Executive for "just cause" pursuant to
applicable law. In addition, the termination of the
Executive's employment shall be deemed to have been for just
cause if termination of his employment shall have been the
result of:
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(i) an act or acts by him, or any omission by
him, constituting a felony, and the
Executive has entered a guilty plea or
confession to or has been convicted of such
felony;
(ii) act of fraud or dishonesty by the Executive
which results or is intended to result in
harm to the Company;
(iii) gross negligence by the Executive in the
performance of his duties;
(iv) gross insubordination by the Executive;
(v) the breach of any material provision of this
Agreement by the Executive.
Further, it is expressly agreed that Executive's refusal to relocate
outside the United States or to Alaska or Hawaii, and if that refusal
by the Executive results in the Executive's termination, then said
termination shall be a "Termination Without Cause.".
5. (c) Except for the payment of any earned but unpaid salary due at
the time of termination of the Employment Term and except for any payments which
may be due as set forth below, Executive shall not be entitled to receive any
additional compensation of any kind from the Company upon the termination of the
Employment Term:
(1) If termination of the Employment Term is due to the death of
the Executive, Executive's surviving spouse, or if none, the
Executive's estate or legal representative, shall be paid the
Base Annual Salary in monthly installments for a period of two
(2) years commencing immediately upon the death of Executive;
plus any accrued, but unpaid bonus, at the time of death,
payable at the end of the second month following the end of
the fiscal year in accordance with the terms of the bonus
plan.
(2) If termination of the Employment Term is due to the Permanent
Disability of the Executive, the Executive shall be paid
one-half of the Base Annual Salary in monthly installments for
a period of two (2) years after the termination of the
Executive's employment; plus any accrued, but unpaid bonus, at
the time of Permanent Disability, payable at the end of the
second month following the end of the fiscal year in
accordance with the terms of the bonus plan.
(3) If termination of the Employment Term is due to the
Resignation of the Executive, the Executive shall be paid
through the thirtieth (30th) calendar day following receipt by
the Company of Executive's written resignation; plus any
accrued but unpaid bonus at the time of Resignation, payable
at the end of the
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second month following the end of the fiscal
year in accordance with the terms of the bonus plan.
(4) If termination of the Employment Term is due to Termination
without Cause by the Company, the Executive shall be paid
severance equal to two times (2x) the amount of the
Executive's Base Annual Salary in effect at the time of
termination, payable in a lump sum at the time of termination,
less applicable withholdings required by law; plus any
accrued, but unpaid bonus at the time of termination payable
at the end of the second month following the end of the fiscal
year in accordance with the terms of the bonus plan. In
addition, Executive shall be paid the Company subsidy for
eighteen (18) months of COBRA coverage payable in a lump sum
at termination less applicable withholdings required by law.
In addition to severance pay provided herein, the Company, at
its expense, will provide the Executive with outplacement
counseling and the support services of an executive
outplacement firm for a period until re-employment, but no
longer than eighteen (18) months after termination.
5. (d) Release Contingency; No Duplication of Severance Pay. Payment of
benefits under Section 5 of this Agreement shall be conditioned upon Executive's
execution of a full release of all claims against Employer (other than claims
with respect to vested retirement benefits, vested stock options and other
vested accrued benefits, and other than with respect to workers compensation
claims) which is in a form acceptable to Employer; and also shall be in lieu of
any other severance payments under any other severance plan or program of
Employer.
6. Protected Information; Prohibited Solicitation.
6. (a) The Executive hereby recognizes and acknowledges that during the
course of his employment by the Company, the Company has disclosed and will
furnish, disclose, or make available to the Executive confidential and
proprietary information related to the Company's business including, without
limitation, customer lists, financial information, ideas, processes, inventions,
and devices (the "Confidential Information"), that such Confidential Information
has been developed and will be developed through the expenditure by the Company
of substantial time and money and that all such Confidential Information except
to the extent it is in the public domain shall constitute trade secrets
protected under applicable law. The Executive further agrees to use such
Confidential Information only for the purpose of carrying out his duties with
the Company and agrees that he will not, for a period of two (2) years after his
last day of employment with the Company, misappropriate for himself or others or
disclose to any third party, either directly or indirectly, any Confidential
Information. It is expressly understood that Executive shall not be in breach of
this Section 6(a) for any disclosure he is required to make by virtue of a final
unappealable order of a court of competent jurisdiction. It is further expressly
agreed that Executive shall return to the Company at the time of termination and
not retain any
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property belonging to the Company, including, without limitation any and all
originals and copies of documents referencing or containing any Confidential
Information.
6. (b) The Executive hereby agrees that for a period of two (2) years
following his last day of employment by the Company, Executive shall not,
without the written consent of the Company, knowingly solicit, entice, or
persuade any other employees of the Company to leave the services of the Company
for any reason.
6. (c) The Executive further agrees that he will not, for a period of
two (2) years following his last day of employment by the Company, enter into
any relationship whatsoever, either directly or indirectly alone or in a
partnership, or as an officer, director, employee or stockholder (beneficially
owning the stock or options to acquire stock totaling more than five percent of
the outstanding shares) of any corporation (other than the Company), or
otherwise acquire or agree to acquire a significant percent or future equity or
other proprietorship interest, whether as a stockholder, partner, proprietor, or
otherwise, with any enterprise, business, or division thereof (other than the
Company), which is engaged in the contract concessions and entertainment
business similar to that engaged in by the Company in those states within the
United States in which the Company is, at the time of such termination of
employment, conducting its business and over which the Executive has had direct
or indirect supervisory responsibility while in the employment of the Company.
6. (d) Information Regarding This Agreement. Executive shall not,
without the prior written consent of Employer, either before, during or after
the Employment Term, communicate or divulge any information regarding the
circumstances or amounts payable under this Agreement; provided, that nothing in
this paragraph shall prevent Executive from sharing with his spouse and
confidential legal and financial advisors general information regarding the
amount of his compensation as may be necessary to make basic financial
decisions, or disclosing general information about Executive's work experience
(not including any confidential, proprietary or other information concerning the
Company or its operations) to prospective employers if necessary to enable
Executive to obtain placement at a salary and other benefits commensurate with
Executive's past compensation.
6. (e) The Executive acknowledges that the restrictions placed upon him
by this Section 6 are reasonable, given the nature of his position, and that
there is sufficient consideration promised him pursuant to this Agreement to
support these restrictions.
6. (f) The restrictions of this Section 6 shall survive Executive's
last day of employment by the Company and shall be in addition to any
restrictions imposed upon the Executive by statute or at common law.
7. Injunctive Relief. The Executive hereby expressly acknowledges that
any breach or threatened breach by the Executive of any of the terms set forth
in Section 6 of this Agreement may result in significant and continuing injury
to the Company, the monetary value of which may
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be impossible to establish. Therefore, the Executive agrees that the Company
shall be entitled to apply for injunctive relief in South Carolina or any other
court of appropriate jurisdiction. The provisions of this Section 7 shall
survive the Employment Term.
8. Parties Benefitted; Assignments. This Agreement shall be binding
upon the Executives, the heirs and personal representative or representatives of
the Executive and upon the Company and its successors and assigns. Neither this
Agreement nor any rights or obligations hereunder may be assigned by the
Executive.
9. Notices. Any notice required or permitted by this Agreement shall be
in writing sent by personal delivery, or by registered or certified mail, return
receipt requested, addressed to Executive's immediate supervisor and the Company
at its then principal office, or the Executive at his then current address, as
the case may be or to such other address or addresses as any party hereto may
from time to time specify in writing for the purpose of a notice given to the
other parties in compliance with this Section 9. Notices shall be deemed given
when received.
10. Governing Law and Venue. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of South
Carolina without regard to conflict of law principles and the parties agree to
submit themselves to the jurisdiction of the federal or state courts of the
State of South Carolina for any claim arising under this Agreement which is
brought by the other party in South Carolina.
11. Arbitration of Disputes. Except for claims barred by the applicable
statute of limitations and except for claims for injunctive relief which the
Company may elect to pursue in state or federal court, the Executive and the
Company agree that any and all disputes between them, and any claim by either
party that cannot be amicably settled shall be determined solely and exclusively
by arbitration in accordance with the Employment Dispute Resolution Rules then
pertaining of the American Arbitration Associations or any successor thereof at
its office nearest Employer's principal place of business unless the parties
otherwise agree in writing. The arbitration shall be conducted by three
arbitrators. Judgment upon an award by the majority of the arbitrators shall be
binding, and shall be entered in a court of competent jurisdiction.
12. Indemnification and Insurance; Legal Expenses. The Company
will indemnify and hold harmless the Executive to the fullest extent
permitted by the laws of the State of South Carolina for the indemnification
of officers or directors, against all costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any action suit, or
proceedings to which the Executive may be made a party by reason of being or
having been an officer or employee of the Company, or having served any other
enterprises at the request of the Company. In addition, the Company will
maintain officer and director liability insurance and the Executive shall be
entitled to the protection offered in any insurance policies the Company may
elect to maintain generally for the benefit of its directors and officers
insuring against such losses. It is expressly understood that there is no
obligation by the Company to indemnify the
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Executive for any dispute, claim, or controversy arising under this Agreement,
or for which indemnification is inappropriate under applicable law.
13. Miscellaneous. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement supersedes any
prior written or oral agreements or understandings between the parties relating
to the employment of Executive, the compensation or benefits promised to
Executive or any other agreement or understanding relating in any way to the
subject matter in this Agreement. No modification or amendment of this
Agreement shall be valid unless in writing and signed by or on behalf of the
parties hereto. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by all applicable
laws, ordinances, rules and regulations. If any provision of this Agreement, or
the application thereof to any person or circumstance shall, for any reason and
to any extent, be held invalid or unenforceable, such invalidity and
unenforceability shall not affect the remaining provisions hereof and the
application of such provisions to other persons or circumstances, all of which
shall be enforced to the greatest extent permitted by law. The compensation
provided to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any amounts
payable to the Executive hereunder after the death of the Executive shall be
paid to the Executive's estate or legal representative. The headings in this
Agreement are inserted for convenience of reference only and shall not be part
of or control or affect the meaning of any provision hereof.
IN WITNESS WHEREOF the parties have duly executed and delivered this
Agreement as of the day and year first above written.
VOLUME SERVICES, INC. EXECUTIVE
By: /s/ Lawrence A. Hatch /s/ Kenneth R. Frick
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Lawrence A. Hatch Kenneth R. Frick
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Exhibit 10.9
EMPLOYMENT AGREEMENT
Employment Agreement (this "Agreement"), dated as of August
24, 1998, by and between Service America Corporation, a Delaware corporation
(the "Company"), and Michael J. Higgins (the "Executive").
The Company and the Executive wish to provide for the terms
of his employment as a senior executive of the Company.
It is therefore agreed as follows:
1. Term. The employment of the Executive under this
Agreement shall commence as of August 24, 1998 (the "Effective Date") and
shall continue through the first anniversary of the Effective Date (the
"Initial Term"), subject to earlier termination as provided for in Section 4;
provided, however, that the term of Executive's employment hereunder shall
automatically be extended for six months each (the "Additional Term") unless
and until either party shall give the other party notice (in the manner
hereinafter provided), not later than 60 days prior to the expiration of the
Initial Term or any subsequent six month extension thereof, of the notifying
party's termination of the Executive's employment effective as of the
expiration of the Initial Term or any subsequent six month extension thereof
next succeeding the giving of such notice. For purposes hereof, the Initial
Term and any Additional Term are referred to collectively as the "Term."
2. Duties; Place of Employment.
(a) During the Term, the Executive shall serve as Executive
Vice President Transitional Services of the Company, in which capacity he
shall devote all of his business time, effort and energies to the business of
the Company. The Executive shall have such authority and responsibility as may
from time to time be assigned to him by GE Capital Corporation (to the extent
required under the letter agreement with the Company dated the date hereof)
or, to the extent not inconsistent with such letter agreement, by the Chief
Executive Officer and the Board of Directors of the Company (the "Board").
Without limiting the generality of the foregoing sentence, the Executive's
responsibilities shall include supervising and overseeing (i) the integration
of financial management of the operation of Service America and VSI, including
merging general ledger, payroll, operating reports, MIS/IT and financial
planning and establishing common audit procedures; (ii) the integration of
logistics, including assessing and integrating purchasing, reviewing
warehousing, distribution and inventory control procedures and centralizing
management of vehicles, equipment and furniture; and (iii) the integration of
operations, including establishing integrated marketing/business development
functions and setting standard operating and reporting procedures, including
submission of quarterly reports to General Electric Capital Corporation.
(b) The principal place of employment of the Executive shall
be within 25 miles of Stamford, Connecticut or Bryn Mawr, Pennsylvania and
shall not be changed without
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the Executive's prior written consent; provided,
however, the Executive may be required to travel to South Carolina on a
regular basis.
3. Compensation and Benefits.
(a) Base Salary. During the Term, the Company shall pay the
Executive an annual salary of $218,400, payable in accordance with the
Company's salary payment policies governing senior executives.
(b) Bonuses. In the sole discretion of the Board, the
Executive also shall receive such bonus compensation, if any, determined by
the Board, and shall be entitled to participate in any executive bonus plan
that the Board shall establish for the senior executives of the Company.
(c) Expense Reimbursement. The Company shall reimburse the
Executive for ordinary and necessary business expenses incurred by him in the
performance of his duties as an employee of the Company in accordance with the
Company's policies governing reimbursement of expenses of senior executives;
provided that the Executive accounts to the Company for such expenses in the
manner customarily prescribed by the Company for its senior executives.
(d) Benefit Plans, Fringe Benefits and Vacation.
(i) During the Term, the Executive shall be
entitled to the coverage or benefits under any and all employee
benefit plans maintained by the Company (including, without
limitation, medical insurance, life insurance, split dollar life
insurance, long-term disability insurance and pension plans, if any)
to the extent permissible under the terms of the Plans and to all
fringe benefits for which his status and level of employment qualify
him in accordance with the Company's benefits policies governing
senior executives.
(ii) The Executive shall be entitled to paid
vacations (taken consecutively or in segments), in accordance with
the Company standard vacation policies governing senior executives,
but in no event less than four weeks each calendar year during the
Term. Such vacations shall be taken at times consistent with the
effective discharge of the Executive's duties.
(iii) It is recognized that the services of the
Executive hereunder will require the use of a suitable automobile and
the Company agrees to supply and maintain the same at its expense in
accordance with the Company's policies with respect thereto for
senior executives. The Executive shall be entitled to continue the
use of his current business automobile or to be provided with at
least an equivalent new vehicle at such intervals as apply to other
senior executives of the Company.
(iv) The Executive shall be reimbursed for up to
$5,000 for the fees and expenses related to membership in one club
designated by the Executive and such other organizations consistent
with the Company's policies pertaining thereto governing senior
executives.
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(v) The Company shall continue to reimburse the
Executive for the cost of maintaining his current apartment in
Stamford, Connecticut in the same manner as the Company has done
so in the past, subject to such normal and customary increases
as may be incurred in the ordinary course.
(vi) Whenever this Section 3 calls for the
Executive to obtain benefits comparable to those of other senior
executives of the Company, the Executive shall obtain benefits at
least comparable to those of other senior executives of the Company
or, if more favorable, of VSI.
4. Termination.
(a) Death and Disability. The Executive's employment under
this Agreement shall terminate upon his death. The Company may terminate the
Executive's employment under this Agreement by written notice to the Executive
or his representative if the Executive has a Disability. For purposes of this
agreement, the Executive shall be deemed to have a "Disability" if, for
physical or mental reasons, the Executive is unable to perform the essential
functions of the Executive's duties hereunder in accordance with this
Agreement, for 120 consecutive days, or 180 days during any twelve month
period, as determined in accordance herewith. The Disability of the Executive
shall be determined by a medical doctor selected by agreement of the Company
and the Executive and upon the request of either party by notice to the other.
If the Company and the Executive cannot agree on the selection of a medical
doctor, each of them will select a medical doctor and the two medical doctors
will select a third medical doctor who shall determine whether the Executive
has a Disability. The determination of such medical doctor shall be binding on
both parties. The Executive shall submit to a reasonable number of
examinations by the medical doctor making the determination of Disability. If
the Executive is not legally competent, the Executive's legal guardian or duly
authorized attorney-in-fact shall act in the Executive's stead for the
purposes of submitting the Executive to the examinations and for all other
purposes hereunder.
(b) Termination by the Company For Cause. The Company may
terminate the Executive's employment under this Agreement for Cause by written
notice to the Executive. "Cause" shall mean termination by action of at least
a majority of the members of the Board upon (i) the Executive's breach of
Section 7 of this Agreement; (ii) the Executive's material breach of any other
provision of this Agreement; (iii) the Executive's willful failure to adhere
to any written Company policy if the Executive has been given written notice
and a reasonable opportunity to comply with such policy or cure his failure to
comply; (iv) serious wilful misconduct by the Executive in connection with his
employment; or (v) the commission of a felony or the equivalent thereof or a
misdemeanor including moral turpitude. Such action shall take place at a
meeting duly called and held upon at least 15 days' prior written notice to
the Executive specifying the particulars of the action or inaction alleged to
constitute "Cause" (and at which meeting the Executive and his counsel were
entitled to be present and given reasonable opportunity to be heard). Action
or inaction by that Executive shall not be considered "willful" unless done or
omitted by him intentionally and not in good faith and without his reasonable
belief that his action or inaction was in the best interests of the Company,
and shall not include failure to act by reason of total or partial incapacity
due to physical or mental illness.
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(c) Termination by the Company Without Cause. The Company
may terminate the Executive's employment under this Agreement at any time by
written notice to the Executive, whether or not in accordance with Section
4(a) or 4(b).
(d) Termination by the Executive for Good Reason. The
Executive may terminate his employment under this Agreement for "Good Reason"
by written notice to the Company within a reasonable period following the
event giving rise to such Good Reason; provided, however, that the Company
shall have the right to cure the action that constitutes "Good Reason" within
five business days of the date of such notice. For purposes of this Agreement,
"Good Reason" shall mean: (i) the Company's material breach of this Agreement;
(ii) the assignment of the Executive, without his consent, to a position,
responsibilities or duties of a materially lesser status or degree of
responsibility than his position, responsibilities or duties at the Effective
Date; or (iii) the Company's breach of Section 3(b).
5. Consequences of Termination.
(a) Cause or Absence of Good Reason. If the Executive's
employment under this Agreement is terminated (i) by the Company pursuant to
Section 4(b) or (ii) by the Executive other than pursuant to Section 4(d), the
Executive shall not thereafter be entitled to receive any salary, bonus or
other payments or benefits under this Agreement, other than the payments
pursuant to Section 3(a) of salary earned, accrued vacation and the
reimbursement pursuant to Section 3(c) of expenses incurred, in each case,
through the date of termination.
(b) Death or Disability. If the Executive's employment under
this Agreement is terminated pursuant to Section 4(a) due to his death, or
Disability, the Executive shall not thereafter be entitled to receive any
salary, bonus or other payments or benefits under this Agreement, other than
the following: (a) payments pursuant to Section 3(a) of salary earned, accrued
vacation and the reimbursement pursuant to Section 3(c) of expenses incurred,
in each case, through the date of termination and (b) an amount equal to the
Executive's one year's base salary at the annual rate in effect on the date of
his death or Disability. In addition, if the Executive's employment is
terminated due to his death, the Company shall continue to provide, for a
period of one year from the date of the Executive's death, the Executive's
spouse and minor children with medical, hospitalization and dental insurance
comparable to that provided by the Company prior to such termination.
(c) Other Terminations. If the Executive's employment under
this Agreement is terminated (i) by the Company pursuant to Section 4(c) or
(ii) by the Executive pursuant to Section 4(d), the Executive shall not
thereafter be entitled to receive any salary, bonus or other payments or
benefits under this Agreement, other than the following: (a) payments pursuant
to Section 3(a) of salary for the balance of the Term and a payment equivalent
to his annual salary at the annual rate in effect immediately prior to such
termination; (b) reimbursement pursuant to Section 3(c) of expenses incurred
through the date of termination; (c) benefits pursuant to Section 3(d)(i) for
the earlier of the balance of the Term and the date the Executive receives
comparable coverage from a subsequent employer to the extent permissible under
the terms of the Plans providing such benefits; (d) accrued vacation; and (e)
assignment of title to any life insurance policy covering the life of the
Executive after which time the Executive shall be fully
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responsible for all costs of such policy due and payable after the Term (and
provided that, in the event such policy is a "split dollar" policy or
otherwise evidences an ownership interest by the Company, the Company shall be
entitled to recover its interest therein before any such assignment is
effective).
(d) Mitigation. The Executive shall have no duty or
obligation to seek or accept other employment under this Agreement and shall
not be required to mitigate the amount of any cash payments or benefits
provided for by this Agreement by seeking or accepting employment.
6. Certain Restrictions.
(a) Confidentiality. The Executive acknowledges that he has
acquired and will acquire information respecting the business and affairs of
the Company, its subsidiaries and affiliates (including VSI and its
subsidiaries) that is non-public, confidential and/or proprietary in nature
("Confidential Information"). Accordingly, the Executive shall keep
confidential and not disclose to any person or use (except as required in the
conduct of the business of the Company in the ordinary course and consistent
with past practice) all such Confidential Information, except as required by
law (provided prior written notice thereof is given by the Executive to the
Company) or with the Company's written consent, unless such information is
known generally to the public or the trade (through sources other than the
Executive's unauthorized disclosure). Upon termination of his employment for
any reason, the Executive shall deliver to the Company all Confidential
Information (in any form, including, but not limited to, electronic media) in
his possession or subject to his control that belongs to the Company.
(b) Competitive Activity.
(i) During the period of his employment hereunder
and for one year thereafter, Executive agrees that, without the prior
written consent of the Company, (A) he will not, directly or
indirectly, either as principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee or in any other
capacity, carry on, be engaged in or have any financial interest in,
any business which is in competition with the business of the Company
or any of its affiliates and (B) he shall not, on his own behalf or
on behalf of any person, firm or company, directly or indirectly,
solicit or offer employment to any person who has been employed by
the Company or any of its affiliates at any time during the 12 months
immediately preceding such solicitation.
(ii) For purposes of this Section 6(b), a business
shall be deemed to be in competition with the Company and its
affiliates if it is involved in the sale or provision of dining
services or vending services at stadiums, ballparks, convention
centers, concert halls, theaters, seaports, golf courses, arenas,
race tracks, parks, bandstands, or other recreational venues.
(iii) Executive and the Company agree that this
covenant not to compete is a reasonable covenant under the
circumstances, and further agree that if in the opinion of any court
of competent jurisdiction such restraint is not reasonable in any
5
<PAGE>
respect, such court shall have the right, power and authority to
excise or modify such provision or provisions of this covenant as to
the court shall appear not reasonable and to enforce the remainder of
the covenant as so amended. Executive agrees that any breach of the
covenants contained in this Section 6(b) would irreparably injure the
Company. Accordingly, Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in
equity, cease making any payments otherwise required by this
Agreement and obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation
of this Agreement by Executive.
(iv) Nothing in this Section 6(b) shall prohibit
the Executive from acquiring or holding not more than five percent
(5%) of any class of publicly traded securities of any business.
7. Miscellaneous.
(a) Notices. Any notice or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, sent by nationally recognized
overnight courier service or mailed by registered mail, return receipt
requested, to a party at his or its address set forth below or at such other
address as a party may specify by notice to the other in accordance herewith:
To the Executive:
Michael J. Higgins
619 Fox Fields Road
Bryn Mawr, PA 19010
To the Company:
Service America Corporation
300 First Stamford Place
P.O. Box 10203
Stamford, Connecticut 06904-2203
Attn: General Counsel
Notices on behalf of a party may be signed and sent by an attorney for that
party.
(b) Entire Agreement; Amendment. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
and is intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement between the parties with
respect thereto and cannot be changed or terminated orally.
(c) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the
6
<PAGE>
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement. Any waiver must be in writing.
(d) Indemnification. The Executive shall be entitled to be
indemnified for acting as an officer in accordance with the Company's
Certificate of Incorporation and By-Laws. The Company agrees specifically that
it shall maintain provisions in its Certificate of Incorporation and By-laws
relating to exculpation or indemnification of officers thereof (unless
required by law) such that the Executive shall continue to be entitled to such
exculpation and indemnification as was in effect immediately prior to the date
hereof under the Certificate of Incorporation and By-Laws of the Company (or
any equally favorable arrangement) to the fullest extent permitted under the
laws of the applicable jurisdiction of incorporation. The Company also shall
maintain directors and officers liability insurance coverage for the Executive
which coverage shall be on terms and in amounts at least as favorable to such
Executive as they were under insurance maintained by the Company immediately
prior to the date herein.
(e) Assignment. Except as otherwise provided in this
paragraph, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, representatives, successors and
permitted assigns.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original, but all of
which together shall constitute the same instrument.
(g) Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement.
(h) Governing Law. This Agreement shall, in accordance with
Section 51- 11401 of the General Obligation Law of the State of New York, be
governed by the laws of the State of New York, without regard to any conflicts
of laws principles thereof that would call for the application of the laws of
any other jurisdiction.
(i) Arbitration. Any and all disputes or controversies
arising out of or relating to this Agreement, other than claims brought
pursuant to Section 6, shall be resolved by arbitration at the American
Arbitration Association (the "AAA") at its New York City offices before a
panel of three arbitrators under the then existing rules of the AAA. The
parties agree that in any such arbitration, the arbitrators shall not have the
power to reform or modify this Agreement in any way and to that extent their
powers are so limited. The determination of the arbitrators shall be final and
binding on the parties and judgment on it may be entered in any court of
competent jurisdiction. The prevailing party in arbitration in connection with
the enforcement of this Agreement shall be entitled to recover from the other
party all reasonable out-of-pocket costs and disbursements and any and all
charges that may be made in the cost of the arbitration and the fees of the
arbitrator or any other enforcement thereof.
(j) Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
SERVICE AMERICA CORPORATION
By:
------------------------------
Name:
Title:
------------------------------
Michael J. Higgins
8
<PAGE>
enforcement of this Agreement shall be entitled to recover from the other
party all reasonable out-of-pocket costs and disbursements and any and all
charges that may be made in the cost of the arbitration and the fees of the
arbitrator or any other enforcement thereof.
(j) Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
SERVICE AMERICA CORPORATION
By: /s/ John T. Dee
------------------------------
Name: John T. Dee
Title: President
------------------------------
Michael J. Higgins
9
<PAGE>
enforcement of this Agreement shall be entitled to recover from the other
party all reasonable out-of-pocket costs and disbursements and any and all
charges that may be made in the cost of the arbitration and the fees of the
arbitrator or any other enforcement thereof.
(j) Waiver of Jury Trial. THE PARTIES HERETO HEREBY
WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
SERVICE AMERICA CORPORATION
By:
-----------------------------
Name:
Title:
/s/ Michael J. Higgins
------------------------------
Michael J. Higgins
10
<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
Employment Agreement (this "Agreement"), dated as of September
29, 1998, by and between VSI Acquisition II Corporation, a Delaware corporation
(the "Company") and Janet L. Steinmayer (the "Executive").
The Company and the Executive wish to provide for the terms of
her employment as a senior executive of the Company.
It is therefore agreed as follows:
1. Term. The employment of the Executive under this
Agreement shall commence as of September 29, 1998 (the "Effective Date") and
shall continue until terminated pursuant to Section 4 (the "Term").
2. Duties; Place of Employment.
(a) During the Term, the Executive shall serve as Vice
President, General Counsel and Secretary of the Company. The Executive shall
report to the Chairman and Chief Executive Officer and the Board of Directors of
the Company and shall have such functions, duties, authority and
responsibilities at the Company as she has on the date hereof at Service America
Corporation (i.e., overseeing the legal affairs of the Company and major
acquisitions, financings and other business transactions, managing litigation
and general corporate counseling) and such other duties and responsibilities as
may from time to time be prescribed by the Chairman and Chief Executive Officer
and the Board of Directors, provided that such duties are consistent with her
present duties and the Executive's position with the Company. It is understood
that the Executive shall only be required to work two to three days per week
during which time she shall devote her business time, efforts and energies to
the business of the Company. Nothing herein shall preclude the Executive from
serving as an arbitrator or as a director of a for-profit or not-for-profit
entity so long as such activities do not unreasonably interfere with the
Executive's duties hereunder.
(b) The principal place of employment of the Executive shall
be within ten (10) miles of Stamford, Connecticut and shall not be changed
without the Executive's prior written consent.
3. Compensation and Benefits.
(a) Base Salary. During the Term, the Company shall pay the
Executive an annual salary of $180,000, plus $250 per hour for each hour the
Executive works in excess of 24 hours per week. Such salary shall be payable in
accordance with the Company's salary payment policies governing senior
executives. The Executive's salary shall be reviewed at least annually and may
be increased at the Company's discretion.
<PAGE>
(b) Bonuses. In the sole discretion of the Board, the
Executive also shall receive such bonus compensation, if any, determined by the
Board, and shall be entitled to participate in any executive bonus plan that the
Board shall establish for the senior executives of the Company.
(c) Expense Reimbursement. The Company shall reimburse the
Executive for ordinary and necessary business expenses incurred by her in the
performance of her duties as an employee of the Company in accordance with the
Company's policies governing reimbursement of expenses of senior executives;
provided that the Executive accounts to the Company for such expenses in the
manner customarily prescribed by the Company for its senior executives.
(d) Benefit Plans, Fringe Benefits and Vacation.
(i) During the Term, the Executive shall be
entitled to the coverage or benefits under any and all employee benefit
plans maintained by the Company (including, without limitation, life
insurance, long-term disability insurance and pension plans, if any,
but excluding medical insurance as long as Executive is covered under
her spouse's current GE Capital coverage) to the extent permissible
under the terms of the plans and to all fringe benefits for which her
status and level of employment qualify her in accordance with the
Company's benefits policies governing senior executives.
(ii) The Executive shall be entitled to paid
vacations (taken consecutively or in segments), in accordance with the
Company standard vacation policies governing senior executives, but in
no event less than four weeks each calendar year during the Term. Such
vacations shall be taken at times consistent with the effective
discharge of the Executive's duties.
(iii) It is recognized that the services of the
Executive hereunder will require use of a suitable automobile. The
Company agrees to provide Executive with an automobile allowance of not
more than $25,000 to buy-out the lease on her present automobile.
Thereafter the Executive shall be entitled to continue the use of her
current automobile or to be provided with at least an equivalent new
vehicle at such intervals as apply to other senior executives of the
Company.
4. Termination.
(a) Death and Disability. The Executive's employment under
this Agreement shall terminate upon her death. The Company may terminate the
Executive's employment under this Agreement by written notice to the Executive
or her representative if the Executive has a Disability. For purposes of this
Agreement, the Executive shall be deemed to have a "Disability" if, for physical
or mental reasons, the Executive is unable to perform the essential functions of
the Executive's duties hereunder in accordance with this Agreement, for 120
consecutive days, or 180 days during any twelve month period, as determined in
accordance herewith. The Disability of the Executive shall be determined by a
medical doctor selected by agreement of the Company and the Executive and upon
the request of either party by notice to the other. If the Company and the
Executive cannot agree on the selection of a medical doctor, each of them will
select a medical doctor and the two medical doctors will select a third medical
doctor who shall determine whether the Executive has
-2-
<PAGE>
a Disability. The determination of such medical doctor shall be binding on both
parties. The Executive shall submit to a reasonable number of examinations by
the medical doctor making the determination of Disability. If the Executive is
not legally competent, the Executive's legal guardian or duly authorized
attorney-in-fact shall act in the Executive's stead for the purposes of
submitting the Executive to the examinations and for all other purposes
hereunder.
(b) Termination by the Company for Cause. The Company may
terminate the Executive's employment under this Agreement for Cause by written
notice to the Executive. "Cause" shall mean termination by action of at least a
majority of the members of the Board upon (i) the Executive's breach of Section
6 of this Agreement; (ii) the Executive's material breach of any other provision
of this Agreement; (iii) the Executive's willful failure to adhere to any
written Company policy if the Executive has been given written notice and a
reasonable opportunity to comply with such policy or cure her failure to comply;
(iv) serious willful misconduct by the Executive in connection with her
employment; or (v) the commission of a felony or the equivalent thereof or a
misdemeanor involving moral turpitude. Such action shall take place at a meeting
of the Board duly called and held upon at least 15 days' prior written notice to
the Executive specifying the particulars of the action or inaction alleged to
constitute "Cause" (and at which meeting the Executive and her counsel were
entitled to be present and given reasonable opportunity to be heard). Action or
inaction by the Executive shall not be considered "willful" unless done or
omitted by her intentionally and not in good faith and without her reasonable
belief that her action or inaction was in the best interests of the Company, and
shall not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(c) Termination by the Company without Cause. The Company
may terminate the Executive's employment under this Agreement at any time by
written notice to the Executive, whether or not in accordance with Section 4(a)
or 4(b).
(d) Termination by the Executive for Good Reason. The
Executive may terminate her employment under this Agreement for "Good Reason" by
written notice to the Company; provided, however, that the Company shall have
the right to cure the action that constitutes "Good Reason" within five business
days of the date of such notice. For purposes of this Agreement, "Good Reason"
shall mean: (i) the Company's material breach of this Agreement; (ii) the
assignment of the Executive, without her consent, to a position,
responsibilities or duties of a materially lesser status or degree of
responsibility than her position, responsibilities or duties at the Effective
Date; (iii) the Company's breach of Section 3(b); or (iv) a "Change of Control"
if the Executive terminates her employment hereunder within six (6) months of
the date on which the Change of Control takes place. For purposes hereof,
"Change of Control" shall mean any "person" (as such term is used in Sections
3(a) (9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 515% or more of the combined voting power of the then outstanding
securities of the Company; (b) a change in the composition of a majority of the
Board of Directors of the Company within twelve months after any person is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 25% of the combined voting power of the then outstanding
securities of the Company; or (c) the sale of substantially all the assets of
the Company and/or its operating subsidiaries.
-3-
<PAGE>
5. Consequences of Termination.
(a) Cause or Absence of Good Reason. If the Executive's
employment under this Agreement is terminated (i) by the Company pursuant to
Section 4(b) or (ii) by the Executive other than pursuant to Section 4(d), the
Executive shall not thereafter be entitled to receive any salary, bonus or other
payments or benefits under this Agreement, other than the payments pursuant to
Section 3(a) of compensation earned, accrued vacation and the reimbursement
pursuant to Section 3(c) of expenses incurred, in each case, through the date of
termination.
(b) Death or Disability. If the Executive's employment under
this Agreement is terminated pursuant to Section 4(a) due to her death or
Disability, the Executive shall not thereafter be entitled to receive any
salary, bonus or other payments or benefits under this Agreement, other than the
following: (i) payments pursuant to Section 3(a) of compensation earned, accrued
vacation and the reimbursement pursuant to Section 3(c) of expenses incurred, in
each case, through the date of termination and (ii) an amount paid in monthly
installments equal to two times (2x) the Executive's compensation under Section
3(a) over the one-year period prior to the date of her death or Disability
(annualized in the case of any termination prior to the end of the first year).
In addition, if the Executive's employment is terminated due to her death, the
Company shall continue to provide, for a period of one year from the date of the
Executive's death, the Executive's spouse and minor children with medical,
hospitalization and dental insurance comparable to that provided by the Company
prior to such termination.
(c) Other Termination. If the Executive's employment under
this Agreement is terminated (i) by the Company pursuant to Section 4(c) or (ii)
by the Executive pursuant to Section 4(d), the Executive shall not thereafter be
entitled to receive any salary, bonus or other payment or benefits under this
Agreement, other than the following: (a) payments pursuant to Section 3(a) of
compensation through the date of termination plus a payment equal to two times
(2x) the Executive's compensation under Section 3(a) over the one-year period
prior to the date of termination (annualized in the case of any termination
prior to the end of the first year); (b) reimbursement pursuant to Section 3(c)
of expenses incurred through the date of termination; (c) benefits pursuant to
Section 3(d)(i) for the earlier of eighteen (18) months from the date of
termination and the date the Executive receives comparable coverage from a
subsequent employer to the extent permissible under the terms of the plans
providing such benefits; (d) accrued vacation; and (e) assignment of title to
any life insurance policy covering the life of the Executive after which time
the Executive shall be fully responsible for all costs of such policy due and
payable after the Term (and provided that, in the event such policy is a "split
dollar" policy or otherwise evidences an ownership interest by the Company, the
Company shall be entitled to recover its interest therein before any such
assignment is effective).
(d) Mitigation. The Executive shall have no duty or
obligation to seek or accept other employment under this Agreement and shall not
be required to mitigate the amount of any cash payments or benefits provided for
by this Agreement by seeking or accepting employment.
-4-
<PAGE>
6. Certain Restrictions.
(a) Confidentiality. The Executive acknowledges that she has
acquired and will acquire information respecting the business and affairs of the
Company, its subsidiaries and affiliates that is non-public, confidential and/or
proprietary in nature ("Confidential Information"). Accordingly, the Executive
shall keep confidential and not disclose to any person or use (except as
required in the conduct of the business of the Company in the ordinary course
and consistent with past practice) all such Confidential Information, except as
required by law (provided prior written notice thereof is given by the Executive
to the Company) or with the Company's written consent, unless such information
is known generally to the public or the trade (through sources other than the
Executive's unauthorized disclosure). Upon termination of her employment for any
reason, the Executive shall deliver to the Company all Confidential Information
(in any form, including, but not limited to, electronic media) in her possession
or subject to her control that belongs to the Company.
(b) Competitive Activity. The Executive agrees that, during
her employment under this Agreement and for two years after the end of such
employment she shall not, without the prior consent of the Board, directly or
indirectly, (i) act as an officer, partner, employee or equity-holder of any
enterprise or business involved primarily in providing food services in a manner
similar to that provided by the Company in those states within the United States
in which the Company is, at the time of termination of employment, conducting
its business; or (ii) hire, solicit or encourage to leave the employ of the
Company or any of its subsidiaries any person who is then an employee of any of
such companies. Nothing in this Section 6(b) shall prohibit the Executive from
acquiring or holding not more than five percent (5%) of any class of publicly
traded securities of any business. As used herein, "Food Services" shall include
the sale or provision of dining services or vending services at stadiums,
ballparks, convention centers, concert halls, theaters, seaports, golf courses,
arenas, race tacks, parks, bandstands or other recreational venue customers.
(c) Remedy for Breach and Modification. The Executive
acknowledges that the provisions of this Section 6 are reasonable and necessary
for the protection of the Company and that the Company may be irrevocably
damaged if these provisions are not specifically enforced. Accordingly, the
Executive agrees that, in addition to any other relief or remedies available to
the Company, the Company shall be entitled to seek and obtain an appropriate
injunction or other equitable remedy for the purposes of restraining the
Executive from any actual or threatened breach of or otherwise enforcing these
provisions. If any provision of this Section 6 is deemed invalid or
unenforceable, such provision shall be deemed modified and limited to the extent
necessary to make it valid and enforceable.
7. Miscellaneous.
(a) Notices. Any notice or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, sent by nationally recognized
overnight courier service or mailed by registered mail, return receipt
requested, to a party at her or its address set forth below or at such other
address as a party may specify by notice to the other in accordance herewith:
-5-
<PAGE>
To the Executive:
Janet L. Steinmayer
7 Nawthorne Road
Old Greenwich, Connecticut 06870
To the Company:
VSI Acquisition II Corporation
300 First Stamford Place
Stamford, CT 06902
Attention: Chief Executive Officer
Notices on behalf of a party may be signed and sent by an attorney for that
party.
(b) Entire Agreement; Amendment. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(other than the provisions of that letter agreement between you and Service
America Corporation dated February 1, 1998, which shall be fully performed upon
the closing of the Sale, as defined therein) and is intended (with the documents
referred to herein) as a complete and exclusive statement of the terms of the
agreement between the parties with respect thereto and cannot be changed or
terminated orally.
(c) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
(d) Indemnification. The Executive shall be entitled to be
indemnified for acting as an officer in accordance with the Company's
Certificate of Incorporation and By-Laws. The Company agrees specifically that
it shall maintain provisions in its Certificate of Incorporation and By-laws
relating to exculpation or indemnification of officers and directors thereof
(unless required by law) such that the Executive shall continue to be entitled
to such exculpation and indemnification as was in effect immediately prior to
the date hereof under the Certificate of Incorporation and ByLaws of Service
America Corporation (or any equally favorable arrangement) to the fullest extent
permitted under the laws of the applicable jurisdiction of incorporation. The
Company also shall maintain directors and officers liability insurance coverage
for the Executive which coverage shall be on terms and in amounts at least as
favorable to the Executive as they were under insurance maintained by Service
America Corporation immediately prior to the date herein. The Company will
promptly pay or reimburse the Executive for all costs and expenses incurred by
the Executive as a result of any claim, action or proceeding arising out of, or
challenging the validity, advisability or enforceability of, this Agreement or
any provision thereof.
(e) Assignment. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective heirs,
representatives, successors and permitted assigns.
-6-
<PAGE>
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original, but all of
which together shall constitute the same instrument.
(g) Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement.
(h) Governing Law. This Agreement shall, in accordance with
Section 5-1401 of the General Obligations Law of the State of New York, be
governed by the laws of the State of New York, without regard to any conflicts
of laws principles thereof that would call for the application of the laws of
any other jurisdiction.
(i) Arbitration. Any and all disputes or controversies
arising out of or relating to this Agreement, other than claims brought pursuant
to Section 6, shall be resolved by arbitration at the American Arbitration
Association (the "AAA") at its New York City offices before a panel of three
arbitrators under the then existing rules of the AAA. The parties agree that in
any such arbitration, the arbitrators shall not have the power to reform or
modify this Agreement in any way and to that extent their powers are so limited.
The determination of the arbitrators shall be final and binding on the parties
and judgment on it may be entered in any court of competent jurisdiction.
(j) Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By: /s/ John T. Dee
------------------------------
Name:
Title:
/s/ Janet L. Steinmayer
------------------------------
Janet L. Steinmayer
-7-
<PAGE>
Exhibit 12
VOLUME SERVICES AMERICA, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In thousands)
EXHIBIT 12
<TABLE>
<CAPTION>
13 Week
Fiscal Year Ended period ended
1994 1995 1996 1997 1998 March 30, 1999
------ ------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations
before income taxes, extraordinary
item and cumulative effect of change
in accounting principle.................. $2,798 $(984) $(3,868) $(2,787) $(2,220) $(9,364)
Add Fixed Charges:
Interest Expense (excluding capitalized). 433 474 6,778 7,562 10,771 4,332
Amortization of loan costs............... -- 16 478 354 551 300
Interest factor in rents................. 193 262 297 352 338 188
------ ----- ------- ------- ------- -------
Total earnings as defined.................. $3,424 $(232) $ 3,685 $ 5,481 $ 9,440 $(4,544)
====== ===== ======= ======= ======= =======
Fixed Charges:
Interest Expense........................ $ 433 $ 474 $ 6,778 $ 7,562 $10,771 $ 4,332
Amortization of loan costs.............. -- 16 478 354 551 300
Interest factor in rents................ 193 262 297 352 338 188
------ ----- ------- ------- ------- -------
626 752 7,553 8,268 11,660 4,820
====== ===== ======= ======= ======= =======
Ratio of Earnings to Fixed Charges........ 5.5 -- -- -- -- --
====== ===== ======= ======= ======= =======
Deficiency in the coverage of fixed
charges................................. $ -- $(984) $(3,868) $(2,787) $(2,220) $(9,364)
====== ===== ======= ======= ======= =======
<CAPTION>
Pro forma
---------------------------------------
52 Week 13 Week
period ended period ended
December 29, March 30,
1998 1999
------ ------
<S> <C> <C>
Loss from continuing operations
before income taxes, extraordinary
item and cumulative effect of change
in accounting principle.................. $(15,500) $(10,600)
Add Fixed Charges:
Interest Expense (excluding capitalized). 22,200 5,200
Amortization of loan costs............... 1,400 300
Interest factor in rents................. 338 188
-------- --------
Total earnings as defined.................. $ 8,438 $ (4,912)
======== ========
Fixed Charges:
Interest Expense........................ $ 22,200 $ 5,200
Amortization of loan costs.............. 1,400 300
Interest factor in rents................ 338 188
-------- --------
$ 23,938 $ 5,688
======== ========
Ratio of Earnings to Fixed Charges........ -- --
======== ========
Deficiency in the coverage of fixed
charges................................. $(15,500) $(10,600)
======== ========
</TABLE>
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Volume Services
America, Inc. on Form S-4 of our report dated March 18, 1999, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the headings "Summary Historical Financial
Information of Volume Holdings", "Selected Historical Financial
Information of Volume Holdings" and "Experts" in such Prospectus.
Deloitte & Touche LLP
Greenville, South Carolina
May 27, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Volume Services America, Inc. of our report dated June 2, 1998 relating to the
consolidated financial statements of Service America Corporation, which appear
in such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Stamford, Connecticut
May 27, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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0
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