<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ARAMARK CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement no.:
3) Filing Party:
4) Date Filed:
<PAGE>
Aramark Corporation
JOSEPH NEUBAUER
[LOGO OF ARAMARK APPEARS HERE]
Chairman and
Chief Executive
Officer
January 8, 1998
Dear fellow owner:
The attached material spells out the full details of Share 100, our proposed
ownership restructuring which will be voted on at ARAMARK's annual
stockholders' meeting scheduled for February 10, 1998.
I urge you to read the proxy statement carefully--we have attempted to make
the lengthy legal document reader-friendly and informative. The detailed
question and answer section, in particular, puts into perspective the future
outlook that the Share 100 program holds for manager owners.
The key features of Share 100 are as follows:
. Outside stockholders will receive $347.50 a share ($34.75 on a Class B
equivalent share basis) for all their Class A Common Stock.
. Our Company will then be 100% employee-owned. Approximately 1,000 owner
managers will own shares directly, and more than 10,000 employees will
own shares through the employee benefit plans.
. Class B stockholders will receive various classes of stock designed to
track the performance of the Company's main business groups. Owner
managers will receive 50% of the stock of the business group for which
they work and 50% of a composite stock. The composite stock is
representative of all the Company's operations.
. Class B Common Stock has been appraised at $29.55 per share.
. Any management stockholder who sold shares or exercised purchase
opportunities using the stock-for-stock exercise method since September
1, 1997 will also receive the benefit of this higher valuation.
. It is anticipated that employee benefit plans will exchange a portion of
their shares for approximately $133 million in cash, which will be
invested in a portfolio of securities. The benefit plans will, however,
continue to be substantially invested in the Company's common stock.
. The Company will borrow approximately $440 million to buy out the equity
interests of the outside stockholders and pay cash as elected by the
benefit plans, and pay the other costs and expenses of Share 100.
. We do not anticipate that the incurrence of this additional borrowing
will affect our ability to make ongoing investments in our businesses
including acquisitions.
Share 100 realizes our management team's desire to control our own destiny,
and provides an exceptional investment return for our outside investors. For
our outside investors, I gratefully recognize the faith you have had in us over
the years. For our owner managers, I urge you to embrace this unique
entrepreneurial opportunity, thereby supporting both the continued success of
the Company and your own personal goals.
Sincerely,
/s/ Joseph Neubauer
Aramark Tower
1101 Market Street
Philadelphia, PA 19107-2988
215 238 3880
<PAGE>
[LOGO OF ARAMARK APPEARS HERE]
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To Our Stockholders:
The annual meeting of stockholders of ARAMARK Corporation (the "Company")
will be held on the Sixteenth Floor of ARAMARK Tower, 1101 Market Street,
Philadelphia, Pennsylvania, on February 10, 1998, at 12:00 P.M., noon,
Philadelphia time, for the following purposes:
1. To consider and vote upon a proposal to authorize an amendment to the
Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") described in the accompanying Proxy Statement, that
would reclassify each share of the Company's Class A Common Stock into
one share of a new series of redeemable preferred stock, which will be
immediately redeemed by the Company in exchange for:
(a) $347.50 per share ($34.75 on a Class B equivalent share basis) in
cash; or
(b) at the election of the holder, $347.50 per share principal amount
($34.75 on a Class B equivalent share basis) of 7.25% Guaranteed
Convertible Installment Promissory Notes due 2007 (subject to certain
suitability requirements and treatment of fractional amounts described
in the accompanying Proxy Statement).
2. To consider and vote upon a proposal to approve the merger of a newly
incorporated subsidiary with and into the Company, pursuant to which
each share of the Company's Class B Common Stock will be converted into
the right to receive:
(a) $29.55 per share in cash; or
(b) at the election of the holder and based upon employment status
(provided that the holder is not, and is not a permitted transferee of,
an employee of the magazine and book business of the Company), new
classes of Company stock intended to reflect separately the performance
of the Company's various business groups.
3. To consider and vote upon a proposal to further amend the Certificate of
Incorporation, as described in the accompanying Proxy Statement:
(a) to increase the number of shares of common stock authorized for
issuance from 175,000,000 to 200,000,000;
(b) to give the Board of Directors of the Company the authority to
issue common stock in series (which may be referred to as separate
classes) and to fix the terms of such series;
(c) in order to give effect to the foregoing proposals, to amend the
terms of the Class A Common Stock and Class B Common Stock by reducing
the number of authorized shares and by making conforming changes to
defined terms and cross-references;
(d) to provide that, upon consummation of any future public offering
of the Company's common stock, stockholder action may be taken only at
an annual meeting of stockholders or at a special meeting of
stockholders and stockholder action by written consent shall be
prohibited; and
(e) to provide that, upon consummation of any future public offering
of the Company's common stock, the Board of Directors shall be
classified into three classes, each of which, after a transitional
arrangement, will serve for three years, with one class being elected
each year.
4. To consider and vote upon certain amendments to, and the restatement of,
the Amended and Restated Stockholders' Agreement.
<PAGE>
5. To elect directors for the ensuing year.
6. To transact such other business as may properly come before the annual
meeting and at any adjournments thereof.
The Board of Directors has fixed the close of business on December 29, 1997
as the record date for determination of the stockholders entitled to notice of
and to vote at the meeting and any adjournments thereof. The votes described
in Proposals 2 and 4 will be taken after the vote on, and effectiveness of,
the reclassification described in Proposal 1. Accordingly, if the
reclassification is approved and implemented, no shares of Class A Common
Stock will be outstanding and entitled to vote on Proposals 2 and 4. A list of
stockholders will be open for examination by stockholders for any purpose
germane to the annual meeting for a period of ten days prior to the annual
meeting at the offices of the Company at ARAMARK Tower, 1101 Market Street,
Philadelphia, Pennsylvania.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE FILL IN,
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT IN THE RETURN ENVELOPE
PROVIDED FOR THAT PURPOSE.
Martin W. Spector
Executive Vice President,
General Counsel and Secretary
Dated: January 8, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY OF DEFINED TERMS................................................. iv
INTRODUCTION.............................................................. 1
PROXY STATEMENT SUMMARY................................................... 4
Questions and Answers for Management Investors.......................... 18
Summary Comparison of Terms of Common Stocks............................ 34
RISK FACTORS.............................................................. 38
THE ANNUAL MEETING........................................................ 45
SHARE 100................................................................. 47
General................................................................. 47
Background and Reasons for Share 100.................................... 48
Recommendation of the Board of Directors................................ 51
Opinion of Financial Advisor............................................ 51
Opinion of HLHZ......................................................... 54
Appraisals of Common Stock.............................................. 55
Structure of Share 100.................................................. 55
Interests of Certain Persons in Share 100............................... 56
Certain Effects of Share 100............................................ 57
Certain Projections..................................................... 57
Dividend Policy......................................................... 59
Certain Management and Allocation Policies.............................. 59
Dissenters' Rights...................................................... 61
Certain U.S. Federal Income Tax Considerations.......................... 63
THE PLAN OF RECAPITALIZATION.............................................. 67
General................................................................. 67
Effective Time.......................................................... 67
The Reclassification.................................................... 67
The Merger.............................................................. 68
Procedure for Holders of Shares......................................... 69
Cash-Out of Former Managers............................................. 73
Treatment of Certain Selling Management Holders......................... 73
Treatment of Magazine and Book Employees................................ 74
Certain Contingent Payments............................................. 74
Treatment of Outstanding Options........................................ 75
Treatment of Employee Benefit Plans..................................... 76
Conditions.............................................................. 77
Termination; Amendment.................................................. 78
AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION....................... 79
General................................................................. 79
The Reclassification.................................................... 79
Increase of Authorized Common Stock..................................... 79
Board Authority Amendment............................................... 80
Continuing Common Stock Amendment....................................... 80
Proposed Amendments to Certificate of Incorporation Relating to Stock-
holder Action and the Board of Directors............................... 81
Vote Required........................................................... 85
Recommendation of the Board of Directors................................ 85
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHANGES TO CERTAIN AGREEMENTS............................................ 86
The Stockholders' Agreement............................................ 86
Voting................................................................. 86
Recommendation of the Board of Directors............................... 86
The Registration Rights Agreement...................................... 86
FINANCING OF SHARE 100................................................... 87
General................................................................ 87
The Bank Facility...................................................... 87
Sources and Uses of Funds.............................................. 88
Estimated Costs and Fees............................................... 88
HISTORICAL AND PRO FORMA CAPITALIZATION.................................. 89
PRO FORMA FINANCIAL INFORMATION.......................................... 90
DESCRIPTION OF BUSINESS.................................................. 94
Food and Support Services Group........................................ 94
Uniform and Career Apparel Group....................................... 94
Educational Resources Group............................................ 95
Composite Group........................................................ 95
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION..................................................... 96
Results of Operations.................................................. 96
Financial Condition and Liquidity...................................... 98
SECURITY OWNERSHIP BEFORE AND AFTER SHARE 100............................ 99
DESCRIPTION OF CAPITAL STOCK............................................. 100
Existing Capital Stock................................................. 100
Capital Stock After the Effective Time................................. 101
Determinations by the Board of Directors............................... 105
Inter-Group Interest of Composite Group in Business Groups............. 106
DESCRIPTION OF INSTALLMENT NOTES......................................... 108
General................................................................ 108
Maturity and Interest.................................................. 108
Conversion............................................................. 109
Optional Redemption.................................................... 109
Assignability of Installment Notes..................................... 109
Guarantee.............................................................. 109
Covenant............................................................... 109
ELECTION OF DIRECTORS.................................................... 110
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 118
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS......................... 119
FINANCIAL STATEMENTS..................................................... 119
PROPOSALS BY STOCKHOLDERS FOR PRESENTATION AT THE 1999 ANNUAL MEETING.... 119
LEGAL OPINION............................................................ 119
PROXY SOLICITATION....................................................... 119
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................ 119
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Annex I--Illustrations of Certain Terms................................ I-1
Annex II--J.P. Morgan Fairness Opinion................................. II-1
Annex III--Share 100--Agreement and Plan of Recapitalization and
Merger................................................................ III-1
Annex IV--Form of Installment Note..................................... IV-1
Annex V--Restated Certificate of Incorporation......................... V-1
Annex VI--Amended and Restated Stockholders' Agreement................. VI-1
Annex VII--Index to Financial Information.............................. VII-1
Annex VIII--DGCL Section 262--Dissenters' Rights....................... VIII-1
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED
IN THE PROXY
TERM STATEMENT
---- ---------------
<S> <C>
Amendment Certificate........................................... 3
Annual Meeting.................................................. 1
Appraisal Price................................................. 55
ARAMARK Ownership Program....................................... 114
Arrangement..................................................... 117
ATROI........................................................... 117
Available Dividend Amount....................................... 102
Bank Facility................................................... 87
Benefit Plans................................................... 68
Board........................................................... 2
Board Authority Amendment....................................... 3
Business Group.................................................. 2
Business Group Stock............................................ 2
Business Group Stocks........................................... 2
Business Group Subsidiary....................................... 103
Business Groups................................................. 2
By-Laws......................................................... 82
Call Option..................................................... 73
Certificate of Designations..................................... 3
Certificate of Incorporation.................................... 2
Certificates.................................................... 70
Charter Amendments.............................................. 3
Chase........................................................... 57
Class A Cash Consideration...................................... 1
Class A Common Stock............................................ 1
Class A Composite Stock......................................... 1
Class A Election................................................ 8
Class A Stock Exchange.......................................... 1
Class B Cash Consideration...................................... 1
Class B Common Stock............................................ 1
Class B Composite Stock......................................... 2
Class B Election................................................ 9
Classified Board Amendment...................................... 3
Code............................................................ 7
Common Stock.................................................... 1
Company......................................................... 1
Composite Group................................................. 2
Composite Stock................................................. 2
Contingent Payment.............................................. 74
Continuing Common Stock Amendment............................... 3
Continuing Holders.............................................. 47
Conversion Ratio................................................ 104
Corporate Employees............................................. 2
Delaware Chancery Court......................................... 62
DGCL............................................................ 9
disposition..................................................... 65
Dissenters' Rights.............................................. 61
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED
IN THE PROXY
TERM STATEMENT
---- ---------------
<S> <C>
DSUs.......................................................... 26
EBIT.......................................................... 117
EBITDA........................................................ 52
Education Group Employees..................................... 2
Education Group Stock......................................... 1
Educational Resources Group................................... 2
Effective Time................................................ 8
Election...................................................... 9
Election Date................................................. 9
Exchange Agent................................................ 9
Extraordinary Dividend........................................ 74
Extraordinary Redemption...................................... 74
Food and Support Group Employees.............................. 2
Food and Support Group Stock.................................. 1
Food and Support Services Group............................... 2
Form of Election.............................................. 9
Former Managers............................................... 68
Fractional Amounts............................................ 72
Future Merger................................................. 74
Goldman Sachs................................................. 7
Group......................................................... 2
Group Stock................................................... 2
Group Stock Consideration..................................... 1
Group Stocks.................................................. 2
Groups........................................................ 2
Guaranteed Notes.............................................. 65
HLHZ.......................................................... 54
Increased Capital Amendment................................... 2
Individual.................................................... 73
Installment Notes............................................. 1
Inter-Group Interest.......................................... 40
Inter-Group Interest Fraction................................. 106
IRS........................................................... 64
ISPOs......................................................... 115
J.P. Morgan................................................... 6
LTM........................................................... 52
Magazine and Book Business.................................... 2
Magazine and Book Employees................................... 2
Management Investor........................................... 2
Merger........................................................ 1
Merger Certificate............................................ 3
Noncontinuing Former Management Holder........................ 73
Notes Consideration........................................... 1
Number of Shares Issuable with Respect to the Inter-Group In-
terest....................................................... 106
Outside Stockholders.......................................... 49
Outstanding Business Group Fraction........................... 106
Permitted Transferees......................................... 2
Plan of Recapitalization...................................... 1
Pooled Debt................................................... 60
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED
IN THE PROXY
TERM STATEMENT
---- ---------------
<S> <C>
Public Offering................................................. 74
Public Offering Date............................................ 79
Reclassification................................................ 1
Reclassification Certificate.................................... 3
Reclassification Effective Time................................. 67
Record Date..................................................... 1
Redeemable Transitory Participating Preferred Stock............. 67
Registration Rights Agreement................................... 3
Related Person.................................................. 73
relative........................................................ 73
Repurchased Shares.............................................. 75
Restated Charter................................................ 3
Restated Stockholders' Agreement................................ 86
Restricted Investors............................................ 115
RONA............................................................ 117
RTPPS........................................................... 64
Sale............................................................ 74
Section 262..................................................... 61
Selling Holder.................................................. 73
Series Preferred Stock.......................................... 100
Share 100....................................................... 1
Share 100 Certificates.......................................... 3
Stock Option Plan............................................... 75
Stock Option Plans.............................................. 75
Stockholder Action Amendment.................................... 3
Stockholders' Agreement......................................... 3
Stockholders' Agreement Amendment............................... 3
Suitability Requirement......................................... 72
TIN............................................................. 66
Uniform and Career Apparel Group................................ 2
Uniform Group Employees......................................... 2
Uniform Group Stock............................................. 2
United States Alien............................................. 66
</TABLE>
vi
<PAGE>
[LOGO OF ARAMARK APPEARS HERE]
----------------
PROXY STATEMENT
----------------
INTRODUCTION
This Proxy Statement, mailed to stockholders on or about January 8, 1998, is
furnished in connection with the solicitation by the Board of Directors of
ARAMARK Corporation (the "Company") of proxies in the accompanying form from
holders of outstanding shares of the Company's Common Stock, Class A, $.01 par
value per share ("Class A Common Stock"), and outstanding shares of the
Company's Common Stock, Class B, $.01 par value per share ("Class B Common
Stock," and together with the Class A Common Stock, "Common Stock"), for use
at an annual meeting of stockholders to be held on the Sixteenth Floor of
ARAMARK Tower, 1101 Market Street, Philadelphia, Pennsylvania, on February 10,
1998, at 12:00 P.M., Philadelphia time, and at any adjournments thereof (the
"Annual Meeting"). The Company's executive offices are located at ARAMARK
Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107-2988 (telephone:
215-238-3000).
Only holders of shares of Common Stock of record at the close of business on
December 29, 1997 (the "Record Date") are entitled to vote at the Annual
Meeting. On that date, there were outstanding 1,957,245 shares of Class A
Common Stock and 20,416,777 shares of Class B Common Stock. Each holder of
Common Stock entitled to vote on each matter will have the right to one vote
on such matter for each such share standing in his, her or its name on the
books of the Company.
At the Annual Meeting, holders of Common Stock will be asked to consider and
approve various elements of an Agreement and Plan of Recapitalization and
Merger dated as of January 6, 1998 (the "Plan of Recapitalization") which
contemplates the recapitalization of the Company and certain transactions and
other matters (collectively, "Share 100").
Share 100 involves the reclassification (the "Reclassification") of the
Company's Class A Common Stock into a new series of redeemable preferred
stock, which will then be redeemable for:
(a) $347.50 per share ($34.75 on a Class B equivalent share basis) in
cash (the "Class A Cash Consideration"); or
(b) at the election of the holder, $347.50 per share ($34.75 on a Class B
equivalent share basis) principal amount (the "Notes Consideration") of
7.25% Guaranteed Convertible Installment Promissory Notes due 2007 (the
"Installment Notes"), subject to certain Suitability Requirements (Proposal
1).
The Company will redeem this redeemable preferred stock immediately after
the Reclassification Effective Time. The Class A Cash Consideration of $347.50
per share represents an increase of more than 60% over the Appraisal Price at
September 1, 1997, which was the most recent appraisal before the announcement
of Share 100.
Holders of Class A Common Stock who are Former Managers or Company Benefit
Plans will be offered the opportunity to voluntarily exchange certain of their
Class A Common Stock, on a share for share basis, for a new class of common
stock of the Company (the "Class A Stock Exchange"), designated as Class A--
Composite Group (the "Class A Composite Stock"). The Class A Stock Exchange
will be consummated immediately prior to the Reclassification Effective Time.
Share 100 also provides for the merger of a newly incorporated subsidiary
with and into the Company (the "Merger"). The Company will be the surviving
corporation in the Merger. At the effective time of the Merger, each
outstanding share of Class B Common Stock will be converted into the right to
receive:
(a) $29.55 per share in cash (the "Class B Cash Consideration"); or
(b) at the election of any Continuing Holder of Class B Common Stock and
based upon employment status, one or more of the following classes of
common stock (the "Group Stock Consideration") of the Company: (1) Class
E--Educational Resources Group (the "Education Group Stock"); (2) Class F--
Food and Support Services Group (the "Food and Support Group Stock"); (3)
Class U--Uniform and
<PAGE>
Career Apparel Group (the "Uniform Group Stock"); and (4) Class B--
Composite Group (the "Class B Composite Stock") (Proposal 2).
Continuing Holders of Class B Common Stock will be entitled to elect, in
lieu of the Class B Cash Consideration, the Group Stock Consideration pursuant
to the Merger. Each management investor under the Stockholders' Agreement (a
"Management Investor") and all of his or her Permitted Transferees: (a) will
be deemed to have made such election for all of their shares if such election
is made by the holders of 50% or more of the Class B Common Stock owned by
those persons or (b) will be deemed not to have made such election for any of
their shares if such election is made by holders of less than 50% of the Class
B Common Stock owned by those persons. It is a condition to Share 100 that
Continuing Holders of no more than $25 million of the Class B Common Stock
(valued at $29.55 per share) be entitled to receive the Class B Cash
Consideration or perfect their Dissenters' Rights with respect to such shares
under Section 262 of the DGCL.
The Education Group Stock, the Food and Support Group Stock and the Uniform
Group Stock (collectively, the "Business Group Stocks," and each a "Business
Group Stock") are intended to reflect separately the performance of each of
the Company's principal businesses--educational resources business (the
"Educational Resources Group"); food and support services business (the "Food
and Support Services Group"); and uniform and career apparel business (the
"Uniform and Career Apparel Group"; and collectively with the Educational
Resources Group and Food and Support Services Group, the "Business Groups,"
and each, a "Business Group"). The Class A Composite Stock and the Class B
Composite Stock (collectively, the "Composite Stock") reflect the "residual"
interest in each of the Business Groups and any other businesses or
investments of the Company and its subsidiaries (the "Composite Group"; and
collectively with the Educational Resources Group, Food and Support Services
Group and Uniform and Career Apparel Group, the "Groups," and each, a
"Group"). The Business Group Stocks and the Composite Stock are referred to
collectively as the "Group Stocks" and each, a "Group Stock."
In the Merger, the Class B Common Stock held by Continuing Holders who have
elected Group Stock Consideration will be converted, on a share-for-share
basis, into the right to receive the Group Stock Consideration based on
employment status, as determined by the Company's Board of Directors (the
"Board"), as follows:
(a) employees of the Educational Resources Group and their Permitted
Transferees (collectively, "Education Group Employees") will receive 50%
Education Group Stock and 50% Class B Composite Stock;
(b) employees of the Food and Support Services Group and their Permitted
Transferees (collectively, "Food and Support Group Employees") will receive
50% Food and Support Group Stock and 50% Class B Composite Stock;
(c) employees of the Uniform and Career Apparel Group and their Permitted
Transferees (collectively, "Uniform Group Employees") will receive 50%
Uniform Group Stock and 50% Class B Composite Stock; and
(d) employees who do not work exclusively for a single Business Group,
including executive officers and other corporate staff of the Company, and
their Permitted Transferees (collectively, "Corporate Employees") will
receive 100% Class B Composite Stock.
Permitted transferees under the Stockholders' Agreement of Management
Investors ("Permitted Transferees") will receive the same Group Stock
Consideration as such Management Investors. Employees of the magazine and book
business (the "Magazine and Book Business") and their Permitted Transferees
(collectively, "Magazine and Book Employees") will be entitled to receive only
the Class B Cash Consideration.
As part of Share 100, stockholders also will be asked to consider and
approve five related proposals to further amend the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation"): (i) to
increase the number of shares of common stock authorized for issuance from
175,000,000 to 200,000,000, to provide greater assurance that a sufficient
number of shares would be available in the event of a conversion of a class of
Business Group Stock into Class A Composite Stock or Class B Composite Stock
(the "Increased Capital Amendment"); (ii) to give the Board of Directors of
the Company the authority to issue common stock in series (which may be
referred to as separate classes) and to fix the terms of such series, which
authority will
2
<PAGE>
be used initially by the Board to create the Group Stocks in connection with
Share 100 (the "Board Authority Amendment"); (iii) in order to give effect to
Share 100, to amend the terms of the Class A Common Stock and Class B Common
Stock by reducing the number of authorized shares and by making conforming
changes to defined terms and cross-references (the "Continuing Common Stock
Amendment"); (iv) to provide that, upon the consummation of any future public
offering of the Company's common stock, stockholder action may be taken only
at an annual meeting of stockholders or at a special meeting of stockholders
and stockholder action by written consent shall be prohibited (the
"Stockholder Action Amendment"); and (v) to provide that, upon the
consummation of any future public offering of the Company's common stock, the
Board shall be classified into three classes, each of which, after a
transitional arrangement, will serve for three years, with one class being
elected each year (the "Classified Board Amendment") (Proposal 3).
Share 100 also contemplates certain amendments to, and the restatement of,
the Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement"), which amendments are designed to give effect to, and take account
of, Share 100 (the "Stockholders' Agreement Amendment") (Proposal 4).
Additionally, implementation of Share 100 will result in the termination of
the Amended and Restated Registration Rights Agreement (the "Registration
Rights Agreement") because after Share 100 is implemented, all holders of
Class A Common Stock who are parties to the Registration Rights Agreement will
no longer own any of the Common Stock.
In addition, at the Annual Meeting, stockholders will be asked to elect
directors for the ensuing year.
Holders of Group Stock will be stockholders of the Company and will be
subject to the risks associated with an investment in the Company and all of
its businesses, assets and liabilities. Financial effects that arise from a
Group and affect the Company's results of operations or financial condition
could, if significant, affect the results of operations or financial condition
of other Groups or the Appraisal Price of the classes of common stock relating
to the other Groups and reduce the assets of the Company legally available for
payment of future dividends on such other classes of common stock. When
evaluating Share 100, stockholders of the Company should be aware of certain
risk factors relating thereto. See "RISK FACTORS."
If Proposals 1 and 3 are approved by the stockholders, the Company will file
with the Secretary of State of the State of Delaware an Amendment to the
Certificate of Incorporation (the "Amendment Certificate") to effect the
Increased Capital Amendment, the Board Authority Amendment, the Continuing
Common Stock Amendment, the Stockholder Action Amendment and the Classified
Board Amendment (the "Charter Amendments"). After the Amendment Certificate is
filed, the Company will file a Certificate of Designations with respect to the
Group Stocks and the Redeemable Transitory Participating Preferred Stock (the
"Certificate of Designations"). Thereafter, the Company will effect the Class
A Stock Exchange, and immediately after the Class A Stock Exchange, the
Company will file a second Amendment to the Certificate of Incorporation to
effect the Reclassification (the "Reclassification Certificate"). After filing
the Reclassification Certificate, the Company will redeem the Redeemable
Transitory Participating Preferred Stock. After the redemption, the Company
will hold the vote on Proposals 2 and 4, and if approved by the stockholders
entitled to vote thereon, the Company will file a Certificate of Merger with
respect to the Merger (the "Merger Certificate," and together with the
Amendment Certificate, the Certificate of Designations and the
Reclassification Certificate, the "Share 100 Certificates"). After the
implementation of Share 100, the Company will file a Restated Certificate of
Incorporation in the form attached hereto as Annex V (the "Restated Charter")
integrating the provisions effected by the Share 100 Certificates into a
single instrument. At any time prior to filing any of the Share 100
Certificates with the Secretary of State of the State of Delaware, including
after adoption of any portion of Share 100 by the Company's stockholders, the
Board may abandon the transactions to be effected by any such Share 100
Certificate without further action by the stockholders. Each of the proposals
relating to Share 100 (Proposals 1, 2, 3 and 4) is conditioned upon the
approval, or expected approval, of the others and will not be implemented if
any such proposal is not approved, or expected to be approved, by
stockholders.
THE BOARD BELIEVES ADOPTION OF SHARE 100, INCLUDING EACH OF THE PROPOSALS
WHICH CONSTITUTE A PART THEREOF, IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND, ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSALS 1, 2, 3 AND 4, AND THEREBY APPROVE SHARE 100.
3
<PAGE>
PROXY STATEMENT SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement. Reference is made to, and this Proxy Statement Summary is
qualified in its entirety by, the more detailed information contained in this
Proxy Statement including the Annexes hereto. Stockholders are urged to read
this Proxy Statement including the Annexes hereto in its entirety.
ANNUAL MEETING
The Company will hold its Annual Meeting on the Sixteenth Floor of ARAMARK
Tower, 1101 Market Street, Philadelphia, Pennsylvania, on February 10, 1998, at
12:00 P.M., Philadelphia time. Only holders of record of Common Stock, as of
the close of business on December 29, 1997, are entitled to notice of, to
attend and to vote at the Annual Meeting.
The Reclassification of the Class A Common Stock (Proposal 1) requires the
affirmative vote of the holders of a majority of the outstanding Class A Common
Stock voting as a single class and the affirmative vote of the holders of a
majority of the outstanding Common Stock voting as a single class. The Merger
(Proposal 2) requires the affirmative vote of the holders of a majority of the
outstanding Class B Common Stock voting as a single class and does not require
the vote of the holders of Class A Common Stock. Each of the Charter Amendments
(Proposal 3) requires the affirmative vote of the holders of a majority of the
outstanding Common Stock voting as a single class, and the Continuing Common
Stock Amendment also requires the affirmative vote of the holders of the
outstanding Class A Common Stock and Class B Common Stock, each voting as a
single class. Amendments to the Stockholders' Agreement (Proposal 4) require,
pursuant to the Stockholders' Agreement, the affirmative vote by Management
Investors who hold (in combination with their Permitted Transferees) at least a
majority of the Common Stock held by Management Investors and their Permitted
Transferees. Accordingly, the votes by Management Investors for the
Stockholders' Agreement will be binding on their Permitted Transferees,
notwithstanding a different vote by such Permitted Transferees.
Each of the proposals relating to Share 100 (Proposals 1, 2, 3 and 4) is
conditioned upon the approval, or expected approval, of the others and will not
be implemented if any such proposal is not approved, or expected to be
approved, by stockholders.
SHARE 100
General.
Share 100 contemplates the Reclassification of the Company's Class A Common
Stock into a new series of redeemable preferred stock, which will then be
redeemable for:
(a) $347.50 per share ($34.75 on a Class B share equivalent basis) in
cash (Class A Cash Consideration); or
(b) at the election of the holder, $347.50 per share ($34.75 on a Class B
share equivalent basis) principal amount of Installment Notes, subject to
certain Suitability Requirements.
The Company will redeem this redeemable preferred stock immediately after the
Reclassification Effective Time.
Holders of the Class A Common Stock who are Former Managers or Company
Benefit Plans will be offered the opportunity to voluntarily exchange certain
of their Class A Common Stock, on a share for share basis, for Class A
Composite Stock pursuant to the Class A Stock Exchange. The Class A Stock
Exchange will be consummated immediately prior to the Reclassification
Effective Time.
Share 100 also provides for the merger of a newly incorporated subsidiary
with and into the Company (the Merger). The Company will be the surviving
corporation in the Merger. At the effective time of the Merger, each share of
Class B Common Stock outstanding will be converted into the right to receive:
(a) $29.55 per share in cash (the Class B Cash Consideration); or
4
<PAGE>
(b) at the election of any Continuing Holder of Class B Common Stock and
based on employment status, one or more of the following classes of common
stock (the Group Stock Consideration) of the Company: (1) Education Group
Stock; (2) Food and Support Group Stock; (3) Uniform Group Stock; and (4)
Class B Composite Stock.
The Education Group Stock, the Food and Support Group Stock and the Uniform
Group Stock are intended to reflect separately the performance of each of the
Business Groups. The Composite Stock reflects the "residual" interest in each
of the Business Groups and any other businesses or investments of the Company
or any of its subsidiaries.
Group Stock Election. In the Merger, Continuing Holders of Class B Common
Stock will be entitled to elect, in lieu of the Class B Cash Consideration, the
Group Stock Consideration. Each Management Investor and all of his or her
Permitted Transferees: (a) will be deemed to have made such election for all of
their shares if such election is made by the holders of 50% or more of the
Class B Common Stock owned by those persons; or (b) will be deemed not to have
made such election for any of their shares if such election is made by holders
of less than 50% of the Class B Common Stock owned by those persons. It is a
condition to Share 100 that Continuing Holders of no more than $25 million of
the Class B Common Stock (valued at $29.55 per share) be entitled to receive
the Class B Cash Consideration or perfect their Dissenters' Rights with respect
to such shares under Section 262 of the DGCL. See "SHARE 100--General."
Former Managers. Holders of Class A Common Stock who are Former Managers may
continue their equity investment in the Company by participating in the Class A
Stock Exchange. Former Managers who fail to participate in the Class A Stock
Exchange will have their Class A Common Stock called by the Company pursuant to
the terms of the Stockholders' Agreement for $29.55 per share (on a Class B
equivalent share basis). See "THE PLAN OF RECAPITALIZATION--Cash-Out of Former
Managers."
Class A Contingent Payment. Any holder of Class A Common Stock (other than a
Former Manager) who receives the Class A Cash Consideration or the Notes
Consideration will also be entitled to a contingent cash payment in excess of
the Class A Cash Consideration or Notes Consideration, if within two years from
the Effective Time the Company engages in certain corporate transactions. See
"THE PLAN OF RECAPITALIZATION--Certain Contingent Payments."
Magazine and Book Employees. Holders of Class B Common Stock who are Magazine
and Book Employees will be entitled to receive only the Class B Cash
Consideration in Share 100. See "SHARE 100--Treatment of Magazine and Book
Employees."
Charter Amendments. Share 100 also contemplates five further amendments to
the Certificate of Incorporation: (i) to increase the number of shares of
common stock authorized for issuance from 175,000,000 to 200,000,000 (Increased
Capital Amendment); (ii) to give the Board the authority to issue common stock
in series (which may be referred to as separate classes) and to fix the terms
of such series, which authority will be used initially by the Board to create
the Group Stocks in connection with Share 100 (the Board Authority Amendment);
(iii) in order to give effect to Share 100, to amend the terms of the Class A
Common Stock and Class B Common Stock by reducing the number of authorized
shares and by making conforming changes to defined terms and cross-references
(the Continuing Common Stock Amendment); (iv) to provide that, upon
consummation of any future public offering of the Company's common stock,
stockholder action may be taken only at an annual meeting of stockholders or at
a special meeting of stockholders and stockholder action by written consent
shall be prohibited (Stockholder Action Amendment); and (v) to provide that,
upon consummation of any future public offering of the Company's common stock,
the Board shall be classified into three classes, each of which, after a
transitional arrangement, will serve for three years, with one class being
elected each year (Classified Board Amendment). See "AMENDMENTS TO RESTATED
CERTIFICATE OF INCORPORATION."
5
<PAGE>
Stockholders' Agreement Amendment. Share 100 also contemplates certain
amendments to, and the restatement of, the Stockholders' Agreement, designed to
give effect to, and take account of, Share 100. Additionally, implementation of
Share 100 will result in the termination of the Registration Rights Agreement.
See "CHANGES TO CERTAIN AGREEMENTS."
Reasons for Share 100.
Share 100 was adopted by the Board to eliminate the equity interests of
outside stockholders in the Company and to align more closely management
stockholders' investment interests with the performance of the Business Group
for which each employee works. It will also allow the Company to (i) preserve
the financial, strategic and operational benefits it currently enjoys as a
single company and (ii) maintain flexibility that would not be available if the
Groups were separate legal entities. See "SHARE 100--Background and Reasons for
Share 100."
Recommendation of the Board of Directors.
THE BOARD BELIEVES ADOPTION OF SHARE 100 (INCLUDING THE RECLASSIFICATION, THE
MERGER, THE CHARTER AMENDMENTS AND THE STOCKHOLDERS' AGREEMENT AMENDMENT THAT
CONSTITUTE A PART THEREOF) IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND, ACCORDINGLY, UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR SHARE 100.
Opinion of Financial Advisor.
At the meeting of the Board on January 6, 1998, the Company's independent
financial advisor, J.P. Morgan Securities Inc. ("J.P. Morgan"), delivered its
oral opinion to the Board, which was later confirmed in writing as of the date
of this Proxy Statement, to the effect that (i) the consideration to be
received by holders of the Company's Class A Common Stock in connection with
the Reclassification and the Class A Stock Exchange (whether they receive cash
or Class A Composite Stock) is fair, from a financial point of view, to such
holders and (ii) the consideration to be received by the holders of the
Company's Class B Common Stock in connection with the Merger (whether they
receive cash or Group Stock) is fair, from a financial point of view, to such
holders. The full text of the J.P. Morgan written opinion, which sets forth the
procedures followed, limits of the review undertaken, assumptions made and
other matters considered in connection with rendering its opinion, is attached
as Annex II to this Proxy Statement and should be read carefully in its
entirety.
Interests of Certain Persons in Share 100.
In considering Share 100, stockholders should be aware that certain members
of the Company's management and the Board have certain interests that present
them with potential conflicts of interest in connection with Share 100. The
Board was aware of these interests when it approved Share 100 and considered
them at that time among the other matters described under "SHARE 100--
Background and Reasons for Share 100."
The interests that give rise to certain potential conflicts of interests in
connection with Share 100 include, among others: (i) the Company's directors
and its executive officers will not receive any of the Business Group Stocks,
while most other Management Investors will receive part Business Group Stock
and part Class B Composite Stock in exchange for their Class B Common Stock;
(ii) one Company director and his Permitted Transferees own both Class A Common
Stock and Class B Common Stock and all of the other directors (and/or their
Permitted Transferees) own Class B Common Stock; (iii) two Company directors
also serve as trustees for the Company's Benefit Plans, and, as such, are
subject to certain fiduciary duties that may give rise to different investment
priorities and concerns with respect to the shares held under the Benefit
Plans; (iv) an affiliate of one bank that is an agent of and participates in
the Bank Facility to be used in connection with the financing of Share
6
<PAGE>
100 is a substantial holder of the Class A Common Stock; (v) Goldman, Sachs &
Co. ("Goldman Sachs"), whose parent, The Goldman Sachs Group, L.P., is a
substantial holder of Class A Common Stock, has historically been a financial
advisor to the Company, was a participant in discussions that influenced the
development of Share 100 in which its parent would receive $347.50 per share
($34.75 on a Class B equivalent share basis) in exchange for its shares of
Class A Common Stock in the Reclassification, will receive a fee in connection
with its financial advisory services to the Company in connection with Share
100, and may again provide financial advisory services to the Company from time
to time after the implementation of Share 100; (vi) an affiliate of J.P. Morgan
serves as an agent of and participates in the Company's Bank Facility and J.P.
Morgan served as co-arranger of the recent refinancing of the Bank Facility for
which they have received fees; and (vii) Share 100 will have an impact on
stockholders that varies depending upon whether such holders own Class A Common
Stock or Class B Common Stock and upon the Group in which the holder is
employed.
For further information concerning these and other matters that present
certain potential conflicts of interest in connection with Share 100, see
"SHARE 100--Background and Reasons for Share 100" and "--Interests of Certain
Persons in Share 100."
Certain Management and Allocation Policies.
If Share 100 is approved by the stockholders and implemented by the Board,
the Company will provide unaudited supplemental selected financial information
for each Business Group, in addition to the audited consolidated financial
statements of the Company. Consistent with the Restated Charter and relevant
policies, each Business Group's financial results will include allocated
portions of the Company's corporate general and administrative costs and other
shared services. Principal corporate activities, which include the allocation
of debt, will be allocated to the Groups based on methods that Company
management believes to be reasonable and will be reflected in the respective
supplemental selected financial information as described in "SHARE 100--Certain
Management and Allocation Policies."
Dissenters' Rights.
Under Delaware law, holders of shares of Class B Common Stock are entitled to
Dissenters' Rights in the Merger under Section 262 of the DGCL. Stockholders
who elect to demand a statutory appraisal of their shares must comply with the
requirements set forth in that section, which is attached as Annex VIII hereto.
FAILURE TO STRICTLY COMPLY WITH THESE REQUIREMENTS MAY RESULT IN THE LOSS OF
DISSENTERS' RIGHTS. See "SHARE 100--Dissenters' Rights" and Annex VIII hereto.
Certain Federal Income Tax Considerations.
The Reclassification and the Class A Stock Exchange will constitute a
"recapitalization" of the Company within the meaning of Section 368(a)(l)(E) of
the Internal Revenue Code of 1986 (the "Code"). The Merger should be
disregarded for federal income tax purposes as a momentary and mere step in the
plan to convert the Class B Common Stock into Class B Cash Consideration and
Group Stock Consideration within the meaning of Code Sections 302 and
368(a)(1)(E). As such, the Reclassification, the Class A Stock Exchange and the
Merger should not be a taxable transaction to the Company or the holders of
Common Stock who, following such transactions, continue to hold common stock,
but should be a taxable transaction to the holders of Common Stock whose stock
is redeemed or exchanged for cash or Installment Notes. Stockholders whose
Common Stock is redeemed or exchanged should, subject to certain exceptions,
obtain capital gain treatment to the extent they recognize gain as a result of
the Reclassification or the Merger and may be eligible to receive installment
sale treatment for federal income tax purposes, in each case, depending upon
the form or forms of consideration which they receive. See "SHARE 100--Certain
U.S. Federal Income Tax Considerations" for a detailed description of certain
U.S. federal income tax consequences expected to result from the
Reclassification, the Class A Stock Exchange and the Merger.
7
<PAGE>
RISK FACTORS
Stockholders are urged to read the section titled "RISK FACTORS" for a
description of certain risk factors relating to Share 100 and the ownership of
securities of the Company after Share 100. The following include some of the
risk factors described in the section titled "RISK FACTORS": (i) the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities; (ii) limited separate stockholder rights with respect to the
five classes of Common Stock; (iii) fiduciary duties of the Board are to all
stockholders regardless of class or series; (iv) the potential diverging
interests of any two classes of common stock; (v) the ability of the Board to
change management and allocation policies; (vi) the ability of the Board to
transfer funds among the Groups; (vii) the effect of allocating financing costs
among the Groups; (viii) the ability of the Board to issue authorized but
unissued shares of stock; (ix) the change of the Company's capitalization to
one that is more highly leveraged; and (x) the possibility of a court finding
that the Company's issuance of cash or Installment Notes in Share 100 was a
fraudulent conveyance.
THE PLAN OF RECAPITALIZATION
General; Effective Time.
The Plan of Recapitalization provides for (i) the Reclassification, (ii) the
Merger, (iii) adoption of the Charter Amendments, and (iv) the Stockholders'
Agreement Amendment and the Registration Rights Agreement termination. Share
100 will become effective at the time all of the Share 100 Certificates are
filed with the Secretary of State of the State of Delaware (the "Effective
Time"). Assuming stockholder approval of each of the relevant proposals
relating to Share 100, the filings of the Share 100 Certificates and the
Restated Charter are currently anticipated to be made as promptly as
practicable after the relevant votes are taken at the Annual Meeting, other
than the Merger Certificate which is anticipated to be filed on the following
day.
Procedure for Holders of Shares.
Class A Common Stock--
Class A Cash Consideration: Holders of Class A Common Stock who desire to
receive the Class A Cash Consideration should not make a Class A Election but
should complete and return a Green Form of Election and concurrently deliver
the Certificates representing their shares of Class A Common Stock.
Notes Consideration: Holders of Class A Common Stock who desire to receive
the Notes Consideration and who meet to the Company's satisfaction the
Suitability Requirements must make a proper and timely election (the "Class A
Election") for such consideration on the enclosed Green Form of Election and
should concurrently deliver the Certificates representing their shares of Class
A Common Stock.
Class A Stock Exchange: Former Managers who desire, and are eligible, to
participate in the Class A Stock Exchange in respect of any of their shares of
Class A Common Stock must make a proper and timely election on the enclosed
Green Form of Election prior to 10:00 a.m., Philadelphia time on the Election
Date. Such holders should deliver the Certificates representing their shares
pursuant to instructions to be contained in an ownership statement or a
certificate profile report delivered by the Company promptly after the
Effective Time. Former Managers who do not want to participate in the Class A
Stock Exchange in respect of any of their shares of Class A Common Stock and
desire to receive $29.55 per share (on a Class B equivalent share basis)
pursuant to the Call Option should complete and return a Green Form of Election
and concurrently deliver the Certificates representing their shares.
Class B Common Stock--
Group Stock Consideration: Continuing Holders of Class B Common Stock who
desire to elect to receive the Group Stock Consideration in respect of all of
their shares of Class B Common Stock must make a proper
8
<PAGE>
and timely election (the "Class B Election," and together with the Class A
Election, each an "Election") on the enclosed proxy card. Such holders should
deliver the Certificates representing their shares of Class B Common Stock
pursuant to instructions to be contained in an ownership statement or a
certificate profile report delivered by the Company promptly after the
Effective Time.
Class B Cash Consideration: Continuing Holders of Class B Common Stock who
desire to receive the Class B Cash Consideration in respect of all of their
shares of Class B Common Stock should not make a Class B Election but should
complete and return a Blue Form of Election and concurrently deliver the
Certificates representing their shares of Class B Common Stock. Magazine and
Book Employees should complete and return a Blue Form of Election and
concurrently deliver the Certificates representing their shares of Class B
Common Stock.
Elections. To make an effective Class A Election, a holder of Class A Common
Stock must complete and sign a Green Form of Election/Letter of Transmittal
(collectively with the Blue Form of Election/Letter of Transmittal, "Form of
Election") and return it to the Special Exchange Agent Group, consisting of
three members of management of the Company and formed for the specific purpose
of acting, and authorized by the Board to act, as Exchange Agent with respect
to Share 100 (the "Exchange Agent"), at ARAMARK Corporation, The ARAMARK Tower,
1101 Market Street, Philadelphia, Pennsylvania 19107, Attention: Exchange
Agent, prior to 10:00 A.M., Philadelphia time, on the day of the Annual Meeting
or, if the Annual Meeting is postponed or adjourned without approval and
adoption of Share 100, on the day on which Share 100 is approved and adopted by
the Company's stockholders (the later of such days being referred to herein as
the "Election Date"). To make an effective Class B Election, a holder of Class
B Common Stock must check the election box on the proxy card and sign and
return it to the Company prior to or at the Annual Meeting.
Any holder of Class A Common Stock (other than a Former Manager) who fails to
make a proper and timely Class A Election will receive the Class A Cash
Consideration. Any Continuing Holder of Class B Common Stock who fails to make
a proper and timely Class B Election will receive the Class B Cash
Consideration.
Even if you plan to vote against Share 100, you should nonetheless make a
proper and timely Election to ensure that you will receive the desired
consideration in the event Share 100 is ultimately approved and becomes
effective. You can make an effective Election without concurrently delivering
your Certificates.
The Company will not issue any cash or Installment Notes until the
Certificates with respect to which payment is to be made have been properly
surrendered to the Exchange Agent. Accordingly, if you desire to receive cash
or Installment Notes as promptly as possible following the Effective Time, you
should deliver your Certificates accompanied by your Form of Election. If Share
100 is not approved or is not consummated, we will return your Certificates.
Conditions; Termination; Amendment.
The Company's obligation to consummate Share 100 is subject to, among other
conditions: (i) the approval and adoption of Share 100 by the requisite vote
and consent of the stockholders of the Company; (ii) receipt of the proceeds of
the Financing; (iii) receipt by the Board of satisfactory appraisals or similar
reports supporting the conclusions that (a) sufficient surplus is available to
permit consummation of the transactions contemplated by Share 100 under the
General Corporation Law of Delaware (the "DGCL") and (b) the fair value of the
Company's total assets will exceed the fair value of its total liabilities
immediately after the Effective Time; (iv) receipt by the Board of satisfactory
opinions of counsel; and (v) Continuing Holders of no more than $25 million of
the Class B Common Stock (valued at $29.55 per share) becoming entitled to
receive the Class B Cash Consideration or perfecting their Dissenters' Rights.
Most of such conditions may be waived by the Company. For additional conditions
to the Company's obligation to consummate Share 100, see "THE PLAN OF
RECAPITALIZATION--Conditions."
9
<PAGE>
The Plan of Recapitalization may be terminated and Share 100 abandoned by the
Board at any time prior to the Effective Time to the extent any Share 100
Certificate is not effective, notwithstanding approval by the Company's
stockholders.
At any time prior to the Effective Time to the extent any Share 100
Certificate is not effective, the Board may modify or amend any term of the
Plan of Recapitalization as set forth herein, add any new term or waive almost
any condition thereof, provided that no such modification, amendment, addition
or waiver that requires stockholder or any other approval under the DGCL or any
other applicable law, or under the Certificate of Incorporation or the
Stockholders' Agreement or Registration Rights Agreement, will occur following
the Annual Meeting unless such approval is obtained. In the event of a material
modification to the Plan of Recapitalization, a supplement to this Proxy
Statement will be distributed to stockholders and, if necessary, stockholders'
proxies will be resolicited.
FINANCING OF SHARE 100
The Company will increase its aggregate debt level by approximately $440
million to finance Share 100, including amounts required to redeem shares and
to pay the fees and expenses incurred in connection with Share 100. The Company
has refinanced its unsecured revolving credit facility for that purpose. See
"FINANCING OF SHARE 100."
DESCRIPTION OF CAPITAL STOCK
For a summary description of the Group Stocks, see "--Summary Comparison of
Terms of Common Stocks." For a detailed description of the Group Stocks, see
"DESCRIPTION OF CAPITAL STOCK."
DESCRIPTION OF INSTALLMENT NOTES
For a summary description of the Installment Notes, see "DESCRIPTION OF
INSTALLMENT NOTES." For information regarding certain federal income tax
consequences, see "SHARE 100--Certain U.S. Federal Income Tax Considerations--
Treatment of Redemption of Class A Common Stock for Installment Notes." The
form of Installment Note is included herein as Annex IV.
ELECTION OF DIRECTORS
Stockholders will also elect twelve directors at the Annual Meeting. See
"ELECTION OF DIRECTORS."
10
<PAGE>
THE COMPANY
The following table presents certain summary historical and pro forma
consolidated financial information for the Company as of the dates and for the
periods indicated. The pro forma consolidated income statement data gives
effect to Share 100 (including the Reclassification, the Merger, the incurrence
of additional indebtedness and the payment of fees and expenses in connection
therewith) as if it had been consummated at the beginning of fiscal 1997. The
pro forma consolidated balance sheet data gives effect to Share 100 as if it
had been consummated as of October 3, 1997. All such information is derived
from the more detailed information contained in the Consolidated Financial
Statements of the Company and the notes thereto, and the Historical and Pro
Forma Capitalization and Pro Forma Financial Information of the Company, and
the notes thereto, included elsewhere herein or in Annex VII.
<TABLE>
<CAPTION>
ARAMARK CORPORATION AND SUBSIDIARIES
------------------------------------------------------------
PRO FORMA
FISCAL YEAR FISCAL YEAR ENDED ON OR NEAR SEPTEMBER 30
ENDED ------------------------------------------------
1997(6) 1997(1) 1996 1995 1994 1993
----------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $6,310.4 $6,310.4 $6,122.5 $5,600.6 $5,161.6 $4,890.7
Earnings before
depreciation and
amortization, interest,
and income taxes....... 523.6 523.6 478.0 433.9 415.7 399.4
Earnings before interest
and income taxes (2)... 331.9 331.9 295.2 277.0 272.0 268.9
Interest expense, net... 145.2 116.0 116.0 109.4 108.5 125.7
Income before
extraordinary item and
cumulative effect of
change in accounting
for income taxes (3)... 128.5 146.1 112.2 100.2 95.0 84.3
Net income.............. 146.1 109.5 93.5 86.1 77.1
Earnings per share:(4)
Income before
extraordinary item and
cumulative effect of
change in accounting
for income taxes:(3)
As reported........... N/A $ 3.28 $ 2.37 $ 2.01 $ 1.87 $ 1.64
Pro forma:(7)(8)
Composite Stock...... $ 4.19
Education Group
Stock............... 3.05
Food and Support
Group Stock......... 1.93
Uniform Group Stock.. 3.93
Net income............. N/A $ 3.28 $ 2.31 $ 1.88 $ 1.69 $ 1.49
Ratio of earnings to
fixed charges (5)...... 2.1x 2.3x 2.1x 2.1x 2.1x 1.9x
BALANCE SHEET DATA (AT
PERIOD END):
Total assets............ $2,755.2 $2,753.6 $2,844.8 $2,643.3 $2,122.0 $2,040.6
Long-term borrowings:
Senior................. 1,525.4 1,084.9 1,160.8 1,109.4 691.5 533.8
Subordinated........... 129.0 129.0 161.2 165.4 290.4 474.9
Common stock subject to
potential repurchase
(9).................... 20.0 23.3 18.6 19.1 20.8 21.7
Shareholders' equity
(deficit).............. (63.0) 370.0 296.2 252.3 182.6 124.1
</TABLE>
- --------
(1) Fiscal 1997 was a fifty-three week period. See note 1 to the consolidated
financial statements.
(2) See note 2 to the consolidated financial statements.
(3) See note 3 to the consolidated financial statements.
(4) Based on weighted average shares of common stock outstanding for all
periods. See note 1 to the consolidated financial statements.
(5) For the purpose of determining the ratio of earnings to fixed charges,
earnings include pre-tax income plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest on all indebtedness (excluding
capitalized interest) plus that portion of operating lease rentals
representative of the interest factor (deemed to be one-third of operating
lease rentals).
(6) For pro forma information, see "PRO FORMA FINANCIAL INFORMATION."
(7) Pro forma earnings per share is determined by dividing earnings available
for each respective Group by the weighted average number of Group shares
outstanding.
(8) The 1997 pro forma earnings per share reflect the after-tax effects of
other income (expense) which is $1.07, $0, ($1.32) and $0.14 per share for
the Composite Stock, Education Group Stock, Food and Support Group Stock
and Uniform Group Stock, respectively. See notes 2 and 11 to the
consolidated financial statements.
(9) See note 7 to the consolidated financial statements.
11
<PAGE>
SUPPLEMENTAL PRO FORMA SELECTED FINANCIAL DATA
FOR
THE EDUCATIONAL RESOURCES GROUP
The supplemental pro forma selected financial data below has been derived
from the consolidated financial statements of the Company, and presents
selected financial data of the businesses underlying the Education Group Stock
as described in "DESCRIPTION OF THE BUSINESS--Educational Resources Group." The
Income Statement Data was prepared as if Share 100 had been consummated at the
beginning of the periods presented and the Balance Sheet Data was prepared as
if Share 100 had occurred on October 3, 1997. The information presented below
has been prepared in accordance with the proposed management and allocation
policies described in "SHARE 100--Certain Management and Allocation Policies,"
and includes (i) the historical results of the Educational Resources Group,
(ii) an allocated portion of the Company's indebtedness and related interest
expense and (iii) an allocated portion of the Company's corporate general and
administrative costs.
Holders of Group Stock will be stockholders of the Company and will be
subject to the risks associated with an investment in the Company and all of
its businesses, assets and liabilities. Financial effects that arise from a
Group and affect the Company's results of operations or financial condition
could, if significant, affect the results of operations or financial condition
of other Groups or the Appraisal Price of the classes of common stock relating
to the other Groups and reduce the assets of the Company legally available for
payment of future dividends on such other classes of common stock. When
evaluating Share 100, stockholders of the Company should be aware of certain
risk factors relating thereto. See "RISK FACTORS." See "SHARE 100--Appraisals
of Common Stock" for a discussion of information considered by HLHZ in
rendering its appraisals. Additionally, the consolidated financial statements
(and notes thereto) of the Company and the information contained in
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION," "SHARE 100," "DESCRIPTION OF CAPITAL STOCK," and "PRO FORMA
FINANCIAL INFORMATION" should be read in conjunction with this information.
12
<PAGE>
THE EDUCATIONAL RESOURCES GROUP
<TABLE>
<CAPTION>
FISCAL FISCAL
NOTE 1997 1996
------- --------- ---------
(IN MILLIONS, UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... (a) $ 332.2 $ 289.3
Earnings before depreciation and amortization,
interest and income taxes....................... 43.5 36.2
Depreciation and amortization.................... (a) 17.0 14.7
Operating income................................. (a) 26.5 21.5
Allocated corporate overhead..................... (b) 1.0 1.0
Interest expense on allocated debt, net.......... (c) 4.6 4.7
Income before income taxes....................... 20.9 15.8
Net income....................................... (d) 11.7 8.6
Earnings available for Education Group Stock..... (e) 0.7 0.5
BALANCE SHEET DATA:
Total Assets..................................... (a) $ 210.4
Allocated Debt................................... (c) $ 60.0
</TABLE>
NOTES TO SUPPLEMENTAL DATA:
(a) For information on business segments see Note 11 to the Company's fiscal
1997 consolidated financial statements in Annex VII.
(b) Represents an allocation of indirect corporate expenses. See "SHARE 100--
Certain Allocation and Management Policies" for a further discussion of the
allocation of corporate expenses and the Board's authority to modify
allocation methodologies at its discretion. Costs of corporate departments
providing direct services to the various Groups are included in operating
income as reported. Corporate expenses of $1.3 million are included in
Educational Resources Group operating income in each of fiscal 1997 and
fiscal 1996.
(c) Debt is managed on a consolidated basis. Allocated debt of the Educational
Resources Group consists of (i) the Company's debt, if any, that has been
allocated in its entirety to the Educational Resources Group and (ii) a
portion of the Company's debt that is allocated among the Groups ("pooled
debt"). The interest rate on the Educational Resources Group pooled debt is
based on the effective rate of the Company's total pooled debt. See "SHARE
100--Certain Allocation and Management Policies" for additional information
regarding allocated debt and related interest expense and the Board's
authority to modify allocation methodologies at its discretion.
(d) The Educational Resources Group is included in the consolidated federal
income tax return filed by the Company. Accordingly, the provision for
federal income taxes and related payment of tax are determined on a
consolidated basis. A provision for income taxes in determining net income
for the Educational Resources Group was computed in accordance with the
Company's tax allocation policy for the Groups. In general, the tax
provisions included in determining net income approximate the provisions
which would be required if the Educational Resources Group were a separate
taxpayer. See "SHARE 100--Certain Allocation and Management Policies" for
additional information regarding the tax allocation policy. Deferred tax
assets attributable to the Educational Resources Group are included in the
Total Assets caption above.
(e) Earnings available for Education Group Stock represents total net income of
the Educational Resources Group reduced by the portion thereof allocable to
the Inter-Group Interest. See "DESCRIPTION OF CAPITAL STOCK--Inter-Group
Interest of Composite Group in Business Groups." See "PROXY STATEMENT
SUMMARY--The Company" for pro forma earnings per share.
13
<PAGE>
SUPPLEMENTAL PRO FORMA SELECTED FINANCIAL DATA
FOR
THE FOOD AND SUPPORT SERVICES GROUP
The supplemental pro forma selected financial data below has been derived
from the consolidated financial statements of the Company and presents selected
financial data of the businesses underlying the Food and Support Group Stock as
described in "DESCRIPTION OF THE BUSINESS--Food and Support Services Group."
The Income Statement Data was prepared as if Share 100 had been consummated at
the beginning of the periods presented and the Balance Sheet Data was prepared
as if Share 100 had occurred on October 3, 1997. The information presented
below has been prepared in accordance with the proposed management and
allocation policies described in "SHARE 100--Certain Management and Allocation
Policies," and includes (i) the historical results of the Food and Support
Services Group, (ii) an allocated portion of the Company's indebtedness and
related interest expense and (iii) an allocated portion of the Company's
corporate general and administrative costs.
Holders of Group Stock will be stockholders of the Company and will be
subject to the risks associated with an investment in the Company and all of
its businesses, assets and liabilities. Financial effects that arise from a
Group and affect the Company's results of operations or financial condition
could, if significant, affect the results of operations or financial condition
of other Groups or the Appraisal Price of the classes of common stock relating
to the other Groups and reduce the assets of the Company legally available for
payment of future dividends on such other classes of common stock. When
evaluating Share 100, stockholders of the Company should be aware of certain
risk factors relating thereto. See "RISK FACTORS." See "SHARE 100--Appraisals
of Common Stock" for a discussion of information considered by HLHZ in
rendering its appraisals. Additionally, the consolidated financial statements
(and notes thereto) of the Company and the information contained in
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION," "SHARE 100," "DESCRIPTION OF CAPITAL STOCK," and "PRO FORMA
FINANCIAL INFORMATION" should be read in conjunction with this information.
14
<PAGE>
THE FOOD AND SUPPORT SERVICES GROUP
<TABLE>
<CAPTION>
FISCAL FISCAL
NOTE 1997 1996
---- -------- --------
(IN MILLIONS,
UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. (a) $4,131.4 $3,816.0
Earnings before depreciation and amortization, other
expense/income, interest and income taxes............ 300.1 266.1
Depreciation and amortization......................... (a) 100.2 96.5
Earnings before other expense/income, interest and in-
come taxes........................................... 199.9 169.6
Other expense/income, net............................. (a) 29.5 2.7
Operating income...................................... (a) 170.4 166.9
Allocated corporate overhead.......................... (b) 6.5 6.5
Interest expense on allocated debt, net .............. (c) 83.6 84.3
Income before income taxes............................ 80.3 76.1
Net income............................................ (d) 36.4 43.1
Earnings available for Food and Support Group Stock... (e) 7.6 9.1
BALANCE SHEET DATA:
Total Assets.......................................... (a) $1,258.8
Allocated Debt........................................ (c) $1,050.0
</TABLE>
NOTES TO SUPPLEMENTAL DATA:
(a) For information on business segments, see Note 11 to the Company's fiscal
1997 consolidated financial statements in Annex VII.
(b) Represents an allocation of indirect corporate expenses. See "SHARE 100--
Certain Allocation and Management Policies" for a further discussion of the
allocation of corporate expenses and the Board's authority to modify
allocation methodologies at its discretion. Costs of corporate departments
providing direct services to the various Groups are included in operating
income as reported. Corporate expenses of $15.9 million and $15.3 million
are included in Food and Support Services Group operating income in fiscal
1997 and fiscal 1996, respectively.
(c) Debt is managed on a consolidated basis. Allocated debt of the Food and
Support Services Group consists of (i) the Company's debt, if any, that has
been allocated in its entirety to the Food and Support Services Group and
(ii) a portion of the Company's debt that is allocated among the Groups
("pooled debt"). The interest rate on the Food and Support Services Group
pooled debt is based on the effective rate of the Company's total pooled
debt. See "SHARE 100--Certain Allocation and Management Policies" for
additional information regarding allocated debt and related interest
expense and the Board's authority to modify allocation methodologies at its
discretion.
(d) The Food and Support Services Group is included in the consolidated federal
income tax return filed by the Company. Accordingly, the provision for
federal income taxes and related payment of tax are determined on a
consolidated basis. A provision for income taxes in determining net income
for the Food and Support Services Group was computed in accordance with the
Company's tax allocation policy for the Groups. In general, the tax
provisions included in determining net income approximate the provisions
which would be required if the Food and Support Services Group were a
separate taxpayer. See "SHARE 100--Certain Allocation and Management
Policies" for additional information regarding the tax allocation policy.
Deferred tax assets attributable to the Food and Support Services Group are
included in the Total Assets caption above.
(e) Earnings available for Food and Support Group Stock represents total net
income of the Food and Support Services Group reduced by the portion
thereof allocable to the Inter-Group Interest. See "DESCRIPTION OF CAPITAL
STOCK--Inter-Group Interest of Composite Group in Business Groups." See
"PROXY STATEMENT SUMMARY--The Company" for pro forma earnings per share.
15
<PAGE>
SUPPLEMENTAL PRO FORMA SELECTED FINANCIAL DATA
FOR
THE UNIFORM AND CAREER APPAREL GROUP
The supplemental pro forma selected financial data below has been derived
from the consolidated financial statements of the Company, and presents
selected financial data of the businesses underlying the Uniform Group Stock as
described in "DESCRIPTION OF THE BUSINESS--Uniform and Career Apparel Group."
The Income Statement Data was prepared as if Share 100 had been consummated at
the beginning of the periods presented and the Balance Sheet Data was prepared
as if Share 100 had occurred on October 3, 1997. The information presented
below has been prepared in accordance with the proposed management and
allocation policies described in "SHARE 100--Certain Management and Allocation
Policies," and includes (i) the historical results of the Uniform and Career
Apparel Group, (ii) an allocated portion of the Company's indebtedness and
related interest expense and (iii) an allocated portion of the Company's
corporate general and administrative costs.
Holders of Group Stock will be stockholders of the Company and will be
subject to the risks associated with an investment in the Company and all of
its businesses, assets and liabilities. Financial effects that arise from a
Group and affect the Company's results of operations or financial condition
could, if significant, affect the results of operations or financial condition
of other Groups or the Appraisal Price of the classes of common stock relating
to the other Groups and reduce the assets of the Company legally available for
payment of future dividends on such other classes of common stock. When
evaluating Share 100, stockholders of the Company should be aware of certain
risk factors relating thereto. See "RISK FACTORS." See "SHARE 100--Appraisals
of Common Stock" for a discussion of information considered by HLHZ in
rendering its appraisals. Additionally, the consolidated financial statements
(and notes thereto) of the Company and the information contained in
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION," "SHARE 100," "DESCRIPTION OF CAPITAL STOCK," and "PRO FORMA
FINANCIAL INFORMATION" should be read in conjunction with this information.
16
<PAGE>
THE UNIFORM AND CAREER APPAREL GROUP
<TABLE>
<CAPTION>
FISCAL FISCAL
NOTE 1997 1996
------ --------- ---------
(IN MILLIONS, UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................................... (a) $ 1,252.2 $ 1,049.2
Earnings before depreciation and amortization,
other expense/income, interest and income
taxes........................................ 179.5 160.8
Depreciation and amortization................. (a) 58.4 52.2
Earnings before other expense/income, interest
and income taxes............................. 121.1 108.6
Other expense/income, net..................... (a) (2.9) (31.6)
Operating income.............................. (a) 124.0 140.2
Allocated corporate overhead.................. (b) 3.4 3.5
Interest expense on allocated debt, net....... (c) 40.0 40.3
Income before income taxes.................... 80.6 96.4
Net income.................................... (d) 48.9 58.1
Earnings available for Uniform Group Stock.... (e) 7.3 8.7
BALANCE SHEET DATA:
Total Assets.................................. (a) $ 1,042.0
Allocated Debt................................ (c) $ 500.0
</TABLE>
NOTES TO SUPPLEMENTAL DATA:
(a) For information on business segments, see Note 11 to the Company's fiscal
1997 consolidated financial statements in Annex VII.
(b) Represents an allocation of indirect corporate expenses. See "SHARE 100--
Certain Allocation and Management Policies" for a further discussion of the
allocation of corporate expenses and the Board's authority to modify
allocation methodologies at its discretion. Costs of corporate departments
providing direct services to the various Groups are included in operating
income as reported. Corporate expenses of $4.8 million and $5.4 million are
included in Uniform and Career Apparel Group operating income in fiscal
1997 and fiscal 1996, respectively.
(c) Debt is managed on a consolidated basis. Allocated debt of the Uniform and
Career Apparel Group consists of (i) the Company's debt, if any, that has
been allocated in its entirety to the Uniform and Career Apparel Group and
(ii) a portion of the Company's debt that is allocated among the Groups
("pooled debt"). The interest rate on the Uniform and Career Apparel Group
pooled debt is based on the effective rate of the Company's total pooled
debt. See "SHARE 100--Certain Allocation and Management Policies" for
additional information regarding allocated debt and related interest
expense and the Board's authority to modify allocation methodologies at its
discretion.
(d) The Uniform and Career Apparel Group is included in the consolidated
federal income tax return filed by the Company. Accordingly, the provision
for federal income taxes and related payment of tax are determined on a
consolidated basis. A provision for income taxes in determining net income
for the Uniform and Career Apparel Group was computed in accordance with
the Company's tax allocation policy for the Groups. In general, the tax
provisions included in determining net income approximate the provisions
which would be required if the Uniform and Career Apparel Group were a
separate taxpayer. See "SHARE 100--Certain Allocation and Management
Policies" for additional information regarding the tax allocation policy.
Deferred tax assets attributable to the Uniform and Career Apparel Group
are included in the Total Assets caption above.
(e) Earnings available for Uniform Group Stock represents total net income of
the Uniform and Career Apparel Group reduced by the portion thereof
allocable to the Inter-Group Interest. See "DESCRIPTION OF CAPITAL STOCK--
Inter-Group Interest of Composite Group in Business Groups." See "PROXY
STATEMENT SUMMARY--The Company" for pro forma earnings per share.
17
<PAGE>
QUESTIONS AND ANSWERS FOR MANAGEMENT INVESTORS
To assist management owners to better understand Share 100, a summary
description of certain significant provisions of the Plan of Recapitalization
is provided below in a question and answer format.
<TABLE>
<CAPTION>
TOPIC Q/A
----- ------
<S> <C>
Introduction........................................................ 1-23
Share 100........................................................... 24-35
What Will I Receive in Share 100?................................... 36-45
Terms of the New Classes of Stock................................... 46-56
Employee Benefit Plans.............................................. 57-59
Appraisal Price..................................................... 60-64
Stock Options and Purchase Opportunities............................ 65-66
Exercise of Purchase Opportunities/Purchase of Stock................ 67-77
Recent Sales of Stock............................................... 78-80
Future Transfers and Sales of Stock................................. 81-93
Deferred Payment Program/Bank Loans................................. 94-98
Taxes............................................................... 99-101
</TABLE>
INTRODUCTION
1.Q:WHAT IS THE NAME OF THIS PLAN?
A: We're calling it Share 100.
2.Q:WHY?
A: Because nearly 15 years after the "buyout," we are finally completing
the "buyback."
3.Q:MEANING . . .?
A: We are repurchasing the remaining 20% of our stock that, since 1984, has
been in the hands of outside investors.
Now, we will own 100% of our company. We'll share 100% in all the
assets. We'll share 100% in all the profits we earn, and we'll share
100% of all the value we add and create for our customers.
Approximately 1,000 owner managers will own shares directly, and more
than 10,000 employees will own shares through the employee benefit
plans.
4.Q:SO, THIS IS BASICALLY ABOUT A BUYBACK?
A: Actually, the buyback is just the beginning.
5.Q:WHAT ELSE IS INVOLVED?
A: We're also going to restructure the Company to give you more direct
ability to impact your investment in the stock of the Company.
6.Q:HOW?
A: 50% of your stock will be Business Group-specific. The other 50% will be
a composite stock consisting of our three principal Business Groups--
Educational Resources, Food and Support Services and Uniform and Career
Apparel. 100% of your stock will be composite stock if you do not work
exclusively for a single Business Group (such as executive officers and
other corporate staff).
18
<PAGE>
7.Q:SO, IF I'M IN CAMPUS SERVICES . . .?
A: 50% of your total shares will be in the Food and Support Group Stock and
50% in the Class B Composite Stock.
8.Q:AND IF I WORK FOR WEARGUARD . . .?
A: 50% of the total shares you hold will be in Uniform Group Stock and 50%
in the Class B Composite Stock.
9.Q:AND THE SAME FOR CHILDREN'S WORLD EMPLOYEES?
A: Yes. And the same is true for employees of our Educational Resources
Group. 50% of the shares of all employees in this Business Group will be
Education Group Stock and 50% will be Class B Composite Stock.
10.Q:CAN THE VALUE OF THE BUSINESS GROUP STOCK GO UP OR DOWN INDEPENDENT OF THE
COMPOSITE STOCK?
A: Sure. The value of each Business Group Stock will be determined
primarily by the performance of the Business Group.
11.Q:WILL THE COMPANY, OR ANY OF THESE BUSINESS GROUPS, BE PUBLICLY TRADED?
A: No.
12.Q:IS THIS THE FIRST STEP IN THE COMPANY, OR ANY OF OUR BUSINESS GROUPS,
GOING PUBLIC?
A: No. It's a step that allows us to fully capture 100% of the value we
create. And, more importantly, it fully positions us to realize our
unique potential as a Company.
13.Q:SO, WE HAVE NO PLANS TO GO PUBLIC?
A: No plans at this time. Right now we have no need to do it. With our
strong cash flows, there's no need for additional capital. And creating
the Business Group Stocks allows for more market-oriented valuations.
14.Q:DOES ALL OF THIS REQUIRE A VOTE OF APPROVAL FROM ARAMARK SHAREHOLDERS?
A: Yes.
15.Q:HOW DOES THAT WORK?
A: Share 100 will not be approved unless we receive an affirmative vote
from the holders of a majority of both the outstanding Class A and Class
B Common Stock.
16.Q:IS A "YES" VOTE EXPECTED?
A: It is not appropriate for us to comment on the outcome before the votes
are counted. However, all of the officers and directors of the Company
intend to vote "Yes".
17.Q:IS THERE ANY REASON WHY A SHAREHOLDER WOULD VOTE "NO?"
A: Every owner of Class A and Class B Common Stock must come to that
conclusion on their own.
18.Q:WHAT HAPPENS IF THE PLAN IS NOT APPROVED BY THE STOCKHOLDERS?
A: The capital structure of the Company stays the way it is today.
19.Q:WILL EACH BUSINESS GROUP BE GOVERNED BY A DIFFERENT BOARD OF DIRECTORS?
A: No.
19
<PAGE>
20.Q:IS THERE ANY POTENTIAL DOWNSIDE TO THIS PLAN?
A: There are always risks associated with any major transaction. This is a
major transaction. Our debt and our interest costs will rise. This will
reduce our available cash flow and could restrict our financial
flexibility during an economic downturn. But in the opinion of the Board
of Directors and senior management, the Company has more than sufficient
financial and operating strength to manage these risks.
21.Q:WHAT ABOUT OUR MAGAZINE AND BOOK BUSINESS?
A: It's not going to be included in this program. The business needs short
term, cash-based specific incentives due to the current state of its
industry. Share 100, which is designed to create long term incentives
for management owners, is not the appropriate incentive program.
22.Q:WHAT ABOUT THE EMPLOYEES IN THAT BUSINESS?
A: All owner-managers in the Magazine and Book business will be cashed out.
They will be given $29.55 in cash for every share they currently hold.
We will be implementing a new incentive program to fully and fairly
compensate these men and women for the difficult and important work they
are doing to turn that business around. But, it will be a cash incentive
program.
23.Q:HOW DO I FIND OUT MORE INFORMATION ABOUT THIS SHARE 100?
A: The remainder of these questions and answers, which are a little more
formal in style, and this entire Proxy Statement are designed to provide
you with additional information. You should read it carefully before you
make any decision on how to vote or what election, if any, you should
make.
SHARE 100
24.Q:WHAT IS SHARE 100?
A: Share 100 is a comprehensive plan that will change the ownership of the
Company. The plan will (i) eliminate the equity interests of outside
stockholders and (ii) align more closely the investment interests of
management owners with the performance of the Business Group for which
they work.
The Company will eliminate the equity interests of outside stockholders
by repurchasing their shares. The Company will also offer to repurchase
from the Company's retirement and profit sharing plans the Company stock
held in such plans. The trustees, as fiduciaries for the plans, have
preliminarily indicated, subject to further review and advice of their
independent legal counsel and financial advisors, that they will elect
on behalf of the plans to exchange approximately 30% of their existing
shares for cash and to retain 70% of their investment. The Company will
pay for these shares and for the other costs and expenses of Share 100
by borrowing approximately $440 million in additional funds from its
banks. Accordingly, future increases in value of the Company's equity
due to improved performance of the Company as a whole will be for the
benefit of the management owners and the Company's retirement and profit
sharing plans. Similarly, any future decreases in value will be borne
solely by the management owners and the Company's retirement and profit
sharing plans.
The Company will align more closely the investment interests of
management owners with the performance of the Business Groups for which
they work by creating three new classes of common stock, called Business
Group Stocks, and by converting a portion of the existing shares of
Common Stock held by management investors who work for these Business
Groups into shares of the Business Group Stocks. The Business Group
Stocks are intended to reflect separately the performance of the
Company's main Business Groups.
As a result of Share 100, the Appraisal Price of the Class A Common
Stock (on a Class B equivalent share basis) will increase to $34.75 per
share, and the Appraisal Price of the Class B Common Stock
20
<PAGE>
will increase to $29.55 per share. The difference in the Appraisal Price
of the stock held by Benefit Plans and outside stockholders (Class A
Common Stock) and owner managers (Class B Common Stock), which
difference is due primarily to differences in liquidity, has existed
since the buyout in 1984 and is anticipated to continue in the future.
The Business Group Stocks and the Class B Composite Stock will each have
an initial Appraisal Price of $29.55 per share, and the Class A
Composite Stock (on a Class B equivalent share basis) will have an
initial Appraisal Price of $34.75 per share.
25.Q:WHAT IS BUSINESS GROUP STOCK?
A: Business Group Stock is the name of the three new classes of common
stock of the Company designed to track separately the performance of the
Company's three main Business Groups:
. Education Group Stock is intended to reflect separately the
performance of the Educational Resources Group;
. Food and Support Group Stock is intended to reflect separately the
performance of the Food and Support Services Group; and
. Uniform Group Stock is intended to reflect separately the performance
of the Uniform and Career Apparel Group.
26.Q:WHAT IS COMPOSITE STOCK?
A: The Composite Stock is intended to reflect a "residual" interest in the
three main Business Groups in addition to reflecting any other business
or investments of the Company or any of its subsidiaries. Composite
Stock is comprised of two new classes of common stock of the Company,
Class A Composite Stock (which is the class of ARAMARK stock that will
be owned by the Company's retirement and profit-sharing plans) and Class
B Composite Stock.
27.Q:WILL ALL MANAGEMENT OWNERS RECEIVE THE SAME CLASS OF STOCK IN SHARE 100?
A: No. Generally, most management owners will receive part Business Group
Stock and part Class B Composite Stock; and management owners who do not
work exclusively for a single Business Group will receive all Class B
Composite Stock. The Board believes that this will better align all
management owners with the businesses whose operations they can impact.
28.Q:WHY IS SHARE 100 BEING PROPOSED?
A: Share 100 is being proposed to accomplish the following objectives:
. to become a 100% employee-owned Company, with approximately 1,000
owner managers owning shares directly, and more than 10,000 employees
owning shares through the employee benefit plans,
. to better align management objectives with business objectives by
increasing management ownership and by giving management owners a
more direct economic interest in the Business Groups for which they
work,
. to maintain the ARAMARK business culture by continuing common
ownership, governance and operating control of the Business Groups,
. to establish a more market-oriented valuation, through appraisals of
the individual Business Groups,
. to facilitate comparisons with competitors of the individual Business
Groups, and
. to maintain flexibility to engage in future strategic transactions,
if appropriate.
21
<PAGE>
29.Q:WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE SHARE 100?
A: Share 100 will not be implemented unless all of Share 100 and all the
related proposals are approved. Although different proposals require
different votes for approval, if all of the proposals receive the
affirmative vote of the holders of a majority of the outstanding Class A
Common Stock and of the holders of a majority of the outstanding Class B
Common Stock, they will all be approved.
Based on preliminary indications received by the Company, the Company
believes the directors and executive officers of the Company, the
trustees of the Company's employee benefit plans, on behalf of such
plans, and certain holders of Class A Common Stock currently intend to
vote in favor of all of such proposals. Those persons have voting
control over approximately 64% of the Class A Common Stock and 46% of
the Class B Common Stock.
30.Q:WHAT HAPPENS IF SHARE 100 IS NOT APPROVED BY THE STOCKHOLDERS?
A: The capital structure of the Company will remain as it is today.
31.Q:IS THE COMPANY BEING DIVIDED INTO SEPARATE COMPANIES?
A: No. The Company will remain organized as it is today and all of the
Business Group Stocks and the Composite Stock will be common stocks of
ARAMARK Corporation. However, the Appraisal Prices of the Business Group
Stocks will be determined primarily on the basis of the performance of
their respective Business Groups (each of which is a separate part of
the Company).
Share 100 does not in any way affect our relations with our clients or
our suppliers. Our existing contracts will continue unaffected by Share
100.
32.Q:WILL EACH BUSINESS GROUP BE GOVERNED BY A DIFFERENT BOARD OF DIRECTORS?
A: No. The Board of Directors of the Company will remain the sole board of
directors and will address and resolve issues involving the interests of
any of the Business Groups.
33.Q:HOW WILL DIVERGING INTERESTS BETWEEN BUSINESS GROUPS BE RESOLVED?
A: Basically, diverging interests will continue to be resolved as they are
today--by the Board.
When making decisions with regard to matters that create potential
diverging interests, the Board will act in accordance with the terms of
the Restated Charter, the Company's management and allocation policies
and its fiduciary duties. The Board could also from time to time refer
matters to an existing committee or one or more new committees of the
Board, and have such committee or committees report to the Board on such
matters or decide such matters.
34.Q: WILL THE COMPANY OR ANY OF THE BUSINESS GROUPS BECOME PUBLICLY TRADED AS
A RESULT OF SHARE 100?
A: No. The Company and the Business Groups will remain private. The Company
has no present intention to have its stock, or the stock of any of its
Business Groups, publicly traded. The Company will continue, however, to
file financial statements with the Securities and Exchange Commission
following Share 100.
35.Q:ARE THERE ANY RISKS TO THE COMPANY AS A RESULT OF SHARE 100?
A: There are always risks associated with any major transaction. The Board
has considered the risk of diverging interests among the holders of the
classes of Business Group Stock and the Composite Stock, and the risk of
the increased debt that the Company plans to incur as part of Share 100.
This increased leverage will result in higher interest costs, and could
also lead to higher interest rates. The increased debt will reduce
available cash flow and could restrict financial flexibility during an
economic downturn.
22
<PAGE>
Management has carefully reviewed these risks with the Board, which has
concluded the Company is well positioned from a financial point of view
to address these risks. In addition, the operating characteristics of
the Company will be unchanged as a result of Share 100, and accordingly
no additional operating risks should develop as a by-product of the
transaction.
WHAT WILL I RECEIVE IN SHARE 100?
36.Q:WHICH STOCK WILL I RECEIVE IN SHARE 100?
A: If you make an election for stock, the stock that you receive in
exchange for the Class B Common Stock you currently hold will depend on
the particular Business Group you work for:
. most management owners will receive 50% Business Group Stock of the
particular Business Group in which they are employed and 50% Class B
Composite Stock; and
. management owners who do not work exclusively for a single Business
Group, including executive officers and other corporate staff of the
Company, will receive Class B Composite Stock.
Management owners in the Magazine and Book Business and management
owners who do not make an effective election for stock will receive
$29.55 per share in cash.
37.Q: WHAT WILL BE THE CONVERSION RATIO FOR CONVERTING THE EXISTING SHARES OF
CLASS B COMMON STOCK INTO BUSINESS GROUP STOCK OR CLASS B COMPOSITE STOCK
IN SHARE 100?
A: The conversion ratio will be one for one. You will receive the same
aggregate number of shares of Business Group Stock and Class B Composite
Stock as the total number of shares of Class B Common Stock you hold
immediately before Share 100. For example, if you own 1,000 shares of
Class B Common Stock, you will receive 500 shares of Business Group
Stock and 500 shares of Class B Composite Stock.
38.Q:DO I HAVE TO INVEST MORE MONEY AT THIS TIME TO PARTICIPATE IN SHARE 100?
A: No. The shares of Class B Common Stock you presently hold will be
exchanged for Class B Composite Stock and Business Group Stock, as
applicable, without any additional investment by you in the Company.
39.Q:CAN I CHOOSE WHICH CLASS OF BUSINESS GROUP STOCK I RECEIVE IN SHARE 100?
A: No.
40.Q:CAN I RECEIVE CASH IN LIEU OF ANY CLASS OF STOCK IN SHARE 100?
A: Yes. You may receive $29.55 in cash per share in lieu of Business Group
Stock and Class B Composite Stock; however, Share 100 is conditioned on
the holders of current Class B Common Stock with an aggregate Appraisal
Price of no more than $25 million becoming entitled to receive cash for
their Class B Common Stock or perfecting their Dissenters' Rights with
respect to such shares.
You cannot elect to receive stock in lieu of cash for only part of the
stock you own. Any election must be for all of the stock owned by you
and all of your Permitted Transferees.
However, the Company's internal market will continue as in the past. The
next internal market will begin on March 15.
41.Q:WILL EACH OF MY PERMITTED TRANSFEREES BE REQUIRED TO EXCHANGE HIS/HER
SHARES?
A: Yes. Your Permitted Transferees will receive the same consideration,
cash or Business Group Stock and/or Class B Composite Stock, that you
receive in Share 100. You and your Permitted Transferees,
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if any, must all make the same election whether to receive stock in lieu
of cash, and if not unanimous, the election made by those who hold a
majority of such shares will apply to all shares of Class B Common Stock
held by you and them.
42.Q:AFTER SHARE 100, WILL I STILL OWN THE CLASS B COMMON STOCK THAT I
CURRENTLY OWN?
A: No. Employees of a Business Group will own part Business Group Stock of
the particular Business Group in which they are employed and part Class
B Composite Stock. Employees who do not work exclusively for a single
Business Group, including executive officers and other corporate staff
of the Company, will own Class B Composite Stock.
43.Q:WILL I RECEIVE NEW STOCK CERTIFICATES?
A: No. Your shares will be "uncertificated." However, you may obtain new
certificates from the Company. If you have shares pledged to secure a
loan, the lender may require you to obtain new certificates.
44.Q:WHAT SHOULD I DO WITH THE STOCK CERTIFICATES THAT I CURRENTLY HOLD?
A: The Company will mail to you shortly after Share 100, an ownership
statement reflecting all of your and your Permitted Transferees' new
shares as a group and your purchase opportunities and stock options.
This statement will be similar to the ownership statement you currently
receive. The Company will also mail to you a certificate profile report
which will list all of your current stock certificates and instructions
for sending your stock certificates to the Company.
After the Company receives the stock certificates for your shares of
Class B Common Stock, the Company will send to you a statement of
registered shares which will show the new shares of Group Stock and
Composite Stock you receive in Share 100.
Your shares will be "uncertificated" and you will not receive stock
certificates unless you request them. The ownership statement will
include instructions for requesting certificates for your new shares as
well as instructions for obtaining a statement of registered shares,
even if you cannot find your current stock certificates.
45.Q:BUT WHAT IF I AM RECEIVING CASH IN SHARE 100?
If you are receiving cash in Share 100, you should send in your
certificates representing shares of Class B Common Stock to the Company
along with a completed and signed Blue Form of Election/Transmittal
Letter prior to the date of the Annual Meeting. We cannot mail your
check until we receive your stock certificates. If you have lost any of
your stock certificates, follow the instructions on the Blue Form of
Election/Transmittal Letter.
TERMS OF THE NEW CLASSES OF STOCK
46.Q:WILL MANAGEMENT'S VOTING RIGHTS BE AFFECTED BY SHARE 100?
A: Yes. Immediately after Share 100, each share will continue to have one
vote. However, the management stockholders will have 97% of the vote
after Share 100 (compared to approximately 92% of the vote before Share
100).
47.Q: WILL I BE ENTITLED TO VOTE ON ANY MATTERS SUBMITTED TO A VOTE OF THE
HOLDERS OF COMPOSITE STOCK OR ONLY THOSE MATTERS CONCERNING MY BUSINESS
GROUP?
A: The holders of Composite Stock and Business Group Stock will vote
together as a single voting group. Each share of Composite Stock and
Business Group Stock will have one vote. If in the future there is a
public offering of any class of Business Group Stock, the voting rights
of the Class B Composite
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Stock and the Business Group Stocks that have not been part of the
public offering will increase to ten votes per share.
48.Q:WILL I RECEIVE DIVIDENDS ON ANY CLASS OF THE BUSINESS GROUP STOCK OR THE
COMPOSITE STOCK?
A: The Board does not currently intend to pay dividends on any class of
Business Group Stock or Composite Stock, and instead plans to retain
future earnings, if any, for the development of the Company's
businesses.
49.Q: IF ONE CLASS OF BUSINESS GROUP STOCK OR COMPOSITE STOCK RECEIVES A
DIVIDEND, WILL OTHER CLASSES OF BUSINESS GROUP STOCK AND COMPOSITE STOCK
RECEIVE A DIVIDEND?
A: The Board does not currently intend to pay dividends. However, in the
event that in the future the Board contemplates dividends, the Board
will be able, in its sole discretion, to pay dividends exclusively on
any class of Business Group Stock or on the Composite Stock or on all,
in equal or unequal amounts. However, if any dividend is paid on the
Composite Stock, then a dividend must be paid on the Class A Composite
Stock equal to ten times the per share amount paid on the Class B
Composite Stock.
50.Q: IF ONE CLASS OF BUSINESS GROUP STOCK OR COMPOSITE STOCK SPLITS, WILL ALL
OTHER CLASSES OF BUSINESS GROUP STOCK AND COMPOSITE STOCK SPLIT?
A: Not necessarily. The Board will be able, in its sole discretion, to
split any class of Business Group Stock or Composite Stock.
51.Q: WILL THE COMPANY BE ABLE TO SELL ONE OF THE BUSINESS GROUPS WITHOUT
FIRST GETTING THE APPROVAL OF HOLDERS OF THAT STOCK?
A: Yes, the Company will be able to do so, just as it can now. So long as
the assets of a Business Group continue to represent less than
substantially all of the properties and assets of the Company, the Board
may approve sales and other dispositions of all or any amount of the
properties and assets of that Business Group without stockholder
approval.
52.Q: WILL THE COMPANY BE ABLE TO CONVERT ANY CLASS OF BUSINESS GROUP STOCK
INTO COMPOSITE STOCK IN THE FUTURE?
A: Yes. The Company may, at any time, convert shares of any class of
Business Group Stock into shares of Class A Composite Stock or Class B
Composite Stock on the basis of the ratio of the Appraisal Price of the
applicable Business Group Stock to the Appraisal Price of the applicable
Composite Stock.
53.Q: WILL THE COMPANY BE ABLE TO CREATE A SEPARATE COMPANY FOR A BUSINESS
GROUP AND THEN CONVERT THAT CLASS OF BUSINESS GROUP STOCK INTO SHARES OF
THE SEPARATE COMPANY?
A: Yes. The Company may redeem any class of Business Group Stock for a
number of shares of one or more wholly owned subsidiaries of the Company
that holds all the assets and liabilities attributable to that Business
Group.
54.Q: WILL THE COMPANY BE ABLE TO CHANGE THE TERMS OF ANY BUSINESS GROUP STOCK
WITHOUT FIRST GETTING APPROVAL OF THE STOCKHOLDERS?
A: No. If a proposed amendment would alter or change the powers,
preferences or special rights of any class of Business Group Stock to
affect it adversely, that class of Business Group Stock would be
entitled to vote as a separate class on the amendment.
However, the Company could effectively cause the terms to change in
connection with an underwritten public offering by calling the shares of
the class of Business Group Stock for conversion into Class A
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Composite Stock or Class B Composite Stock and creating a new class of
Business Group Stock (for substantially the same Business Group as was
the Business Group Stock called for conversion) designated for the
stated purpose of having an underwritten public offering. The holders of
the Business Group Stock called for conversion could then, at their
election prior to the conversion date, convert their shares into shares
of the new class of Business Group Stock, at a conversion ratio
determined by the Board.
55.Q: IF I ACCEPT A TRANSFER OF EMPLOYMENT FROM ONE BUSINESS GROUP TO ANOTHER,
COULD THE COMPANY REQUIRE ME TO EXCHANGE MY BUSINESS GROUP STOCK OF MY
FORMER BUSINESS GROUP FOR BUSINESS GROUP STOCK OF MY NEW BUSINESS GROUP?
A: Yes. The Company would be able to convert your Business Group Stock of
your former Business Group for Business Group Stock of your new Business
Group on the basis of the ratio of the Appraisal Price of your former
Business Group Stock to the Appraisal Price of your new Business Group
Stock.
56.Q: WILL THERE BE A SEPARATE STOCKHOLDERS' AGREEMENT FOR EACH BUSINESS GROUP,
OR WILL ALL BUSINESS GROUP STOCK AND COMPOSITE STOCK BE GOVERNED BY ONE
STOCKHOLDERS' AGREEMENT?
A: The current Stockholders' Agreement will be amended and restated to
reflect any necessary changes as a result of Share 100. Its terms will
apply to all Business Group Stock and Composite Stock held by management
owners and their permitted transferees. No other stockholders' agreement
will be entered into.
EMPLOYEE BENEFIT PLANS
57.Q: WHAT WILL BE THE EFFECT OF SHARE 100 ON THE RETIREMENT AND PROFIT SHARING
PLANS?
A: Because of the increase in the Appraisal Price, the value of your
account will increase.
The retirement and profit sharing plans, as holders of Class A Common
Stock, have the option of receiving cash or receiving shares of Class A
Composite Stock in Share 100. The trustees, as fiduciaries for the
plans, have preliminarily indicated, subject to further review and
advice of their independent legal counsel and financial advisors, that
they will elect on behalf of the plans to exchange approximately 30% of
their existing shares of Class A Common Stock for cash and to retain 70%
of their investment in ARAMARK by electing to convert shares into shares
of Class A Composite Stock. The $81 million of cash proceeds would be
diversified and invested in other assets.
The Magazine and Book Retirement Plan is being amended so that the plan
will no longer provide for investment in employer stock. The trustees,
as fiduciaries for the plan, have preliminarily indicated, subject to
further review and advice of their independent legal counsel and
financial advisors, that they will elect on behalf of the plan to
exchange all of the plan's existing shares of Class A Common Stock for
cash. The $52 million of cash proceeds would be diversified and invested
in other assets.
58.Q: WHICH STOCKS WILL THE COMPANY USE FOR FUTURE EMPLOYER CONTRIBUTIONS TO
THE RETIREMENT AND PROFIT SHARING PLANS?
A: The Company currently intends to make future employer stock
contributions to the plans in Class A Composite Stock.
59.Q: WHAT WILL BE THE EFFECT OF SHARE 100 ON THE STOCK UNIT RETIREMENT PLAN?
A: Deferred Common Stock Units ("DSUs") in each participant's account for
Class B Common Stock will be converted into DSUs for Class B Composite
Stock. Future employer contributions will be made in DSUs for Class B
Composite Stock.
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APPRAISAL PRICE
60.Q: AT THE TIME OF SHARE 100, WILL THE APPRAISAL PRICE OF THE CLASS B COMMON
STOCK DIFFER FROM ANY OF THE BUSINESS GROUP STOCK APPRAISAL PRICES?
A: No. The Appraisal Price of the Class B Common Stock immediately before
Share 100 will equal the Appraisal Prices of the Business Group Stocks
and the Class B Composite Stock immediately after Share 100.
61.Q: HOW CAN THEY ALL BE THE SAME?
A: Generally, the Appraisal Price per share of a Business Group Stock is
the value of the entire equity of the Business Group divided by the sum
of the outstanding shares plus the number of shares included in the
residual Composite Stock. The Company will adjust the number of shares
included in the residual Composite Stock for each Business Group so that
all of the Appraisal Prices will be the same at the Effective Time of
Share 100.
62.Q: WHEN AND HOW WILL THE APPRAISAL PRICE OF EACH CLASS OF COMMON STOCK BE
DETERMINED IN THE FUTURE?
A: Currently, Houlihan, Lokey, Howard & Zukin Financial Advisers, Inc. (the
independent appraisal firm selected by the Board since 1994 to provide
appraisals) provides an appraisal of the fair market value of each class
of Common Stock as of December 1, March 1, June 1 and September 1 of
each year.
63.Q: WHAT WILL HAPPEN TO THE APPRAISAL PRICE AFTER SHARE 100?
A: There will be a new appraisal as of March 1 of the Composite Stocks and
Business Group Stocks which will be in effect for the first internal
market period following Share 100 beginning March 15. Going forward, the
Appraisal Prices of each of the Business Group Stocks will fluctuate
depending on the performance of the Business Group to which it relates,
and the Appraisal Prices of the Composite Stocks will fluctuate
depending upon the performance of the various Business Groups and other
factors affecting the Company as a whole.
64.Q: WILL THE APPRAISAL PRICE OF EACH OF THE BUSINESS GROUP STOCKS BE TOTALLY
INDEPENDENT AFTER SHARE 100?
A: No. Notwithstanding the attribution of the Company's assets and
liabilities (including contingent liabilities) and stockholders' equity
among the Business Groups for the purposes of determining the Appraisal
Prices of the Business Group Stocks, holders of each class of Business
Group Stock will be stockholders of the same Company and will continue
to be subject to all the risks associated with an investment in the
Company and all of its businesses, assets and liabilities. The
attribution and the change in the equity structure of the Company
contemplated by Share 100 will not affect title to the assets or
responsibility for the liabilities of the Company or any of its
subsidiaries. As a result, Share 100 will not affect the rights of
holders of the Company's or any of its subsidiaries' debt. The results
of operations or financial condition of any Business Group could affect
the results of operations or financial condition of the other Business
Groups and the Appraisal Prices of the Business Group Stock relating to
those Business Groups. In addition, any net losses of any Business Group
and dividends or distributions on, or repurchases of, Business Group
Stock of any Business Group will reduce the assets of the Company
legally available for payment of dividends on all classes of Common
Stock. However, the value of each Business Group Stock will be
determined primarily by the performance of the Business Group.
STOCK OPTIONS AND PURCHASE OPPORTUNITIES
65.Q: WHAT WILL HAPPEN TO MY UNEXERCISED OUTSTANDING STOCK OPTIONS AND PURCHASE
OPPORTUNITIES?
A: If you are a Continuing Holder who elects the Group Stock Consideration,
your unexercised outstanding stock options and purchase opportunities
will be converted for the same consideration
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(Business Group Stock and/or Class B Composite Stock) and in the same
proportions into which your Class B Common Stock is converted pursuant
to Share 100. If you are not a Continuing Holder who elects the Group
Stock Consideration, see "THE PLAN OF RECAPITALIZATION--Treatment of
Outstanding Options" for details of how your option or purchase
opportunities will be affected.
66.Q: WILL I RECEIVE NEW GRANT CERTIFICATES FOR MY OUTSTANDING STOCK OPTIONS
AND PURCHASE OPPORTUNITIES?
A: No. You will receive an ownership statement shortly after Share 100 that
will reflect all your shares, stock options and purchase opportunities.
EXERCISE OF PURCHASE OPPORTUNITIES/PURCHASE OF STOCK
67.Q: IF I WORK FOR ONE BUSINESS GROUP, WILL I BE ABLE TO PURCHASE SHARES OF
BUSINESS GROUP STOCK OF ANOTHER BUSINESS GROUP OR SHARES OF CLASS A
COMPOSITE STOCK?
A: No. To the extent you have purchase opportunities, you will be able to
purchase the Business Group Stock that corresponds to the Business Group
of your employment and will also be able to purchase, as part of each
purchase opportunity, some Class B Composite Stock.
68.Q: IF I AM AWARDED GRANTS IN THE FUTURE, WILL GRANTS BE FOR BUSINESS GROUP
STOCK OR COMPOSITE STOCK?
A: Generally, the grants will be for part Business Group Stock that
corresponds to the Business Group in which a management owner is
employed and for part Class B Composite Stock, and management owners who
do not work exclusively for a single Business Group, including executive
officers and other corporate staff of the Company, will receive grants
for all Class B Composite Stock.
69.Q: IF I ACCEPT A TRANSFER OF EMPLOYMENT FROM ONE BUSINESS GROUP TO ANOTHER,
COULD THE COMPANY REQUIRE ME TO EXCHANGE MY PURCHASE OPPORTUNITIES
RELATING TO MY FORMER BUSINESS GROUP FOR PURCHASE OPPORTUNITIES RELATING
TO MY NEW BUSINESS GROUP?
A: Yes. The Company would be able to require you to exchange your former
Business Group purchase opportunities for purchase opportunities
relating to your new Business Group. The exercise price per share and
the number of shares granted would be appropriately adjusted based on
the relative Appraisal Prices of the Business Group Stocks at the time
of the transfer.
70.Q: WILL MY EXISTING GRANTS HAVE THE SAME EXERCISE SCHEDULE ONCE THEY ARE
CONVERTED TO BUSINESS GROUP STOCK AND/OR CLASS B COMPOSITE STOCK?
A: Yes. Existing grants, after conversion, will have the same exercise
schedule.
71.Q: IF MY CURRENT PURCHASE OPPORTUNITIES FOR CLASS B COMMON STOCK ARE
CONVERTED INTO PURCHASE OPPORTUNITIES FOR BUSINESS GROUP STOCK AND CLASS
B COMPOSITE STOCK, WILL I BE ABLE TO EXERCISE THE PURCHASE OPPORTUNITIES
FOR BUSINESS GROUP STOCK WITHOUT ALSO EXERCISING THE PURCHASE
OPPORTUNITIES FOR CLASS B COMPOSITE STOCK?
A: No. You will be required to exercise your purchase opportunities
proportionally. For example, assume the next installment of your
purchase opportunity is for 300 shares of Class B Common Stock, and in
Share 100 it is converted into an installment for 150 shares of Business
Group Stock and 150 shares of Class B Composite Stock. If you wanted to
exercise the installment for 150 total shares, you would have to
exercise it for 75 shares of Business Group Stock and 75 shares of Class
B Composite Stock. The Company will make rounding adjustments to avoid
the need to exercise for fractional shares.
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72.Q:WILL I BE ABLE TO PURCHASE SHARES THE SAME WAY I HAVE IN THE PAST?
A: Yes. The Company will distribute a prospectus to you prior to the
exercise periods and you should follow the instructions in the
prospectus.
73.Q: HOW WILL I KNOW WHAT THE APPRAISAL PRICE OF MY STOCK IS WHEN I EXERCISE
MY OPTION OR PURCHASE OPPORTUNITY?
A: Similar to the Company's current practice, the Company will have each
class of Business Group Stock and Composite Stock independently
appraised quarterly (December 1, March 1, June 1 and September 1) by an
independent appraiser. This information generally is communicated with
the Chairman's quarterly letter to stockholders. Additionally, recorded
updates of Appraisal Prices can be obtained by calling 1-888-96-OWNER.
74.Q: WILL I STILL HAVE TO PAY TAXES WHEN I EXERCISE?
A: Yes, just as you would if you exercised a purchase opportunity now. All
outstanding purchase opportunities are non-qualified stock options for
U.S. income tax purposes. The difference between your exercise price and
the higher Appraisal Price in effect at the time you exercise is income
to you, taxable at the time of exercise.
75.Q: CAN I STILL USE THE STOCK-FOR-STOCK EXERCISE METHOD WHEN I EXERCISE?
A: Yes. The Company will distribute to you a prospectus prior to the
exercise periods, and you should follow the instructions in the
prospectus.
76.Q: CAN I STILL BORROW TO PURCHASE THE SHARES COVERED BY MY PURCHASE
OPPORTUNITY?
A: Yes. Generally, if you wish to borrow money to purchase shares, you must
make your own financing arrangements with outside lenders. In addition,
for certain exercises of purchase opportunities, the Company's Deferred
Payment Program will also be available.
77.Q: WILL THE COMPANY INFORM ME PRIOR TO THE TIME THAT I PURCHASE STOCK FROM
THE COMPANY (THROUGH THE EXERCISE OF A PURCHASE OPPORTUNITY OR OPTION) OR
SELL STOCK TO THE COMPANY (IN THE INTERNAL MARKET OR OTHERWISE) OF ANY
PENDING OR POTENTIAL TRANSACTION THAT COULD INCREASE OR DECREASE THE
VALUE OF THE STOCK?
A: No. The Company will continue its current practice of not disclosing any
pending or potential transaction in connection with your decision to
purchase from or sell to the Company any shares of Company stock owned
by you. It is in the best interests of the Company and the stockholders
taken as a whole for the Company to be able to conduct orderly
transactions in common stock on a continual basis (including in
connection with the internal market and repurchases upon termination of
employment) and for the Company concurrently to be able to consider from
time to time on a confidential basis potential transactions that could
affect the fair market value and/or the Appraisal Price of the shares.
The Company does not make a practice of disclosing publicly its
projections or the status of any transaction that may be under
consideration.
RECENT SALES OF STOCK
78.Q: WILL THE COMPANY MAKE AN ADJUSTMENT TO THE PRICE PAID FOR ANY SHARES OF
CLASS B COMMON STOCK THAT I RECENTLY SOLD TO THE COMPANY?
A: Yes. After the implementation of Share 100, the Company will make an
adjustment to the price paid for any shares the Company repurchased in
the period between September 1, 1997 and the implementation of Share 100
(if you received the September 1 or December 1, 1997 Appraisal Price).
The amount of the adjustment will be the difference between $29.55 per
share, the Appraisal Price at
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Share 100, and the price you received. The Company will send you a check
for this amount after the implementation of Share 100.
79.Q: WILL THE COMPANY ALSO MAKE AN ADJUSTMENT FOR SHARES EXCHANGED WHEN I
EXERCISED STOCK OPTIONS OR PURCHASE OPPORTUNITIES USING THE STOCK-FOR-
STOCK METHOD DURING THAT PERIOD?
A: Yes. The amount of the adjustment will be the difference between $29.55
per share, the Appraisal Price at the implementation of Share 100, and
the Appraisal Price at the time of your exercise for all shares
exchanged when using the stock-for-stock exercise method between
September 1, 1997 and the Effective Time of Share 100. The Company will
send you a check for this amount after the implementation of Share 100.
80.Q: WHAT WILL BE THE TREATMENT OF THIS ADJUSTMENT FOR U.S. FEDERAL INCOME
TAX PURPOSES?
A: The cash payment to you should be treated as an "adjustment of purchase
price" of your shares of Class B Common Stock actually sold to the
Company or constructively sold to the Company when you exercised your
stock options or purchase opportunities using the stock-for-stock
method. As such, the payment should be treated as additional sales
proceeds received by you, generally taxable as 1998 capital gain. If you
held the stock actually or constructively for 12 months or less, the
gain will be taxed at your ordinary income tax rate; if you held the
stock more than 12 months but not more than 18 months, the gain will be
taxed at no more than 28%; and, if you held the stock more than 18
months, the gain will be taxed at no more than 20%. Your tax basis in
the new stock will be adjusted downward to reflect the cash payment.
FUTURE TRANSFERS AND SALES OF STOCK
81.Q: WILL I BE ABLE TO TRANSFER SHARES OF BUSINESS GROUP STOCK OR CLASS B
COMPOSITE STOCK?
A: Generally, the restrictions of the Stockholders' Agreement will
continue, and accordingly, you will not be able to sell or otherwise
transfer your shares of Business Group Stock or Class B Composite Stock
(other than in limited instances).
82.Q: IF MY SHARES OF CLASS B COMMON STOCK ARE CONVERTED INTO SHARES OF
BUSINESS GROUP STOCK AND CLASS B COMPOSITE STOCK, WILL I BE ABLE TO SELL
OR TRANSFER SHARES OF BUSINESS GROUP STOCK WITHOUT ALSO SELLING OR
TRANSFERRING SHARES OF CLASS B COMPOSITE STOCK?
A: No. Shares of Class B Composite Stock and Business Group Stock will have
to be sold or transferred proportionally together: generally, for each
share of Class B Composite Stock you sell or transfer, you must also
sell or transfer one share of Business Group Stock with it. The Company
will make rounding adjustments to avoid the need to sell or transfer
fractional shares.
83.Q: MAY I STILL TRANSFER SHARES FOR ESTATE OR TAX PLANNING PURPOSES?
A: Yes. As in the past, you may transfer your shares for estate or tax
planning purposes as gifts to your spouse, child, grandchild or parent,
or a trust for the benefit of any of them, or to a qualifying charitable
organization. You may also make other transfers to your family members,
their trusts or other entities if the transfer is approved by the Board.
You must, however, transfer your Class B Composite Stock and Business
Group Stock proportionally together.
84.Q: MAY I STILL PLEDGE MY SHARES?
A: Yes. As in the past, you may pledge your shares to a commercial bank or
savings and loan institution as security for your indebtedness. However,
you may do so only if the lender agrees that, upon realization of its
security, the lender will dispose of the shares only in compliance with
the terms of
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the Stockholders' Agreement. If you are eligible and elect to
participate in the Company's Deferred Payment Program, you will be
required to pledge shares to the Company.
85.Q: CAN I STILL SELL SHARES BACK TO THE COMPANY IN THE INTERNAL MARKET?
A: Yes.
86.Q: WILL THERE BE ANY CHANGE IN THE GUIDELINES OR THE TIMING OF THE INTERNAL
MARKET?
A: Yes. The general guideline will be increased, so that a management owner
may sell up to $250,000 of shares in any internal market. The timing and
other terms of the internal market will not be changed.
87.Q: WILL THE STOCK REPURCHASE POLICY CHANGE AS A RESULT OF SHARE 100?
A: No.
88.Q: WILL THE EMERGENCY BUYBACK PROGRAM STILL BE AVAILABLE?
A: Yes.
89.Q: WHAT WILL HAPPEN TO MY STOCK IF MY EMPLOYMENT IS TERMINATED?
A: The current provisions of the Stockholders' Agreement will continue to
apply. The Company will have the right to call your shares of Class B
Composite Stock and Business Group Stock. At any time during the 10
years following the termination of your employment, the Company has the
right to call any or all of your shares and any and all of the shares of
your permitted transferees.
90.Q: DO THE CALL RIGHTS STILL APPLY TO A TERMINATION OF MY EMPLOYMENT WITH
THE BUSINESS GROUP THAT IS BEYOND MY CONTROL?
A: Yes. The call rights apply to all terminations of employment with the
Company and its subsidiaries without regard to cause, including death,
permanent and complete disability, voluntary or involuntary termination
of employment and retirement.
91.Q: IF I VOLUNTARILY TERMINATE MY EMPLOYMENT, THE COMPANY HAS THE RIGHT TO
CALL MY SHARES OF COMMON STOCK. WILL THE COMPANY INFORM ME PRIOR TO THE
TIME I TERMINATE MY EMPLOYMENT OF ANY PENDING OR POTENTIAL TRANSACTION
THAT COULD INCREASE THE VALUE OF THE CLASS B COMPOSITE STOCK OR BUSINESS
GROUP STOCK?
A: No. The Company will continue its current practice of not disclosing any
pending or potential transaction in connection with your decision to
terminate your employment (or in connection with your decision to
exercise a put or in any other circumstance). It is in the best
interests of the Company and the stockholders taken as a whole for the
Company to be able to conduct orderly transactions in common stock on a
continual basis (including in connection with the internal market and
repurchases upon termination of employment) and for the Company
concurrently to be able to consider from time to time on a confidential
basis potential transactions that could affect the fair market value
and/or the Appraisal Price of the shares. The Company does not make a
practice of disclosing publicly its projections or the status of any
transaction that may be under consideration.
92.Q: WILL I BE ABLE TO REQUIRE THE COMPANY TO REPURCHASE SHARES?
A: Generally, no. However, upon your death, complete disability or normal
retirement, you or your estate, as appropriate, subject to the Company's
financing agreements, can require the Company to purchase up to 30% of
your shares. The Company will be required to purchase these shares for
cash at the current Appraisal Price for Class B Composite Stock or the
applicable class of your Business Group Stock.
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93.Q: WHO WILL SET THE STOCK REPURCHASE POLICY AND INTERNAL MARKET GUIDELINES
FOR EACH BUSINESS GROUP STOCK AND THE CLASS B COMPOSITE STOCK?
A: The Board will set the Stock Repurchase Policy and internal market
guidelines for each Business Group Stock and the Class B Composite
Stock.
DEFERRED PAYMENT PROGRAM/BANK LOANS
94.Q: WHAT WILL HAPPEN TO MY OUTSTANDING OBLIGATIONS UNDER THE DEFERRED PAYMENT
PROGRAM?
A: Any outstanding obligations under the Deferred Payment Program will
remain intact.
95.Q: WHAT WILL HAPPEN TO THOSE SHARES THAT ARE BEING HELD AS COLLATERAL BY THE
COMPANY FOR OBLIGATIONS UNDER THE DEFERRED PAYMENT PROGRAM?
A: The shares the Company is holding as collateral for obligations under
the Deferred Payment Program will be exchanged automatically for shares
of Class B Composite Stock or Business Group Stock, as applicable.
96.Q: WILL THE DEFERRED PAYMENT PROGRAM STILL BE OFFERED?
A: Yes, subject to continuing Board approval.
97.Q: WILL THE DEFERRED PAYMENT PROGRAM PROVISIONS BE CHANGED AS A RESULT OF
SHARE 100?
A: No, except for minor administrative changes that may be necessary to
reflect Share 100 and except that the Program and its terms will
continue to be subject to Board approval.
98.Q: WHAT WILL HAPPEN TO MY OUTSTANDING BANK LOANS AND THE SHARES THE BANK IS
HOLDING AS COLLATERAL?
A: The shares the bank is holding as collateral will be exchanged for
shares of Class B Composite Stock or Business Group Stock, as
applicable. Although we believe your outstanding bank loans should
remain intact, that decision will be made by your bank.
TAXES
99.Q: WILL I HAVE TO PAY ANY ADDITIONAL TAXES AS A RESULT OF SHARE 100?
A: Generally, no. If, however, you receive cash in exchange of your shares
under Share 100, you will be subject to tax on the capital gain
resulting from that exchange. The amount of that capital gain will be
the difference between your tax basis in the shares exchanged and the
price you received. Furthermore, if you receive cash as a payment
adjusting the price paid for any shares of Class B Common Stock the
Company repurchased between September 1, 1997 and the closing of Share
100, you will be subject to tax on the capital gain resulting from that
adjustment. The amount of that capital gain will be the entire amount of
the adjusting payment you receive. In addition, if you receive a cash
payment adjusting for shares exchanged when you exercised using the
stock-for-stock method, you will be subject to tax on capital gain
resulting from that adjustment. The amount of that capital gain will be
less than the entire amount of the adjusting payment you receive.
100.Q: HOW WILL I KNOW THE COST AND TAX BASIS FOR MY COMPOSITE STOCK OR
BUSINESS GROUP STOCK?
A: The basis of the Class B Common Stock you currently hold will be carried
over to the Composite Stock or Business Group Stock that you will
receive in exchange for such Class B Common Stock. Likewise, your
holding period for capital gain purposes for Class B Common Stock will
carryover to Composite Stock or Business Group Stock you receive in
exchange for it.
32
<PAGE>
101.Q: AS A NON-U.S. RESIDENT STOCKHOLDER WHO IS NOT A UNITED STATES CITIZEN,
ARE THERE ANY TAX CONSEQUENCES TO ME FROM SHARE 100?
A: Yes. A non-United States stockholder who is not a United States resident
generally should recognize no gain or loss for United States tax
purposes on the exchange of Company stock for (i) Composite Stock or
Business Group Stock or both or (ii) cash. Continued ownership of
Company stock will subject any individual holders to potential United
States estate tax upon the death of the individual. As to the possible
tax effect of the transactions under foreign tax law, each holder is
directed to seek advice from qualified foreign tax advisors.
33
<PAGE>
SUMMARY COMPARISON OF TERMS OF COMMON STOCKS
The following is a comparison of the Class A Common Stock and Class B Common
Stock (Common Stock) with the Class A Composite Stock and Class B Composite
Stock (Composite Stock) and the Education Group Stock, Food and Support Group
Stock and Uniform Group Stock (Business Group Stock). Difference in classes
within the Common Stock, Composite Stock and Business Group Stock will be
specifically noted below. This summary is qualified in its entirety by the more
detailed information contained in this Proxy Statement and the Annexes hereto.
See "PROXY STATEMENT SUMMARY," "RISK FACTORS," "SHARE 100--Certain Management
and Allocation Policies" and "DESCRIPTION OF CAPITAL STOCK." Stockholders are
urged to read carefully this Proxy Statement and the Annexes hereto in their
entirety.
<TABLE>
<CAPTION>
COMMON STOCK BUSINESS GROUP STOCK COMPOSITE STOCK
------------ -------------------- ---------------
<S> <C> <C>
BUSINESS OF THE COMPANY
All businesses of the The Business Groups are The Composite Group is
Company. comprised of the Educational generally comprised of (i) an
Resources Group, Food and interest in each Business
Support Services Group and the Group (the Inter-Group
Uniform and Career Apparel Interest), which excludes the
Group. interest represented by any
outstanding shares of Business
Group Stock, and (ii) all
other businesses in which the
Company or any of its
subsidiaries may be engaged
(other than those comprising
the Business Groups).
DIVIDENDS
The Company currently The Company currently does not The Company currently does not
does not pay dividends intend to pay dividends on the intend to pay dividends on the
on the Common Stock. Business Group Stock. Composite Stock.
The holders of shares of The dividends on any Group The holders of shares of Class
Class A Common Stock and Stock are limited to the A Composite Stock and Class B
Class B Common Stock dividends that could be Composite Stock will be
would be entitled to re- payable if it were a separate entitled to receive the same
ceive the same dividends company (Available Dividend dividends and other
and other distributions, Amount). The Board may, in its distributions, ratably, with
ratably, with the holder sole discretion, declare and the holder of one share of
of one share of Class A pay dividends exclusively on Class A Composite Stock
Common Stock entitled to any Business Group Stock, entitled to receive ten times
receive ten times what exclusively on the Composite what the holder of one share
the holder of one share Stock, or on all such classes of Class B Composite Stock is
of Class B Common Stock of common stock, in equal or entitled to receive.
is entitled to receive. unequal amounts,
notwithstanding the relative The dividends on any Group
Available Dividend Amounts, Stock are limited to the
the amount of prior dividends dividends that could be
declared on each class, the payable if it were a separate
respective voting or company (Available Dividend
liquidation rights of each Amount). The Board, subject to
class or any other factor. the limitations set forth
above, may, in its sole
discretion, declare and pay
dividends, exclusively on any
Business Group Stock,
exclusively on the Composite
Stock, or on all such classes
of
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK BUSINESS GROUP STOCK COMPOSITE STOCK
------------ -------------------- ---------------
<S> <C> <C>
common stock, in equal or
unequal amounts,
notwithstanding the relative
Available Dividend Amounts,
the amount of prior dividends
declared on each class, the
respective voting or
liquidation rights of each
class or any other factor.
VOTING RIGHTS
One vote per share. The holders of Business Group The holders of Composite Stock
Stock and Composite Stock will and Business Group Stock will
vote together as a single vote together as a single
voting group. Each Business voting group. Each Composite
Group Stock will have one vote Stock will have one vote per
per share. Upon the occurrence share. Upon the occurrence of
of an underwritten public an underwritten public
offering of any class of offering of any class of
Business Group Stock, each Business Group Stock, each
share of Business Group Stock share of Class B Composite
will thereafter have 10 votes Stock will thereafter have 10
per share; except that the votes per share.
class of Business Group Stock
that is offered in such
underwritten public offering
will continue to have one vote
per share; and except that any
class of Business Group Stock
having 10 votes per share that
is offered in a subsequent
underwritten public offering
will thereafter have one vote
per share.
CONVERSION AT OPTION OF COMPANY
The Company may, at any The Company may, at any time, The Company may, at any time,
time, convert all convert all outstanding shares convert all outstanding shares
outstanding shares of of any class of Business Group of Class B Composite Stock
Class B Common Stock Stock into a number of shares into Class A Composite Stock,
into Class A Common of Class A Composite Stock or with each outstanding share of
Stock, with each Class B Composite Stock equal Class B Composite Stock
outstanding share of to the ratio of the Appraisal converted into one-tenth of a
Class B Common Stock Price of one share of the share of Class A Composite
converted into one-tenth Business Group Stock to the Stock.
of a share of Class A Appraisal Price of one share
Common Stock. of Class A Composite Stock or If a full-time employee of the
Class B Composite Stock, as Company or any of its
applicable. subsidiaries accepts a
transfer in employment from
If a full-time employee of the one Group to another, the
Company or any of its Board may declare that all or
subsidiaries accepts a any part of the outstanding
transfer in employment from shares of any class of common
one Group to another, the stock held by such individual
Board may declare that all or or a Permitted Transferee of
any part of the outstanding such individual be converted
shares of any into
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK BUSINESS GROUP STOCK COMPOSITE STOCK
------------ -------------------- ---------------
<S> <C> <C>
class of common stock held by a number of shares of such
such individual or a Permitted other class or classes of
Transferee of such individual common stock as the Board
be converted into a number of determines.
shares of such other class or
classes of common stock as the
Board determines.
CONVERSION AT OPTION OF HOLDER
A holder of Class B During the period after shares None.
Common Stock may at any of any class of Business Group
time, but only with the Stock are called for
prior approval of the conversion as provided in
Board, convert each of paragraph 1 of "Conversion at
his or her shares into Option of Company," above, the
one-tenth of a share of holders of those shares may in
Class A Common Stock. lieu of such conversion,
convert their shares into
shares of a new class of
Business Group Stock (for
substantially the same
Business Group Stock as was
the class of Business Group
Stock being converted), if
any, that the Board may
designate for the stated
purpose of having an
underwritten public offering.
MANDATORY CONVERSION
If a holder of Class B None. None.
Common Stock ceases to
be either a director,
full-time employee of
the Company or a
Permitted Transferee
thereof, then each share
of Class B Common Stock
held by such holder
shall be converted into
one-tenth of a share of
Class A Common Stock.
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY
None. The Company may redeem any None.
class of Business Group Stock
for a number of shares of one
or more wholly owned
subsidiaries of the Company
that hold all of the assets
and liabilities attributed to
that Business Group.
LIQUIDATION
Holders of Common Stock Holders of Business Group Holders of Composite Stock
are entitled to receive Stock will be entitled to will be entitled to receive
the net assets of the receive the net assets of the the net assets of the Company,
Company, if any, Company, if any, if any, remaining for
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK BUSINESS GROUP STOCK COMPOSITE STOCK
------------ -------------------- ---------------
<S> <C> <C>
remaining for remaining for distribution to distribution to holders of
distribution to holders holders of common stock, common stock, ratably with the
of Common Stock, ratably with the holders of holders of Business Group
ratably, with the holder Composite Stock, with the Stock, with the holder of one
of one share of Class A holder of one share of Class A share of Class A Composite
Common Stock entitled to Composite Stock entitled to Stock entitled to receive ten
receive ten times what receive ten times what the times what the holder of one
the holder of one share holder of one share of Class B share of Class B Composite
of Class B Common Stock Composite Stock or Business Stock or Business Group Stock
is entitled to receive. Group Stock is entitled to is entitled to receive.
receive.
CERTAIN MANAGEMENT AND ALLOCATION POLICIES
The Company currently The Company intends to follow The Company intends to follow
has centralized certain policies with respect certain policies with respect
management of most to the allocation to the to the allocation to the
financial activities, Groups of principal corporate Groups of principal corporate
does not allocate activities, including (i) the activities, including (i) the
Company indebtedness to centralized management of most centralized management of most
its business segments, financial activities, (ii) the financial activities, (ii) the
partially allocates to allocation of Company allocation of Company
its business segments indebtedness either among the indebtedness either among the
corporate general and Groups or in its entirety to Groups or in its entirety to
administrative costs, one Group, (iii) the one Group, (iii) the
and does not generally accounting for transfers of accounting for transfers of
allocate to its business cash or other property from cash or other property from
segments federal income one Group to another Group, one Group to another Group,
taxes and tax benefits. (iv) the financial impacts of (iv) the financial impacts of
issuances of additional shares issuances of additional shares
of Business Group Stock or of Composite Stock or Business
Composite Stock, (v) the Group Stock, (v) the
allocation of corporate allocation of corporate
general and administrative general and administrative
costs, and (vi) the allocation costs, and (vi) the allocation
of federal income taxes and of federal income taxes and
tax benefits. tax benefits.
STOCKHOLDERS OF ONE COMPANY
- -- Holders of Business Group Holders of Composite Stock
Stock will continue to be will continue to be subject to
subject to the risks the risks associated with an
associated with an investment investment in the Company and
in the Company and all of its all of its businesses, assets
businesses, assets and and liabilities. Financial
liabilities. Financial effects effects arising from any of
arising from the Composite the Business Groups that
Group that affect the affect the Company's results
Company's results of of operations or financial
operations or financial condition could, if
condition could, if significant, affect the
significant, affect the results of operations or
results of operations or financial position of the
financial position of any of Composite Group or the market
the Business Groups or the price of the Composite Stock.
market price of any class of
Business Group Stock.
</TABLE>
37
<PAGE>
RISK FACTORS
Stockholders should carefully consider all of the information set forth in
this Proxy Statement and, in particular, the specific risk factors described
below.
STOCKHOLDERS OF ONE COMPANY; FINANCIAL EFFECTS ON ONE GROUP COULD AFFECT
ANOTHER
Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and stockholders' equity among the Groups, holders of
Group Stock will be stockholders of the Company and will continue to be
subject to all of the risks associated with an investment in the Company and
all of its businesses, assets and liabilities. Such allocation and the change
in the equity structure of the Company contemplated by Share 100 will not
affect title to the assets or responsibility for the liabilities of the
Company or any of its subsidiaries. As a result, the implementation of Share
100 will not affect the rights of holders of any debt of the Company or its
subsidiaries. Financial impacts arising from any of the Groups that impact the
Company's results of operations or financial condition could impact the
results of operations or financial condition of the other Groups and the
Appraisal Price of the Group Stocks. In addition, any net losses of any of the
Groups and dividends or distributions on, or repurchases of, any Group Stock
will reduce the legally available funds of the Company available for payment
of dividends on all of the Group Stock. Accordingly, the Company's
consolidated financial statements should be read in conjunction with the
supplemental pro forma selected financial information of each of the Business
Groups.
If Share 100 is approved by the stockholders and implemented by the Board,
the Company will provide, to holders of each Group Stock, financial
statements, management's discussion and analysis of financial condition and
results of operations, business descriptions and other information for the
consolidated Company and supplemental selected financial information for each
of the Business Groups.
LIMITED SEPARATE STOCKHOLDER VOTING RIGHTS; EFFECTS ON VOTING POWER
Under Share 100, holders of each Group Stock would not be provided any
rights specifically related to their corresponding Group or have any right to
vote on matters as a separate class, other than separate voting rights in
limited circumstances as required by the DGCL. Separate meetings for the
holders of any Group Stock would not be held.
Under Share 100, holders of all Group Stock would vote as one class on all
matters coming before any meeting of stockholders and would not have any
separate class voting rights except in limited circumstances as required by
the DGCL. Under the DGCL, the holders of the outstanding shares of a class are
entitled to vote as a class upon a proposed amendment to a corporation's
certificate of incorporation, whether or not entitled to vote on such
amendment by the certificate of incorporation, if the amendment would change
the authorizing number of shares or the par value of such class or would alter
or change the powers, preferences or special rights of such class so as to
affect them adversely. For this purpose, if a proposed amendment would alter
or change the powers, preferences or special rights of one or more classes so
as to affect them adversely, but would not so affect any other classes, then
only the shares of the class so affected by the amendment would be entitled to
vote as a separate class on the amendment.
Certain matters on which holders of Group Stock would vote together as a
single class could involve a divergence or the appearance of a divergence of
interests between the holders of different Group Stocks. For example, the
Restated Charter does not require that a merger or consolidation of the
Company requiring the approval of the Company's stockholders be approved by a
separate vote of holders of any classes of Common Stock. As a result, if
holders of any one or more classes of the Common Stock that possess the
requisite voting power vote to approve the merger or consolidation, the merger
or consolidation could be consummated even if the holders of a majority of
some other class of Common Stock vote against the merger or consolidation. See
"--Potential Diverging Interests" and "--Allocation of Proceeds of Mergers."
38
<PAGE>
If Share 100 is approved by stockholders, each Group Stock will have one
vote per share. Upon the occurrence of an underwritten public offering by the
Company of any class of Business Group Stock, however, each share of Class B
Composite Stock and Business Group Stock will thereafter have 10 votes per
share; provided that the class of Business Group Stock that is offered in the
underwritten public offering will thereafter continue to be entitled to one
vote per share; provided, further, that any class of Business Group Stock
having ten votes per share that is offered in a subsequent underwritten public
offering will, after the consummation of such underwritten public offering, be
entitled to one vote per share. See "DESCRIPTION OF CAPITAL STOCK--Capital
Stock After the Effective Time--Composite Stock and Business Group Stock--
Voting Rights."
FIDUCIARY DUTIES OF THE BOARD OF DIRECTORS ARE TO ALL STOCKHOLDERS REGARDLESS
OF CLASS OR SERIES
Under Delaware law, the Board has a duty to act with due care and in the
best interests of all the Company's stockholders, including the holders of all
Group Stocks. The existence of the various Group Stocks may give rise to
occasions when the interests of the holders of different Group Stocks may
diverge or appear to diverge. See "--Potential Diverging Interests." The Board
will address and resolve any issues involving material divergence of interests
between the holders of different Group Stocks.
Although the Company is not aware of any precedent concerning the manner in
which principles of Delaware law would be applied in the context of a capital
structure involving multiple classes or series of capital stock the rights of
which include terms designed to reflect the separate performance of specified
businesses, principles of Delaware law provide that a board of directors must
act in accordance with its good faith business judgment of the corporation's
best interests, taking into consideration the interests of all stockholders
regardless of class or series. Under these principles of Delaware law and the
"business judgment rule," a good faith determination made by a disinterested
and adequately informed board of directors with respect to any matter having a
disparate impact upon any Group Stock would be a defense to any challenge to
such determination made by or on behalf of any of such groups of holders.
Nevertheless, a Delaware court hearing a case involving such a challenge may
decide to apply principles of Delaware law other than those discussed above,
or may fashion new principles of Delaware law, in order to decide such a case,
which would be a case of first impression. There may arise circumstances
involving a divergence of interests in which the Board is held to have
properly discharged its responsibilities to act with due care and in the best
interests of the Company and all of its stockholders, but in which holders of
any of the Group Stocks consider themselves to be disadvantaged relative to
another class. In such a case, under the general principles of Delaware law
discussed above, such holders would not have any other remedy under Delaware
law with respect to the circumstances giving rise to the divergence of
interests.
POTENTIAL DIVERGING INTERESTS
The existence of separate classes of common stock could give rise to
occasions when the interests of the holders of different Group Stocks diverge
or appear to diverge. Examples include determinations by the Board to (i) pay
or omit the payment of dividends on any Group Stock, (ii) allocate
consideration to be received by holders of each of the classes of common stock
in connection with a merger or consolidation involving the Company, (iii)
convert one class of common stock into shares of another class of common
stock, (iv) approve certain dispositions of assets attributed to any Group,
(v) so long as there is an Inter-Group Interest, allocate the proceeds of
issuances of a Business Group Stock either to the Composite Group in respect
of its Inter-Group Interest or to such Business Group and (vi) make
operational and financial decisions with respect to one Group that could be
considered to be detrimental to another Group, including whether to make
transfers of funds among Groups. When making decisions with regard to matters
that create potential diverging interests, the Board would act in accordance
with the terms of the Restated Charter, the management and allocation policies
described in "SHARE 100--Certain Management and Allocation Policies" to the
extent applicable and its fiduciary duties. See "--Fiduciary Duties of the
Board of Directors Are to All Stockholders Regardless of Class or Series." The
Board could also from time to time refer matters involving such conflict
issues to an existing committee or one or more new committees of the Board and
have such committee or committees report to the Board on such matters or
decide such matters to the extent permitted by the bylaws and applicable law.
Specific potential conflicts of interests are discussed below under separate
headings.
39
<PAGE>
NO ASSURANCE OF PAYMENT OF DIVIDENDS
The Board does not intend currently to pay dividends on any class of Group
Stock. Determinations as to the future dividends on any of the Group Stocks
would be based primarily upon the financial condition, results of operations
and business requirements of the relevant Group and the Company as a whole.
Dividends on any of the Group Stocks, if any, would be payable out of the
lesser of (i) all assets of the Company legally available for the payment of
dividends and (ii) the Available Dividend Amount with respect to the relevant
Group. The holders of shares of Class A Composite Stock and Class B Composite
Stock shall be entitled to receive the same dividends and other distributions,
ratably with the holder of one share of Class A Composite Stock entitled to
receive ten times what the holder of one share of Class B Composite Stock is
entitled to receive. Subject only to such limitations, the Board reserves the
right to declare and pay dividends on the Class A Composite Stock, Class B
Composite Stock, Education Group Stock, Food and Support Group Stock and
Uniform Group Stock in any amount and could, in its sole discretion, declare
and pay dividends exclusively on any or all of such Group Stocks, in equal or
unequal amounts, notwithstanding the relative Available Dividend Amounts, the
amount of prior dividends declared on each class, the respective voting or
liquidation rights of each class or any other factor. In addition, net losses
of any Group, dividends and distributions on any Group Stock and any
repurchases of any Group Stock would reduce the assets of the Company legally
available for future dividends on all Group Stocks. See "SHARE 100--Dividend
Policy" and "DESCRIPTION OF CAPITAL STOCK--Capital Stock After the Effective
Time--Composite Stock and Business Group Stock--Dividends."
ALLOCATION OF PROCEEDS OF MERGERS
The Restated Charter will not contain any provisions governing how
consideration to be received by holders of Common Stock in connection with a
merger involving the entire Company is to be allocated among holders of
different classes of Common Stock. In any such merger, the percentage of the
consideration to be allocated to holders of any class of Common Stock will be
determined by the Board and may be materially more or less than that which
might have been allocated to such holders had the Board chosen a different
method of allocation. See "--Limited Separate Stockholder Voting Rights;
Effects on Voting Power."
OPTIONAL CONVERSION OF CLASS OF COMMON STOCK
The Board could, in its sole discretion, determine to convert shares of any
of the Business Groups into shares of Class A Composite Stock or Class B
Composite Stock at any time. Any such determination could be made at a time
when either or both of the Class A Composite Stock or Class B Composite Stock
or such class of Business Group Stock may be considered to be overvalued or
undervalued. In determining whether to convert one class of Business Group
Stock into Class A Composite Stock or Class B Composite Stock, the Board would
act in accordance with its good faith business judgment that any such
conversion is in the best interests of the Company, taking into consideration
the interests of all common stockholders, including both the holders of the
class of Business Group Stock being converted and the holders of Class A
Composite Stock or Class B Composite Stock into which it is to be converted.
See "DESCRIPTION OF CAPITAL STOCK--Capital Stock After the Effective Time--
Composite Stock and Business Group Stock--Conversion and Redemption."
DISPOSITION OF GROUP ASSETS
As long as the assets of a Group continue to represent less than
substantially all of the properties and assets of the Company, the Board may
approve sales and other dispositions of all or any amount of the properties
and assets of such Group without stockholder approval, because under the DGCL
stockholder approval is required only for a sale or other disposition of all
or substantially all of the properties and assets of the entire Company. The
appropriate disposition of proceeds would be subject to determination by the
Board in accordance with the Restated Charter, approved allocation policies
and its fiduciary duties. See "--Fiduciary Duties of the Board of Directors
Are to All Stockholders Regardless of Class or Series."
ALLOCATION OF PROCEEDS UPON ISSUANCE OF ANY CLASS OF BUSINESS GROUP STOCK
If the Composite Group, at the time the Company issues any shares of any
class of Business Group Stock, holds an inter-group interest representing an
interest in the equity value of any of the Business Groups (an "Inter-
40
<PAGE>
Group Interest"), the Board would, in its sole discretion, determine whether
to allocate all or any portion of the proceeds of such issuance to the
applicable Business Group or to the Composite Group. To the extent the net
proceeds of such issuance of shares of the Business Group Stock are allocated
to the applicable Business Group, the financial records of the applicable
Business Group would reflect the receipt of such proceeds. To the extent such
net proceeds are allocated to the Composite Group, the Inter-Group Interest
would be reduced. See "DESCRIPTION OF CAPITAL STOCK--Inter-Group Interest of
Composite Group in Business Groups." Any such allocation may favor one Group
at the expense of another. Any such allocation will be made by the Board in
its good faith business judgment that such allocation is in the best interests
of the Company, taking into consideration the interests of all common
stockholders. See "--Fiduciary Duties of the Board of Directors Are to All
Stockholders Regardless of Class or Series." In addition, if the Company
issues shares of any class of Business Group Stock for the account of the
Composite Group in respect of the Composite Group's Inter-Group Interest in
the applicable Business Group, the voting power of holders of shares of such
Business Group Stock immediately prior to such issuance would be diluted for
any class vote by such holders even though no consideration received for such
shares would be allocated to such Business Group. Moreover, if the Company
issues additional shares of any class of Business Group Stock, the voting
power of holders of shares of other Business Group Stock immediately prior to
such issuance would be diluted for any class vote by such holders even though
no consideration received for such shares would be allocated to such other
Business Group.
OPERATIONAL AND FINANCIAL DECISIONS
The Board could, in its sole discretion, from time to time, make operational
and financial decisions or implement policies that affect disproportionately
the businesses of any of the Groups, such as transfers of services, funds or
assets among Groups and other inter-Group transactions, the allocation of
financing opportunities in the public markets and the allocation of business
opportunities, resources and personnel that may be suitable for the Groups.
Any such decision may favor one Group at the expense of another. All such
decisions will be made by the Board in its good faith business judgment and in
accordance with procedures and policies adopted by the Board from time to
time, including the policies described under "SHARE 100--Certain Management
and Allocation Policies," to ensure that such decisions will be made in a
manner consistent with the best interests of the Company, taking into
consideration the interests of all common stockholders. For further discussion
of potential divergence of interests, see "--Fiduciary Duties of the Board of
Directors Are to All Stockholders Regardless of Class or Series," "--
Allocation of Financing Costs; Transfers of Funds Among Groups; Equity
Contributions," and "SHARE 100--Certain Management and Allocation Policies."
MANAGEMENT AND ALLOCATION POLICIES SUBJECT TO CHANGE
The Company's policies described herein with respect to dividends, the
allocation of corporate expenses, assets and liabilities, the allocation of
proceeds of sales of each class of Group Stock and other matters may be
modified or rescinded, or additional policies may be adopted, in the sole
discretion of the Board without approval of the stockholders, although the
Board has no present intention to do so. Any determination of the Board to
modify or rescind such policies, or to adopt additional policies, including
any such decision that would have disparate impacts upon holders of any class
of Group Stock, would be made in accordance with the Board's good faith
business judgment of the best interests of the Company, taking into
consideration the interests of all common stockholders. See "--Potential
Diverging Interests."
ALLOCATION OF FINANCING COSTS; TRANSFERS OF FUNDS AMONG GROUPS; EQUITY
CONTRIBUTIONS
As described under "SHARE 100--Certain Management and Allocation Policies,"
most financial activities will be managed by the Company on a centralized
basis. Such financial activities include cash management and the issuance and
repayment of short-term and long-term debt. In the event that cash or other
property allocated to one Group is transferred to another Group (other than
transfers made with respect to the Inter-Group Interest upon the payment of
any dividend or other distribution on any class of Business Group Stock), such
transfer would be accounted for in one of the following ways, as determined by
the Board: (i) as a reallocation of Pooled Debt, as described under the
caption referred to above, (ii) as an increase or decrease in the Number of
Shares
41
<PAGE>
Issuable with Respect to the Inter-Group Interest, (iii) as a sale of assets
among the Groups, or (iv) as a short-term or long-term loan from one Group to
another Group. There are no specific criteria to determine which of the
foregoing would be applied to a particular transfer of cash or property from
one Group to another Group. Such determination would be made by the Board in
the exercise of its business judgment based upon all relevant circumstances,
including the financing needs and objectives of the recipient Group, the
investment objectives of the transferring Group, the availability, cost and
time associated with alternative financing sources, prevailing interest rates
and general economic conditions. Any such determination could affect the
amount of interest expense reflected in the financial records of the
applicable Group. All transfers of material assets from one Group to another
Group will be deemed to be made on a fair value basis for the foregoing
purposes, as determined by the Board.
A portion of the Company's debt may be allocated to each Group, and interest
expense will be charged to each Group, based primarily on the weighted average
interest rate of such Pooled Debt or in some instances on a specific
allocation. As a result, changes in the amount of Pooled Debt could affect
such weighted average interest rate and, therefore, could affect the interest
expense charged among the Groups in respect of their allocated portions. In
addition, in obtaining its financing through increases of its allocated Pooled
Debt, the Group receiving the proceeds would receive a "benefit" or
"detriment" to the extent such weighted average rate is lower or higher,
respectively, than the market rate for a hypothetical borrowing of debt by
such Group if such Group were a stand-alone corporation. Debt of the Company
also may be allocated in its entirety to one Group as determined by the Board.
The Board could, in its sole discretion, determine that a transfer of cash
or other property from one Group to another Group should be accounted for as a
short-term or long-term loan. The Board would establish the terms on which
loans among the Groups would be made, including interest rate, amortization
schedule, maturity and redemption terms. In the event that the Board
determines that a transfer of funds between Groups should be accounted for as
a loan, the Group receiving the funds would receive a "benefit" or "detriment"
to the extent the rate determined by the Board is lower or higher,
respectively, than the market rate for a hypothetical borrowing of debt by
such Group if such Group were a stand-alone corporation.
The Board also could, in its sole discretion, determine from time to time to
contribute, as additional equity, cash or other property of the Composite
Group to any of the Business Groups, thereby increasing the Inter-Group
Interest. Similarly, the Board could, in its sole discretion, determine from
time to time to transfer cash or other property from any of the Business
Groups to the Composite Group as a reduction in such equity, thereby
decreasing the Inter-Group Interest. Although any increase in the Inter-Group
Interest resulting from an equity contribution by the Composite Group to any
of the Business Groups or any decrease in the Inter-Group Interest resulting
from a transfer of funds from any of the Business Groups to the Composite
Group would be determined by reference to the then current Appraisal Price of
the applicable class of Business Group Stock, such changes could occur at a
time when such shares could be considered undervalued or overvalued. The
holders of outstanding shares of any class of Business Group Stock would not
have an opportunity to participate in a similar transaction.
ABSENCE OF APPROVAL RIGHTS WITH RESPECT TO FUTURE ISSUANCES OF AUTHORIZED
SHARES
The authorized but unissued shares of capital stock would be available for
issuance from time to time by the Company at the sole discretion of the Board
for any proper corporate purpose. Such issuances could include shares of any
class of Group Stock, as well as the issuance of such shares upon the
conversion or exercise of securities of the Company that are convertible into
or exercisable or exchangeable for such shares. The approval of the
stockholders of the Company will not be sought by the Company for the issuance
of authorized but unissued shares of any class of Group Stock (or the
reissuance of previously issued shares that have been reacquired by the
Company) or securities of the Company that are convertible into or exercisable
or exchangeable for such shares, unless deemed advisable by the Board or
required by applicable law or regulation.
LEVERAGE; EARNINGS; FINANCIAL CONDITION
Share 100 will immediately change the Company's capitalization to one that
is more highly leveraged. On a pro forma basis (assuming consummation of Share
100), at October 3, 1997, the Company would have had
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approximately $1.67 billion of short-term and long-term debt and an
approximately $63 million deficit in stockholders' equity as compared to the
approximately $1.23 billion of short-term and long-term debt and approximately
$370 million of stockholders' equity actually existing on such date. As more
fully described below, if Share 100 had occurred as of September 27, 1996 (the
prior fiscal year end), the Company would have reported, on a pro forma basis,
net income of approximately $128 million for the fiscal year ended October 3,
1997, compared to net income of approximately $146 million actually reported
for the period. The Company's ratio of earnings to fixed charges for such
period would have been 2.1x on a pro forma basis as compared to the 2.3x
actually reported. See "HISTORICAL AND PRO FORMA CAPITALIZATION" and "PRO
FORMA FINANCIAL INFORMATION."
These changes in the Company's capitalization are expected to have several
important consequences, including, but not limited to, the following: (i)
significant additional interest expense and principal repayment obligations
will be incurred by the Company, and the Company will require substantial
additional cash for required payments with respect to such obligations, (ii)
the ability of the Company to satisfy its obligations (including its
obligations to pay interest on the additional indebtedness incurred), to
reduce its debt and to increase its equity will be even more dependent than
previously upon the future performance of the Company, which will continue to
be subject to prevailing economic conditions as well as financial, business
and other factors affecting the business and operations of the Company,
including factors beyond the control of the Company, and (iii) the
indebtedness incurred and the resulting deficit in stockholders' equity could
limit the Company's ability to effect future financings and may otherwise
restrict corporate activities. See "FINANCING OF SHARE 100."
In the event that the projections for the Company's operations described
under "SHARE 100--Certain Projections" are not substantially realized, funds
needed to permit the Company to meet its obligations will have to be derived
from alternative sources. Possible alternative sources include reductions in
the Company's activities, including possible reductions in certain
expenditures or expenses of the Company. Additional funds could also be
obtained through the sale of assets, but no specific assets have been selected
as probable candidates for such sales.
Although the Company expects to continue its practice of entering into
various types of interest rate protection agreements, the Company's capital
structure after Share 100 will include approximately $440 million of
additional variable rate indebtedness, causing the Company to be more
sensitive to prevailing interest rates than prior to Share 100.
FRAUDULENT CONVEYANCE
If a court in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, were to find that, at the time the
Company issued, distributed, exchanged or redeemed the Class A Common Stock,
the Class B Common Stock and the Redeemable Transitory Participating Preferred
Stock and the cash, Installment Notes and Group Stocks in Share 100, the
Company (i) was insolvent, (ii) was rendered insolvent by reason of such
distributions, (iii) was engaged in a business or transaction for which the
assets remaining with the Company constituted unreasonably small capital or
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay as such debts matured, such court could void the distributions
to stockholders and require that such holders return the same (or equivalent
amounts) to the Company or to a fund for the benefit of its creditors
(including, under certain circumstances, the banks providing a substantial
portion of the financing for Share 100). The measure of insolvency for
purposes of the foregoing will vary depending upon the law of the jurisdiction
which is being applied. Generally, however, the Company would be considered
insolvent if the fair value of the Company's assets is less than the amount of
the Company's total debts and liabilities or if the Company has incurred debt
beyond its ability to repay as such debt matures. It is a condition to
consummation of Share 100 that the Board has received an appraisal supporting
the conclusion that the fair value of the Company's assets immediately
following Share 100 will exceed its liabilities. See "SHARE 100--Opinion of
HLHZ." In addition, the Board and management believe that the Company will be
able to repay its debt as it matures following Share 100, as shown in the
projections set forth in "SHARE 100--Certain Projections." See also "SHARE
100--Opinion of HLHZ" and "PRO FORMA FINANCIAL INFORMATION."
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CERTAIN ACCOUNTING TREATMENT
As described under "PRO FORMA FINANCIAL INFORMATION," Share 100 will be
accounted for as a redemption of shares not subject to purchase accounting.
Accordingly, notwithstanding receipt of the appraisals described herein, the
Company's assets will be reflected on the Company's consolidated financial
statements after Share 100 at their historical cost and will not, for
accounting purposes, be adjusted to reflect their then current fair market
value. As a result of this accounting treatment, had Share 100 been
consummated as of October 3, 1997, the Company would have had a deficit in
stockholders' equity of approximately $63 million, as shown in the Company's
pro forma consolidated balance sheet at October 3, 1997 contained in "PRO
FORMA FINANCIAL INFORMATION." See also "SHARE 100--Certain Projections."
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THE ANNUAL MEETING
This Proxy Statement and the enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board for use at the Annual
Meeting to be held on the Sixteenth Floor of ARAMARK Tower, 1101 Market
Street, Philadelphia, Pennsylvania, on February 10, 1998, at 12:00 P.M.,
Philadelphia time, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
On December 29, 1997, the date for determining stockholders entitled to vote
at the meeting, 1,957,245 shares of Class A Common Stock and 20,416,777 shares
of Class B Common Stock were outstanding and entitled to vote held by an
aggregate of approximately 1,668 stockholders of record. Each such share of
Common Stock entitles the holder thereof to one vote on each matter on which
such class of Common Stock is entitled to vote. Any shareholder giving a proxy
may revoke it at any time before it is voted by delivering another later dated
proxy or written notice of revocation to the Company's Secretary at or before
the Annual Meeting or by attending and voting in person at the Annual Meeting.
A proxy, if executed and not revoked, will be voted for each of the proposals
described herein, unless it contains specific instructions to the contrary, in
which event it will be voted in accordance with such instructions. The persons
named in the proxy also may vote in favor of a proposal to adjourn the Annual
Meeting to a subsequent date or dates without further notice, in order to
solicit and obtain sufficient votes to approve the matters being considered at
the Annual Meeting. If a proxy is returned which specifies a vote against a
proposal, such discretionary authority will not be used to adjourn the Annual
Meeting in order to solicit additional votes in favor of such proposal.
A majority of the votes entitled to be cast on matters to be considered at
the Annual Meeting constitutes a quorum. If a share is represented for any
purpose at the Annual Meeting, it is deemed to be present for quorum purposes
and for all other matters as well. Abstentions are included in determining the
number of votes present or represented at the Annual Meeting.
Proposal 1 (the Reclassification of the Class A Common Stock) requires the
affirmative vote of the holders of a majority of the outstanding Class A
Common Stock voting as a single class and the affirmative vote of the holders
of a majority of the outstanding Common Stock voting as a single class.
Proposal 2 (the Merger) requires the affirmative vote of the holders of a
majority of the outstanding Class B Common Stock voting as a single class and
does not require the vote of the holders of Class A Common Stock. Proposal 3
(the adoption of the Charter Amendments) requires the affirmative vote of the
holders of a majority of the outstanding Common Stock voting as a single
class, and the Continuing Common Stock Amendment also requires the affirmative
vote of the holders of the outstanding Class A Common Stock and Class B Common
Stock, each voting as a single class. Proposal 4 (Amendments to the
Stockholders' Agreement) requires the affirmative vote by Management Investors
who hold (in combination with their Permitted Transferees) at least a majority
of the Common Stock held by Management Investors and their Permitted
Transferees. Accordingly, the votes by Management Investors for the
Stockholders' Agreement Amendment will be binding on their Permitted
Transferees, notwithstanding a different vote by such Permitted Transferees.
Before holding the vote on Proposals 1 and 3, the Company will determine,
based upon a preliminary count of proxies received by the Company with respect
to Proposals 2 and 4, whether the Company expects Proposals 2 and 4 to be
approved at the Annual Meeting by the holders entitled to vote thereon. If the
Company expects such approval, the votes on Proposals 1 and 3 will be taken.
If Proposals 1 and 3 are approved by the stockholders, the Company will
implement the Charter Amendments and the Reclassification prior to any further
votes on the other Proposals. The vote on Proposal 2 (the Merger) and Proposal
4 (the Stockholders' Agreement Amendment) will be taken after the
Reclassification. After the Reclassification, the Class A Common Stock will
not be outstanding. Accordingly, the Class A Common Stock will not be entitled
to vote on the Merger or the amendments to the Stockholders' Agreement because
it will not be outstanding at the time of the vote. The affirmative vote of
the holders of a plurality of the shares of Common Stock present or
represented at the Annual Meeting will be required to elect the directors for
the ensuing year. Abstentions will have the effect of a vote against Proposals
1, 2, 3 and 4 but will have no effect on the election of the directors for the
ensuing year.
Each of the proposals relating to Share 100 (Proposals 1, 2, 3 and 4) is
conditioned upon the approval, or expected approval, of the others and will
not be implemented if any such proposal is not approved, or expected
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to be approved, by stockholders. Accordingly, a vote against any one proposal,
or an abstention, will have the effect of a vote against all four of such
proposals.
Management does not intend to present, and does not have any reason to
believe that others will present, any item of business at the Annual Meeting
other than those specifically set forth in the accompanying Notice of Annual
Meeting of Stockholders. However, if other matters are presented for a vote,
the proxy agents will have the right to vote the shares represented by proxy
cards on such matters in accordance with their discretion.
Holders of Class A Common Stock and Continuing Holders of Class B Common
Stock who plan to vote their shares against Share 100 and the related
proposals should nonetheless make proper and timely Elections on the enclosed
Form of Election or proxy card in accordance with the procedures described
herein to ensure that they will receive the desired form or forms of
consideration in the event Share 100 and the related proposals are ultimately
approved and become effective. See "THE PLAN OF RECAPITALIZATION--Procedure
for Holders of Shares."
The Company's directors and executive officers, and their Permitted
Transferees, all of whom have advised the Company that they intend to vote for
approval of Share 100 and the related proposals, have sole or shared voting
power with respect to approximately 46% of the outstanding Class B Common
Stock. The parent of Goldman Sachs, Chase and certain individual stockholders,
who have advised the Company that they intend to vote for approval of Share
100 and the related proposals, have sole or shared voting power with respect
to approximately 17% of the outstanding Class A Common Stock. The trustees of
the Benefit Plans, who have preliminarily indicated their intention to vote
for approval of Share 100 and the related proposals, have voting power with
respect to approximately 47% of the outstanding Class A Common Stock. See
"SHARE 100--Interests of Certain Persons in Share 100" and "SECURITY OWNERSHIP
BEFORE AND AFTER SHARE 100."
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SHARE 100
GENERAL
At the Annual Meeting, holders of the Common Stock will be asked to consider
and approve various elements of the Plan of Recapitalization which
contemplates the recapitalization of the Company and certain transactions and
other matters. Share 100 involves (i) the Reclassification of the Company's
Class A Common Stock as a result of which each share of Class A Common Stock
will be reclassified into a new series of redeemable preferred stock, which
will then be redeemable pursuant to its terms for: (a) $347.50 ($34.75 on a
Class B equivalent share basis) in cash (Class A Cash Consideration); or (b)
at the election of the holder, in lieu of the Class A Cash Consideration,
$347.50 ($34.75 on a Class B equivalent share basis) principal amount of
Installment Notes (Notes Consideration), subject to certain Suitability
Requirements described in "THE PLAN OF RECAPITALIZATION--Procedure for Holders
of Shares--Certain Suitability Requirements" and the treatment of fractional
amounts described in "THE PLAN OF RECAPITALIZATION--Procedure for Holders of
Shares--Treatment of Fractional Shares" (Proposal 1) and (ii) the merger of a
newly incorporated, wholly-owned subsidiary of the Company with and into the
Company, pursuant to which each share of Class B Common Stock issued and
outstanding immediately prior thereto will be converted into the right to
receive (a) $29.55 in cash (Class B Cash Consideration) or (b) at the election
of any Continuing Holder of Class B Common Stock and based upon employment
status, one or more of the following classes of common stock (Group Stock
Consideration): (1) Education Group Stock; (2) Food and Support Group Stock;
(3) Uniform Group Stock; and (4) Class B Composite Stock (Proposal 2).
The Company will redeem the Redeemable Transitory Participating Preferred
Stock immediately after the Reclassification Effective Time, and this Proxy
Statement constitutes the applicable notice of redemption. Holders of the
Class A Common Stock who are Former Managers or Company Benefit Plans will be
offered the opportunity to voluntarily exchange certain of their Class A
Common Stock, on a share for share basis, for Class A Composite Stock pursuant
to the Class A Stock Exchange. The shares of Class A Composite Stock received
by Former Managers will be subject to the Stockholders' Agreement. The Class A
Stock Exchange will be consummated immediately prior to the Reclassification
Effective Time.
In the Merger, Holders of Class B Common Stock, other than Magazine and Book
Employees (the "Continuing Holders"), will be entitled to elect, in lieu of
the Class B Cash Consideration, the Group Stock Consideration. Each Management
Investor and all of his or her Permitted Transferees: (a) will be deemed to
have made such election for all of their shares if such election is made by
the holders of 50% or more of the Class B Common Stock owned by those persons;
or (b) will be deemed not to have made such election for any of their shares
if such election is made by holders of less than 50% of the Class B Common
Stock owned by those persons. It is a condition to Share 100 that Continuing
Holders of no more than $25 million of the Class B Common Stock (valued at
$29.55 per share) be entitled to receive the Class B Cash Consideration or
perfect their Dissenters' Rights with respect to such shares under Section 262
of the DGCL. See "THE PLAN OF RECAPITALIZATION--Treatment of Magazine and Book
Employees" for information related to Magazine and Book Employees.
The Business Group Stocks are intended to reflect separately the performance
of each of the Business Groups. The Composite Stock reflects the "residual"
interest in each of the Business Groups and any other businesses or
investments of the Company or any of its subsidiaries (Composite Group).
In the Merger, the Class B Common Stock held by Continuing Holders who have
elected Group Stock Consideration will be converted, on a share-for-share
basis, into the right to receive the Group Stock Consideration based on
employment status, as determined by the Board, as follows: (i) Education Group
Employees will receive 50% Education Group Stock and 50% Class B Composite
Stock; (ii) Food and Support Group Employees will receive 50% Food and Support
Group Stock and 50% Class B Composite Stock; (iii) Uniform Group Employees
will receive 50% Uniform Group Stock and 50% Class B Composite Stock; and (iv)
Corporate Employees will receive 100% Class B Composite Stock. See "THE PLAN
OF RECAPITALIZATION--The Merger."
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Former Managers who fail to participate in the Class A Stock Exchange will
have all of their Class A Common Stock called by the Company. According to the
terms of the Stockholders' Agreement, the purchase price for such shares of
Class A Common Stock will be $29.55 per share (on a Class B equivalent share
basis). See "THE PLAN OF RECAPITALIZATION--Cash-Out of Former Managers."
Any holder of Class A Common Stock (other than a Former Manager) who makes a
Class A Election for the Class A Cash Consideration or the Notes Consideration
will also be entitled to a contingent cash payment in excess of the Class A
Cash Consideration or Notes Consideration, if within two years from the
Effective Time the Company engages in certain corporate transactions. See "THE
PLAN OF RECAPITALIZATION--Certain Contingent Payments."
As part of Share 100, stockholders also will be asked to consider and
approve five related proposals to further amend the Certificate of
Incorporation: (i) to increase the number of shares of common stock authorized
for issuance from 175,000,000 to 200,000,000 in order to provide greater
assurance that a sufficient number of shares would be available in the event
of a conversion of a class of Business Group Stock into Class A Composite
Stock or Class B Composite Stock (Increased Capital Amendment); (ii) to give
the Board of Directors of the Company the authority to issue common stock in
series (which may be referred to as separate classes) and to fix the terms of
such series, which authority will be used initially by the Board to create the
Group Stocks in connection with Share 100 (the Board Authority Amendment);
(iii) in order to give effect to Share 100, to amend the terms of the Class A
Common Stock and Class B Common stock by reducing the number of authorized
shares and by making conforming changes to defined terms and cross-references
(the Continuing Common Stock Amendment); (iv) to provide that, upon the
consummation of any future public offering of the Company's common stock,
stockholder action may be taken only at an annual meeting of stockholders or
at a special meeting of stockholders, and stockholder action by written
consent shall be prohibited (Stockholder Action Amendment); and (v) to provide
that, upon the consummation of any future underwritten public offering of the
Company's common stock, the Board shall be classified into three classes, each
of which, after a transitional arrangement, will serve for three years, with
one class being elected each year (Classified Board Amendment) (Proposal 3).
Share 100 also contemplates certain amendments to, and the restatement of,
the Stockholders' Agreement, which amendments are designed to give effect to,
and take account of, Share 100 (Proposal 4). Additionally, implementation of
Share 100 will result in the termination of the Registration Rights Agreement
because after Share 100, all holders of Class A Common Stock who are a party
to the Registration Rights Agreement will no longer own any of the Company's
Common Stock.
If Share 100 is approved, the Company will file with the Secretary of State
of the State of Delaware the Share 100 Certificates to effect Share 100. The
Certificate of Designations to be filed will contain the provisions set forth
in Parts 4A and 4C of Article FOURTH of the Restated Charter, the
Reclassification Certificate to be filed will contain the provisions set forth
in the third paragraph of Article FOURTH of the Restated Charter and the
Amendment Certificate to be filed will contain the provisions set forth in (i)
the first, second and fourth paragraphs and Part 4D of Article FOURTH, (ii)
Part 5C of Article FIFTH and (iii) Article SIXTH of the Restated Charter. At
any time prior to filing any of the Share 100 Certificates with the Secretary
of State of the State of Delaware, including after adoption of any portion of
Share 100 by the Company's stockholders, the Board may abandon the
transactions to be effected by any such Share 100 Certificate without further
action by the stockholders. After implementation of Share 100, the Company
will file the Restated Charter integrating the provisions effected by the
Share 100 Certificates into a single instrument.
The authorized but unissued shares of Group Stock would be available for
issuance by the Company, from time to time, as determined by the Board, for
any proper corporate purpose, which could include raising capital, paying
stock dividends, providing compensation or benefits to employees or acquiring
other companies or businesses. The approval of the stockholders of the Company
will not be solicited by the Company for the issuance from the authorized but
unissued shares of Group Stock of additional shares of Composite Stock or
Business Group Stock unless such approval is deemed advisable by the Board or
is required under the DGCL.
BACKGROUND AND REASONS FOR SHARE 100
Share 100 was adopted by the Board following its review of various
alternatives designed to eliminate the equity interests of outside
stockholders in the Company and to align more closely the investment interests
of
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management owners with the performance of the Groups for which they work. The
Board believes the issuance of Group Stock best accomplishes the objective of
aligning management owners' investment interests with the performance of the
respective Groups for which they work. During the 1997 fiscal year, senior
members of the Company's management began preliminary discussions with J.P.
Morgan and with Goldman Sachs and Outside Stockholders ("Outside Stockholders"
are holders of Class A Common Stock other than Company Benefit Plans and
Former Managers) regarding the possible means of achieving the foregoing
objectives. Goldman Sachs and J.P. Morgan historically have been financial
advisors to the Company. An affiliate of J.P. Morgan is an agent under the
Company's Bank Facility. The parent of Goldman Sachs is a substantial holder
of Class A Common Stock. Subsequently, members of the Company's senior
management also held discussions with representatives of certain other
substantial Outside Stockholders concerning these matters.
The Company's senior management considered several alternatives for
achieving its objectives, including continuing current operations without
change or spinning off and/or breaking up pieces of the Company. As a result
of studying these alternatives, and discussing them with the Company's
advisors and certain Outside Stockholders, the Company's senior management
concluded a recapitalization of the Company would most nearly achieve all of
its objectives.
Accordingly, in early July 1997, the Company's senior management developed a
preliminary recapitalization proposal pursuant to which, among other things,
the Company would redeem from the Outside Stockholders all of their Class A
Common Stock for cash. In discussing this initial proposal with certain
Outside Stockholders, including both individuals and institutions, the
Company's management was made aware that (i) certain Outside Stockholders
desired to receive a contingent cash payment in excess of the Class A Cash
Consideration or Notes Consideration, if within two years from the Effective
Time the Company engages in certain corporate transactions, and (ii) certain
institutions were of the view that the proposed per share price should be
higher. As a result of these discussions and further discussions with certain
Outside Stockholders, and after considering the interests and concerns of all
the Company's stockholders and consulting with the Company's advisors, the
Company's senior management developed a proposed plan which, after a number of
additional interim revisions, became what is now the Plan of Recapitalization.
At a meeting held on August 12, 1997, the Board, after receiving a preliminary
report from management, encouraged management to continue its review of the
Company's alternatives with the assistance of its outside legal counsel and
financial advisors.
Among the alternatives considered were continuing current operations without
change; the spin-off of subsidiaries comprising each of the Business Groups;
the merger or sale of the Company or of the subsidiaries comprising each of
the Business Groups; the initial public offering of the Company or any
Business Group; or acquiring other businesses. None of the alternatives was
considered likely to further the objective of aligning management owners'
investment interests with the performance of the respective Groups for which
they work, while preserving the financial, strategic and operational benefits
of remaining a single corporation.
On September 22, October 20, and November 11, 1997 the Company's management,
on September 22 and October 20, 1997 the Company's legal advisors, and on
October 20, 1997 the Company's financial advisors, made presentations to the
Board concerning Share 100. On January 6, 1998 after having received and
considered more detailed and updated presentations, the Board unanimously
approved Share 100 on the terms set forth in this Proxy Statement. See "SHARE
100--Recommendation of the Board of Directors" and "--Interests of Certain
Persons in Share 100."
In arriving at its recommendation and determination that Share 100 is in the
best interests of the Company and its stockholders, the Board, with the
assistance of its financial and legal advisors, considered various strategic,
financial, legal and tax factors and identified the following as the principal
advantages of Share 100:
.Becoming a 100% employee-owned Company.
.Producing a better alignment of management objectives with business
objectives by increasing management ownership and by giving management
owners a more direct economic interest in the respective Groups for which
they work.
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.Outside Stockholders will receive, in redemption of their equity interest,
a cash payment (or, if they qualify and elect, Installment Notes, which are
designed to allow them to defer taxable gain that may be recognized as a
result of Share 100), representing a substantial premium over their
original investment in the Company.
.By remaining a single entity, the Company would continue to enjoy certain
financial, strategic and operational benefits that would not be available
if the Business Groups were separate legal entities. For example, the
Business Groups would benefit from the oversight of certain key,
experienced management personnel, administrative economies and lower
borrowing costs.
.Establishing a more market-oriented valuation of the Company's various
businesses through appraisals of each of the Business Groups.
.Facilitating comparisons between each of the Business Groups and their
competitors.
.The Company retaining the flexibility to engage in future strategic
transactions, if appropriate.
The Board also considered the following potential adverse consequences of
Share 100:
.The financing of Share 100 and its repayment will be dependent on the
Company's operations, assets, credit, cash flow and earning power and that,
as a result of Share 100, there will be an increase in the Company's long-
term indebtedness, as well as a deficit in stockholders' equity and a
decrease in net earnings and free cash flow.
.Holders of Group Stocks would continue to be subject to the risks
associated with an investment in a single company and all of the Company's
businesses, assets and liabilities. See "RISK FACTORS--Stockholders of One
Company; Financial Effects on One Group Could Affect Another."
.The potential diverging interests of the holders of the various Group
Stocks and the issues that could arise in resolving those conflicts. See
"SHARE 100--Certain Management and Allocation Policies" and "RISK FACTORS--
Potential Diverging Interests."
The Board also considered the following additional factors:
.The financial analyses and presentations of J.P. Morgan and its opinion
that (i) the consideration to be received by the holders of the Company's
Class A Common Stock in connection with the Reclassification and the Class
A Stock Exchange (whether they receive cash or Class A Composite Stock) is
fair, from a financial point of view, to such holders and (ii) the
consideration to be received by the holders of the Company's Class B Common
Stock in connection with the Merger (whether they receive cash or Group
Stock) is fair, from a financial point of view, to such holders. See "--
Opinion of Financial Advisor."
.The analyses, presentations and written solvency opinion of HLHZ. See "--
Opinion of HLHZ."
The Board determined that, on balance, the positive aspects of Share 100
outweigh any potentially adverse consequences and concluded that Share 100 is
in the best interests of the Company and its stockholders. The foregoing
discussion of the advantages, adverse consequences and other factors
considered by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of Share 100,
the Board did not quantify or assign any relative weights to the factors
considered in reaching its determination, although its individual members may
have given different weights to different factors.
In connection with its approval of Share 100, the Board, in order to isolate
certain potential conflicts of interest with respect to certain of its
members, held two separate votes. First, Share 100 was unanimously approved by
the Company's directors, with Mr. Neubauer (the Chairman and Chief Executive
Officer of the Company), Mr. Ksansnak (the Vice Chairman and a trustee for the
Company's Benefit Plans), Mr. Campbell (a trustee for the Company's Benefit
Plans) and Mr. Driscoll (who owns with his Permitted Transferees shares of
Class A Common Stock) not participating in such vote. Immediately after such
vote, Share 100 was unanimously approved by the Company's directors with all
directors participating in such vote. See "SHARE 100--Interests of Certain
Persons in Share 100" for the share ownership and other interests of the
directors in connection with Share 100.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD BELIEVES ADOPTION OF SHARE 100 (INCLUDING THE RECLASSIFICATION,
THE MERGER, THE CHARTER AMENDMENTS AND THE STOCKHOLDERS' AGREEMENT AMENDMENT
THAT CONSTITUTE A PART THEREOF) IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND, ACCORDINGLY, UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR SHARE 100, SET FORTH AS PROPOSALS 1, 2, 3 AND 4.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated August 25, 1997, J.P. Morgan was
retained by the Company to deliver a fairness opinion in connection with Share
100. No limitations were imposed by the Company upon J.P. Morgan with respect
to the investigations made or procedures followed by it in rendering its
opinions. J.P. Morgan was not, however, authorized to solicit, and did not
solicit, inquiries with respect to an acquisition of the Company or any of its
constituent businesses.
J.P. Morgan delivered its opinion to the Board on January 6, 1998, which was
confirmed in writing as of the date of this Proxy Statement, that, as of such
date, (i) the consideration to be received by the holders of the Company's
Class A Common Stock in connection with the Class A Stock Exchange and the
Reclassification (whether they receive cash or Class A Composite Stock) is
fair, from a financial point of view, to such holders and (ii) the
consideration to be received by the holders of the Company's Class B Common
Stock in connection with the Merger (whether they receive cash or Group Stock)
is fair, from a financial point of view, to such holders.
The full text of the written opinion of J.P. Morgan, which sets forth the
assumptions made, matters considered and limits on the review undertaken in
connection with rendering its opinion, is attached as Annex II to this Proxy
Statement and should be read carefully in its entirety. J.P. Morgan's written
opinion is addressed to the Board, is directed only to (i) the consideration
to be received by the holders of the Company's Class A Common Stock in
connection with the Class A Stock Exchange and the Reclassification and (ii)
the consideration to be received by the holders of the Company's Class B
Common Stock in connection with the Merger, and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote at the Annual Meeting. The summary of the opinion of J.P. Morgan
set forth in this Proxy Statement is qualified in its entirety by reference to
the full text of such opinion.
In arriving at its opinion, J.P. Morgan reviewed, among other things, (i)
this Proxy Statement, (ii) the audited financial statements of the Company for
the fiscal year ended October 3, 1997, (iii) certain publicly available
information concerning the Business Groups and of certain other companies
engaged in businesses comparable to those of the Business Groups, (iv) the
reported market prices for certain other companies' securities deemed
comparable to those of the Business Groups, (v) the terms of certain other
business transactions deemed relevant by J.P. Morgan, (vi) certain internal
financial analyses and forecasts prepared by the Company, and (vii) certain
agreements with respect to outstanding indebtedness or obligations of the
Company. J.P. Morgan also held discussions with certain members of the
management of the Company with respect to certain aspects of the Class A Stock
Exchange, the Reclassification and the Merger, the past and current business
operations of the Company, the financial condition and future prospects and
operations of the Company, the effects of the Class A Stock Exchange, the
Reclassification and the Merger on the financial condition and future
prospects of the Company, and certain other matters believed necessary or
appropriate to J.P. Morgan's inquiry. In addition, J.P. Morgan reviewed such
other financial studies and analyses and considered such other information as
it deemed appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or
that was furnished to it by the Company or otherwise reviewed by J.P. Morgan,
and J.P. Morgan has not assumed any responsibility or liability therefor. J.P.
Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P.
Morgan. In relying on financial analyses and forecasts provided to J.P.
Morgan, J.P. Morgan has assumed that they have been reasonably prepared based
on assumptions reflecting the best currently available
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estimates and judgments by management as to the expected future results of
operations and financial condition of the Company and the Business Groups.
J.P. Morgan has also assumed that the Class A Stock Exchange, the
Reclassification and the Merger will have the tax consequences described in
this Proxy Statement, and in discussions with, and materials furnished to J.P.
Morgan by, representatives of the Company, and that the other transactions
described in this Proxy Statement will be consummated as described in this
Proxy Statement. J.P. Morgan has assumed, without independent verification,
the accuracy of all legal opinions delivered to the Company by its counsel in
connection with the Class A Stock Exchange, the Reclassification and the
Merger.
J.P. Morgan's opinions are based on economic, market and other conditions as
in effect on, and the information made available to J.P. Morgan as of, the
date of its opinion. Subsequent developments may affect J.P. Morgan's written
opinion, and J.P. Morgan does not have any obligation to update, revise, or
reaffirm such opinion. J.P. Morgan expressed no opinion as to the price at
which the Company's Composite Stocks or Business Group Stocks will be
appraised or traded at any future time. J.P. Morgan expressed no opinion as to
any aspects of Share 100 other than the consideration being received by the
holders of the Company's Class A Common Stock in connection with the Class A
Stock Exchange and the Reclassification and the consideration being received
by the holders of the Company's Class B Common Stock in connection with the
Merger. J.P. Morgan expressed no opinion with respect to any repurchase of
Class A Common Stock pursuant to the Call Option or as to the value of the
Installment Notes.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion. In arriving at its opinions,
J.P. Morgan did not attribute any particular weight to any particular analysis
or factor, but rather made qualitative judgments as to the significance and
relevance of each analysis or factor.
Public Trading Multiples. Using publicly available information and financial
projections, J.P. Morgan compared selected financial data, ratios and
multiples of the Food and Support Services Group, the Uniform and Career
Apparel Group and the Educational Resources Group with similar data for
selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be analogous to these Business Groups. Although these companies were
judged by J.P. Morgan to be analogous at this time, there can be no assurance
that these same companies would be considered analogous at any time in the
future. The comparable companies selected by J.P. Morgan for the Food and
Support Services Group were Marriott International Incorporated, Servicemaster
Ltd., Morrison Health Care, Daka International, Wackenhut Corporation, Sodexho
Alliance, and Compass Group. The comparable companies selected by J.P. Morgan
for the Uniform and Career Apparel Group were Cintas Corporation, G & K
Services Incorporated, Unitog Company, Angelica Corporation, Unifirst
Corporation, and Superior Surgical Manufacturing. The comparable companies
selected by J.P. Morgan for the Educational Resources Group were Nobel
Education Dynamic Incorporated, Childtime Learning Centers Incorporated, and
Children's Discovery Centers Incorporated. These companies were selected,
among other reasons, because J.P. Morgan determined that, although there are
no publicly-traded companies with precisely the same mix of business and
financial condition as the Business Groups, the selected companies are
publicly-traded companies with operations that, for purposes of analysis, may
be considered to be similar to the operations of the relevant Business Groups.
For each comparable company, J.P. Morgan reviewed the following multiples
using the most recent publicly available information: firm value (which
includes the market value of equity and preferred stock plus debt net of cash
and marketable securities) to latest twelve months ("LTM") EBIT and to
projected 1998 and 1999 EBIT; firm value to LTM EBIT plus depreciation and
amortization ("EBITDA") and to projected 1998 and 1999 EBITDA; and equity
value (which includes the market value of equity and preferred stock) to LTM
earnings and to projected 1998 and 1999 earnings.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow
analysis for the purpose of determining a range of firm values for each of the
Business Groups. J.P. Morgan calculated the unlevered free cash flows that
each of the three Business Groups is expected to generate during fiscal years
1998 through 2003
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based upon financial projections prepared by the management of the Company.
J.P. Morgan calculated a range of terminal asset values of the three Business
Groups at the end of fiscal year 2003 by applying a perpetuity growth rate
ranging from 2.0% to 4.0% of the unlevered free cash flow of the relevant
Business Group during the final year of the 6-year period. The unlevered free
cash flows and the range of terminal asset values were then discounted to
present values using a range of discount rates from 9.0% to 10.0%, which were
chosen by J.P. Morgan based upon an analysis of the weighted average cost of
capital of the three Business Groups. The present value of the unlevered free
cash flows and the range of terminal asset values were then added to arrive at
a range of firm values for each of the three Business Groups. In addition,
J.P. Morgan performed sensitivity analyses to understand the effect on firm
values of adjustments to management projections, including adjustments to
reflect lower sales growth, lower operating margins, and higher capital
expenditures during the period.
Private Company Discounts. The estimated value of shares in a private
company is typically discounted because the shares cannot be readily sold in a
liquid public market and because the shares frequently have limited voting
rights or are subject to shareholder agreements or similar arrangements. While
financial theory does not provide any explicit formulas with which to
calculate this discount, a number of studies of sales of restricted stock and
pre-IPO transactions have established the clear existence of a private company
discount. Furthermore, the presence of a discount has been supported in IRS
tax valuations and court cases. The existence of a discount is further
supported by the valuation analysis done by professionals that specialize in
investing in private companies. J.P. Morgan applied private company discount
ranges to both the Class A Common Stock and the Class B Common Stock.
Conclusions Regarding Cash Consideration. J.P. Morgan calculated the sum of
the value ranges determined for each of the three Business Groups based on
public trading multiples and the discounted cash flow analysis described
above. In addition, J.P. Morgan valued certain other material assets and
liabilities that are not included in the three Business Groups based on
accounting book values, discounted cash flow analysis, comparable company
transaction multiples, and Company estimates. These material non-Business
Group assets and liabilities included the Distributive segment, assets and
liabilities related to Spectrum Healthcare Services, Inc., unallocated
corporate overhead expenses, and debt instruments. J.P. Morgan then calculated
the equity value per share of the Company's outstanding common stock by adding
the firm values of the Business Groups to the material non-Business Group
assets described above and subtracting the total Company debt and other
material non-Business Group liabilities described above. This yielded a range
of value for the Class A Common Stock of approximately $32.31 to $40.38 per
share, after applying the applicable private company discount for the Class A
Common Stock, and a range of value for the Class B Common Stock of
approximately $27.52 to $34.40 per share, after applying the applicable
private company discount for the Class B Common Stock.
Conclusions Regarding Stock Consideration. J.P. Morgan calculated the
percentages of the Company owned by each of the five major groups of
shareholders after giving effect to the Class A Stock Exchange and the
Reclassification, but before giving effect to the Merger. The five groups
analyzed were the remaining holders of the Class A Composite Stock, the
Corporate Employees, the Food and Support Group Employees, the Uniform Group
Employees and the Education Group Employees. These percentages reflected the
relative ownership interests of the five groups that will continue to have
equity ownership interests in the Company, but before giving effect to the
creation of the Group Stocks. J.P. Morgan then determined the percentages of
the Company owned by each of the five major shareholder groups after giving
effect to the Merger and the creation of the Group Stocks. In calculating the
post-Merger percentages, J.P. Morgan took into consideration the mix of
Business Group Stock and Composite Stock that each shareholder group will
receive in connection with the Merger and the respective value ranges of the
Business Groups determined as described above. J.P. Morgan concluded that the
percentage of the Company owned by each of the five shareholder groups would
be approximately equivalent both before and after the consummation of the
Merger. J.P. Morgan noted that the ownership percentages of the five major
shareholder groups will begin to change as the relative values of the Groups
Stock change based on the performance of the Business Groups.
The summary set forth above does not purport to be a complete description of
the analyses of data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to
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partial analysis or summary description. J.P. Morgan believes that the summary
set forth above and its analysis must be considered as a whole and that
selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and
opinion. J.P. Morgan based its analyses on assumptions that it deemed
reasonable, including assumptions concerning general business and economic
conditions and industry-specific factors. The other principal assumptions upon
which J.P. Morgan based its analyses are set forth above under the description
of each such analysis. J.P. Morgan's analyses are not necessarily indicative
of actual values or actual future results that might be achieved, which values
may be higher or lower than those indicated. Moreover, J.P. Morgan's analyses
are not and do not purport to be appraisals or otherwise reflective of the
prices at which businesses actually could be bought or sold.
As compensation for financial advisory services in connection with Share 100
and for rendering the opinion described above, the Company paid J.P. Morgan a
fee of $800,000. The Company also agreed to indemnify J.P. Morgan against
certain liabilities, including liabilities arising under the federal
securities laws, and to reimburse J.P. Morgan for its reasonable out-of-pocket
expenses, including the fees and disbursements of its counsel. In addition, an
affiliate of J.P. Morgan serves as an agent under the Company's existing Bank
Facility, and J.P. Morgan served as co-arranger of the recent refinancing of
the Bank Facility for which it received additional fees. See "--Interests of
Certain Persons in Share 100" and "FINANCING OF SHARE 100."
As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. J.P. Morgan was selected to deliver an opinion to the
Board with respect to the Class A Stock Exchange, the Reclassification and the
Merger on the basis of such experience and its familiarity with the Company.
J.P. Morgan and its affiliates maintain banking and other business
relationships with the Company and its affiliates, for which it receives
customary fees. In the ordinary course of their businesses, affiliates of J.P.
Morgan may actively trade the debt securities of the Company for their own
accounts or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
OPINION OF HLHZ
The specialty investment banking firm of Houlihan, Lokey, Howard & Zukin
Financial Advisors, Inc. ("HLHZ") has provided to the Board a written opinion
to the effect that (a) on a pro forma basis, the fair market value and present
fair saleable value of the Company's assets would exceed the Company's
liabilities including identified contingent liabilities by an amount at least
equal to the total par value of the Company's outstanding capital stock; (b)
the Company should be able to pay its debts as they become absolute and
mature, following the consummation of Share 100; and (c) the capital remaining
in the Company after Share 100 would not be unreasonably small for the
business in which the Company is engaged, as management has indicated the
business is now conducted and is proposed to be conducted following
consummation of Share 100. In rendering its opinion, HLHZ made reviews,
analyses and inquiries, including, among others, visiting the Company
headquarters, meeting with members of senior management of the Company and of
its principal businesses and conducting such other studies and investigations
as it deemed appropriate. In rendering its opinion, HLHZ relied, without
independent verification upon, among other things, certain financial
information provided by the Company and other parties, and did not make or
obtain any independent valuation of the Company's assets or properties. HLHZ's
opinion was based in part on business, economic, market and other conditions
as they existed and can be evaluated by them as of the date of the delivery of
their opinion. HLHZ's opinion and its engagement letter provide that the
opinion may not be delivered to or relied upon by any person other than the
Board and certain lenders providing financing in connection with Share 100.
HLHZ will give an update of its opinion at the implementation of Share 100.
HLHZ has substantial experience in the valuation of businesses and has
provided valuation services for the Company from time to time, including in
connection with the appraisal of the Common Stock.
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APPRAISALS OF COMMON STOCK
The Company as a matter of course obtains an appraisal of the fair market
value of its Common Stock as of December 1, March 1, June 1 and September 1 of
each year (an "Appraisal Price"). In addition, the Company has obtained
Appraisal Prices as of the implementation of Share 100. The recent quarterly
Appraisal Prices of the Class B Common Stock for the eight quarters commencing
March 1, 1996 and ending December 1, 1997 are $15.40, $15.95, $16.20, $16.70,
$17.55, $18.50, $20.00 and $24.90.
The anticipated Appraisal Price of the Common Stock, immediately before the
implementation of Share 100, is $347.50 for the Class A Common Stock ($34.75
on a Class B equivalent share basis) and $29.55 for the Class B Common Stock.
The anticipated Appraisal Price of the Group Stocks immediately after the
implementation of Share 100 is $347.50 for the Class A Composite Stock ($34.75
on a Class B equivalent share basis) and $29.55 for the Class B Composite
Stock and each of the Business Group Stocks. The difference in the anticipated
Appraisal Price of the Class A Composite Stock and the Class B Composite Stock
is due primarily to differences in liquidity which have existed since the
buyout and are anticipated to continue in the future. The Board will be
receiving an update of the appraisals on the date of the Annual Meeting.
HLHZ, a specialty investment banking firm, provided the appraisals. The
appraisals were based on the capitalization of earnings and cash flow approach
and on the basis of discounted cash flow analysis. Consideration has also been
given to the various rights, terms and features of both the Class A Common
Stock and Class B Common Stock. The appraisals as of December 1, 1997 and as
of the implementation of Share 100 were also affected by the proposal of Share
100, including the arm's-length negotiation process between senior management
and certain Outside Stockholders described above which established the amount
of the Class A Cash Consideration. The Company has used HLHZ for its quarterly
appraisals since 1994.
In rendering its appraisals, HLHZ: (i) generally holds interviews and
discussions with key senior corporate officers at the Company's corporate
headquarters in Philadelphia, Pennsylvania; (ii) reviews the history and
nature of the Company; (iii) reviews the financial data bearing upon recent
and prospective operations, including the Company's SEC 10-K and 10-Q filings,
other recent SEC filings, audited and interim financial statements, and
internal financial and operating segment data as well as long-term financial
forecasts of the Company; (iv) reviews and analyzes the Company's operating
segments and their prospects; (v) examines capital market information deemed
relevant to the assessment of investment risk return attributes of the Class A
Common Stock and Class B Common Stock; and (vi) analyzes any other factors
that it considers necessary under the circumstances. The internal data and
forecasts reviewed by HLHZ include operating results, business plans and
strategic plans for each Business Group and the Company that are not made
generally available to the stockholders of the Company.
The Company has paid fees of approximately $375,000 plus reimbursement of
certain expenses to HLHZ for the opinion referred to above and for appraisal
services rendered to the Company in connection with Share 100 and during the
12 months prior to the date of this Proxy Statement. In addition, the Company
has agreed to indemnify HLHZ against certain liabilities which it might incur
in connection with the preparation of the opinion and the appraisals referred
to above or otherwise as a result of the services which it rendered.
STRUCTURE OF SHARE 100
The use of Redeemable Transitory Participating Preferred Stock is necessary
in Share 100 because, under Delaware law, the Company may not reclassify the
Class A Common Stock directly into cash (or any combination of consideration
an element of which is cash). Certificates for Redeemable Transitory
Participating Preferred Stock will not be sent to the holders of Class A
Common Stock; in lieu thereof, cash and/or, if elected, Installment Notes will
be issued based upon the number of shares of Redeemable Transitory
Participating Preferred Stock to which such former holders of Class A Common
Stock are entitled in the Reclassification. See "THE PLAN OF
RECAPITALIZATION."
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INTERESTS OF CERTAIN PERSONS IN SHARE 100
In considering Share 100, stockholders should be aware that certain members
of the Company's management and the Board have certain interests, described
below, which present them with potential conflicts of interest in connection
with Share 100. The Board was aware of these interests when it approved Share
100 and considered them at that time among the other matters described under
"SHARE 100--Recommendation of the Board of Directors."
General. As a result of Share 100, the Company's Corporate Employees,
including directors and executive officers, will be entitled to receive one
share of Class B Composite Stock for each share of Class B Common Stock held
by them immediately prior to the Effective Time. Unlike some other Continuing
Holders of Class B Common Stock, they will not receive Business Group Stock.
Furthermore, Magazine and Book Employees will be entitled to receive only the
Class B Cash Consideration and will not be entitled to retain any equity
interest in the Company.
Holders of Class A Common Stock (including one director of the Company and
his Permitted Transferees, the Benefit Plans and all of the Outside
Stockholders), on the other hand, will be entitled ultimately to receive in
Share 100 $34.75 per share on a Class B equivalent basis in cash (or $29.55 if
such holder is a Former Manager), or, if they so elect, certain consideration
(in various combinations at their election) consisting of cash, Class A
Composite Stock (assuming such holder is a Former Manager or a Benefit Plan
and participates in the Class A Stock Exchange) and/or Installment Notes,
subject to satisfaction of the Suitability Requirements. Unlike the Continuing
Holders of Class B Common Stock, the Outside Stockholders of Class A Common
Stock will not be permitted to retain their equity interest in the Company.
For a description of the different rights, powers and limitations of the
various Group Stocks, see "DESCRIPTION OF CAPITAL STOCK--Capital Stock After
the Effective Time." For a description of the Installment Notes, see
"DESCRIPTION OF INSTALLMENT NOTES."
Share Ownership and Other Interests of Directors and Executive Officers. For
the beneficial ownership of the Company's outstanding capital stock by the
Management Investors, the Outside Stockholders and the Benefit Plans before
and after Share 100, see "SECURITY OWNERSHIP BEFORE AND AFTER SHARE 100" and
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
As indicated in the above referenced tables, all of the Company's directors
(and/or their Permitted Transferees) hold Class B Common Stock, with Messrs.
Neubauer and Ksansnak holding a significant number of Class B Common Stock
shares. In addition, Messrs. Neubauer and Ksansnak are also members of senior
management of the Company and will continue to be senior members of management
of the Company after Share 100. Mr. Neubauer played the leading role in
developing Share 100. As a result of Share 100, the relative equity ownership
and voting power of the Management Investors (including all of the directors)
will increase while the equity ownership and voting power of the Benefit Plans
will decrease and the equity ownership and voting power of the Outside
Stockholders will cease. In that connection, Share 100 will have the effect of
increasing the Management Investors' participating equity interest in the
Company from approximately 57% (representing approximately 92% of the voting
power) to approximately 80% of the outstanding participating equity of the
Company (representing approximately 97% of the voting power). After Share 100,
outstanding awards and options held by Messrs. Neubauer and Ksansnak and other
directors under the Company's stock option plans will be adjusted to provide
that all such options exercisable for Class B Common Stock will become
exercisable for Class B Composite Stock. See "THE PLAN OF RECAPITALIZATION--
Treatment of Outstanding Options."
Mr. Driscoll, who is a director of the Company, and his Permitted
Transferees hold 16,416 shares of Class A Common Stock. Such shares of Class A
Common Stock held by such persons will be entitled (if the holders qualify and
so elect) only to receive certain consideration consisting (in various
combinations at their election) of cash and/or Installment Notes which is
different from the consideration which holders of Class B Common Stock will be
entitled to receive in Share 100.
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Messrs. Campbell and Ksansnak, who are directors of the Company, also serve
as trustees for the Company's Benefit Plans, and, as such, are subject to
certain fiduciary duties which may give rise to different investment
priorities and concerns with respect to the shares held under the Benefit
Plans. As of October 3, 1997, 922,424 shares of Class A Common Stock were held
under the Benefit Plans. The trustees for the Benefit Plans are authorized to
vote the Class A Common Stock held under such Benefit Plans. Based upon, among
other things, the advice of the Benefit Plans' separate legal counsel and
financial advisor, the trustees have preliminarily indicated that they intend
to vote this Class A Common Stock held under the Benefit Plans in favor of
Share 100 and to elect to receive, for all of the Class A Common Stock held
under the Benefit Plans, approximately 30% in cash in the Reclassification and
70% in Class A Composite Stock pursuant to the Class A Stock Exchange (other
than the Magazine and Book Retirement Plan which is likely to elect all cash).
See "THE PLAN OF RECAPITALIZATION--Treatment of Employee Benefit Plans."
Other Interests. Chase Capital Partners ("Chase") is a substantial Outside
Stockholder, holding 73,520 shares of Class A Common Stock. Chase Manhattan
Bank, an affiliate of Chase, along with an affiliate of J.P. Morgan, serves as
an agent under the Company's Bank Facility. Chase Securities Inc., an
affiliate of Chase and Chase Manhattan Bank, and J.P. Morgan served as co-
arrangers of the recent refinancing of the Bank Facility. J.P. Morgan, Chase
Securities Inc. and their respective bank affiliates have received fees of
approximately $800,000 in connection with the financing of Share 100. See
"FINANCING OF SHARE 100."
Goldman Sachs and J.P. Morgan have historically provided financial advisory
services to the Company and participated in discussions with senior members of
management of the Company which influenced the development of Share 100. The
parent of Goldman Sachs is a substantial Outside Stockholder, holding 163,440
shares of Class A Common Stock. Goldman Sachs will be entitled to a fee of
$800,000 for financial advisory services to the Company in connection with
Share 100. J.P. Morgan also provided financial advisory services and a
fairness opinion to the Company in connection with Share 100 for which it
received a fee of $800,000. The Company may engage Goldman Sachs and/or J.P.
Morgan to render financial advisory services from time to time after Share 100
is consummated. See "SHARE 100--Background and Reasons for Share 100" and "--
Opinion of Financial Advisor."
For certain additional information concerning relationships and transactions
between the Company and certain of its directors, officers and stockholders,
see "ELECTION OF DIRECTORS."
CERTAIN EFFECTS OF SHARE 100
Share 100 will increase the Company's long-term indebtedness, create a
deficit balance in stockholders' equity and decrease net earnings and net cash
flow. See "RISK FACTORS" and "SHARE 100--Certain Projections," "FINANCING OF
SHARE 100" and "PRO FORMA FINANCIAL INFORMATION."
After the Effective Time, the Company will continue to be operated and
managed by its present management, under the direction of the Board,
substantially as presently managed and operated. Except for Share 100, and as
otherwise described in this Proxy Statement, there are no present plans or
proposals that would result in any material extraordinary corporate
transaction, such as a merger, reorganization, liquidation, relocation of
operations, or sale or transfer of a material amount of assets involving the
Company or its subsidiaries, or any material change in the Company's corporate
structure, business or composition of its management. See "RISK FACTORS."
CERTAIN PROJECTIONS
The following projections cover the fiscal years 1998 through 2000. The
Company does not as a matter of course publish projections as to future
results of operations or financial condition. However, in connection with
developing the terms of Share 100, certain similar projections of the
Company's future operating performance were furnished to certain Outside
Stockholders. In addition, in connection with seeking to obtain financing for
Share 100, substantially similar projections over the expected term of the
financing were furnished to certain current and prospective lending
institutions.
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THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED ON A
VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY
THE COMPANY, MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT
BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE
REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN.
For purposes of the projections, Share 100 is assumed to have occurred as of
the beginning of fiscal 1998. Other significant assumptions are discussed in
the Notes to Projections and should be carefully reviewed along with the risk
factors discussed under "RISK FACTORS." The Company does not intend in the
future to release publicly, on a periodic basis or otherwise, updates to the
projections set forth herein.
Share 100 will be accounted for as a redemption of stock not subject to
purchase accounting, and therefore, assets and liabilities will be carried at
their historical cost. The accounting principles and policies used in
preparing the projections are consistent with the accounting principles and
policies used by the Company in preparing its historical Consolidated
Financial Statements included in Annex VII hereto.
The projections should be read in conjunction with the information contained
under "HISTORICAL AND PRO FORMA CAPITALIZATION" and "PRO FORMA FINANCIAL
INFORMATION" and the Consolidated Financial Statements of the Company and
notes thereto included in Annex VII hereto.
ARAMARK CORPORATION
PROJECTIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
1998* 1999 2000
------ ------ ------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................................ $6,583 $7,142 $7,829
Income before depreciation and amortization, interest
and income taxes....................................... 564 626 691
Operating income........................................ 365 409 455
Interest, net........................................... 153 144 135
Net income.............................................. $ 123 $ 154 $ 186
FUNDS FLOW DATA:
Net income.............................................. $ 123 $ 154 $ 186
Depreciation and amortization........................... 199 217 236
------ ------ ------
Total sources......................................... $ 322 $ 371 $ 422
------ ------ ------
Net capital additions................................... $ 237 $ 225 $ 226
Change in working capital............................... 13 5 7
Other................................................... 2 45 48
------ ------ ------
Total uses............................................ $ 252 $ 275 $ 281
------ ------ ------
Cash available to service debt and acquisitions......... $ 70 $ 96 $ 141
====== ====== ======
</TABLE>
- --------
* Share 100 is assumed to have occurred as of the beginning of fiscal 1998.
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NOTES TO PROJECTIONS
(a) The projections present consolidated financial information reflecting the
impact on the Company of Share 100. The projections are based on a variety
of estimates and assumptions which, though considered reasonable by the
Company, may not be realized, and are subject to significant business,
economic and competitive uncertainties, many of which are beyond the
control of the Company. Actual results may differ materially from those
shown.
(b) For purposes of the projections, Share 100 is assumed to have occurred as
of the beginning of fiscal 1998. The projections also assume that in Share
100 all Outside Stockholders receive the Class A Cash Consideration,
approximately 75% of Former Managers by number of shares elect to receive
Class A Composite Stock pursuant to the Class A Stock Exchange and the
rest have their shares repurchased pursuant to the Stockholders'
Agreement, the Magazine and Book Benefit Plan receives the Class A Cash
Consideration, all other Benefit Plans receive 30% cash in the
Reclassification and 70% Class A Composite Stock pursuant to the Class A
Stock Exchange, all Magazine and Book Employees receive the Class B Cash
Consideration, and all Continuing Holders receive the Group Stock
Consideration.
(c) The provision for income taxes reflects a federal income tax rate of 35%
and a combined state and local rate, before federal income tax benefit, of
7%.
(d) The accounting principles and policies used in preparing the projections
are consistent with the accounting principles and policies used by the
Company in preparing its historical Consolidated Financial Statements
included in Annex VII.
DIVIDEND POLICY
The Board does not intend currently to pay dividends on any Group Stock, and
instead plans to retain future earnings, if any, for the repayment of
indebtedness and the development of each of the Groups. In the event that
dividends are paid in the future, the holders of shares of Class A Composite
Stock and Class B Composite Stock shall be entitled to receive the same
dividends and other distributions, ratably, with the holder of one share of
Class A Composite Stock entitled to receive ten times what the holder of one
share of Class B Composite Stock is entitled to receive. While the Board does
not intend currently to change the initial dividend policy regarding the Group
Stocks, it reserves the right to do so at any time and from time to time. See
"DESCRIPTION OF CAPITAL STOCK--Capital Stock After the Effective Time--
Composite Stock and Business Group Stock--Dividends."
CERTAIN MANAGEMENT AND ALLOCATION POLICIES
If Share 100 is approved by the stockholders and implemented by the Board,
the Company will prepare consolidated financial statements in accordance with
generally accepted accounting principles for the Company and supplemental
selected financial information for each of the Business Groups. The
supplemental selected financial information for each of the Business Groups
reflects the results of operations of the businesses included therein.
Consistent with the Certificate of Incorporation and relevant policies, such
Business Groups' supplemental selected financial information will include
allocated portions of the Company's corporate general and administrative costs
and other shared services. Notwithstanding such allocations, holders of each
class of Business Group Stock will continue to be subject to all of the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities. See "RISK FACTORS--Stockholders of One Company; Financial
Effects on One Group Could Affect Another."
If Share 100 is approved by the stockholders and implemented by the Board,
principal corporate activities will be allocated to the Groups based on
methods that management of the Company believes to be reasonable and will be
reflected in the Business Groups' supplemental selected financial information
as follows:
(i) Most financial activities will be managed by the Company on a
centralized basis. Such financial activities include cash management, and
the issuance and repayment of short-term and long-term debt. In the event
that cash or other property allocated to one Group is transferred to
another Group (other than
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transfers made with respect to the Inter-Group Interest upon the payment of
any dividend or other distribution on a class of Business Group Stock),
such transfer will be accounted for in one of the following ways, as
determined by the Board: (A) as a reallocation of Pooled Debt, (B) as a
short-term or long-term loan from one Group to another Group, (C) as an
increase or decrease in the Number of Shares Issuable with Respect to the
Inter-Group Interest, or (D) as a sale of assets between the two Groups.
There are no specific criteria to determine which of the foregoing would be
applied to a particular transfer of cash or property from one Group to
another Group. Such determination would be made by the Board in the
exercise of its business judgment based upon all relevant circumstances,
including the financing needs and objectives of the recipient Group, the
investment objectives of the transferring Group, the availability, cost and
time associated with alternative financing sources, prevailing interest
rates and general economic conditions. All transfers of material assets
from one Group to another Group will be made on a fair value basis for the
foregoing purposes, as determined by the Board.
(ii) Debt of the Company is either allocated among the Groups ("Pooled
Debt") or is allocated in its entirety to one Group. Cash allocated to one
Group that is used to repay Pooled Debt will decrease such Group's
allocated portion of Pooled Debt. Cash or other property allocated to one
Group that is transferred to another Group will, if so determined by the
Board, decrease the transferring Group's allocated portion of Pooled Debt
and, correspondingly, increase the recipient Group's allocated portion of
Pooled Debt. Pooled Debt bears interest at a rate based on the weighted
average interest rate of such debt calculated on a periodic basis and
applied to the average Pooled Debt balance during the period. Any expense
related to debt of the Company that is allocated in its entirety to any
Group will be allocated in whole to such Group, and any expense related to
increases in Pooled Debt will be reflected in the weighted average interest
rate of such Pooled Debt as a whole. The Board in the future could
determine to allocate interest expense on Pooled Debt on another basis. For
example, the Board could allocate interest expense on Pooled Debt based on
its estimate of the interest costs that would be incurred if the Business
Groups were separate companies.
(iii) Cash or other property allocated to one Group that is transferred
to another Group, could, if so determined by the Board, be accounted for
either as a short-term loan or as a long-term loan. The Board would
establish the terms on which loans among the Groups would be made,
including interest rate, amortization schedule, maturity and redemption
terms.
(iv) Cash or other property allocated to the Composite Group that is
contributed as additional equity to a Business Group will increase the
Number of Shares Issuable with Respect to the Inter-Group Interest. Cash or
other property allocated to a Business Group that is transferred to the
Composite Group would, if so determined by the Board, decrease the Number
of Shares Issuable with Respect to the Inter-Group Interest.
(v) All financial impacts of issuances of additional shares of any class
of Business Group Stock, the proceeds of which are attributed to such
Business Group, would be reflected entirely in the financial records of
such Business Group. All financial impacts of issuances of additional
shares of Composite Stock or additional shares of any class of Business
Group Stock, the proceeds of which are attributed to the Inter-Group
Interest of the Composite Group, would not be reflected in the financial
records of the applicable Business Group. Financial impacts of dividends or
other distributions on, and purchases of, shares of any class of Business
Group Stock will be reflected in the respective financial records of such
Business Group, except that so long as the Composite Group has an Inter-
Group Interest, the Composite Group would be credited, and the appropriate
Business Group's financial records would be charged, with an amount that is
proportionate to the aggregate amount paid in respect of any such dividend
on, or other distribution with respect to, the Business Group Stock of such
Business Group.
(vi) Corporate general and administrative costs and other shared services
are generally allocated to the Groups based upon utilization of such
services by each Group. Where determinations based on utilization alone are
impracticable, other methods and criteria that management believes to be
equitable and to provide a reasonable estimate of the cost attributable to
each Group are used.
(vii) Federal income taxes, which are determined on a consolidated basis,
are allocated to each Group in accordance with the Company's tax allocation
policy and reflected in the financial statements for each Group. In
general, the consolidated federal tax provision and related tax payments or
refunds are allocated
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among the Groups, based principally upon the financial income, taxable
income, credits and other amounts directly related to the respective Group.
Tax benefits that cannot be used by the Group generating such attributes,
but can be utilized on a consolidated basis, are allocated to the Group
that generated such benefits. As a result, the amount of federal taxes
payable or refundable allocated to the Group is not necessarily comparable
to that which would have resulted if the Group had filed a separate tax
return. State income taxes generally are computed on a separate company
basis.
The above policies may be modified or rescinded, or additional policies may
be adopted, in the sole discretion of the Board, without approval of the
stockholders, although the Board has no present plans to do so. Any
determination of the Board to modify or rescind such policies, or to adopt
additional policies, including any such decision that would have disparate
effects upon holders of any of the classes of Group Stock, would be made by
the Board in its good faith business judgment of the Company's best interests,
taking into consideration the interests of all common stockholders. See "RISK
FACTORS--Fiduciary Duties of the Board of Directors Are to All Stockholders
Regardless of Class or Series."
The Company currently has centralized management of most financial
activities, does not allocate Company indebtedness to its business segments,
partially allocates to its business segments corporate general and
administrative costs, and does not allocate to its business segments federal
income taxes and tax benefits.
Decisions as to such allocations are typically made by the Company's
corporate financial personnel under the overall direction of the Company's
chief financial officer. Any allocation of material significance would be
reported to the Audit and Corporate Practices Committee of the Board. The
Company anticipates that such procedures would continue after the
implementation of Share 100.
DISSENTERS' RIGHTS
If the Merger is consummated, holders of shares of Class B Common Stock are
entitled to appraisal rights ("Dissenters' Rights") under Section 262 of the
DGCL ("Section 262") as to shares owned by them, provided that they comply
with the conditions established by Section 262. Section 262 is reprinted in
its entirety as Annex VIII to this Proxy Statement. All references in Section
262 to a "stockholder" are to the record holder of the shares of Class B
Common Stock as to which Dissenters' Rights are asserted.
The following discussion of the law relating to Dissenters' Rights is not a
complete statement of such rights and is qualified in its entirety by
reference to Annex VIII. THIS DISCUSSION AND ANNEX VIII SHOULD BE REVIEWED
CAREFULLY BY ANY HOLDER OF CLASS B COMMON STOCK WHO WISHES TO EXERCISE
STATUTORY DISSENTERS' RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO
BECAUSE FAILURE STRICTLY TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN AND
THEREIN MAY RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Each stockholder electing to demand the statutory appraisal of his or her
shares of Class B Common Stock shall deliver to the Company, before the taking
of the vote on the Merger at the Annual Meeting, a written demand for
statutory appraisal of his or her shares of Class B Common Stock. ANY SUCH
STOCKHOLDER MUST MAIL OR DELIVER HIS OR HER WRITTEN DEMAND TO THE SECRETARY AT
ARAMARK TOWER, 1101 MARKET STREET, PHILADELPHIA, PENNSYLVANIA 19107-2988. The
written demand must specify the stockholder's name and mailing address, the
number of shares of Class B Common Stock owned, and that the stockholder is
thereby demanding statutory appraisal of his or her shares of Class B Common
Stock. This written demand must be in addition to and separate from any proxy
or vote against the Merger. Voting against, abstaining from voting or failing
to vote on the Merger will not constitute a demand for statutory appraisal
within the meaning of Section 262. Any stockholder electing to demand his or
her Dissenters' Rights will not be granted Dissenters' Rights under Section
262 if such stockholder has either voted in favor of the Merger or consented
thereto in writing (including by granting the proxy solicited by this Proxy
Statement or by returning a signed proxy without specifying a vote against the
Merger or a direction to abstain from such vote). ACCORDINGLY, A VOTE IN FAVOR
OF THE MERGER OR A
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PROXY EXECUTED WITHOUT INSTRUCTIONS WILL CONSTITUTE A WAIVER OF DISSENTERS'
RIGHTS. Additionally, Dissenters' Rights will not be granted under Section 262
if the stockholder does not continuously hold through the effective time of
the Merger the shares of Class B Common Stock with respect to which he or she
demands statutory appraisal. All holders of Class A Common Stock who
participate in the Class A Stock Exchange will be required to waive any rights
under Section 262 with respect to their shares of Class A Composite Stock in
connection with the Merger. Accordingly, the holders of Class A Composite
Stock will not be entitled to Dissenters' Rights in connection with the
Merger.
A demand for statutory appraisal must be executed by or for the stockholder
of record, fully and correctly, as such stockholder's name appears on the
Class B Common Stock certificate or certificates. If the shares of Class B
Common Stock are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, such demand must be executed by the fiduciary.
If the shares of Class B Common Stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, such demand must be
executed by all joint owners. An authorized agent, including an agent for two
or more joint owners, may execute the demand for statutory appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner.
Within 120 days after the effective time of the Merger, either the Company
or any stockholder who has complied with the required conditions of Section
262 may file a petition in the Delaware Court of Chancery (the "Delaware
Chancery Court") demanding a determination of the value of the shares of Class
B Common Stock. If a petition is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to Dissenters' Rights and will appraise the shares of Class B Common
Stock owned by such stockholders, determining the fair value of such shares of
Class B Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
The Delaware Chancery Court may require the stockholders who have demanded a
statutory appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the statutory appraisal proceedings;
and if any stockholder fails to comply with such direction, the Delaware
Chancery Court may dismiss the proceedings as to such stockholder.
Although the Company believes that the Merger consideration is fair, no
representation is made as to the outcome of the statutory appraisal of fair
value as determined by the Delaware Chancery Court, and stockholders should
recognize that such a statutory appraisal could result in a determination of a
value higher or lower than, or the same as, the Merger consideration.
Moreover, the Company does not anticipate offering more than the Merger
consideration to any stockholder exercising Dissenters' Rights and reserves
the right to assert, in any statutory appraisal proceeding, that, for purposes
of Section 262, the "fair value" of a share of Class B Common Stock is less
than the Merger consideration. In determining such fair value, the Delaware
Chancery Court is to take into account all relevant factors. In Weinberger v.
UOP Inc., the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in a statutory appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that in making this determination of fair value
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is
to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware
Supreme Court stated that such exclusion is a "narrow exclusion [that] does
not encompass known elements of a value," but which rather applies only to the
speculative elements of value arising from such accomplishment or expectation.
In Weinberger, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which are
known or
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susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." In addition, Delaware courts have decided
that the statutory appraisal remedy, depending on the factual circumstances,
may or may not be a stockholder's exclusive remedy in connection with
transactions such as the Merger.
Stockholders considering seeking statutory appraisal should have in mind
that the "fair value" of their shares of Class B Common Stock determined under
Section 262 could be more than, the same as or less than the consideration
being paid to the holders of Class B Common Stock in the Merger, and that
opinions of investment banking firms as to fairness, from a financial point of
view, are not opinions as to fair value under Section 262. The cost of the
proceeding may be determined by the Delaware Chancery Court and taxed against
the parties as the Delaware Chancery Court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware
Chancery Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the proceeding, including without
limitation, reasonable attorneys' fees and the fees and expenses of experts,
be charged pro rata against the value of all shares of Class B Common Stock
entitled to statutory appraisal.
Within 120 days after the effective time of the Merger, any stockholder who
has complied with the requirements for exercise of Dissenters' Rights, as
discussed above, is entitled, upon written request, to receive from the
Company a statement setting forth the aggregate number of shares not voted in
favor of the Merger and with respect to which demands for statutory appraisal
have been made and the aggregate number of holders of such shares. Such
statement must be mailed within 10 days after the written request therefor has
been received by the Company in the Merger.
Any stockholder who has duly demanded statutory appraisal in compliance with
Section 262 will not, from and after the effective time of the Merger, be
entitled to vote for any purpose the shares of Class B Common Stock subject to
such demand or to receive payment of dividends or other distributions on such
shares of Class B Common Stock, except for dividends or distributions payable
to stockholders of record at a date prior to such effective time.
At any time within 60 days after the effective time of the Merger, any
stockholder shall have the right to withdraw his or her demand for statutory
appraisal and to accept the terms offered in the Merger; after this period,
the stockholder may withdraw his or her demand only with the consent of the
surviving corporation in the Merger. If no petition for statutory appraisal is
filed with the Delaware Chancery Court within 120 days after the effective
time of the Merger, stockholders' rights to appraisal shall cease. Inasmuch as
the Company will have no obligation in the Merger to file such a petition, and
has no present intention to do so, any stockholder who desires such a petition
to be filed is advised to file it on a timely basis. However, no petition
timely filed in the Delaware Chancery Court demanding statutory appraisal
shall be dismissed as to any stockholder without the approval of the Delaware
Chancery Court, and such approval may be conditioned upon such terms as the
Delaware Chancery Court deems just. Any holder of Class B Common Stock who
effectively withdraws his or her demand for statutory appraisal, or whose
right to a statutory appraisal shall cease, and has not elected the Class B
Stock Consideration shall receive the Class B Cash Consideration as provided
in the Plan of Recapitalization. See "THE PLAN OF RECAPITALIZATION--The
Merger."
The obligation of the Company to effect Share 100 (including the Merger) is
subject to the condition that Continuing Holders of no more than $25 million
of the Class B Common Stock (valued at $29.55 per share) be entitled to
receive the Class B Cash Consideration or perfect their Dissenters' Rights
with respect to such shares under the DGCL.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the direct U.S. federal income tax consequences of
Share 100 is based on the advice of Milbank, Tweed, Hadley & McCloy, tax
counsel to the Company for Share 100. The discussion is based on the Code and
Treasury Department regulations, published positions of the Internal Revenue
Service
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("IRS") and court decisions now in effect, all of which are subject to change.
Although future legislation or regulations could be enacted or promulgated so
as to apply retroactively to Share 100, upon advice of counsel, the Company
believes that, as a practical matter, it is unlikely any legislation or
regulations would apply retroactively.
Advance Tax Ruling. The Company has not applied for an advance tax ruling
from the IRS because the IRS has included the issuance of stock with
characteristics similar to the Composite Stock and Business Group Stock among
the transactions upon which it will not issue advance rulings.
Tax Implications to the Stockholders. This discussion addresses only those
stockholders who hold Company Common Stock and would hold the Composite Stock
or Business Group Stock as a capital asset and is included for general
information only. It does not discuss all aspects of federal income taxation
that may be relevant to a stockholder in light of that stockholder's
particular tax circumstances and does not apply (except where and to the
extent noted) to certain types of stockholders that may be subject to special
treatment under the federal income tax laws, including corporations, non-
United States owners, and pass-through entities. In addition, neither foreign,
state or local tax consequences nor estate and gift tax considerations are
discussed.
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE U.S. FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATION, AS
WELL AS TO THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX
LAWS TO WHICH THEY MAY BE SUBJECT AND THE POTENTIAL IMPACT OF POSSIBLE LAW
CHANGES.
Reclassification of Class A Common Stock to Redeemable Transitory
Participating Preferred Stock ("RTPPS")--The RTPPS is newly created and
promptly will be redeemed as part of the Reclassification. As such, the
reclassification of Class A Common Stock into RTPPS and the resulting RTPPS
should be disregarded for federal income tax purposes because the existence
and efficacy of RTPPS will be momentary and a mere step in the plan to convert
the Class A Common Stock into cash. If the RTPPS were to be accorded
recognition for tax purposes, the exchange of Class A Common Stock for RTPPS
would be a "recapitalization" of the Company within the meaning of Section
368(a)(1)(E) of the Code and would result in no gain or loss to the Company.
Because the RTPPS would participate in corporate growth, it would not
constitute "nonqualified preferred stock," so the exchange of Class A Common
Stock for RTPPS would result in no gain or loss to the exchanging
stockholders. Discussions below disregard the RTPPS for federal income tax
purposes.
General--The Reclassification and the Class A Stock Exchange will constitute
a "recapitalization" of the Company within the meaning of Section 368(a)(1)(E)
of the Code. The Merger, including conversion of Class B Common Stock into
rights to receive Class B Cash Consideration or Group Stock Consideration,
should be disregarded for federal income tax purposes because the existence
and efficacy of the newly incorporated, wholly-owned subsidiary of the Company
will be momentary and a mere step in the plan to convert the Class B Common
Stock into Class B Cash Consideration and Group Stock Consideration within the
meaning of Code Sections 302 and 368(a)(1)(E). As such, the Reclassification,
the Class A Stock Exchange and the Merger , including conversion of Class
B Common Stock into a right to receive Group Stock Consideration, should not
be a taxable transaction to the Company or to stockholders who receive Class A
Stock Consideration or Business Group Stock Consideration. In those cases,
stockholders' tax bases and capital gain holding periods in Group Stocks will
equal the tax bases and include the holding periods they had in their Class A
Common Stock and Class B Common Stock. The Reclassification and the Merger,
including conversion of Class B Common Stock into a right to receive Class B
Cash Consideration, will be taxable transactions to stockholders who receive
cash or Installment Notes, with the consequences described below.
Treatment of Redemption of Class A Common Stock and Class B Common Stock for
Cash--Individual stockholders who exchange their Class A Common Stock or Class
B Common Stock for cash will realize capital gain on the exchange equal to the
excess of cash received over their tax basis in their stock, taxable (to the
extent not otherwise offset by capital losses) at a capital gain rate of 20%
in most cases, 28% if the exchanging stockholder's holding period is more than
12 and not more than 18 months and at ordinary income rates if the stock has
been held 12 months or less and thus produces capital gain net income to the
extent that gain is short-
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term capital gain. The foregoing will apply to cash received in lieu of
fractional Installment Notes (i.e., in principal amounts of less than $10,000
or not of integral multiples of $10,000) for stockholders who receive Notes
Consideration, as if the stockholders received fractional Installment Notes
and then had the fractional Installment Notes redeemed by the Company.
Treatment of Redemption of Class A Common Stock for Installments Notes--
Stockholders who exchange their Class A Common Stock, a security that is not
traded on any established securities market, for Installment Notes will
realize capital gain on the exchange but should qualify for "installment sale"
treatment described in Code Section 453. As such, any gain recognized by the
exchanging shareholder may be reported on the installment method, i.e., the
gain is reported when the payments on the Installment Notes are received or
the Installment Notes are otherwise disposed of. In the case of redeeming
stockholders who, on December 31, 1998, own installment obligations that arose
from any source in 1998 and have, in the aggregate, a face amount in excess of
$5,000,000, "interest" on the deferred tax liability attributable to the
installment obligations in excess of $5,000,000 will be imposed under Code
Section 453A. If a stockholder who receives an Installment Note elects out of
"installment sale" treatment, taxable gain will be recognized to the same
extent as if Class A Common Stock had been exchanged for cash in the amount of
the face value of the Installment Note (See "--Treatment of Redemption of
Class A Common Stock and Class B Common Stock for Cash," above). Tax basis in
Installment Notes is the same as the stockholder's basis in the Class A Common
Stock exchanged for the Installment Notes, increased by the amount of any
taxable gain recognized and reduced by the amount of cash or other property
received by the stockholder on the exchange.
If a stockholder receiving Installment Notes reports gain from the exchange
of Class A Common Stock on the installment method, any disposition,
transmission, sale or distribution (a "disposition") of the Installment Notes
(including by gift) will result in the recognition of capital gain or loss to
the extent of the difference between (1) the stockholder's tax basis in the
Installment Notes and (2)(i) the amount realized, in the case of a disposition
by sale or exchange, or (ii) the fair market value of the Installment Notes at
the time of disposition in the case of disposition other than by sale or
exchange.
Conversion of Installment Notes--The Installment Notes will be convertible
after February 11, 1999 into Company 7.10% Guaranteed Notes due 2006 (the
"Guaranteed Notes") as described in "DESCRIPTION OF INSTALLMENT NOTES." The
exchange of Installment Notes for Guaranteed Notes should constitute a taxable
disposition of the Installment Notes, resulting in capital gain or loss. In
such a case, a holder's tax basis in the Guaranteed Notes will equal the fair
market value of the Guaranteed Notes. For purposes of determining whether the
Guaranteed Notes have "original issue discount," the "issue price" of the
Guaranteed Notes will be determined pursuant to Code Section 1273(b) (if the
Guaranteed Notes are "traded on an established securities market") or Code
Section 1274 (if the Guaranteed Notes are not traded on an established
securities market).
Holders of the Class A Common Stock should consult their own tax advisors as
to the federal income tax consequences of electing to receive Installment
Notes and converting the Installment Notes into Guaranteed Notes, as well as
the federal income tax consequences of holding the Guaranteed Notes, including
the possible application of the original issue discount and market discount
rules.
Any conversion of Business Group Stock into Class B Composite Stock, or
Business Group Stock or Class B Composite Stock into Class A Composite Stock,
upon the Company's exercise of its right to do so should constitute a tax-free
exchange to the exchanging stockholder. An exchanging stockholder's tax basis
and holding period in the converted Business Group Stock or Class B Composite
Stock would be carried over to the Class A Composite Stock or Class B
Composite Stock received in the tax-free exchange.
United States Alien Holders--A holder who is a United States Alien (as
defined below) will not be subject to United States federal income or
withholding tax on any gain realized on the taxable sale or exchange of any
stock, unless (A) the gain is effectively connected with a United States trade
or business conducted by the United States Alien, (B) the United States Alien
is an individual who was present in the United States for a period or periods
of 183 days or more during the taxable year and certain other conditions are
met, or (C) the Company, at
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various times, were to be classified as a "United States Real Property Holding
Corporation." The Company has determined that it is not and has not been and
does not believe that it will become a "United States Real Property Holding
Corporation" for federal income tax purposes.
A "United States Alien" is any person that, for United States federal income
tax purposes, is a foreign corporation, a nonresident alien individual, a
nonresident alien fiduciary or a foreign estate or trust, or a foreign
partnership that includes as a member any of the foregoing persons.
Backup Withholding--Payors of interest, dividends and certain other
reportable payments are generally required to withhold 31% of those payments
if the payee (i) fails to furnish the Company with its Taxpayer Identification
Number ("TIN"), which, for an individual, would be his or her Social Security
number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it
has failed to properly report payments of interest or dividends or (iv) under
certain circumstances, fails to certify under penalties of perjury that it has
furnished a correct TIN and has been notified by the IRS that it is subject to
backup withholding for failure to report payments of interest or dividends.
This rule will apply to the payments of Class A Cash Consideration and Class B
Cash Consideration. Stockholders should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedures
for obtaining an exemption.
The amount of any backup withholding from a payment to a holder of the
Composite Stock or Business Group Stock will be allowed as a credit against
the stockholder's federal income tax liability and may entitle the stockholder
to a refund, provided the required information is furnished to the IRS.
Tax Implications Were Business Group Stock to be Treated as Property Other
Than Company Stock--In the opinion of tax counsel, both the Composite Stock
and the Business Group Stock will be Company common stock and the tax
implications of Share 100 will be as described above. Were either the
Composite Stock or Business Group Stock treated as property other than Company
stock, the Company could recognize a significant taxable gain on the issuance
of the stock in an amount equal to the excess of the fair market value of the
stock sold over its zero tax basis in the hands of the Company. Furthermore,
if any of the Business Group Stock were treated as stock of a Company
subsidiary, and not as Company common stock, depending upon the amount of
stock issued, the applicable Business Group would not be includible in the
Company's consolidated federal income tax return, and any dividends paid or
deemed to be paid to the Company by the Composite Group or the applicable
Business Group could be taxed to the Company, subject to any applicable
dividends received deduction. Were either the Composite Stock or Business
Group Stock treated as property other than Company stock, stockholders could
be considered to have exchanged their Class A Common Stock or Class B Common
Stock for Composite Stock or Business Group Stock in taxable transactions.
This could cause the stockholders to realize taxable gain equal to the
difference between the fair market value of the Composite Stock or Business
Group Stock received in the taxable exchange and the tax bases in the
stockholders' hands of the Class A Common Stock or Class B Common Stock
exchanged. Although it is possible the IRS might assert that Composite Stock
or Business Group Stock is not Company stock, the Company's tax counsel
believes the IRS would not prevail in that assertion.
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THE PLAN OF RECAPITALIZATION
The information contained in this Proxy Statement with respect to the Plan
of Recapitalization does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Plan of Recapitalization, a
copy of which is attached hereto as Annex III and is incorporated herein by
reference, and to the other agreements and documents referred to herein which
are attached as annexes to this Proxy Statement. Stockholders are urged to
read carefully the complete text of each such document.
GENERAL
Share 100 provides for (i) the Reclassification described below in "--The
Reclassification," (ii) the Merger described below in "--The Merger," (iii)
adoption of the Charter Amendments described in "AMENDMENTS TO THE RESTATED
CERTIFICATE OF INCORPORATION," and (iv) the Stockholders' Agreement Amendments
and the Registration Rights Agreement termination described in "CHANGES TO
CERTAIN AGREEMENTS."
Share 100 is being presented to stockholders as four separate proposals.
Share 100 will not be implemented unless each of Proposals 1, 2, 3 and 4 are
approved, or expected to be approved, by stockholders.
It is expected that if Share 100 is not approved by the requisite vote of
the Company's stockholders (see "INTRODUCTION"), or if Share 100 is not
consummated for any other reason, including the failure to satisfy any of the
conditions thereto (see "THE PLAN OF RECAPITALIZATION--Conditions"), the
Company's current management, under the direction of the Board, will continue
to manage and operate the Company as an ongoing business substantially as
presently managed and operated. No other alternative is being considered at
the present time. In addition, the Stockholders' Agreement and the
Registration Rights Agreement, in their existing form, will continue in full
force and effect.
EFFECTIVE TIME
Share 100 will become effective at the time all of the Share 100
Certificates are filed with the Secretary of State of the State of Delaware
(Effective Time). The filings of the Share 100 Certificates are currently
anticipated to be made as promptly as practicable after the relevant votes are
taken at the Annual Meeting, other than the Merger Certificate which is
anticipated to be filed on the following day. Such filings will be made,
however, only upon satisfaction or, where permissible, waiver of all
conditions contained in the Plan of Recapitalization and provided that the
Plan of Recapitalization has not been terminated. See "THE PLAN OF
RECAPITALIZATION--Conditions" and "--Termination; Amendment."
THE RECLASSIFICATION
The following is a description of the Reclassification, relating to the
Class A Common Stock. Pursuant to Share 100, each share of Class A Common
Stock outstanding immediately prior to the time that the Reclassification
Certificate is filed with the Secretary of State of the State of Delaware (the
"Reclassification Effective Time") will be reclassified as, and changed into,
one share of Redeemable Transitory Participating Preferred Stock, par value
$1.00 per share (the "Redeemable Transitory Participating Preferred Stock"),
which will be redeemed immediately after the Reclassification Effective Time
for: (a) the Class A Cash Consideration (consisting of $347.50 in cash); or
(b) at the election of the holder, in lieu of the Class A Cash Consideration,
$347.50 principal amount of Installment Notes (Notes Consideration), subject
to the Class A Suitability Requirements, described in "--Procedure for Holders
of Shares--Certain Suitability Requirements" and the treatment of fractional
amounts described in "--Procedure for Holders of Shares--Treatment of
Fractional Shares." The Company will redeem all outstanding shares of
Redeemable Transitory Participating Preferred Stock immediately after the
Reclassification Effective Time. PURSUANT TO THE TERMS OF THE REDEEMABLE
TRANSITORY PARTICIPATING PREFERRED STOCK, THIS PROXY STATEMENT CONSTITUTES THE
NOTICE OF SUCH REDEMPTION.
Holders of Class A Common Stock who are individuals who at one time owned
(or their Permitted Transferees owned) Class B Common Stock which was
converted into Class A Common Stock pursuant to the
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terms of the Certificate of Incorporation upon the termination of employment
with the Company, and their Permitted Transferees (collectively, "Former
Managers") or the Company's benefit plans which hold Class A Common Stock
("Benefit Plans") will be offered the opportunity to voluntarily exchange
certain of their Class A Common Stock, on a share for share basis, for Class A
Composite Stock pursuant to the Class A Stock Exchange. The Class A Stock
Exchange will be consummated immediately prior to the Reclassification
Effective Time. A Former Manager shall not be entitled to participate in the
Class A Stock Exchange with respect to any shares of Class A Common Stock that
were not so converted from Class B Common Stock, and such unconverted shares
shall be eligible to be reclassified into Redeemable Transitory Participating
Preferred Stock and subsequently redeemed only for cash and/or Installment
Notes in Share 100.
Any holder of Class A Common Stock (other than a Former Manager) who fails
to make a proper and timely Class A Election as to any of such holder's shares
of Class A Common Stock will be entitled to receive only the Class A Cash
Consideration with respect to such shares. Any holder of Class A Common Stock
who is not a Former Manager and who fails to meet to the Company's
satisfaction a Suitability Requirement will be entitled to receive in Share
100 only the Class A Cash Consideration with respect to such holder's shares
of Class A Common Stock. Holders of Class A Common Stock who do not desire the
tax deferral designed to be provided by the Installment Notes should not make
a Class A Election to receive consideration which in whole or in part consists
of Installment Notes. See "SHARE 100--Certain U.S. Federal Income Tax
Considerations" and "DESCRIPTION OF INSTALLMENT NOTES."
THE MERGER
The following is a description of the Merger as it relates to the Class B
Common Stock. Pursuant to Share 100, ARAMARK Share, 100 Inc., a newly
incorporated, wholly-owned subsidiary of the Company will be merged with and
into the Company. The Company will be the surviving corporation in the Merger.
At the effective time of the Merger, each share of Class B Common Stock issued
and outstanding immediately prior thereto will be converted into the right to
receive (i) the Class B Cash Consideration (consisting of $29.55 per share in
cash) or (ii) at the election of any Continuing Holder of Class B Common Stock
and based on employment status, the Group Stock Consideration. Any Continuing
Holder of Class B Common Stock who fails to make a proper and timely Class B
Election for the Group Stock Consideration will be entitled to receive only
the Class B Cash Consideration with respect to such shares.
In the Merger, the Class B Common Stock held by Continuing Holders who have
elected Group Stock Consideration will be converted, on a share-for-share
basis, into the right to receive the Group Stock Consideration based on
employment status, as determined by the Board, as follows: (i) Education Group
Employees will receive one share of Education Group Stock and one share of
Class B Composite Stock for each two shares of Class B Common Stock; (ii) Food
and Support Group Employees will receive one share of Food and Support Group
Stock and one share of Class B Composite Stock for each two shares of Class B
Common Stock; (iii) Uniform Group Employees will receive one share of Uniform
Group Stock and one share of Class B Composite Stock for each two shares of
Class B Common Stock; and (iv) Corporate Employees will receive one share of
Class B Composite Stock for each share of Class B Common Stock. With respect
to each Continuing Holder who continues to hold one share of Class B Common
Stock after giving effect to such conversion of shares, such remaining share
shall be converted into the right to receive one share of Class B Composite
Stock. Only Continuing Holders of Class B Common Stock shall be entitled to
make a Class B Election.
Continuing Holders of Class B Common Stock will be entitled to elect, in
lieu of the Class B Cash Consideration, the Group Stock Consideration. Each
Management Investor and all of his or her Permitted Transferees (as identified
on the books of the Company): (a) will be deemed to have made such election
for all of their shares if such election is made by the holders of 50% or more
of the Class B Common Stock owned by those persons; or (b) will be deemed not
to have made such election for any of their shares if such election is made by
holders of less than 50% of the Class B Common Stock owned by those persons.
It shall be a condition to Share 100 that Continuing Holders of no more than
$25 million of the Class B Common Stock (valued at
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$29.55 per share) be entitled to receive the Class B Cash Consideration or
perfect their Dissenters' Rights with respect to such shares under Section 262
of the DGCL.
PROCEDURE FOR HOLDERS OF SHARES
Class A Common Stock.
Class A Cash Consideration: Holders of Class A Common Stock who desire only
to receive the Class A Cash Consideration in respect of all of their shares of
Class A Common Stock should not make a Class A Election but should complete
and return a Green Form of Election and concurrently deliver the Certificates
representing their shares of Class A Common Stock.
Notes Consideration: Holders of Class A Common Stock who desire, and are
eligible, to elect to receive the Notes Consideration in respect of any of
their shares of Class A Common Stock must make a proper and timely Class A
Election for such consideration on the enclosed Green Form of Election and
should concurrently deliver the Certificates representing their shares of
Class A Common Stock.
Class A Stock Exchange: Holders of Class A Common Stock who desire, and are
eligible to participate in the Class A Stock Exchange in respect of any of
their shares of Class A Common Stock must make a proper and timely election on
the enclosed Green Form of Election prior to 10:00 a.m., Philadelphia time on
the Election Date. Such holders should deliver the Certificates representing
their shares pursuant to instructions to be contained in an ownership
statement or a certificate profile report delivered by the Company promptly
after the Effective Time. Former Managers who do not want to participate in
the Class A Stock Exchange in respect of any of their shares of Class A Common
Stock and desire to receive $29.55 per share (on a Class B equivalent share
basis) pursuant to the Call Option should complete and return a Green Form of
Election and concurrently deliver the Certificates representing their shares.
Class B Common Stock.
Group Stock Consideration: Continuing Holders of Class B Common Stock who
desire to elect to receive the Group Stock Consideration in respect of all of
their shares of Class B Common Stock must make a proper and timely Class B
Election on the enclosed proxy card. Such holders should deliver the
Certificates representing Class B Common Stock pursuant to instructions to be
contained in an ownership statement delivered by the Company promptly after
the Effective Time.
Class B Cash Consideration: Continuing Holders of Class B Common Stock who
desire to receive the Class B Cash Consideration in respect of all of their
shares of Class B Common Stock should not make a Class B Election for such
consideration but should complete and return a Blue Form of Election and
concurrently deliver the certificates representing their shares of Class B
Common Stock. Magazine and Book Employees should not make a Class B Election
but should complete and return a Blue Form of Election and concurrently
deliver their Certificates representing the Class B Common Stock.
Form of Election. To make an effective Class A Election, a holder of Class A
Common Stock must complete and sign a Green Form of Election and return it to
the Special Exchange Agent Group, consisting of three members of management of
the Company and formed for the specific purpose of acting, and authorized by
the Board to act, as the Exchange Agent, at ARAMARK Corporation, The ARAMARK
Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107, Attention:
Exchange Agent, prior to 10:00 A.M., Philadelphia time, on the day of the
Annual Meeting or, if the Annual Meeting is postponed or adjourned without
approval and adoption of Share 100, on the day on which Share 100 is approved
and adopted by the Company's stockholders (the Election Date). To make an
effective Class B Election, a holder of Class B Common Stock must check the
election box on the proxy card and sign and return it to the Company prior to
or at the Annual Meeting. The Company will not distribute the Class A Cash
Consideration, the Notes Consideration, the cash pursuant to the Call Option
or the Class B Cash Consideration until it receives the applicable
Certificates, and accordingly,
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requests that such Certificates be delivered with the Form of Election.
Holders who participate in the Class A Stock Exchange or elect the Group Stock
Consideration are requested to hold their Certificates until they receive an
ownership statement or certificate profile report after the Effective Date,
and then deliver their Certificates to the Company in accordance with such
share ownership statement or certificate profile report.
A Green or Blue, as applicable, Form of Election is being sent to all
holders of record of Class A Common Stock and Class B Common Stock as of the
Record Date together with this Proxy Statement. Additional Forms of Election
may be obtained from the Exchange Agent at ARAMARK Corporation, The ARAMARK
Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107-2988, Attention:
Exchange Agent. Detailed instructions indicating the procedure to be followed
in order properly to complete a Form of Election are set forth in the Form of
Election. Such instruction should be read and followed carefully in order to
ensure that a holder's desired Election is properly made and effected.
A holder of Class A Common Stock may revoke or modify such holder's Election
by written notice received by the Exchange Agent no later than 10:00 A.M.,
Philadelphia time, on the Election Date, accompanied by a new Form of Election
properly completed and signed. A Continuing Holder of Class B Common Stock may
revoke or modify such holder's Election by delivering a properly completed and
signed later-dated proxy card at or prior to the Annual Meeting.
The Company has the discretion, which it may delegate to the Exchange Agent,
to determine whether Forms of Election have been properly completed, signed
and submitted, or properly revoked or modified, and to disregard immaterial
defects in Forms of Election. The decision of the Company (or of the Exchange
Agent in the event discretion is delegated) will be conclusive and binding.
Neither the Company nor the Exchange Agent will be required to notify any
person of any defect in a Form of Election. The Company may waive any
procedural defect in a Form of Election and may seek clarification from any
stockholder with respect to any Election or Elections intended to be made by
such stockholder. For purposes of the Election by Continuing Holders of Class
B Common Stock, each Management Investor and all of his or her Permitted
Transferees (as identified on the books of the Company) must make the same
election for all of their shares, and if not, will be deemed to have made the
same election as the election made by the holders of a majority of the Class B
Common Stock owned by such persons.
Holders of Class A Common Stock or Class B Common Stock who plan to vote
their shares against Share 100 should nonetheless make proper and timely
Elections to ensure that they will receive the desired form or forms of
consideration in the event Share 100 is ultimately approved and becomes
effective.
The Form of Election will serve as a letter of transmittal for use in
surrendering share certificates and specifies that delivery will be effected,
and risk of loss will pass, only upon proper delivery of certificates
representing the Class A Common Stock and Class B Common Stock to the Exchange
Agent. The method of delivery is at the option and risk of the stockholder,
but if by mail, registered mail, return receipt requested, is suggested. A
special envelope has been provided for the purpose of sending a Form of
Election to the Exchange Agent.
In the event Share 100 is not consummated for any reason, the certificates
representing the shares of Class A Common Stock and Class B Common Stock (the
"Certificates") tendered in Share 100 will be promptly returned to the person
who submitted them.
Payment.
Class A Cash Consideration: As promptly as practicable after the Effective
Time, the Exchange Agent will mail to each record holder of Class A Common
Stock who has (i) properly completed and signed and submitted a Green Form of
Election and (ii) surrendered the Certificate, the Class A Cash Consideration
for each such Certificate surrendered. All consideration to be paid in cash
will be paid by check, without interest. In no case will cash be paid until
the shares of Class A Common Stock have been properly surrendered to the
Exchange Agent.
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Notes Consideration: As promptly as practicable after the Effective Time,
the Exchange Agent will mail to each record holder of Class A Common Stock who
has (i) properly completed and signed and timely submitted a Green Form of
Election and (ii) surrendered the Certificate, the Notes Consideration, in
accordance with such holder's Election or Elections, for each such Certificate
surrendered. In no case will Installment Notes be issued until the shares of
Class A Common Stock have been properly surrendered to the Exchange Agent.
Class A Stock Exchange: As soon as practicable after the Effective Time, the
Exchange Agent will mail a certificate profile report to each record holder
who participated in the Class A Stock Exchange advising such holder of the
Class A Composite Stock held by such holder. As promptly as practicable after
the Effective Time, the Exchange Agent will mail to each Former Manager whose
shares of Class A Common Stock were subject to the Call Option who has (i)
properly completed and signed and submitted a Green Form of Election and (ii)
surrendered the Certificate, the cash payable pursuant to the Call Option for
each such Certificate surrendered. Such cash consideration will be paid by
check, without interest. In no case will cash be paid pursuant to the Call
Option until the shares have been properly surrendered to the Exchange Agent.
Group Stock Consideration: As soon as practicable after the Effective Time,
the Exchange Agent will mail an ownership statement or a certificate profile
report and a transmittal form to each record holder advising such holder of
the procedure for surrendering to the Exchange Agent the Certificates
representing the Class B Common Stock in exchange for Group Stock
Consideration. Each such holder of Class B Common Stock, upon surrender of the
Certificates therefor to the Exchange Agent, will be entitled to receive the
Group Stock Consideration in respect of each such Certificate surrendered.
Class B Cash Consideration: As promptly as practicable after the Effective
Time, (a) the Exchange Agent will mail to each Continuing Holder of Class B
Common Stock who has (i) not made a proper and timely Class B Election and
properly completed and signed and submitted a Blue Form of Election for Class
B Cash Consideration and (ii) surrendered the Certificates, the Class B Cash
Consideration for each such Certificate surrendered; and (b) the Exchange
Agent will mail to each Magazine and Book Employee who has (i) properly
completed and signed and submitted a Blue Form of Election for Class B Cash
Consideration and (ii) surrendered the Certificates, the Class B Cash
Consideration for each such Certificate surrendered. All consideration to be
paid in cash will be paid by check, without interest. In no case will cash be
paid until the shares of Class B Common Stock have been properly surrendered
to the Exchange Agent.
Uncertificated Shares. The Company will not issue share certificates with
respect to the Group Stock. Instead, the Company will issue such shares in
uncertificated form. Each management stockholder will receive shortly after
completion of Share 100, an initial ownership statement indicating the Group
Stocks held in such holder's and his or her Permitted Transferee's names as a
group, and will receive an updated ownership statement periodically
thereafter. Stockholders will also receive an initial statement of registered
shares that will separately identify their blocks of Business Group Stock and
Class B Composite Stock which correspond to the separate stock certificates
they currently own. Stockholders will also receive additional statements of
registered shares after any future stock transactions as confirmation.
Stockholders may nevertheless obtain new certificates by following the
procedure which will be set forth on the statement of registered shares.
Lenders may require that the stockholder deliver certificates to the lender
for any shares pledged to secure a loan, in order to effectively perfect the
lender's security interest.
Treatment of Fractional Shares. Shares of Composite Stock and Business Group
Stock will be issuable only in the form of whole shares. Accordingly, no
fractional shares (whether in certificate, scrip or other form) of Group Stock
will be issued. With respect to the Class A Stock Exchange, no fractional
shares will be issued because such holders participating in the Class A Stock
Exchange will receive one share of Class A Composite Stock for each share of
Class A Common Stock exchanged. With respect to Group Stock Consideration, no
fractional shares will be issued because the Merger will be effected on a
share-for-share basis.
A holder of Class A Common Stock who makes an effective Class A Election to
receive consideration consisting in whole or in part of Installment Notes will
not be entitled to receive Installment Notes in stated face
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amounts of less than $10,000, or in stated face amounts in excess of $10,000
(or an integral multiple of $10,000) but less than the next highest integral
multiple of $10,000 ("Fractional Amounts"). Instead, such holder will be
entitled to receive promptly from the Exchange Agent a cash payment in lieu of
any such Fractional Amounts equal to such Fractional Amount. Interest will be
paid on the Installment Notes only to the extent the Installment Notes by
their terms involve the accrual or payment of interest.
Certain Suitability Requirements. In order to ensure compliance with federal
and certain state securities laws which may be applicable to Share 100, the
opportunity for any holder of Class A Common Stock to make a Class A Election
to accept the offer of the Company to receive the Notes Consideration in the
Reclassification is being offered only to any holder of Class A Common Stock
who demonstrates to the Company's satisfaction, by an affirmative
representation on the Form of Election, that such holder is one of the
following (each a "Suitability Requirement"):
(a) a bank, savings and loan association, trust company, insurance
company, investment company registered under the Investment Company Act of
1940, pension or profit-sharing trust (other than a pension or profit-
sharing trust of the Company, a self-employed individual retirement plan or
individual retirement account), an organization described in Code Section
501(c)(3), which has total assets of not less than $5,000,000 according to
its most recent audited financial statements, a corporation having a net
worth on a consolidated basis, according to its most recent audited
financial statements, of not less than $14,000,000 or any wholly owned
subsidiary thereof;
(b) a director or executive officer of the Company;
(c) a person who makes a valid Class A Election to receive Installment
Notes in the Reclassification with an aggregate value of $150,000 or more
provided such person is able to bear the economic risk of the investment,
the investment does not exceed 10% of such person's net worth (or joint net
worth with a spouse), or such person (or with such person's professional
advisor who is unaffiliated with and not compensated by the Company or any
affiliate thereof) has the capacity to protect its own interests in
connection with the transaction;
(d) an individual who elects to receive Installment Notes in the
Reclassification whose net worth (or joint net worth with a spouse) exceeds
$1,000,000, provided such person is able to bear the economic risk of the
investment, the investment does not exceed 10% of such person's net worth
(or joint net worth with a spouse), or such person (or with such person's
professional advisor who is unaffiliated with and not compensated by the
Company or any affiliate thereof) has the capacity to protect its own
interests in connection with the transaction;
(e) an individual who elects to receive Installment Notes in the
Reclassification whose income (or whose joint income with a spouse)
exceeded $200,000 in each of the two most recent years and who reasonably
expects an income in excess of $200,000 in the current year, provided such
person is able to bear the economic risk of the investment, the investment
does not exceed 10% of such person's net worth (or joint net worth with a
spouse), or such person (or with such person's professional advisor who is
unaffiliated with and not compensated by the Company or any affiliate
thereof) has the capacity to protect its own interests in connection with
the transaction;
(f) a person who has preexisting personal or business contacts with the
Company or any officer, director or controlling person thereof of a nature
and duration such as would enable a reasonably prudent person to be aware
of the character, business acumen and general business and financial
circumstances of the person with whom the relationship exists;
(g) a person who, by reason of its business or financial experience or
the business or financial experience of its professional advisor (who is
unaffiliated with and is not compensated by the Company or any affiliate of
the Company), could be reasonably assumed to have the capacity to protect
its own interests in the transaction;
(h) any relative, spouse or relative of the spouse of an individual who
meets any one of the requirements of clauses (b)-(g) above and who makes a
valid Class A Election to receive Installment Notes
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in the Reclassification (an "Individual") who has the same principal
residence as such Individual (a "Related Person"), any trust or estate in
which an Individual and any Related Person collectively own more than 50%
of the beneficial interest, any corporation or other organization of which
an Individual and any Related Person collectively are beneficial owners of
more than 50% (excluding directors' qualifying shares) of the equity
securities ("relative" means a person related by blood, marriage or
adoption); or
(i) any entity in which all the equity owners are persons specified in
(a), (b), (d) or (e) above; provided, however, that persons who are
suitable purchasers only as a result of clause (f) or (g) above shall not
total more than 35 persons and in the event that more than 35 persons rely
on clause (f) or (g), the Company shall determine which 35 persons shall be
permitted so to rely. The Form of Election will contain a section requiring
that each holder of Class A Common Stock who desires to make a Class A
Election for Notes Consideration affirmatively represent that such holder
comes within one of the categories of persons described in clauses (a)
through (i) above and that such holder is acquiring the Installment Notes
for investment and not with a view to distribution. The Company may request
such additional documentation or evidence with respect to such
representation as it deems appropriate, including a representation
regarding investment intent. The good faith determination by the Company
that a holder of Class A Common Stock does not meet the Suitability
Requirements shall be conclusive as to such holder.
CASH-OUT OF FORMER MANAGERS
The Company has determined that it will exercise its right, under the
Stockholders' Agreement, to call (the "Call Option") those shares of Class A
Common Stock that could be, but are not, exchanged in the Class A Stock
Exchange. (A Former Manager who fails to participate in the Class A Stock
Exchange with respect to all of his or her shares that could be exchanged is
referred to as a "Noncontinuing Former Management Holder.") Pursuant to the
Stockholders' Agreement, the Company has a Call Option on any or all of the
Common Stock owned by any former employee of the Company (or by his or her
Permitted Transferees) exercisable at any time for a period of up to 10 years
after the termination of employment of such person. Pursuant to the
Stockholders' Agreement, all Noncontinuing Former Management Holders will
receive $29.55 per Class B equivalent share upon exercise by the Company of
its Call Option. Accordingly, Noncontinuing Former Management Holders will
receive less than the Class A Cash Consideration for their shares of Class A
Common Stock. The Company has also determined that it will exercise its Call
Option with respect to any Former Manager whose Class B Common Stock is
converted into Class A Common Stock after the Reclassification Effective Time
and before the Merger. The closing of the repurchase of shares pursuant to the
Company's exercises of the Call Option will be, as applicable: (i) immediately
prior to the filing of the Reclassification Certificate and (ii) immediately
prior to the filing of the Merger Certificate. THIS PROXY STATEMENT SERVES AS
NOTICE UNDER THE STOCKHOLDERS' AGREEMENT OF THE COMPANY'S EXERCISES OF THE
CALL OPTION.
TREATMENT OF CERTAIN SELLING MANAGEMENT HOLDERS
The Board has determined that the Company will pay additional consideration
to any holder of Class B Common Stock who sold or sells any such shares to the
Company (but only if such holder receives or received a price per share equal
to the September 1, 1997 or December 1, 1997 Appraisal Price), or who
constructively sold or sells such shares in the course of exercising any
options or purchase opportunities with respect thereto using the stock-for-
stock method of exercise, after September 1, 1997 and prior to the Effective
Time (a "Selling Holder"). Accordingly, as soon as practicable after the
Effective Time, the Company will pay to each Selling Holder with respect to
each such sale an amount equal to the product of (a) the difference between
(1) the Class B Cash Consideration and (2) the Appraisal Price in effect at
the time of such actual or constructive sale and (b) the number of shares
actually or constructively sold with respect to each such transaction.
The Company believes that it is important for the success of the ARAMARK
Ownership Program, in general, and Share 100, in particular, that management
employees perceive that all management owners are treated fairly. The Company
believes that these payments, although not required under the Stockholders'
Agreement or otherwise, will further this objective of perceived fairness.
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The cash payment to a Selling Holder will be treated as an "adjustment of
purchase price" of the shares of Class B Common Stock sold to the Company or
deemed sold to the Company upon exercise of stock options or purchase
opportunities using the stock-for-stock method. As such, the payment will be
treated as additional sales proceeds received by a Selling Holder and will
generally be taxable as 1998 capital gain. If the Selling Holder held the
stock sold or deemed sold for 12 months or less, the gain will be taxed at
ordinary income tax rates; if the Selling Holder held the stock more than 12
months but not more than 18 months, the gain will be taxed at no more than
28%; and, if the Selling Holder held the stock more than 18 months, the gain
will be taxed at no more than 20%. The Selling Holder's tax basis in the new
shares received as a result of stock-for-stock exercise will be adjusted
downward to reflect the cash payment and the amount by which basis in the new
stock is reduced will constitute basis deemed sold in exchange for cash. The
Company will report the payments to U.S. taxing authorities as 1998 gross
proceeds from transactions required to be reported by a broker on Form 1099-B.
Tax withholding on such payments is not required.
TREATMENT OF MAGAZINE AND BOOK EMPLOYEES
Magazine and Book Employees will be entitled to receive only the Class B
Cash Consideration in Share 100. The Board concluded that, due to the current
operating challenges facing the Magazine and Book Business and its recent
operating performance, a separate Business Group Stock reflecting the
performance of the Magazine and Book Business would not be appropriate. The
Board determined that long-term equity incentives would not appropriately
align the interests of the Magazine and Book Business employees with current
business objectives. Instead, the Company intends to provide other incentive
plans that will more appropriately align employee interests with the current
business objectives of the Magazine and Book Business.
CERTAIN CONTINGENT PAYMENTS
Any holder of Class A Common Stock who receives the Class A Cash
Consideration or the Notes Consideration will also be entitled to a contingent
cash payment (a "Contingent Payment") if, within two years (or two years and
three months in the case of clause (iv) below) from the Effective Time, one of
the following events shall occur: (i) the Company consummates a stock sale,
merger, consolidation or business combination in which the holders of
Composite Stock receive consideration for their shares and in which the
holders of the Company's common stock before the transaction do not hold at
least a majority of the common stock after the transaction ("Future Merger");
(ii) the Company consummates a sale of all or substantially all of its assets
in which the holders of Composite Stock receive consideration for their shares
("Sale"); provided that any one Business Group shall not be deemed to be
substantially all of its assets; (iii) the Company consummates an underwritten
public offering of more than 15% of its Composite Stock ("Public Offering");
(iv) the Company repurchases 1/3rd or more of its outstanding Composite Stock
within any three-month period for consideration other than its common stock,
provided that such three-month period shall have commenced within the two
years after the Effective Time ("Extraordinary Redemption"); and (v) the
Company pays an extraordinary dividend to holders of its Composite Stock in
excess of $34.75 per share ("Extraordinary Dividend"). The right to receive a
Contingent Payment, if any, may be evidenced by a certificate issued by the
Company and delivered simultaneously with the Class A Cash Consideration or
Notes Consideration. A "Future Merger" shall not include a stock sale, merger,
consolidation or business combination involving any Business Group. A "Public
Offering" shall not include any public offering, secondary offering or other
distribution of any Business Group Stock. All computations are to be done on a
Class B Composite Stock equivalent basis.
Upon consummation of a Future Merger or Sale, each such former holder of
Class A Common Stock will be entitled to receive for each share of Class A
Common Stock for which Class A Cash Consideration or Notes Consideration was
received in Share 100, the amount, if any, by which the fair market value of
the per share consideration received by the holders of Class B Composite Stock
exceeds the sum of $34.75 per share plus an amount equal to simple interest at
5% annually computed on $34.75 per share from the Effective Date to the
relevant date. Upon consummation of a Public Offering, each such former holder
of Class A Common Stock will be entitled to receive for each share of Class A
Common Stock for which Class A Cash Consideration or Notes Consideration was
received in Share 100, the amount, if any, by which the average of the closing
prices
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of the Class B Composite Stock issued in the Public Offering during the period
commencing 91 days, and ending 120 days, after the consummation of the Public
Offering exceeds the sum of $34.75 per share plus an amount equal to simple
interest at 5% annually computed on $34.75 per share from the Effective Date
to the relevant date. Upon the occurrence of an Extraordinary Redemption, each
such former holder of Class A Common Stock will be entitled to receive for
each share of Class A Common Stock for which Class A Cash Consideration or
Notes Consideration was received in Share 100, the amount, if any, equal to
the product of (a) the average purchase price of Class B Composite Stock
repurchased by the Company in the Extraordinary Redemption, less the sum of
$34.75 per share plus an amount equal to simple interest at 5% annually
computed on $34.75 per share from the Effective Date to the relevant date and
(b) a factor equal to (i) the number of shares of Class B Composite Stock
repurchased by the Company in the Extraordinary Redemption (the "Repurchased
Shares") divided by (ii) the sum of (x) the larger of the number of
Repurchased Shares or the number of shares of Class B Composite Stock tendered
to the Company in connection with the Extraordinary Redemption plus (y) the
number of shares of Class A Common Stock that were redeemed by the Company in
Share 100 for Class A Cash Consideration or Notes Consideration. Upon the
occurrence of an Extraordinary Dividend, each such former holder of Class A
Common Stock will be entitled to receive for each share of Class A Common
Stock for which Class A Cash Consideration or Notes Consideration was received
in Share 100, the amount, if any, equal to the total amount per share
distributed by the Company in the Extraordinary Dividend, less the sum of
$34.75 per share plus an amount equal to simple interest at 5% annually
computed on $34.75 per share from the Effective Date to the relevant date.
TREATMENT OF OUTSTANDING OPTIONS
The Company's 1984 Stock Option Plan, Combined Stock Ownership Plan and the
1996 Director Plan (individually, a "Stock Option Plan," and collectively, the
"Stock Option Plans") each provide that, in the event of a change in capital
structure of the Company as a result of a recapitalization or
reclassification, the number of shares for which options may be granted, the
number of shares subject to outstanding options and the option price therefor
shall be appropriately adjusted. The Stock Option Plans will be amended to
reflect the matters described herein.
General. Share 100 provides that, at the Effective Time, each share of Class
B Common Stock will be converted into the right to receive the Class B Cash
Consideration or the Group Stock Consideration. The exercise price per share
for outstanding options will remain unchanged; and the aggregate number of
shares for which options may be granted under each Stock Option Plan will
similarly remain unchanged. Each outstanding option which prior to the
Effective Time is exercisable in all respects for one share of Class B Common
Stock will, after the Effective Time, be changed into an option exercisable as
described below.
Employees Who Elect Group Stock in Share 100. All outstanding stock options
exercisable for Class B Common Stock owned by employees who elect Group Stock
Consideration in Share 100 will be changed into options exercisable for the
same type of, and in the same proportion as the, Group Stock into which their
Class B Common Stock is converted in Share 100.
Employees Receiving Cash in Share 100. Currently exercisable (vested)
options owned by employees who will receive the Class B Cash Consideration
will be changed into an amount in cash equal to $29.55 per share (the Class B
Cash Consideration) less the exercise price of such options. The Company will
pay the foregoing amounts (which will be taxable as ordinary compensation and
so will be reduced for required tax withholding) to such holders at the time
it makes payment to holders of Class B Common Stock receiving the Class B Cash
Consideration in Share 100.
Currently unexercisable (unvested) options owned by the foregoing employees
will be changed into: (i) options exercisable for the same type of, and in the
same proportion as the, Group Stock into which their Class B Common Stock
could have been exchanged in Share 100 had they elected the Group Stock
Consideration or, (ii) at the election of the holder of such options, the
right to receive $29.55 per share (the Class B Cash Consideration) less the
exercise price of such options. The Company will pay the foregoing cash
amounts (which
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will be taxable as ordinary compensation and so will be reduced for required
tax withholding) to such holders, without interest, on the day that the
unvested option would have become exercisable. No cash payment will be due if
the unvested option would not have become exercisable because the holder is
not still an employee of the Company or for any other reason. To make an
effective election regarding such unvested options, a holder must complete and
sign the Blue Form of Election and return it to the Exchange Agent prior to
10:00 a.m., Philadelphia time, on the Election Date.
Employees Who Are Not Holders. Options (whether vested or unvested) owned by
employees of the Company who are not, and do not have Permitted Transferees
who are, holders of Class B Common Stock (e.g., holders of ISPOs or EXPOs who
do not also hold shares of Class B Common Stock) will be changed into: (i)
options exercisable for the same type of, and in the same proportion as the,
Group Stock which they are eligible to own pursuant to the terms of the Group
Stock or, (ii) at the election of the holder of such options, the right to
receive $29.55 per share (the Class B Cash Consideration) less the exercise
price of such options. With respect to vested options, the Company will pay
the foregoing cash amounts (which will be taxable as ordinary compensation and
so will be reduced for required tax withholding) to such holders at the time
it makes payment to holders of Class B Common Stock receiving the Class B Cash
Consideration in Share 100. With respect to unvested options, the Company will
pay the foregoing cash amount (which will be taxable as ordinary compensation
and so will be reduced for required tax withholding), without interest, on the
day that the unvested option would have become exercisable. No cash payment
will be due if the unvested option would not have become exercisable because
the holder is not still an employee of the Company or for any other reason. To
make an effective election regarding such options, a holder must complete and
sign the Blue Form of Election and return it to the Exchange Agent prior to
10:00 a.m., Philadelphia time, on the Election Date.
Magazine and Book Employees. Options (whether vested or unvested) owned by
Magazine and Book Employees will be changed into the right to receive $29.55
per share (the Class B Cash Consideration) less the exercise price of such
options. With respect to vested options, the Company will pay the foregoing
cash amounts (which will be taxable as ordinary compensation and so will be
reduced for required tax withholding) to such holders at the time it makes
payment to holders of Class B Common Stock receiving the Class B Cash
Consideration in Share 100. With respect to unvested options, the Company will
pay the foregoing cash amounts (which will be taxable as ordinary compensation
and so will be reduced for required taxwithholding), without interest, on the
day that the unvested option would have become exercisable. No cash payment
will be due if the unvested option would not have become exercisable because
the holder is not still an employee of the Company or for any other reason.
Magazine and Book EXPO Holders. EXPOs (whether vested or unvested) owned by
employees of the Magazine and Book Business will be changed into the right to
receive $29.55 per share (the Class B Cash Consideration) less the exercise
price of such EXPOs. The Company will pay the foregoing cash amounts (which
will be taxable as ordinary compensation and so will be reduced for required
tax withholding) to such holders at the time it makes payment to holders of
Class B Common Stock receiving the Class B Cash Consideration in Share 100.
For more information concerning each of the Stock Option Plans, and the
options outstanding as of the end of fiscal year 1997, see "ELECTION OF
DIRECTORS--The ARAMARK Ownership Program."
TREATMENT OF EMPLOYEE BENEFIT PLANS
Retirement and Profit Sharing Plans. The Company and its subsidiaries
maintain the Benefit Plans for their respective employees. A principal purpose
of the Benefit Plans is to provide eligible employees with an equity interest
in the Company. Accordingly, each Benefit Plan contains specific provisions
directing that employer contributions be made primarily in Company stock. As
of October 3, 1997, the Benefit Plans held in the aggregate approximately
922,424 shares of Class A Common Stock which were allocated to the accounts of
more than 10,000 employees.
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In connection with Share 100, the trustees have preliminarily indicated that
they intend to vote this Class A Common Stock held under the Benefit Plans in
favor of Share 100 and to elect to receive, for all of the Class A Common
Stock held under the Benefit Plans, approximately 30% in cash in the
Reclassification and 70% in Class A Composite Stock pursuant to the Class A
Stock Exchange. The $81 million of cash proceeds would be diversified and
invested in other funds of the retirement and profit sharing plans. The
provisions requiring that employer contributions be made primarily in Company
stock remain in effect except for the Magazine and Book Retirement Plan.
Accordingly, the Company anticipates that additional Class A Composite Stock
will be contributed to such Benefit Plans to provide benefits to eligible
employees for the current and future years.
On January 6, 1998, the Board voted to amend the Magazine and Book
Retirement Plan. The Magazine and Book Retirement Plan was amended so that the
plan will no longer provide for investment in employer stock. The trustees, as
fiduciaries for the plan, have preliminarily indicated, subject to further
review and advice of their independent legal counsel and financial advisors,
that they will elect on behalf of the plan to exchange all of the plan's
existing shares of Class A Common Stock for cash. The $52 million of cash
proceeds would be diversified and invested in other funds.
The Benefit Plans provide that the trustees for the Benefit Plans vote
Company stock held by them. The trustees have preliminarily indicated that
they are inclined to vote the Class A Common Stock held thereunder in favor of
Share 100. See "SHARE 100--Appraisals of Common Stock" and "--Interests of
Certain Persons in Share 100."
After the Effective Time of Share 100, each Benefit Plan will make
additional payments to former employees who participated in the plan and whose
employment terminated between September 1, 1997 and the Effective Time. The
payment will be in respect of shares of Class A Common Stock which were
repurchased from such former employee's plan account after such termination.
The amount of the payment will be the difference between the Appraisal Price
of the shares at the Effective Time ($347.50 per share) and the price at which
the shares were valued when a distribution was made to the former employee.
Stock Unit Retirement Plan. Deferred Common Stock Units (DSUs) in each
participant's account for Class B Common Stock will be converted into DSUs for
Class B Composite Stock. Future employer contributions will be made in DSUs
for Class B Composite Stock.
After the Effective Time of Share 100, the Company will make additional
payments to former employees who participated in the Stock Unit Retirement
Plan and whose employment terminated between September 1, 1997 and the
Effective Time. The payment will be in respect of the shares of Class B Common
Stock distributed by the plan in connection with the termination and
concurrently repurchased by the Company. The amount of the payment will be the
difference between the Appraisal Price of such shares at the Effective Time
($29.55 per share) and the price at which such shares were repurchased.
CONDITIONS
The obligation of the Company to consummate Share 100 is subject to: (i) the
approval and adoption of Share 100 by the requisite vote and consent of the
stockholders of the Company; (ii) receipt of the proceeds of the Financing;
(iii) the absence of any action, proceeding or investigation instituted or
threatened prior to the Effective Time before any court or administrative body
seeking to restrain, enjoin or otherwise prevent the consummation of Share 100
or to obtain damages or any other relief as a result of Share 100 and the
absence of any restraining order or other injunction in effect prohibiting
consummation of Share 100; (iv) receipt of all material licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its subsidiaries as
may be necessary for consummation of Share 100; (v) the satisfactory
performance of all actions and proceedings and provision of all instruments
and documents required to carry out the transactions contemplated by the Plan
of Recapitalization; (vi) all terms and conditions of the Plan of
Recapitalization required to be complied with are satisfied or waived; (vii)
receipt by the Board of satisfactory appraisals or similar reports supporting
the conclusions that (a) sufficient surplus is available to permit
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consummation of the transactions contemplated by the Plan of Recapitalization
under the DGCL and (b) the fair value of the Company's total assets will
exceed the fair value of its total liabilities immediately after the Effective
Time; (viii) receipt by the Board of satisfactory opinions of counsel; and
(ix) Continuing Holders of no more than $25 million of the Class B Common
Stock (valued at $29.55 per share) becoming entitled to receive the Class B
Cash Consideration or perfecting their Dissenters' Rights. Condition (ix) may
be waived by the Board only if at least 500 record holders would own Class B
Composite Stock immediately after the Effective Time. To the extent permitted
by applicable law, conditions (i) through (viii) may be waived by the Board.
TERMINATION; AMENDMENT
The Plan of Recapitalization may be terminated and Share 100 abandoned by
the Board at any time prior to the Effective Time to the extent any Share 100
Certificate is not effective, notwithstanding approval thereof by the
stockholders of the Company.
At any time prior to the Effective Time to the extent any Share 100
Certificate is not effective, the Board may modify or amend any term of the
Plan of Recapitalization as set forth herein, add any new term or waive any
condition thereof, provided that no such modification, amendment, addition or
waiver which requires stockholder or any other approval under the DGCL or any
other applicable law, or under the Certificate of Incorporation or the
Stockholders' Agreement or Registration Rights Agreement, will occur following
the Annual Meeting unless such approval is obtained. The good faith
determination of the Board that an amendment, modification or supplement to
the Plan of Recapitalization complies with the immediately preceding sentence
shall be conclusive as to all stockholders. In the event of a material
modification to the Plan of Recapitalization, a supplement to this Proxy
Statement will be distributed to stockholders and, if necessary, stockholders'
proxies will be resolicited.
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AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
The following discussion of the Charter Amendments does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Restated Charter, a copy of which is attached to this Proxy Statement as
Annex V and is incorporated herein by reference. Stockholders are urged to
read carefully the complete text of the Restated Charter.
GENERAL
On January 6, 1998, the Board unanimously adopted and declared advisable,
and directed that there be submitted to the stockholders of the Company for
adoption at the Annual Meeting, a resolution that the Certificate of
Incorporation be amended in the following respects: (i) to provide for the
Reclassification and certain related matters; (ii) to increase the number of
shares of common stock authorized for issuance from 175,000,000 to 200,000,000
(Increased Capital Amendment); (iii) to give the Board the authority to issue
common stock in series (which may be referred to as separate classes) and to
fix the terms of such series, which authority will be used initially by the
Board to create the Group Stocks in connection with Share 100 (the Board
Authority Amendment); (iv) in order to give effect to Share 100, to amend the
terms of the Class A Common Stock and Class B Common Stock by reducing the
number of authorized shares and by making conforming changes to defined terms
and cross-references (the Continuing Common Stock Amendment); (v) to provide
that upon the consummation of any future underwritten public offering of the
Company's common stock (the "Public Offering Date"), stockholder action shall
be taken only at an annual meeting of stockholders or at a special meeting of
stockholders and stockholder action by written consent shall be prohibited
(Stockholder Action Amendment); and (vi) to provide that upon the occurrence
of the Public Offering Date, the Board shall be classified into three classes,
each of which, after a transitional arrangement, will serve for three years,
with one class being elected each year (Classified Board Amendment).
If all of Share 100 is expected to be approved then after Proposals 1 and 3
are approved by the stockholders, the Certificate of Incorporation will be
amended by the Amendment Certificate, the Certificate of Designations and the
Reclassification Certificate. After Share 100 is implemented, the Certificate
of Incorporation will then be restated in its entirety (the Restated Charter)
so as to incorporate the provisions of the Share 100 Certificates into a
unified text. As indicated above under "INTRODUCTION," the Increased Capital
Amendment and the Board Authority Amendment are intended to facilitate Share
100 in accordance with the matters described in this Proxy Statement. The
proposed Charter Amendments will be effective upon filing of the Amendment
Certificate.
THE RECLASSIFICATION
The Reclassification Certificate will be filed in order to effect the
Reclassification. Specifically, Article FOURTH of the Certificate of
Incorporation will be amended to provide, effective at the Reclassification
Effective Time, for the reclassification of the Class A Common Stock, pursuant
to which each outstanding share of Class A Common Stock will be reclassified
as, and changed into, one share of Redeemable Transitory Participating
Preferred Stock, which will be redeemable for (and will be redeemed
immediately after the Reclassification Effective Time for): (a) the Class A
Cash Consideration, unless the holder makes an effective Class A Election for
(b) the Notes Consideration. To effect the foregoing, Article FOURTH of the
Certificate of Incorporation will be amended by adding to the introduction
thereof the text set forth in the third paragraph of Article FOURTH of the
Restated Charter.
INCREASE OF AUTHORIZED COMMON STOCK
At the effective time of the Amendment Certificate, Article FOURTH of the
Certificate of Incorporation will be further amended to increase the
authorized number of shares of common stock from 175,000,000 to 200,000,000.
To effect the foregoing, the first paragraph of Article FOURTH of the
Certificate of Incorporation will be replaced by the text set forth in the
first paragraph of Article FOURTH of the Restated Charter.
As described in "DESCRIPTION OF CAPITAL STOCK--Capital Stock After the
Effective Time--Composite Stock and Business Group Stock--Conversion and
Redemption," any conversion of one class of Business Group Stock into Class A
Composite Stock or Class B Composite Stock would be at a rate equal to the
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ratio of the Appraisal Price of one share of the applicable Business Group
Stock to the Appraisal Price of one share of the applicable Class A Composite
Stock or Class B Composite Stock. The number of shares issuable in a
conversion will therefore vary based on the relative Appraisal Prices of the
two classes of Common Stock and the number of outstanding shares of the
classes to be converted. Such a conversion may occur at any time at the
discretion of the Board. In the event the Board determined that a conversion
was in the best interests of the Company, but insufficient shares of
authorized Common Stock were available, the Company would be unable to effect
such conversion without the delays associated with seeking approval of
stockholders to a further amendment to the Certificate of Incorporation. The
Board believes that the proposed amendment is in the best interests of the
Company and its stockholders because of the uncertainty as to the number of
shares that would be issuable in the event of a conversion and to avoid
possible delays should a conversion be determined to be in the best interests
of the Company, taking into consideration the interests of all common
stockholders.
If the proposed amendment is approved by stockholders and implemented by the
Board, the additional authorized shares of Common Stock would be available for
designation as Common Stock and could be issued by the Company from time to
time, as determined by the Board, for any proper corporate purpose, which
could include raising capital, paying stock dividends, providing compensation
or benefits to employees or acquiring other companies or businesses. The
approval of the stockholders will not be solicited by the Company for the
issuance from the authorized but unissued shares of Common Stock of such
additional shares of Common Stock unless such approval is deemed advisable by
the Board or is required under the DGCL.
Other than as described above, the Company has no present understanding or
agreement with respect to the issuance for any purpose of any of the
additional shares that will be authorized for issuance if Share 100 is
approved by the stockholders.
BOARD AUTHORITY AMENDMENT
At the effective time of the Amendment Certificate, Article FOURTH of the
Certificate of Incorporation will be further amended to give the Board the
authority to issue its common stock (other than the Class A Common Stock and
Class B Common Stock) in series (which may be referred to as separate classes)
and to fix the terms of such series. Specifically, the second paragraph of
Article FOURTH of the Certificate of Incorporation will be replaced by the
second and fourth paragraphs of Article FOURTH of the Restated Charter. The
Board is currently authorized to issue preferred stock of the Company in
series and to fix the terms of such series. The Board will use the authority
granted by the Board Authority Amendment to create the Group Stocks in
connection with Share 100. The Company may, in the future, use such authority
to create additional classes or series of Business Group Stock. The Board
Authority Amendment would give the Company greater flexibility for structuring
corporate transactions, raising additional capital and other corporate
purposes. Other than as described above, the Company has no present
understanding or agreement with respect to the creation or issuance for any
purpose of any additional series or class of common stock if Share 100 is
approved by the stockholders.
CONTINUING COMMON STOCK AMENDMENT
At the effective time of the Amendment Certificate, Article FOURTH of the
Certificate of Incorporation will be further amended to incorporate the
Continuing Common Stock Amendment. Specifically, Part 4A of Article FOURTH of
the Certificate of Incorporation will be replaced in its entirety by the text
set forth in Part 4D of the Restated Charter. The Continuing Common Stock
Amendment is being proposed in order to give effect to the terms of Share 100,
the creation of the Group Stocks and the Redeemable Transitory Participating
Preferred Stock and the Increased Capital Amendment. Specifically, the
authorized capital of the Class A Common Stock and the Class B Common Stock
will be decreased from 25,000,000 to 5,000,000 shares, and 150,000,000 to
25,000,000, respectively, and the defined terms and cross-references will be
conformed. After implementation of Share 100, the Continuing Common Stock
Amendment will have no effect on the Company's stockholders or corporate
governance because there will be no shares of such stock issued and
outstanding. The Company has no present understanding or agreement with
respect to the issuance of such shares.
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PROPOSED AMENDMENTS TO CERTIFICATE OF INCORPORATION RELATING TO STOCKHOLDER
ACTION AND THE BOARD OF DIRECTORS
General. Share 100 also contemplates two additional amendments to the
Certificate of Incorporation relating to (i) the requirement that stockholder
action may be taken only at an annual meeting of stockholders or at a special
meeting of stockholders and the prohibition of stockholder action by written
consent (Stockholder Action Amendment) and (ii) the classification of the
Board into three classes (Classified Board Amendment). The text of the
Stockholder Action Amendment is set forth in Article SIXTH of the Restated
Charter and the text of the Classified Board Amendment is set forth in Part 5C
of Article FIFTH of the Restated Charter. As more fully discussed below, the
Board believes that the various elements of the Stockholder Action Amendment
and Classified Board Amendment would, if adopted and upon the occurrence of
the Public Offering Date, effectively reduce the possibility that a third
party could effect a sudden or surprise change in majority control of the
Board by making it more time-consuming to gain control of the Board without
the support of the incumbent directors. The Stockholder Action Amendment and
Classified Board Amendment are not intended to impede a transaction that is
approved by the Board. However, adoption of the Stockholder Action Amendment
and Classified Board Amendment may, after the occurrence of the Public
Offering Date, have significant effects on the ability of stockholders of the
Company to acquire and exercise control, to change the composition of the
incumbent Board and to benefit from certain transactions which are opposed by
the incumbent Board even though they may be favored by a majority of the
stockholders. Accordingly, stockholders are urged to read carefully the
following sections of this Proxy Statement, which summarize Article SIXTH and
Part 5C of Article FIFTH of the Restated Charter included as Annex V to this
Proxy Statement setting forth the full text of the Stockholder Action
Amendment and Classified Board Amendment before voting on the Stockholder
Action Amendment and Classified Board Amendment. Each of these amendments will
be voted on as a separate proposal. Unless each of these amendments is
approved at the Annual Meeting, neither of such amendments will be
implemented. Prior to the Public Offering Date, the Stockholder Action
Amendment and the Classified Board Amendment will have no effect on the
governance of the Company, which will continue as if these Charter Amendments
had not been adopted.
The Stockholder Action Amendment and Classified Board Amendment are being
proposed at a time at which the Company is undertaking a significant corporate
transaction to terminate the equity interests of the outside stockholders in
the Company and realign more closely the investment interests of the
Management Investors with the performance of the principal business unit for
which the Company's employees work. The Company and its Business Groups will
remain private, although going public remains an option for the future with
regard to the Company, as a whole, or any of its Business Groups, in
particular. The Company has no current intention to bring in the future
itself, or any business thereof, public. In light of these significant
developments and potential future public offerings, the Board determined that
this was an appropriate time to review the Company's potential vulnerability
to, and ability to discourage, certain types of unsolicited transactions that
could interfere with the continuity of the Board and management while not
offering maximum value to stockholders. Accordingly, and for the reasons
described in greater detail below, the Board determined to present the
Stockholder Action Amendment and Classified Board Amendment to the
stockholders at the Annual Meeting.
IT SHOULD BE NOTED THAT THE EFFECT OF THE PROPOSED AMENDMENTS, IF ADOPTED
AND ASSUMING THE OCCURRENCE OF THE PUBLIC OFFERING DATE, WILL BE TO MAKE
MERGER PROPOSALS AND ASSUMPTIONS OF CONTROL NOT FAVORED BY THE BOARD, AS WELL
AS THE REPLACEMENT OF MANAGEMENT, MORE DIFFICULT.
Description of the Proposed Amendments.
(1) Certain Stockholder Actions. Pursuant to the DGCL, unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken by stockholders of the Company may be taken without a meeting and
without a stockholder vote if a written consent setting forth the action to be
taken is signed
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by the holders of shares of outstanding stock having the requisite number of
votes that would be necessary to authorize such action at a meeting of
stockholders. The Certificate of Incorporation does not currently otherwise
provide, and Section 10 of Article II of the By-Laws of the Company, as
amended (the "By-Laws"), currently provides for stockholder action by written
consent. Proposed Article SIXTH of the Restated Charter would replace the
current Article SIXTH, which contains definitions which have been incorporated
into the terms of the Group Stock. Proposed Article SIXTH would provide that,
upon the occurrence of the Public Offering Date, stockholder action may be
taken only at an annual meeting of stockholders or at a special meeting of
stockholders and stockholder action by written consent would be prohibited. As
is currently provided in Section 3 of Article II of the By-Laws, a special
meeting of stockholders may be called by the Board or the Chief Executive
Officer of the Company. The Chief Executive Officer is required to call such
special meeting upon the written request of stockholders owning 20% of the
voting rights of the stock entitled to vote at such meeting. The Board
currently anticipates that in connection with the Public Offering Date, the
By-Laws would be amended to remove the ability of stockholders to act by
written consent and the right of stockholders to call a special meeting.
The provisions prohibiting stockholder action by written consent would give
all stockholders of the Company the opportunity to participate in determining
any proposed action and would prevent the holders of a majority of the common
stock from using the written consent procedure to take stockholder action
without affording all stockholders an opportunity to participate. On the other
hand, this amendment will prevent stockholders controlling a majority of the
voting power of the Company from taking legitimate action over the objection
of the Board or a minority of stockholders other than at a meeting of
stockholders at which the proposal is submitted to stockholders. If the By-
Laws are amended as described above, a stockholder could not force stockholder
consideration of a proposal over the opposition of the Board by calling a
special meeting of stockholders prior to such time as the Board or the
Chairman of the Board of the Company believed such consideration to be
appropriate.
(2) Classification of the Board of Directors. The By-Laws currently provide
that directors are to be elected to the Board annually for a term of one year
and fix the number of directors of the Company at not more than nineteen and
not less than nine. Proposed Part 5C of Article FIFTH to the Restated Charter
would provide that upon the occurrence of the Public Offering Date, the
directors of the Company, other than those who may be elected by the holders
of any series of preferred stock or any other series or class of stock as set
forth in the Certificate of Incorporation, will be divided into three classes
as nearly equal in number as possible, and designated as Class I, Class II and
Class III. The initial assignment of directors to such classes shall be made
by the Board and the terms of all such directors shall expire at the first
annual meeting of stockholders following the Public Offering Date, or earlier
at a special meeting called for the purpose of electing directors to such
classes, after which Class I directors will have a term expiring at the next
annual meeting of stockholders following such meeting; Class II directors will
have a term expiring at the second annual meeting of stockholders following
such meeting; and Class III directors will have a term expiring at the third
annual meeting of stockholders following such meeting. Members of each class
of directors will hold office until their successors are elected and
qualified. At each succeeding annual meeting of stockholders, the successors
of the class of directors whose term expires at that meeting will be elected
by a plurality vote of all votes cast at such meeting to hold office for a
term expiring at the annual meeting of stockholders held in the third year
following the year of their election, and until their successors are elected
and qualified. Vacancies of the Board may be filled by a vote of the directors
then in office though less than a quorum for the remainder of the full term.
Directors of the Company are now elected by the holders of a plurality of
the votes cast. The classification of directors will have the effect of making
it more difficult to change the overall composition of the Board. At least two
stockholders' meetings, instead of one, will be required for stockholders to
effect a change in a majority of the Board. Although there has been no problem
in the past with the continuity or stability of the Board, the Board believes
that after the Public Offering Date the longer time required to elect a
majority of a classified Board would help to assure the continuity and
stability of the Company's affairs and policies in the future, since a
majority of the directors at any given time would have prior experience as
directors of the Company. As described in greater detail below, the Board has
taken note of the fact that a classified Board may discourage
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<PAGE>
potential bidders from making unsolicited bids for the Company or from
engaging in proxy contests, thereby depriving some stockholders of the
opportunity to participate in and potentially benefit from these types of
transactions. However, the Board has determined that these potential benefits
are outweighed by the potential negative effects that these types of
transactions may have on the Company and the stockholders as a whole.
Purpose and Effects of the Amendments to Certificate of Incorporation. The
purpose of the Stockholder Action Amendment and Classified Board Amendment is
to discourage, after the Public Offering Date, certain types of transactions,
described below, which involve an actual or threatened change of control of
the Company. The Stockholder Action Amendment and Classified Board Amendment
are not being proposed in response to any specific effort of which the Company
is aware to obtain control of the Company. The proposed amendments are
designed, after the Public Offering Date, to make it more difficult and time-
consuming to change majority control of the Board and thus to reduce the
vulnerability of the Company to an unsolicited proposal for the takeover of
the Company that does not contemplate the acquisition of all the Company's
outstanding shares, or an unsolicited proposal for the restructuring or sale
of all or part of the Company. While the Board recognizes that such takeovers
might in some circumstances be beneficial to stockholders, the Board believes
that, as a general rule, they are not in the best interests of the Company and
its stockholders insofar as they do not permit the Board to negotiate with any
potential acquiror from the strongest practical position.
The 1980s provide many examples of accumulations of substantial stock
positions in public companies by third parties as a prelude to proposing a
takeover or a restructuring or sale of all or part of the company or other
similar extraordinary corporate action. Such actions were often undertaken by
the third party without advance notice to or consultation with management of
the company. In many cases, the purchaser sought representation on the
company's board of directors in order to increase the likelihood that its
proposal would be implemented by the company. If the company resisted the
efforts of the purchaser to obtain representation on the company's board, the
purchaser would commence a proxy contest to have its nominees elected to the
board in place of certain directors or the entire board. In some cases, the
purchaser was not truly interested in taking over the company, but used the
threat of a proxy fight and/or a bid to take over the company as a means of
obtaining for itself a special benefit, such as a repurchase of its equity
position at a premium over market price, not available to other stockholders.
While the early 1990s witnessed a decline in these types of transactions, the
techniques described above remain available and the Company could find itself
subject to abusive tactics of this nature.
The Board believes that the imminent threat of removal of incumbent
directors and the Company's management in such situations would severely
curtail their ability to negotiate effectively with such purchasers. The Board
and management would be deprived of the time and information necessary to
evaluate the takeover proposal, to study alternative proposals and to help
ensure that the best price is obtained in any transaction involving the
Company which may ultimately be undertaken. After the occurrence of the Public
Offering Date, the Stockholder Action Amendment and Classified Board Amendment
will help ensure that the Board, if confronted by a proposal from a third
party which has acquired a significant block of Composite Stock and Business
Group Stock, will have sufficient time to review the proposal and appropriate
alternatives.
Takeovers or changes in the Board or management of the Company which are
proposed and effected without prior consultation and negotiation are not
necessarily detrimental to the Company and its stockholders. Moreover, the
proposed Stockholder Action Amendment and Classified Board Amendment, after
the occurrence of the Public Offering Date, will make it more difficult or
discourage a proxy contest or the assumption of control by a holder of a
substantial block of the Company's stock or the removal of the incumbent Board
and could thus increase the likelihood that incumbent directors will retain
their positions. In addition, since these amendments are designed to
discourage accumulations of large blocks of the Company's stock by purchasers
whose objective may be to have such stock repurchased by the Company at a
premium, these amendments could tend to reduce temporary fluctuations in the
market price of the Company's stock, after the Public Offering Date, that
could result from accumulations of large blocks of stock. Accordingly, after
the Public Offering Date, stockholders could be deprived of certain
opportunities to sell their stock at a temporarily higher market price.
However, the Board believes that the benefits of seeking to protect its
ability to exercise its discretion to negotiate with or to
83
<PAGE>
resist the proponent of an unfriendly or unsolicited proposal to take over or
restructure the Company after the Public Offering Date, and to seek out
appropriate alternatives, if desirable, outweigh these disadvantages.
Moreover, while it is impossible to predict with any degree of certainty
what impact the Stockholder Action Amendment and Classified Board Amendment
would have on the potential realizable value of a stockholder's investment,
particularly in light of the myriad of factors that can and will impact value,
the Board does not believe that these proposals ultimately will negatively
impact stockholder value. It is conceivable that the Stockholder Action
Amendment and Classified Board Amendment will discourage potential acquirors
from launching certain types of unsolicited transactions aimed at taking
control of the Company after the Public Offering Date, thereby denying
stockholders the opportunity to sell their shares, potentially at a premium to
the then current market prices, to these potential bidders. However, the Board
has taken note of the fact that many large U.S. public corporations have
adopted similar classified board structures, and that these have not deterred
acquisitions of these corporations through negotiated transactions. In fact,
as discussed above, the Board's purpose in recommending adoption of the
Stockholder Action Amendment and Classified Board Amendment is to encourage
those who, after the Public Offering Date, might seek control of the Company
to negotiate a transaction with the Board, thereby giving the Board an
opportunity to resist abusive takeover tactics that might permit a change of
control that does not offer value to stockholders and to structure a
transaction in which all stockholders are permitted to participate. In this
way, the Board believes that the Stockholder Action Amendment and Classified
Board Amendment may ultimately enhance the potential realizable value of a
stockholder's investment.
The Certificate of Incorporation does not currently permit cumulative voting
in the election of directors and the By-Laws provide that a plurality of the
votes cast in any election of directors shall elect directors. Accordingly,
the holders of a majority of the Common Stock can now elect all of the
directors then being elected at any annual or special meeting of the Company's
stockholders; moreover, under Delaware law, such holders could remove any
director with or without cause by vote or written consent. If the Stockholder
Action Amendment and Classified Board Amendment are adopted at the Annual
Meeting, removal of incumbent directors, even if favored by a majority of
stockholders will be considerably more difficult after the Public Offering
Date, if not impossible, because stockholders will not be able to act without
a meeting and because under Delaware law classified directors may only be
removed for cause.
The Certificate of Incorporation and By-Laws contain at present no
provisions intended by the Company to have or, to the knowledge of the Board,
having an anti-takeover effect. The Board has no current intention of
soliciting a stockholder vote on any other proposals which could have such an
effect. The Company does have, and after the Effective Time will have,
authorized 10,000,000 shares of Series Preferred Stock (as defined in
"DESCRIPTION OF CAPITAL STOCK") which could be issued with voting power and
other rights fixed by the Board without stockholder approval, except as
required by applicable law. Although the Board presently has no intention of
doing so, these shares could be issued (subject to applicable law) in certain
amounts or to certain holders in a manner (e.g., by giving them
disproportionate or class voting rights), which could have the effect of
discouraging takeover attempts and making it more difficult (particularly if
the Stockholder Action Amendment and Classified Board Amendment become
effective) to obtain the vote required for approval of matters submitted to
stockholders of the Company. After the Effective Time, the Company will also
have authorized 5,000,000 shares of common stock, the terms of which
(including voting power and other rights) are not fixed in the Restated
Charter, which could be similarly issued. Moreover, the increase in voting
power of Class B Composite Stock and Business Group Stock in the event of an
underwritten public offering of Business Group Stock described in "DESCRIPTION
OF CAPITAL STOCK--Capital Stock After the Effective Time" could also have the
effect of discouraging takeover attempts and make it more difficult to obtain
the vote required for approval of matters submitted to stockholders of the
Company. The increased voting power of such Group Stock would have the effect
of increasing the voting power of the Company's management and employees in
relation to the holders of the publicly offered stock.
The Stockholders' Agreement, however, does, and the Restated Stockholders'
Agreement will, contain certain provisions having an anti-takeover effect,
including the obligation to first offer shares to the Company
84
<PAGE>
prior to certain share transfers and the prohibition on any person acquiring
more than 10% of any class of outstanding shares, unless the acquisition is
approved by the Board. These provisions have the effect of preventing any
person from acquiring a significant percentage of any class of the Company's
common stock, unless approved in advance by the Board.
VOTE REQUIRED
Proposal 3 will be voted upon as five separate proposals, each of which
requires the affirmative vote of the holders of a majority of the outstanding
Common Stock voting as a single class, and the Continuing Common Stock
Amendment also requires the affirmative vote of the holders of the outstanding
Class A Common Stock and Class B Common Stock, each voting as a single class.
Each of Proposals 1, 2, 3 and 4 (relating to the Reclassification, the Merger,
the Charter Amendments and the Stockholders' Agreement Amendment) is
conditioned upon approval, or expected approval, of the others and will not be
implemented if any such proposal is not approved, or expected to be approved,
by stockholders. Accordingly, a vote against any such proposal will have the
effect of a vote against all such proposals.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD BELIEVES ADOPTION OF THE CHARTER AMENDMENTS EMBODIED IN PROPOSAL 3
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND, ACCORDINGLY,
UNANIMOUSLY RECOMMENDS STOCKHOLDERS VOTE FOR PROPOSAL 3.
85
<PAGE>
CHANGES TO CERTAIN AGREEMENTS
THE STOCKHOLDERS' AGREEMENT
The Board has unanimously approved, and recommends to the stockholders that
they adopt, an amendment and restatement of the Stockholders' Agreement due to
various changes contemplated under Share 100. The Stockholders' Agreement
Amendment will (i) eliminate references to Outside Stockholders, (ii) provide
that the classes of Composite Stock and Business Group Stock are subject to
all of the terms and provisions of the Stockholders' Agreement and (iii)
provide that a stockholder who sells or transfers any shares of common stock
must sell or transfer a proportionate number of shares of each other class of
common stock owned by such stockholder. For the complete text of the
Stockholders' Agreement, as it would read after the Effective Time (the
"Restated Stockholders' Agreement"), see Annex VI to this Proxy Statement. For
further information regarding the Stockholders' Agreement Amendments presented
in a questions and answers format, see "PROXY STATEMENT SUMMARY--Questions and
Answers for Management Investors."
VOTING
The Restated Stockholders' Agreement will become effective immediately
following the Effective Time. Amendments to the Stockholders' Agreement, as
stated in such agreement, require the affirmative vote of (i) at least 75% of
the Common Stock held by Institutional and Individual Investors (taken as a
whole), as such parties are identified on the books of the Company and (ii) by
Management Investors who hold (in combination with their Permitted
Transferees), as such parties are identified on the books of the Company, at
least a majority of the Common Stock held by Management Investors and their
Permitted Transferees. Accordingly, the votes by Management Investors on the
enclosed Proxy Card will be binding on their Permitted Transferees,
notwithstanding a different vote by such Permitted Transferees. No
Institutional and Individual Investors will be stockholders of the Company on
or after the Reclassification Effective Time. Since the vote on the
Stockholders' Agreement Amendment will be taken after the Reclassification
Effective Time, amendments to the Stockholders' Agreement require only the
affirmative vote by Management Investors described above.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD BELIEVES ADOPTION OF THIS PROPOSAL IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND, ACCORDINGLY, UNANIMOUSLY RECOMMENDS
STOCKHOLDERS VOTE FOR THIS PROPOSAL.
THE REGISTRATION RIGHTS AGREEMENT
Share 100 also contemplates the termination of the Registration Rights
Agreement. The Registration Rights Agreement provides for certain registration
rights on behalf of holders of Class A Common Stock who also are Outside
Stockholders. Since such holders will no longer hold any of the Company's
common stock after Share 100, the Registration Rights Agreement will have no
effect. Accordingly, the Company has determined that the Registration Rights
Agreement will be terminated as of the Reclassification Effective Time.
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<PAGE>
FINANCING OF SHARE 100
GENERAL
The Company will increase its aggregate debt level by approximately $440
million to finance Share 100, including amounts required to redeem, convert or
repurchase shares and to pay the fees and expenses incurred in connection with
Share 100.
THE BANK FACILITY
The Company has entered into a definitive Bank Facility (the "Bank
Facility"), the terms and conditions of which are as set forth below:
The Bank Facility is an unsecured revolving credit facility in the initial
amount of $1.4 billion. The borrowers under the Bank Facility are ARAMARK
Services, Inc. and ARAMARK Uniform Services Group, Inc., and the guarantors
are the Company and certain wholly-owned domestic subsidiaries of the Company
and the two borrowers.
The outstanding commitments under the Bank Facility will reduce through
scheduled amortizations to $1 billion at the end of the fourth year and will
continue at that level to a final maturity at the end of the seventh year.
Interest under the Bank Facility is based upon the London Interbank Offered
Rate (LIBOR) plus a spread of .18% to .70% (estimated initially to be .30%),
or the Certificate of Deposit Rate plus a spread of .28% to .80% (estimated
initially to be .40%), or the Prime Rate at the option of the borrower. The
spread is based on certain financial ratios and credit ratings. The borrowers
will also pay an annual fee of .10% to .30% (estimated initially to be .15%)
on the entire credit facility. J.P. Morgan and Chase Securities Inc., an
affiliate of Chase, were co-arrangers of the recent refinancing of the Bank
Facility.
The Bank Facility contains restrictive covenants which provide, among other
things, limitations on: (i) the creation of mortgages and security interests;
(ii) dispositions of material assets; and (iii) certain significant changes of
control of the Company. Under the Bank Facility, the Company is required to
maintain certain specified minimum ratios of cash flow to fixed charges and to
total borrowings and certain minimum levels of net worth.
The Bank Facility contains various event of default provisions, including
default in payment of principal or interest, material misrepresentation in the
Bank Facility, default in compliance with other terms of the Bank Facility or
the related guarantees, bankruptcy, default on other indebtedness, failure to
satisfy or stay certain judgments or orders entered against the Company or any
of its subsidiaries, failure to pay when due certain amounts with respect to
certain employee benefit plans, and other events with respect to such plans.
87
<PAGE>
SOURCES AND USES OF FUNDS
The estimated sources and uses of funds for the Financing, assuming that in
Share 100 all Outside Stockholders receive the Class A Cash Consideration,
approximately 75% of Former Managers by number of shares participate in the
Class A Stock Exchange and the rest have their shares repurchased pursuant to
the Stockholders' Agreement, the Magazine and Book Benefit Plan receives the
Class A Cash Consideration, all other Benefit Plans receive 30% cash in the
Reclassification and 70% Class A Composite Stock pursuant to the Class A Stock
Exchange, all Magazine and Book Employees receive the Class B Cash
Consideration, and all Continuing Holders receive the Group Stock
Consideration, are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Sources of Funds:
Additional borrowings under Bank Facility..................... $440.5
======
Uses of Funds:
Redemption of Class A Common Stock
Outside Stockholders......................................... $275.9
Benefit Plans................................................ 132.5
Former Managers.............................................. 19.4
Redemption of Class B Common Stock
Magazine and Book Employees.................................. 6.1
Costs and fees................................................ 6.6
------
$440.5
======
</TABLE>
ESTIMATED COSTS AND FEES
Estimated costs and fees in connection with Share 100 and the related
transactions are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Bank Transaction Fees....................................... $2,000
Financial Advisory, Appraisal, Valuation and Accounting
Fees....................................................... 2,600
Legal Fees.................................................. 1,750
Printing, Engraving and Mailing............................. 100
Miscellaneous............................................... 150
------
Total..................................................... $6,600
======
</TABLE>
88
<PAGE>
HISTORICAL AND PRO FORMA CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of October 3, 1997 on a historical basis and on a pro forma basis
after giving effect to Share 100, including the Reclassification and the
Merger, the incurrence of additional indebtedness and the payment of fees and
expenses. This table should be read in conjunction with the "PRO FORMA
FINANCIAL INFORMATION" and the Consolidated Financial Statements and related
notes thereto appearing in Annex VII hereto.
<TABLE>
<CAPTION>
OCTOBER 3, 1997
-------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA(a)
---------- ----------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Long-Term Borrowings (excluding cur-
rent maturities):
Senior............................ $1,083.0 $ 440.5 (c) $1,523.5
Subordinated...................... 129.0 129.0
Obligations under capital leases.. 1.9 1.9
-------- ------- --------
Total Long-Term Borrowings........ 1,213.9 440.5 1,654.4
-------- ------- --------
Common stock subject to potential
repurchase(b)...................... 23.3 (3.3) 20.0
-------- ------- --------
Shareholders' equity................ 370.0 (433.0)(d) (63.0)
-------- ------- --------
Total capitalization.............. $1,607.2 $ 4.2 $1,611.4
======== ======= ========
</TABLE>
NOTES TO HISTORICAL AND PRO FORMA CAPITALIZATION
(a) Share 100 has been accounted for as a redemption of shares not subject to
purchase accounting. The pro forma capitalization does not reflect any
adjustments to the carrying values of assets and liabilities of the
Company based on their fair market value as of the effective date of Share
100.
(b) Under the Company's Stockholders' Agreement, in certain circumstances
individual stockholders may cause the Company to repurchase up to 30% of
their shares for cash, subject, under the current Bank Facility, to an
aggregate limit on repurchases of capital stock of $23.3 million at
October 3, 1997. On a pro forma basis the repurchase limitation would be
$20 million at October 3, 1997.
(c) Reflects an increase in the Bank Facility borrowings to finance the Share
100 transactions.
(d) The pro forma reduction in Shareholders' equity reflects the redemption of
certain Class A and Class B Common Stock as described under "THE PLAN OF
RECAPITALIZATION," a charge of $2.4 million representing the after tax
impact of the nonrecurring costs of Share 100 and the impact of the
potential repurchase feature of common stock described in note (b).
89
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of
October 3, 1997 and unaudited Pro Forma Condensed Consolidated Statement of
Income for the fiscal year ended October 3, 1997 have been prepared to reflect
Share 100, including the Reclassification and the Merger, the incurrence of
additional indebtedness and the payment of fees and expenses. Share 100 has
been accounted for as a redemption of stock not subject to purchase
accounting. The pro forma information does not reflect any adjustments to the
carrying values of assets and liabilities of the Company based on their fair
market value as of the date of Share 100.
The Pro Forma Condensed Consolidated Statement of Income was prepared as if
Share 100 had occurred at the beginning of fiscal 1997. The Pro Forma
Condensed Consolidated Balance Sheet was prepared as if Share 100 had occurred
on October 3, 1997.
No changes in revenues and expenses have been made to reflect the results of
any modification to operations that might have been made had Share 100 been
consummated on the assumed effective dates for presenting pro forma results.
The Pro Forma Condensed Consolidated Statement of Income does not reflect any
non-recurring costs which may be incurred in connection with Share 100. The
pro forma financial statements set forth below are not necessarily indicative
of the consolidated results which would actually have occurred had such
transactions been consummated as of the date and for the period presented or
which may occur in the future.
The pro forma financial information should be read in conjunction with the
Consolidated Financial Statements and related notes thereto for the Company in
Annex VII.
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<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
OCTOBER 3, 1997
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL(a) ADJUSTMENTS PRO FORMA
------------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........... $ 27,352 $ $ 27,352
Receivables......................... 517,035 517,035
Inventories, at lower of cost or
market............................. 366,515 366,515
Prepayments and other current as-
sets............................... 67,314 67,314
---------- --------- ----------
Total current assets.............. 978,216 978,216
---------- --------- ----------
Property and Equipment, net........... 867,176 867,176
Goodwill.............................. 623,841 623,841
Other Assets.......................... 284,346 1,646 (c) 285,992
---------- --------- ----------
$2,753,579 $ 1,646 $2,755,225
========== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
borrowings......................... $ 18,517 $ $ 18,517
Accounts payable.................... 459,847 459,847
Accrued expenses and other current
liabilities........................ 458,387 (2,512)(d) 455,875
---------- --------- ----------
Total current liabilities......... 936,751 (2,512) 934,239
---------- --------- ----------
Long-Term Borrowings.................. 1,213,944 440,500 (b) 1,654,444
Deferred Income Taxes & Other
Noncurrent Liabilities............... 209,583 209,583
Common Stock Subject to Potential Re-
purchase Under Provisions of Stock-
holders' Agreement................... 23,254 (3,254)(e) 20,000
Shareholders' Equity Excluding Common
Stock Subject to Repurchase:
Class A Common Stock, par value
$.01............................... 20 (20) --
Class B Common Stock, par value
$.01............................... 205 (205) --
Class A and B Composite Stock....... -- 165 165
Education Group Stock............... -- 2 2
Food and Support Group Stock........ -- 30 30
Uniform Group Stock................. -- 15 15
Earnings retained for use in the
business........................... 394,090 (436,329) (42,239)
Cumulative translation adjustment... (1,014) (1,014)
Impact of potential repurchase fea-
ture of common stock............... (23,254) 3,254 (e) (20,000)
---------- --------- ----------
Total............................. 370,047 (433,088) (63,041)
---------- --------- ----------
$2,753,579 $ 1,646 $2,755,225
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
91
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 3, 1997
---------------------------------------------------
HISTORICAL(a) ADJUSTMENTS PRO FORMA
--------------- ------------- --------------
<S> <C> <C> <C>
Revenues................. $ 6,310,417 $ $ 6,310,417
-------------- ------------ --------------
Costs and Expenses:
Cost of services pro-
vided................. 5,715,402 5,715,402
Depreciation and amor-
tization.............. 191,732 191,732
Selling and general
corporate expenses.... 83,079 83,079
Other expense (income),
net................... (11,655) (11,655)
-------------- ------------ --------------
5,978,558 5,978,558
-------------- ------------ --------------
Operating income....... 331,859 331,859
Interest Expense, net.... 116,012 29,158 (f) 145,170
-------------- ------------ --------------
Income before income
taxes................. 215,847 (29,158) 186,689
Provision For Income Tax-
es...................... 69,739 (11,513)(d) 58,226
-------------- ------------ --------------
Income Before Extraordi-
nary Items.............. $ 146,108 $ (17,645) $ 128,463
============== ============ ==============
Earnings per share before
Extraordinary Items(g)
As reported............ $ 3.28
Pro forma:
Composite Stock...... $ 4.19
Education Group
Stock............... 3.05
Food and Support
Group Stock......... 1.93
Uniform Group Stock.. 3.93
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Historical Condensed Consolidated Financial Statements of the Company
and Subsidiaries
(b) The following is a summary of the sources and uses of funds borrowed
under the Bank Facility:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Source of Funds:
Additional borrowings un-
der amended bank credit
facility................. $440.5
======
Uses of Funds:
Redemption of Class A Com-
mon Stock:
Outside Stockholders.... $275.9
Benefit Plans........... 132.5
Former Managers......... 19.4
Redemption of Class B Com-
mon Stock
Magazine and Book Em-
ployees................ 6.1
Costs and fees............ 6.6
------
$440.5
======
</TABLE>
The pro forma reduction in Shareholders' Equity reflects the redemption
of certain Class A and Class B Common Stock, a charge of $2.4 million
representing the after tax impact of the nonrecurring costs of Share
100 and the impact of the potential repurchase feature of common stock
more thoroughly described in note (e).
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<PAGE>
(c) Financing costs, net of the write-off of previously deferred
financing costs, will be capitalized and amortized over the term of
the Bank Facility.
(d) Recognition of income tax benefits, at statutory rate, related to
certain expenses which will be deductible for income tax purposes.
(e) Under the Company's Stockholders' Agreement, in certain circumstances
individual stockholders may cause the Company to repurchase up to 30%
of their shares for cash, subject, under the current Bank Facility,
to an aggregate limit on repurchases of capital stock of $23.3
million at October 3, 1997. On a pro forma basis the repurchase
limitation would be $20 million at October 3, 1997.
(f) Represents the additional interest expense related to the
indebtedness incurred in connection with Share 100 plus the
amortization of deferred financing costs. Interest on Bank Facility
borrowings is based upon the average rates in effect during the
respective periods.
(g) Presents the pro forma earnings per share, reflecting the Share 100
transaction. The historical per share amounts reflect the as reported
amounts related to the Class A and B Common Stock. The pro forma
amounts reflect the per share amounts related to the Group Stocks
issued in connection with Share 100. The 1997 pro forma earnings per
share reflect the after-tax effects of other income (expense) which
is $1.07, $0, ($1.32) and $0.14 per share for the Composite Stock,
Education Group Stock, Food and Support Group Stock and Uniform Group
Stock, respectively. See notes 2 and 11 to the Consolidated Financial
Statements.
The table below shows the pro forma earnings available for Composite
Stock.
<TABLE>
<CAPTION>
FOR THE FISCAL
YEAR ENDED
OCTOBER 3, 1997
---------------
(IN THOUSANDS)
<S> <C>
Pro Forma Income from Continuing Operations.............. $128,463
Less earnings allocable to Group Stocks:
Education Group Stock.................................. 701
Food and Support Group Stock........................... 7,645
Uniform Group Stock.................................... 7,336
--------
15,682
--------
Earnings Available for Composite Stock................... $112,781
========
</TABLE>
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<PAGE>
DESCRIPTION OF BUSINESS
The Company is engaged in providing or managing services, including food and
support services, uniform and career apparel, educational resources and
magazine distribution. ARAMARK Services, Inc. was organized in 1959 in
Delaware. The Company was formed in September 1984 by the management of
ARAMARK Services, Inc. and acquired ARAMARK Services, Inc. in December 1984
through a merger.
The Company provides most of its services in the United States. The Company
also conducts operations, primarily the management of food services, in
Belgium, Canada, the Czech Republic, Germany, Hungary, Japan, Korea, Mexico,
Spain and the United Kingdom.
The Company employs approximately 150,000 persons, both full and part time,
including approximately 40,000 employees outside the United States.
Approximately 22,000 employees in the United States are represented by various
labor unions.
The Company believes it recognizes benefit from its corporate name
recognition. Nonetheless, consistent with its businesses, the Company does not
have any material trademarks or patents, and its research and development
expenditures are not material in amount. Although the Company pursues
strategies to increase the number and scope of the services it provides to
existing customers, no single customer of the Company accounts for more than
5% of its revenues. While the Company focuses its purchasing on selected
suppliers and vendors to realize pricing, quality and service benefits,
generally, all materials and services that the Company purchases are available
from more than one supplier, and the loss of any supplier would not have a
material impact on the Company's results of operations. The Company's
businesses are subject to various governmental environmental regulations, and
the Company has adopted policies designed to comply with such regulations.
Such compliance has not had a material impact on the Company's capital
expenditures, earnings or competitive position.
FOOD AND SUPPORT SERVICES GROUP
The Company provides food, refreshment, specialized dietary and support
services (including maintenance and housekeeping) to businesses, and to
educational, governmental and medical institutions. Food, lodging and
merchandise services are also provided at sports and entertainment facilities
such as convention centers, stadiums, parks, arenas, race tracks and other
recreational facilities.
Food, refreshment, specialized dietary and support services are operated at
customer locations generally under contracts of indefinite duration which may
be subject to termination by either party. However, food and related services
at sports and entertainment facilities generally are for fixed contract terms
well in excess of one year. The Company's food and support services are
performed under various financial arrangements including various management-
fee bases as well as profit-and-loss bases.
At most customer food service locations, the equipment and facilities used
in providing these services are owned by the customer. Vending machines and
related equipment, however, are generally owned by the Company. At most sports
and entertainment facilities, the equipment is owned by the Company.
There is a high level of competition in the food and support services
business from local, regional, national and international companies as well as
from businesses and institutions which operate their own services. This
competition takes a number of different forms, including pricing, maintaining
high food and service standards, and innovative approaches to marketing with a
strong emphasis on securing and retaining customer accounts. The Company
believes that it is a significant provider of food and support services in the
United States, Belgium, Canada, Germany and Spain, but that its volume of such
business is small in relation to the total market.
UNIFORM AND CAREER APPAREL GROUP
The Company rents, sells, cleans, maintains and delivers personalized work
apparel and other textile items for customers throughout the United States on
a contract basis. Also provided are walk-off mats, cleaning cloths, disposable
towels, and other environmental control items.
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<PAGE>
The Company operates one of the largest direct marketers of personalized
work clothing, uniforms and related accessories, primarily in the United
States. The Company also operates one of the largest direct marketers of
public safety equipment and public employee uniforms in the United States and
is a leading provider of uniform apparel to the hospitality and healthcare
markets.
Service contracts for the rental and laundering of work apparel and other
textile items are for well in excess of one year and typically for an initial
term of three to five years. Generally, the direct marketing business is
conducted under an invoice arrangement with customers.
The uniform rental services business is highly competitive in the areas in
which the Company operates, with numerous competitors in each major operating
area. Although no one uniform rental services company is predominant in this
industry, the Company believes that it is a significant competitor.
Competition in the direct marketing of work clothing, career apparel, public
safety equipment and related items is from numerous retailers and other direct
marketers at local, regional and national levels. In this market, while the
Company is a significant competitor, the Company's volume of sales is small in
relation to the total market.
The significant competitive factors in the uniform and career apparel
business are the quality of services provided to customers and the prices
charged for such services.
EDUCATIONAL RESOURCES GROUP
The Company provides infant, toddler, preschool and school-age learning
programs. The Company operates community-based child care centers, before and
after school programs on the premises of elementary schools, private
elementary schools and employer on-site child care centers.
These services are provided to and are primarily paid for on a weekly or
monthly basis directly by individual families under short-term agreements. The
Company leases a significant number of its facilities under long-term
arrangements.
The Company believes it is a significant provider of educational and child
care services in the United States.
Competition in all phases of this business segment is from both national and
local providers of educational services as well as from private and public
institutions which provide for their own educational services. Significant
competitive factors in the Company's educational services business are the
quality of care, reputation, physical appearance of facilities, the types of
programs offered to the users of these services and the prices charged for
such services.
COMPOSITE GROUP
The Composite Group comprises the residual interest in each of the Business
Groups, and any other businesses or investments of the Company, including the
magazine and book distribution business.
The Company provides wholesale distribution of magazines, books and other
printed matter. These materials are purchased from national distributors and
publishers and are delivered to retail locations patronized by the general
public.
Distribution services are generally rendered under short-term agreements and
for larger accounts under multi-year agreements, which ordinarily permit the
return of unsold magazines and books with full credit being given to the
retailer and with the Company in turn receiving full credit from its
suppliers.
Competition in the distribution of books and periodicals exists primarily
from magazine and book subscriptions, direct distribution by publishers to
retailers and from other wholesale distributors and alternative uses of retail
shelf space. While the Company's volume of business in the distribution of
books and periodicals is small in relation to the total market, the Company
believes the volume of its wholesale periodical and book distribution makes it
a significant wholesale distributor.
95
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996.
Overview--Revenues for the fiscal year ended October 3, 1997 were $6.3
billion, an increase of 3% over fiscal 1996, with increases in the Food and
Support Services and Uniform and Career Apparel segments partially offset by a
decline in revenues in the Distributive segment and the Health and Educational
Resources segment reflecting the sale of Spectrum (see note 2 to the
consolidated financial statements, included in Annex VII). Excluding Spectrum,
revenues increased 10% over the prior year. Operating income of $331.9 million
increased 12% compared to the prior year. Total Company operating income
includes other income of $11.7 million and $2.9 million in fiscal 1997 and
1996, respectively, as described in note 2 to the consolidated financial
statements. Excluding other income and the operating results of Spectrum,
operating income increased 16% over the prior year, due to strong performances
in the Food and Support Services and Uniform and Career Apparel segments and
Children's World, partially offset by increased operating losses in the
Distributive segment. Excluding other income, the Company's operating income
margin increased to 5.1% from 4.8%, due primarily to improved cost controls
and leveraging of fixed costs.
Interest expense was equal with the prior year, with the impact of lower
rates being offset by increased debt levels to finance capital expenditures
and working capital requirements. The effective income tax rate decreased to
32% in fiscal 1997 from 37% in fiscal 1996 due primarily to the favorable
impact of a permanent difference in the book and tax basis of Spectrum,
partially offset by unfavorable permanent book/tax differences related to
certain intangible asset write-offs (see notes 2 and 6 to the consolidated
financial statements). Fiscal 1996 net income also includes an extraordinary
item for early extinguishment of debt of $2.8 million as described in note 3
to the consolidated financial statements.
Segment Results--Food and Support Services segment revenues were 8% higher
than the prior year due to new accounts (approximately 3%) and increased
volume (approximately 6%), primarily in the United States food businesses,
partially offset by the unfavorable impact of foreign currency translation
(approximately 1%). Uniform and Career Apparel segment revenues increased 19%
due to the impact of recent acquisitions (approximately 11%) and increased
volume in both the uniform rental and direct marketing businesses. Health and
Educational Resources segment revenues, excluding the Spectrum operations,
increased 15% over the comparable prior year period due to enrollment growth,
pricing and new locations at Children's World. Distributive segment revenues
decreased 3% from the comparable prior year period due to a decrease in base
business of approximately 6%, partially offset by the impact of recent
acquisitions.
Fiscal 1997 operating income for the Food and Support Services segment
includes charges of approximately $30 million due primarily to recognize an
impairment of goodwill in a European operation and to reduce certain other
assets to net realizable value as discussed in notes 2 and 11 to the
consolidated financial statements. Excluding the impact of these charges,
operating income increased 20% over the prior year period as a result of the
revenue increases noted above, plus effective cost controls at both United
States and international operations. Uniform and Career Apparel segment
operating income includes gains on the sale of assets of $9 million in 1997
and $37 million in 1996 and charges related primarily to asset realization of
$6 million and $5 million in fiscal 1997 and 1996, respectively (see notes 2
and 11 to the consolidated financial statements). Excluding the impact of
these items, fiscal 1997 operating income increased 11% from the prior year
period due to the revenue increases noted above plus effective cost controls
in the direct marketing businesses, partially offset by increased operating
costs in the uniform rental business. Health and Educational Resources fiscal
1997 operating income includes the gain on sale of Spectrum of $72 million and
fiscal 1996 operating income includes charges of $13 million as discussed in
notes 2 and 11 to the consolidated financial statements. Excluding the impact
of these items, as well as the operating results of Spectrum, segment
operating income increased 23% over the prior year due to the revenue
increases at Children's World noted above. The Distributive segment
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<PAGE>
incurred a fiscal 1997 operating loss of $49.6 million, which includes charges
of approximately $34 million related to asset realization (see notes 2 and 11
to the consolidated financial statements) versus an operating loss of $6.0
million in fiscal 1996. Results continue to be severely impacted by higher
operating expenses due to costs of servicing customers and reduced volume and
margins resulting from the increased competition and consolidation in the
magazine wholesale distribution industry. Management is implementing a plan to
improve the operating results of the distributive business which includes the
divestiture of certain operations, selected acquisitions in certain geographic
regions, and initiatives to increase volume and margins and reduce costs. The
impact of these initiatives is uncertain at this time and the Company projects
that fiscal 1998 operating income in the Distributive segment will continue to
be significantly below historical levels prior to fiscal 1996. The decrease in
fiscal 1997 General Corporate and Other Expenses is due to reserves
established in fiscal 1996 for asset realization, legal, and other matters
described in note 11 to the consolidated financial statements.
Fiscal 1996 Compared to Fiscal 1995.
Overview--Revenues for the fiscal year ended September 27, 1996 were $6.1
billion, a 9% increase over fiscal 1995, with increases being recorded by all
business segments. Operating income of $295.2 million increased 7% compared to
the prior year. Earnings increased substantially in both the Food and Support
Services segment, including the positive impact in fiscal 1996 from the return
of hockey and baseball, and the Uniform and Career Apparel segment. Earnings
were equal to last year for the Health and Educational Resources segment and
declined dramatically in the Distributive segment. Total Company operating
income includes other income of $2.9 million described in note 2 to the
consolidated financial statements, included in Annex VII. The Company's
operating income margin decreased to 4.8% from 4.9%, primarily due to the
decreased earnings of the Distributive segment. Excluding the Distributive
segment, the fiscal 1996 margin was 5.3% and operating income increased 20%
compared to the prior year period.
Interest expense increased $6.6 million or 6% over the prior year due to
increased debt levels to finance acquisitions, partially offset by the
favorable impact of refinancing certain of the Company's subordinated debt and
lower interest rates. The effective income tax rate decreased to 37% in fiscal
1996 from 40% in fiscal 1995 due to the favorable impact resulting from the
June 1996 settlement of certain prior years' tax returns. Fiscal 1996 and 1995
net income reflect extraordinary items for early extinguishment of debt of
$2.8 million and $6.7 million, respectively, as described in note 3 to the
consolidated financial statements.
Segment Results--Food and Support Services segment revenues were 8% higher
than the prior year due to new accounts and increased volume at both U.S. and
international food businesses, acquisitions and the return of hockey and
baseball (see notes 2 and 11 to the consolidated financial statements).
Uniform and Career Apparel segment revenues increased 17% as a result of year
end 1995 acquisitions and increased volume in the uniform rental business,
partially offset by decreased volume from direct marketing of work clothing
and the divestiture described in note 2 to the consolidated financial
statements. Health and Educational Resources segment revenues increased 5% as
a result of enrollment growth and pricing at Children's World and new
contracts at correctional institutions in the healthcare business. Revenue for
the Distributive segment increased 7% due to acquisitions completed during
fiscal 1995 and the impact of the change in customer mix in 1996.
Operating income for the Food and Support Services segment increased 20% due
to increased revenues, including those resulting from the return of hockey and
baseball. Fiscal 1996 operating income for the Uniform and Career Apparel
segment includes the $37 million gain on the sale of a division and charges of
$5 million related to changes in estimates regarding asset realization and
environmental matters described in note 11 to the consolidated financial
statements; excluding the impact of these items, as well as the operating
results of the 1996 divestiture, the increase in segment operating income was
approximately 16% as compared to fiscal 1995. Health and Educational Resources
segment operating income was equal to the prior year with revenue related
increases being offset by higher operating costs and increased reserves for
real estate values (see note 11 to the consolidated financial statements). The
Distributive segment incurred an operating loss of $6.0 million in fiscal 1996
versus operating income of $26.8 million in fiscal 1995. Results were severely
impacted by higher operating expenses due to costs of servicing new customers
and reduced margins resulting from the increased
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<PAGE>
competition and consolidation in the magazine wholesale distribution industry.
These industry changes continued to have an adverse impact on operating income
in the Distributive segment as discussed above. The increase in fiscal 1996
General Corporate and Other Expenses is due primarily to reserves established
for asset realization, legal, and other matters described in note 11 to the
consolidated financial statements.
FINANCIAL CONDITION AND LIQUIDITY
Cash flows generated from operating activities were $230 million. Debt
decreased by $116 million, primarily from the application of the Spectrum sale
proceeds (see note 2 to the consolidated financial statements, included in
Annex VII). The Company expects to continue to fund capital expenditures,
acquisitions and other liquidity needs from cash provided by operating
activities, normal disposals of property and equipment and borrowings
available under its credit facilities. As of October 3, 1997, the Company had
capital commitments of approximately $20 million related to several long-term
concession contracts at stadiums and arenas.
During fiscal 1997 the Company issued $125 million of 7.10% senior notes due
December 2006. The proceeds from the note offering were used to repay
borrowings under the $1 billion credit facility. At November 14, 1997, the
Company had approximately $725 million of unused committed credit availability
under its credit facilities.
As discussed in note 2 to the consolidated financial statements, in January
1997 the Company sold an approximate 83% interest in its Spectrum subsidiary.
The cash proceeds were used to repay borrowings under the $1 billion credit
facility. The sale will not have a material impact on the Company's liquidity.
During fiscal 1997 the Company repurchased $32 million of its Class A Common
Stock and $55 million of its Class B Common Stock, with $22 million of
subordinated installment notes issued as partial consideration. Additionally,
the Company issued $14 million of Class B Common Stock to eligible employees,
primarily through the exercise of installment stock purchase opportunities
(see note 7 to the consolidated financial statements).
The Company has announced a plan of recapitalization which involves the
repurchase of all outstanding Class A Common Stock shares held by outside
stockholders and approximately 30% of the shares owned by its employee benefit
plans. The plan requires the approval of stockholders and is expected to be
implemented during the second quarter of fiscal 1998. The Company recently
increased its $1 billion credit facility and, upon consummation of the
recapitalization, debt will increase by approximately $440 million. Management
believes that credit availability under its credit facilities, as amended,
along with cash flows from operations will continue to be sufficient to fund
operating requirements.
The Year 2000 issue exists because many computer systems and applications
currently use two-digit date fields to designate a year. As a result, on or
near the change of the century, date-sensitive systems will recognize the year
2000 as 1900, or not at all, which may cause systems to process financial and
operational information incorrectly. The Company has assessed and continues to
assess the impact of the Year 2000 issue, including cost estimates to complete
required changes. Plans to address the Year 2000 issue have been developed and
are being implemented. Currently, the Company does not expect that the costs
to be incurred will be material to results of operations or financial
condition.
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SECURITY OWNERSHIP BEFORE AND
AFTER SHARE 100
The following table presents certain information with respect to Common
Stock of the Company (on a Class B Common Stock equivalent basis) beneficially
owned by certain classes of persons, and as adjusted for Share 100 based on
the assumptions set forth in the notes below.
<TABLE>
<CAPTION>
AS ADJUSTED FOR
AT OCTOBER 3, 1997 SHARE 100(2)
----------------------------- -----------------------------
PERCENTAGE OF PERCENTAGE OF CASH AND/OR INSTALLMENT
------------------ ------------------ NOTES ISSUED OR PAID IN
NUMBER OF VOTING TOTAL NUMBER OF VOTING TOTAL SHARE 100
SHARES POWER OUTSTANDING SHARES POWER OUTSTANDING (IN MILLIONS)
---------- ------ ----------- ---------- ------ ----------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management
Stockholders(1)........ 22,901,240 92% 57% 22,042,782 97% 80% $ 25.5
Trustees for various
ARAMARK employee
benefit plans.......... 9,224,240 4% 23% 5,412,400 3% 20% $ 132.5
Outside Stockholders.... 7,938,750 4% 20% -- 0% 0% $ 275.9
---------- --- --- ---------- --- --- -------
Total................. 40,064,230 100% 100% 27,455,182 100% 100% $ 433.9
</TABLE>
- --------
(1) Includes directors, Former Managers and Permitted Transferees.
(2) Assumes (a) that Benefit Plans elect to receive 30% cash in the
Reclassification and 70% Class A Composite Stock pursuant to the Class A
Stock Exchange (other than the magazine and book benefit plan which is
assumed to elect all cash); (b) that approximately 75% of Former Managers
by number of shares participate in the Class A Stock Exchange and the
rest have their shares repurchased pursuant to the Stockholders'
Agreement; and (c) that all other Continuing Holders of Class B Common
Stock will elect to receive the Group Stock Consideration (see "THE PLAN
OF RECAPITALIZATION--General," "--The Reclassification" and "--Procedure
for Holders of Shares").
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DESCRIPTION OF CAPITAL STOCK
The following description of capital stock does not purport to be complete
and is qualified in its entirety by reference to the complete text of the
Restated Charter, a copy of which is attached to this Proxy Statement as Annex
V and is incorporated herein by reference. Stockholders are urged to read
carefully the complete text of the Restated Charter.
EXISTING CAPITAL STOCK
General. The authorized capital of the Company consists of 185,000,000
shares, which includes 150,000,000 shares of Class B Common Stock; 25,000,000
shares of Class A Common Stock; and 10,000,000 shares of Series Preferred
Stock, par value $1.00 per share ("Series Preferred Stock"). As of October 3,
1997, 20,450,100 shares of Class B Common Stock were issued and outstanding
(not including 9,637,714 shares subject to options, installment stock purchase
opportunities and deferred stock units granted and outstanding under the Stock
Option Plans), and 1,961,413 shares of Class A Common Stock were issued and
outstanding. No shares of Series Preferred Stock are issued and outstanding.
Management Investors and their Permitted Transferees (approximately 1,400
persons at October 3, 1997) hold all of the shares of outstanding Class B
Common Stock. There is no established public trading market for the Common
Stock of the Company.
The following is a summary of certain provisions of the Certificate of
Incorporation and the By-Laws. The summary is qualified in its entirety by
reference to such documents filed as exhibits to the Company's Form 10-Q for
the first quarter of fiscal 1996 and the Company's Purchase Opportunity
Registration Statement (No. 33-14365), respectively.
The Class A Common Stock and the Class B Common Stock.
Voting--Each share of Class A Common Stock and each share of Class B Common
Stock entitles the holder thereof to one vote on all matters submitted to the
stockholders. All actions submitted to a vote of stockholders are voted upon
by holders of Class A Common Stock and Class B Common Stock voting together
except that the holders of Class A Common Stock and Class B Common Stock vote
separately as classes with respect to amendments to the Certificate of
Incorporation that may alter or change the powers, preferences or special
rights of their respective classes of stock so as to affect them adversely,
and such other matters as may require class votes under the DGCL. There is no
provision in the Certificate of Incorporation permitting cumulative voting.
Dividends and Other Distributions (including Distributions upon Liquidation
of the Company)--Dividends on the Class A Common Stock and the Class B Common
Stock are paid when, as and if declared by the Board and permitted under the
Company's loan agreements. In respect of rights to dividends and other
distributions in cash, stock or property of the Company (including
distributions upon liquidation of the Company, after provision for creditors
of the Company and any shares of the Company's capital stock having a
preference on liquidation, dissolution or winding up of the Company), each
share of Class A Common Stock is entitled to ten times the dividends and other
distributions payable on each share of Class B Common Stock when, as and if
such dividends or distributions may be declared and/or paid; provided,
however, that in the case of dividends or other distributions payable on the
Class A Common Stock and the Class B Common Stock in capital stock of the
Company other than preferred stock, including distributions pursuant to split-
ups or divisions of the Class A Common Stock or the Class B Common Stock, only
Class A Common Stock is distributed with respect to Class A Common Stock and
only Class B Common Stock is distributed with respect to Class B Common Stock.
In no event may either Class A Common Stock or Class B Common Stock be split,
divided or combined unless the other is split, divided or combined equally;
provided, further, that dividends can be paid on the Class A Common Stock
without the Class B Common Stock.
Convertibility--The Class A Common Stock is not convertible. Subject to the
prior approval of the Board, the Class B Common Stock is convertible at all
times, in whole or in part, and without cost to the stockholder,
100
<PAGE>
into Class A Common Stock on the basis of ten shares of Class B Common Stock
for each share of Class A Common Stock. Only full-time employees and directors
of the Company (and their Permitted Transferees while the transferor is a
full-time employee or director) may hold Class B Common Stock. Upon any holder
of Class B Common Stock ceasing to be a full-time employee or director of the
Company, such holder's Class B Common Stock automatically converts into Class
A Common Stock, on the basis of ten shares of Class B Common Stock for each
share of Class A Common Stock. The Board may at any time order the conversion
of all the Class B Common Stock into Class A Common Stock on a ten-for-one
basis. No fractions of shares of Class A Common Stock would be issued on such
conversion, but rather such amounts would be paid in cash based on the market
value (or, if the Company is not publicly traded, the last appraised value) of
the Class B Common Stock.
Other--The Class A Common Stock and Class B Common Stock do not carry any
preemptive rights enabling a holder to subscribe for or receive shares of
stock of the Company of any class or any other securities convertible into
shares of stock of the Company.
CAPITAL STOCK AFTER THE EFFECTIVE TIME
General. After Share 100, the authorized capital of the Company will consist
of 210,000,000 shares, which includes 10,000,000 shares of Series Preferred
Stock; and 200,000,000 shares of common stock consisting of: 25,000,000 shares
of Class A Composite Stock; 40,000,000 shares of Class B Composite Stock;
20,000,000 shares of Education Group Stock; 40,000,000 shares of Food and
Support Group Stock; 40,000,000 shares of Uniform Group Stock; 5,000,000
shares of Continuing Class A Common Stock and 25,000,000 shares of Continuing
Class B Common Stock. The following summary of the terms of the Redeemable
Transitory Participating Preferred Stock, Composite Stock and Business Group
Stock is qualified in its entirety by reference to the appropriate provisions
of the Restated Charter set forth in Annex V to this Proxy Statement, which is
incorporated herein by reference.
Redeemable Transitory Participating Preferred Stock. In order to facilitate
the Reclassification, the Company will file a Certificate of Designations with
respect to the Redeemable Transitory Participating Preferred Stock. It is
anticipated that no shares of Redeemable Transitory Participating Preferred
Stock will be issued upon reclassification until the Reclassification
Effective Time and that none will be outstanding immediately after the
Reclassification. Each share of Redeemable Transitory Participating Preferred
Stock will be entitled to receive a dividend of ten times the dividend
declared on a share of Class B Composite Stock. In the event of a liquidation,
each share of Redeemable Transitory Participating Preferred Stock will be
entitled to receive ten times what the holder of a share of Class B Composite
Stock is entitled to receive. Each share of Redeemable Transitory
Participating Preferred Stock will have one vote, voting together with the
Class A Composite Stock. The Redeemable Transitory Participating Preferred
Stock is immediately redeemable after the Reclassification Effective Time for
cash or, if the holder makes an election, for Installment Notes, as is more
fully discussed in "SHARE 100--Structure of Share 100."
As indicated above, the Company will redeem the Redeemable Transitory
Participating Preferred Stock immediately after the Reclassification Effective
Time.
Composite Stock and Business Group Stock.
Dividends--Dividends on the Composite Stock and Business Group Stocks will
be subject to substantially the same limitations as dividends on the current
Common Stock, which are (i) limited to the Company's surplus, as defined in
and computed in accordance with DGCL (S) 154 (essentially the excess of net
assets over capital, as defined in the DGCL), or in case there is no such
surplus, in certain circumstances, out of the Company's net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year
under the DGCL and (ii) subject to the prior payment of dividends on any
outstanding shares of preferred stock. No distribution may be made to
stockholders if, after giving effect to such distribution, the Company would
not be able to pay its debts as they become due in the usual course of
business or the Company's total assets would be less than its
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total liabilities plus, subject to certain exceptions, any amounts necessary
to satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those of the stockholders receiving the
distribution.
Dividends on the Composite Stock and the Business Group Stocks will be
further limited to an amount not in excess of such Group's Available Dividend
Amount. The holders of shares of Class A Composite Stock and Class B Composite
Stock shall be entitled to receive the same dividends and other distributions,
ratably with the holder of one share of Class A Composite Stock entitled to
receive ten times what the holder of one share of Class B Composite Stock is
entitled to receive; provided, however, that in the case of dividends or other
distributions payable in Composite Stock, only shares of Class B Composite
Stock shall be distributed with respect to Class B Composite Stock and only
shares of Class A Composite Stock shall be distributed with respect to Class A
Composite Stock, and any such distribution shall be made ratably, with the
holder of one share of Class A Composite Stock entitled to receive the same
number of shares of Class A Composite Stock as the number of shares of Class B
Composite Stock the holder of one share of Class B Composite Stock shall be
entitled to receive and provided, further, that the Board can declare
dividends on Class A Composite Stock without the Class B Composite Stock.
"Available Dividend Amount" with respect to any Business Group, on any date,
shall mean the assets attributed to such Business Group which would be by law
available for the payment of dividends if such Business Group were a separate
corporation, as determined by the Board. "Available Dividend Amount" with
respect to the Composite Group, on any date, shall mean the assets attributed
to the Composite Group which would be by law available for the payment of
dividends if each Business Group were a separate corporation and the Composite
Group owned, with respect to each such Business Group, the Number of Shares
Issuable with respect to the Inter-Group Interests, as determined by the
Board.
Except as otherwise provided in the Restated Charter attached as Annex V to
this Proxy Statement, the Board may not declare and pay dividends or
distributions of shares of the Composite Stock or Business Group Stocks (or
convertible securities convertible into or exchangeable or exercisable for
shares of the Composite Stock or Business Group Stocks) on shares of the
Composite Stock, Business Group Stock or shares of the Series Preferred Stock,
except as follows:
(i) dividends or distributions of shares of Composite Stock (or
convertible securities convertible into or exchangeable or exercisable for
shares of Composite Stock) on shares of Composite Stock or shares of the
Series Preferred Stock attributed to the Composite Group;
(ii) dividends or distributions of shares of any class of Business Group
Stock (or convertible securities convertible into or exchangeable or
exercisable for shares of such shares of Business Group Stock) on shares of
such class of Business Group Stock or shares of the Series Preferred Stock
attributed to the respective Business Group; and
(iii) dividends or distributions of shares of any class of Business Group
Stock (or convertible securities convertible into or exchangeable or
exercisable for shares of such class of Business Group Stock) on shares of
Composite Stock or shares of the Series Preferred Stock attributed to the
Composite Group, but only if the sum of (1) the number of shares of such
class of Business Group Stock to be so issued (or the number of such shares
which would be issuable upon conversion, exchange or exercise of any
convertible securities to be so issued) and (2) the number of shares of
such class of Business Group Stock which are issuable upon conversion,
exchange or exercise of any convertible securities then outstanding that
are attributed to the Composite Group is less than or equal to the
applicable Number of Shares Issuable with Respect to the Inter-Group
Interest.
The DGCL limits the amount of distributions on capital stock to the amount
of funds legally available therefor, which are determined on the basis of the
entire Company, and not just the respective Groups. Consequently, the amount
of legally available funds would reflect the amount of any net losses of any
Group, any distributions on Composite Stock, Business Group Stock, or any
other preferred stock and any repurchases of Composite Stock, Business Group
Stock, or other preferred stock. Dividend payments on the Composite Stock
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and each of the Business Group Stocks could be precluded because of the
unavailability of legally available funds under the DGCL, even though the
Available Dividend Amount test with respect to the relevant Group was met.
Subject to the prior payment of dividends on any outstanding shares of
preferred stock and the foregoing limitations, the Board would be able, in its
sole discretion, to declare and pay dividends exclusively on the Composite
Stock, exclusively on any class of the Business Group Stocks or on all classes
of common stock, in equal or unequal amounts, notwithstanding the relative
Available Dividend Amounts, the amount of prior dividends declared on any
class, the respective voting or liquidation rights of each class or any other
factor.
At the time of any dividend, redemption or other distribution on the
outstanding shares of any class of Business Group Stocks (but excluding a
dividend payable in shares of any class of Business Group Stock), the
applicable Business Group's financial records will be charged with an amount
equal to the product of (i) the Fair Value of such dividend, redemption
payment or distribution paid or distributed in respect of the outstanding
shares of the applicable class of Business Group Stock multiplied by (ii) a
fraction, the numerator of which is the Inter-Group Interest Fraction on the
record date for such dividend, redemption or distribution and the denominator
of which is the Outstanding Business Group Fraction on the record date for
such dividend, redemption or distribution.
See Annex I for illustrations of the calculation of the Inter-Group Interest
and the related effects of dividends on shares of Business Group Stock.
Conversion and Redemption--Share 100 will permit the conversion and
redemption of each class of Business Group Stock and conversion of the Class B
Composite Stock upon the terms described below, but will not permit either
mandatory or optional conversion or redemption of the Class A Composite Stock.
(a) Conversion at Election of the Board.
(i) The Board may at any time convert all outstanding shares of any class
of Business Group Stock or of Class B Composite Stock into fully paid and
nonassessable shares of Class A Composite Stock at the applicable
Conversion Ratio; and no further shares of such converted class of common
stock may be issued thereafter.
(ii) The Board may at any time convert all outstanding shares of any
class of Business Group Stock into fully paid and nonassessable shares of
Class B Composite Stock at the applicable Conversion Ratio; and no further
shares of such converted class of Business Group Stock may be issued
thereafter.
(iii) During the period after shares of any class of Business Group Stock
are called for conversion as provided above, but before the applicable
conversion date, the holders of such shares may, at their election and in
lieu of such conversion, convert their shares into shares of a new class of
Business Group Stock (for substantially the same Business Group as was the
class of Business Group Stock being converted), if any, that the Board may
designate for the stated purpose of having an underwritten public offering.
(b) Conversion upon Transfer of Employment. If a full-time employee of the
Company or any of its subsidiaries accepts a transfer in employment from one
Group to another, then the Board may declare that all or any part of the
outstanding shares of any class of Business Group Stock held by such
individual or a Permitted Transferee of such individual shall be converted, as
of the effective date of such transfer or such later date not more than 90
days thereafter, into fully paid and nonassessable shares of such other class
or classes of Common Stock as the Board shall determine, at the applicable
Conversion Ratios.
(c) Redemption in Exchange for Stock of Subsidiary. At any time at which all
of the assets and liabilities attributed to any of the Business Groups (and no
other assets or liabilities of the Company or any subsidiary thereof) are held
directly or indirectly by one or more wholly-owned subsidiaries of the Company
(each, a "Business Group Subsidiary"), the Board may, provided that there are
assets of the Company legally available therefor, redeem all of the
outstanding shares of the applicable Business Group Stock for a number of
shares of common stock of the applicable Business Group Subsidiary equal to
the product of the applicable Outstanding
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Business Group Fraction multiplied by the number of shares of the applicable
Business Group Subsidiary to be outstanding immediately following such
redemption, on a pro rata basis. The Company will retain or distribute the
balance of the outstanding shares of the common stock of the applicable
Business Group Subsidiary in respect of the Inter-Group Interest of the
Composite Group in the applicable Business Group, if any.
The foregoing provisions allow the Company the flexibility to recapitalize
Class B Composite Stock or any class of the Business Group Stock into Class A
Composite Stock or Class B Composite Stock that would, after such
recapitalization, represent an equity interest in all of the Company's
businesses. The optional exchange could be exercised at any future time if the
Board determined that, under the facts and circumstances then existing, an
equity structure consisting of five classes of Common Stock was no longer in
the best interests of all of the Company's stockholders. Such exchange may be
exercised, however, at a time that is disadvantageous to the holders of one of
the classes of Common Stock. See "RISK FACTORS--Fiduciary Duties of the Board
of Directors Are to All Stockholders regardless of Class or Series" and "--
Potential Diverging Interests."
The "Conversion Ratio" shall be, (i) in the case of conversion of Class B
Composite Stock into Class A Composite Stock, one-tenth of a share of Class A
Composite Stock for each outstanding share of Class B Composite Stock being
converted; and (ii) in the case of conversion of any class of Business Group
Stock into Class A Composite Stock or Class B Composite Stock, the number of
shares of the Class A Composite Stock or Class B Composite Stock equal to the
Appraisal Price of the class of Business Group Stock divided by the Appraisal
Price of the Class A Composite Stock or Class B Composite Stock, as determined
by the Board, for each outstanding share of such Business Group Stock being
converted.
Voting Rights--Each share of Composite Stock and Business Group Stock is
entitled to one vote on all matters submitted for a vote of the Company's
stockholders, provided that the Class A Composite Stock is by its terms not
entitled to vote on the Merger. Upon the occurrence of an underwritten public
offering by the Company of any class of Business Group Stock, each share of
Class B Composite Stock and Business Group Stock shall be thereafter entitled
to 10 votes on all matters submitted to a vote of the Company's stockholders;
provided that the class of Business Group Stock that is offered in the
underwritten public offering shall thereafter continue to be entitled to one
vote per share on all matters submitted to a vote of the Company's
stockholders; provided, further, that any class of Business Group Stock having
ten votes per share that is offered in a subsequent underwritten public
offering shall, after the consummation of such underwritten public offering,
be entitled to one vote per share on all matters submitted to a vote of the
Company's stockholders.
Following implementation of Share 100, the holders of Composite Stock and
Business Group Stocks would vote together as a single voting group, except as
required by Delaware law with respect to certain amendments to the Restated
Charter specifically affecting a class of common stock, in which case a
separate vote by the holders of the particular class affected would also be
required. Accordingly, if a separate vote on a matter by the holders of either
the Composite Stock or any class of the Business Group Stock is not required
under the DGCL and if the Board does not require a separate vote, the class
that is entitled to more than the number of votes required to approve such
matter will be in a position to control the outcome of the vote on such matter
even if the matter involved a divergence or the appearance of a divergence of
the interests between the holders of the Composite Stock and any class of the
Business Group Stock. Conversely, if a separate vote of the holders of either
Composite Stock or any class of the Business Group Stock is required to
approve and amendment of the type described above, such holders could prevent
approval of the amendment notwithstanding that the holders of a majority of
the outstanding stock entitled to vote with respect to both the Composite
Stock and Business Group Stocks had voted in favor of it. Under the DGCL,
where a class vote is not required, the approval of most matters (other than
the election of directors who are elected by a plurality of the votes cast)
requires the affirmative vote of a majority of the shares outstanding and
entitled to vote thereon. See "RISK FACTORS--Limited Separate Stockholder
Voting Rights; Effects on Voting Power."
The Board will reserve the right to condition the submission of a particular
matter on receipt of a separate vote of the holders of outstanding shares of
Composite Stock or any class of the Business Group Stock. The Board has no
present intention of imposing such a separate vote requirement on any matter
which it can now foresee. However, should the Board, in the exercise of its
fiduciary duties and its good faith judgment of the best
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interests of the Company, conclude that such a separate vote is necessary or
desirable, it has reserved the right to so require.
Liquidation--Under Share 100, in the event of a liquidation, dissolution or
termination of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company and
full preferential amounts (including any accumulated and unpaid dividends) to
which holders of any class of preferred stock are entitled (regardless of the
Group to which such shares of preferred stock were attributed), the holders of
Composite Stock and each class of Business Group Stock will be entitled to
receive the net assets, if any, of the Company remaining for distribution to
holders of Common Stock, ratably, with the holder of one share of Class A
Composite Stock entitled to receive ten times what the holder of one share of
Class B Composite Stock and each Business Group Stock is entitled to receive,
subject to adjustment if shares of any classes are subdivided, combined or
distributed as a dividend.
No holders of Composite Stock will have any special right to receive
specific assets attributable to the Composite Group and no holder of any
Business Group Stock will have any special right to receive specific assets
attributable to a Business Group in the case of a liquidation, dissolution or
termination of the Company.
Neither a merger nor consolidation of the Company into or with any other
corporation, nor a merger or consolidation of any other corporation into or
with the Company, nor any sale, lease, exchange or other disposition of all or
any part of the assets of the Company, nor a reorganization of the Company
will, alone, be deemed to be a liquidation of the Company, or cause the
dissolution of the Company, for purposes of the liquidation provisions set
forth above.
Other--The Composite Stock and Business Group Stocks do not carry any
preemptive rights enabling a holder to subscribe for or receive shares of
stock of the Company of any class or any other securities convertible into
shares of stock of the Company.
DETERMINATIONS BY THE BOARD OF DIRECTORS
Determinations Authorized. The Board shall make such determinations with
respect to the assets and liabilities to be attributed to the Groups and the
application of the provisions of Part 4A of the Restated Charter to
transactions to be engaged in by the Company, including, without limiting the
foregoing, the following determinations:
(i) Upon any acquisition by the Company or its subsidiaries of any assets
or business, or any assumption of liabilities, outside of the ordinary
course of business of any Group, the Board shall determine whether such
assets, business and liabilities (or an interest therein) shall be for the
benefit of one or more Groups and, accordingly, shall be attributed to such
Group or Groups, as the case may be.
(ii) Upon any issuance of any shares of any Business Group Stock at a
time when the Number of Shares Issuable with Respect to the Inter-Group
Interest with respect thereto is greater than zero, the Board shall
determine, based on the use of the proceeds of such issuance and any other
relevant factors, whether all or any part of the shares of such Business
Group Stock so issued shall reduce the applicable Number of Shares Issuable
with Respect to the Inter-Group Interest, and the Number of Shares Issuable
with Respect to the Inter-Group Interest shall be adjusted accordingly.
(iii) Upon any issuance by the Company or any subsidiary thereof of any
convertible securities that are convertible into or exchangeable or
exercisable for shares of any Business Group Stock, if at the time such
convertible securities are issued the Number of Shares Issuable with
Respect to the Inter-Group Interest with respect thereto is greater than
zero, the Board shall determine, based on the use of the proceeds of such
issuance of convertible securities in the business of the Composite Group
or such Business Group and any other relevant factors, whether, upon
conversion, exchange or exercise thereof, the issuance of shares of such
Business Group Stock pursuant thereto shall, in whole or in part, reduce
the applicable Number of Shares Issuable with Respect to the Inter-Group
Interest.
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(iv) Upon any issuance of any shares of preferred stock of any series,
the Board shall attribute, based on the use of proceeds of such issuance of
shares of preferred stock in the business of any Group or Groups and any
other relevant factors, the shares so issued to such Group or Groups in
such proportion as the Board shall determine.
(v) Upon any redemption or repurchase by the Company or any subsidiary
thereof of shares of preferred stock or of other securities or debt
obligations of the Company, the Board shall determine, based on the
property used to redeem or purchase such shares, other securities or debt
obligations and any other relevant factors, which, if any, of such shares,
other securities or debt obligations redeemed or repurchased shall be
attributed to which Group or Groups and, accordingly, how many of the
shares of preferred stock or of such other securities, or how much of such
debt obligations, that remain outstanding, if any, are thereafter
attributed to each Group.
Delegation. The Board may delegate any and all authority under Part 4A of
the Restated Charter to any committee thereof and, to the fullest extent
permitted by law, to any authorized officer or agent.
Record of Determinations. The Secretary of the Company shall maintain a
record of determinations made by the Board pursuant to Part 4A of the Restated
Charter, which shall be made available for inspection by any stockholder upon
request.
Board Determinations Binding. Subject to applicable law, any determinations
made by the Board under any provision of Part 4A of the Restated Charter or
otherwise in furtherance of the application of Part 4A of the Restated Charter
shall be final and binding on all stockholders.
If Share 100 is approved by the stockholders and implemented by the Board,
any determinations made in good faith by the Board under any provision
described under "DESCRIPTION OF CAPITAL STOCK," and any determinations with
respect to any Group or the rights of holders of shares of any class of Common
Stock, would be final and binding on all stockholders of the Company, subject
to the rights of stockholders under applicable Delaware law and under the
federal securities laws.
INTER-GROUP INTEREST OF COMPOSITE GROUP IN BUSINESS GROUPS
After allocation of the debt to be incurred to finance Share 100, the
aggregate appraisal value of 100% of the equity value of the Educational
Resources Group, Food and Support Services Group and Uniform and Career
Apparel Group will be approximately $129 million, $645 million and $441
million, respectively. Such numbers were determined based on a review of the
history and nature of the Company; a review of financial data bearing upon
recent and prospective operations, including the Company's SEC form 10-K and
10-Q filings, other recent SEC filings, and internal financial and operating
segment data, as well as long-term financial forecasts of the Company; a
review and analysis of the Groups and their prospects; capital market
information deemed relevant to the assessment of the investment risk return
attributes of each class of Group Stock; and the Appraisal Price of each class
of Group Stock. Based on the determined appraisal value of 100% of the equity
value of each of the Business Groups and the Appraisal Price of $34.75 per
share for each of the Group Stocks (before any deduction for limited
marketability), the number of shares representing 100% of the equity value of
Education Group Stock, Food and Support Group Stock and Uniform Group Stock
will be approximately 3.7 million, 18.5 million and 12.7 million,
respectively. To the extent not all of such shares of Business Group Stock are
issued upon implementation of Share 100, then the number of such unissued
shares represent the initial balance of the Inter-Group Interest in such
Business Groups that is attributable to the Composite Group.
The "Outstanding Business Group Fraction" means the percentage interest in a
Business Group represented at any time by the outstanding shares of such class
of Business Group Stock, and the "Inter-Group Interest Fraction" means the
remaining percentage interest in a Business Group that is attributed to the
Composite Group. The sum of the Inter-Group Interest Fraction and the
Outstanding Business Group Fraction will always equal 100%. The "Number of
Shares Issuable with Respect to the Inter-Group Interest" means the number of
shares of such class of Business Group Stock that could be sold or otherwise
issued by the Company for the account of
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the Composite Group in respect of the Inter-Group Interest. The Inter-Group
Interest would not be represented by actual shares of such class of Business
Group Stock and could not be voted by the Composite Group.
On a pro forma basis assuming Share 100 had occurred at October 3, 1997, and
further assuming that in Share 100 all Outside Stockholders receive the Class
A Cash Consideration, approximately 75% of Former Managers by number of shares
participate in the Class A Stock Exchange and the rest have their shares
repurchased pursuant to the Stockholders' Agreement, the Magazine and Book
Benefit Plan receives the Class A Cash Consideration, all other Benefit Plans
receive 30% Class A Cash Consideration in the Reclassification and 70% Class A
Composite Stock pursuant to the Class A Stock Exchange, all Magazine and Book
Employees receive the Class B Cash Consideration, and all Continuing Holders
receive the Group Stock Consideration, then the Outstanding Business Group
Fraction for each of the Business Groups would be as follows:
<TABLE>
<CAPTION>
OUTSTANDING
BUSINESS GROUP
BUSINESS GROUP FRACTION
-------------- --------------
<S> <C>
Educational Resources...................................... 6%
Food and Support Services.................................. 21%
Uniform and Career Apparel................................. 15%
</TABLE>
The number of shares of a class of Business Group Stock representing 100% of
the equity value of such Business Group would increase as a result of an
offering of such Business Group Stock to the extent of the shares issued for
the account of the Business Group. For example, if 20% of the equity value of
a Business Group were issued in a Business Group stock offering, the number of
shares representing such percentage and issued to the public would cause the
number of shares representing 100% of the equity value of the Business Group
to increase by such number.
At the time of any additional sale of any class of the Business Group Stock,
the Board would, in its sole discretion, determine the allocation of the net
proceeds of such sale between the Composite Group and such Business Group. The
Board could allocate 100% of the net proceeds of a sale of such class of
Business Group Stock to the Composite Group or to such Business Group, in
which event the net proceeds would be reflected entirely in the financial
records of the Group to which such proceeds would be allocated. If the net
proceeds of any sale of such class of Business Group Stock were allocated to
the Composite Group in respect of its Inter-Group Interest, the Number of
Shares Issuable with respect to the Inter-Group Interest would be reduced, the
Inter-Group Interest Fraction would accordingly also be reduced and the
Outstanding Interest Fraction would be proportionately increased. If the net
proceeds of any sale of such class of Business Group Stock were allocated to
such Business Group, the Number of Shares Issuable with respect to the Inter-
Group Interest would not be reduced, but the Inter-Group Interest Fraction
would nonetheless be reduced, and the Outstanding Interest Fraction would
increase accordingly.
The Board reserves the right to issue shares of any class of the Business
Group Stock as a distribution on the Composite Stock, although it has no
current intention to do so. Such a distribution would be treated as a
distribution of shares issuable with respect to the Inter-Group Interest and,
as a result, the Number of Shares Issuable with respect to the Inter-Group
Interest would decrease by the number of shares distributed to the holders of
Composite Stock, resulting in a reduction in the Inter-Group Interest Fraction
and a proportionate increase in the Outstanding Business Group Fraction.
Cash or other property allocated to the Composite Group that is contributed
as additional equity to any of the Business Groups would increase the Number
of Shares Issuable with respect to the Inter-Group Interest (based on the then
current appraisal value of shares of the applicable Business Group Stock),
and, accordingly, would increase the Inter-Group Interest Fraction and
decrease the Outstanding Business Group Fraction. Cash or other property
allocated to the applicable Business Group that is transferred to the
Composite Group would, if so determined by the Board, decrease the Number of
Shares Issuable with respect to the Inter-Group Interest (based on the then
current appraisal value of shares of such class of Business Group Stock) and,
accordingly, would decrease the Inter-Group Interest Fraction and increase the
Outstanding Business Group Fraction. The Board
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could determine, in its sole discretion, to make such contribution or transfer
after consideration of a number of factors, including, among others, the
financing needs and objectives of the recipient Group, the investment
objectives of the transferring Group, the availability, cost and time
associated with alternative financing sources, prevailing interest rates and
general economic conditions.
None of the Business Groups can acquire an Inter-Group Interest in another
Business Group or the Composite Group.
For further discussion and illustrations of the calculation of the Inter-
Group Interest Fraction, the Outstanding Business Group Fraction and the
Number of Shares Issuable with respect to the Inter-Group Interest and the
effects thereon of dividends on, and issuances and repurchase of, shares of
each class of Business Group Stock, and transfers of cash or other property
between Groups, see Annex I hereto.
DESCRIPTION OF INSTALLMENT NOTES
The information contained in this Proxy Statement with respect to the
Installment Notes does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Installment Notes, a copy of
which is attached hereto as Annex IV and incorporated herein by reference. For
information regarding certain federal income tax consequences relating to the
receipt of Installment Notes in Share 100, see "SHARE 100--Certain U.S.
Federal Income Tax Considerations."
GENERAL
The Installment Notes will each be issued as individual promissory notes
without the benefit of an indenture or trustee. The Installment Notes will be
non-negotiable.
The Installment Notes will represent unsecured general obligations of
ARAMARK Services, Inc., a wholly owned subsidiary of the Company, and will be
guaranteed by the Company. The Installment Notes will rank pari passu with the
Company's primary Bank Facility as in effect at the Effective Time and will
rank senior to all subordinated indebtedness of the Company outstanding as of
the Effective Time.
Each share of Redeemable Transitory Participating Preferred Stock may be
redeemed for a portion of an Installment Note constituting $347.50 in
principal. The Installment Notes will be issued only in principal amounts of
$10,000 or integral multiples thereof. In order to receive, among other
things, at least one $10,000 principal amount Installment Note in Share 100, a
holder generally must own at least 29 shares of Redeemable Transitory
Participating Preferred Stock (29 shares of Class A Common Stock immediately
prior to the Reclassification Effective Time).
No representation is made that Installment Notes are the economic equivalent
of the cash in lieu of which such Installment Notes are elected. Any holder of
Class A Common Stock who elects to receive Installment Notes must fulfill a
Suitability Requirement, as defined in "THE PLAN OF RECAPITALIZATION--
Procedure for Holders of Shares--Certain Suitability Requirements." The
Installment Notes may not be acceptable as collateral by banks, other lending
institutions or broker-dealers and may not be an appropriate investment for
certain stockholders of the Company. Stockholders who do not desire the tax
deferral designed to be provided by the Installment Notes should not make an
Election to receive the Installment Notes.
MATURITY AND INTEREST
The Installment Notes will mature on August 1, 2007, and will bear interest
at the rate of 7.25% per annum, accruing from the Effective Time. Interest on
the Installment Notes will be payable in arrears semi-annually on December 15
and June 15 of each year, commencing June 15, 1998. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months. The
Installment Notes will be payable both as to principal and interest at the
principal executive offices of the Company or, at the option of the Company,
payment may be made by check mailed to the address of the holder set forth in
the Installment Note.
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CONVERSION
The Installment Notes will be convertible at par, in whole, at any time
after February 11, 1999 at the option of the holder, into the Company's
publicly traded 7.10% Guaranteed Notes due 2006 (Guaranteed Notes) (subject to
the Company's right to redeem such Installment Note upon such conversion). An
exchange of an Installment Note for a Guaranteed Note will be a taxable
exchange and any gain that was deferred previously will be recognized at that
time. See "SHARE 100--Certain U.S. Federal Income Tax Considerations."
OPTIONAL REDEMPTION
Each Installment Note, in whole but not in part, will be subject to
redemption upon not less than 30 days' notice by mail, at any time after June
14, 2004, or if earlier, in lieu of conversion by the holder at the time the
holder exercises his conversion privilege, at the election of the Company, at
a redemption price equal to 100% of its principal amount, together with
accrued and unpaid interest to the date fixed for redemption.
ASSIGNABILITY OF INSTALLMENT NOTES
No assignment or transfer of the Installment Notes will be permitted except
to the estate of the holder upon his death. The restrictions on assignment or
transfer contained in the Installment Notes are intended to comply with
certain provisions of federal regulations related to the availability of the
installment method for reporting gain for federal income tax purposes by
stockholders who receive Installment Notes. See "SHARE 100--Certain U.S.
Federal Income Tax Considerations."
GUARANTEE
The Company will guarantee the payment of both principal and interest of the
Installment Notes.
COVENANT
The Company will furnish to each holder, within 120 days after the end of
each fiscal year, a copy of the audited annual report for such fiscal year of
the Company containing balance sheets of the Company as of the end of such
fiscal year and statements of income and retained earnings of the Company for
such fiscal year.
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ELECTION OF DIRECTORS
Twelve directors will be elected by a plurality of the votes cast at the
Annual Meeting. The persons listed below are proposed to be elected to serve
until the next annual meeting of stockholders and the election and
qualification of their respective successors:
Joseph Neubauer Lee F. Driscoll, Jr.
James E. Ksansnak Mitchell S. Fromstein
Patricia C. Barron Edward G. Jordan
Robert J. Callander Thomas H. Kean
Alan K. Campbell Reynold C. MacDonald
Ronald R. Davenport James E. Preston
If, due to circumstances not now foreseen, any of the nominees becomes
unavailable for election, the proxy agents named in the proxy cards will have
the right to vote for a substitute in each case, or the Board will take
appropriate action to reduce the number of directors.
DIRECTORS
<TABLE>
<CAPTION>
NAME (AGE AS OF NOVEMBER 1, 1997) OFFICE HELD (COMMITTEE) SINCE
--------------------------------- ------------------------------ -----
<S> <C> <C>
Joseph Neubauer (56)................... Chairman and Director (1)(2)(3) 1979
James E. Ksansnak (57)................. Vice Chairman and Director 1997
Patricia C. Barron (54)................ Director 1997
Robert J. Callander (66)............... Director (2)(3)(4)(5) 1986
Alan K. Campbell (74).................. Director (4) 1980
Ronald R. Davenport (61)............... Director (1)(4)(5) 1980
Lee F. Driscoll, Jr. (71).............. Director (1) 1973
Mitchell S. Fromstein (69)............. Director (3)(4) 1990
Edward G. Jordan (67).................. Director (1)(2)(3) 1980
Thomas H. Kean (62).................... Director (3)(4) 1994
Reynold C. MacDonald (79).............. Director (1)(2)(3) 1977
James E. Preston (64).................. Director (3)(4) 1993
</TABLE>
- --------
The numbers following the offices held by the directors indicate membership in
the following Board committees during fiscal 1997:
(1)Audit and Corporate Practices
(2)Executive
(3)Finance
(4)Human Resources, Compensation and Public Affairs
(5)Stock
DIRECTORS MEETINGS AND COMMITTEES
The Board held nine meetings during fiscal 1997. The Board has certain
standing committees which are described below. During fiscal 1997, each
director attended at least 75% of the aggregate of all Board meetings and all
meetings of committees on which he or she served, except Mr. Fromstein who
attended 13 out of 18 such meetings.
The Audit and Corporate Practices Committee reviews the periodic financial
reports and the accounting principles used by the Company and the adequacy of
the Company's system of internal controls. It also reviews with the
independent public accountant and the internal audit department the scope of
their audits, their audit reports and any recommendation made by them to
determine whether these activities are reasonably designed to assure the
soundness of accounting and financial procedures. It recommends the action to
be taken with respect
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to the appointment, and approves the compensation, of the Company's
independent public accountants and monitors compliance with the Company's
business conduct policy. It held four meetings during fiscal 1997.
The Executive Committee, when acting by unanimous vote of all members, has
the full power of the Board when the Board is not in session, with specific
limitations relating to certain corporate governance or other corporate
matters. It did not hold any meetings during fiscal 1997.
The Finance Committee reviews the overall financial and business plans of
the Company, including capital expenditures, acquisitions and divestitures,
securities issuances and incurrences of debt and the performance of the
Company's retirement benefit plans. It recommends to the Board specific
transactions involving the foregoing, and it has been empowered by the Board
to approve certain financial commitments and acquisitions and divestitures by
the Company up to specified levels. It held four meetings during fiscal 1997.
The Human Resources, Compensation and Public Affairs Committee consists
entirely of outside directors. The committee determines the base salary of the
Chairman and President (subject to review and approval by the Board) and
approves the salaries and bonuses paid to officers and other employees who are
line of business presidents or whose current or proposed base salary exceeds
$200,000 per annum. It reviews appointments to senior management positions and
the nature and scope of the Company's employee benefits plans. It also reviews
and recommends the compensation of outside directors and reviews the Company's
contribution policy and practices for its retirement benefit plans. The
committee is also authorized to exercise the Company's rights and powers under
the Stockholders' Agreement, including approval of grants of stock purchase
opportunities under the ARAMARK Ownership Program as well as the annual
approval of an internal market policy providing for the repurchase of shares
from management investors. It held five meetings during fiscal 1997.
The Stock Committee consists of two outside directors. The committee has
concurrent authority, with the Human Resources, Compensation and Public
Affairs Committee, to approve specific transactions involving Company stock
between officers and directors and the Company. It did not hold any meetings
during fiscal 1997.
BUSINESS EXPERIENCE
The principal occupations the past five years of the Company's directors and
other directorships currently held by directors are as follows:
Mr. Neubauer has been chief executive officer of the Company since February
1983 and the chairman since April 1984; he was President of the Company from
February 1983 to May 1997. He is a director of Bell Atlantic Corporation,
Federated Department Stores, Inc. and First Union Corporation.
Mr. Ksansnak has been vice chairman of the Company since May 1997. From
February 1991 to May 1997 he was executive vice president of the Company; from
May 1986 to February 1991 he was senior vice president of the Company; and
from May 1986 to May 1997 he was chief financial officer of the Company. He is
a director of Advanta Corp. and CSS Industries, Inc.
Ms. Barron has been vice president, Business Operations Support of Xerox
Corporation since April 1997. From 1995 to 1997 she was president, Engineering
Systems of Xerox Corporation and from 1992 to 1994 was president, Office
Document Products of Xerox Corporation. She is a director of Quaker Chemical
Corporation, Reynolds Metals Company, and Frontier Corporation.
Mr. Callander is executive-in-residence at the Business School of Columbia
University. He was president of Chemical Bank and Chemical Banking Corporation
from August 1990 to June 1992. He is a director of Barnes Group, Inc.
Beneficial Corporation, Latin American Dollar Income Fund, Omnicom Group Inc.,
Scudder New Asia Fund, Scudder World Income Opportunities Fund and The Korea
Fund Inc.
Dr. Campbell was vice chairman of the Company from April 1984 to February
1991 and was executive vice president from December 1980 until his retirement
in September 1990.
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<PAGE>
Mr. Davenport has been the chairman of Sheridan Broadcasting Corporation
since 1972.
Mr. Driscoll was a partner in the Philadelphia law firm of Ballard, Spahr,
Andrews & Ingersoll from January 1984 until December 1990.
Mr. Fromstein has been chairman, president and chief executive officer of
Manpower Inc. since March 1976. He is a director of Manpower Inc.
Mr. Jordan was the chairman and chief executive officer of Consolidated Rail
Corporation from 1975 to 1981 and served as the president of The American
College from 1982 until 1987. He is a director of Acme Metals Incorporated.
Former Governor Kean was the Governor of the State of New Jersey from 1982
until 1990. He has been the president of Drew University since 1990. He is a
director of Amerada Hess Corporation, Bell Atlantic Corporation, Beneficial
Corporation, Fiduciary Trust Company International and United Health Care
Corporation.
Mr. MacDonald served as a consultant to Acme Metals Incorporated from May
1992 to May 1997. He was chairman of Acme Metals Incorporated from June 1986
until May 1992. He is a director of Acme Metals Incorporated and Kaiser
Ventures Inc.
Mr. Preston has been the chairman, president, chief executive officer and a
director of Avon Products, Inc. since 1989. He is a director of Reader's
Digest Association and Woolworth Corporation.
EXECUTIVE COMPENSATION
The table below sets forth information with respect to the compensation of
the named executive officers for services in all capacities to the Company and
its subsidiaries in the years indicated.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS GRANTED(#) COMP.(1)
- --------------------------- ----------- -------- -------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Joseph Neubauer.......... 1997 $900,000 $800,000 0 $ 6,000
Chairman and 1996 $850,000 $700,000 0 $14,500
Chief Executive Officer 1995 $820,000 $650,000 500,000 $15,000
James E. Ksansnak........ 1997 $368,000 $325,000 0 $ 6,000
Vice Chairman 1996 $354,000 $300,000 0 $ 6,000
1995 $342,000 $225,000 35,000 $ 5,500
William Leonard.......... 1997 $437,500 $400,000 80,000 $ 6,000
President and 1996 $385,000 $275,000 0 $ 6,000
Chief Operating Officer 1995 $362,000 $325,000 70,000 $ 5,500
Martin W. Spector........ 1997 $345,000 $200,000 0 $ 6,000
Executive Vice Presi-
dent, 1996 $337,000 $200,000 0 $ 6,000
General Counsel and Sec-
retary 1995 $327,000 $200,000 10,000 $ 5,500
L. Frederick Sutherland.. 1997 $347,000 $200,000 50,000 $ 6,000
Executive Vice President
and 1996 $314,500 $240,000 0 $ 6,000
Chief Financial Officer 1995 $280,000 $310,000 100,000 $ 5,500
</TABLE>
- --------
(1) Other compensation includes employer contributions to the Stock Unit
Retirement Plan, plus for fiscal 1996 and 1995, the value of interest
foregone and not recaptured by the Company relating to payment of premiums
for split dollar life insurance.
112
<PAGE>
STOCK PURCHASE OPPORTUNITIES
The following table sets forth information with respect to the named
executive officers concerning individual grants of stock purchase
opportunities made in fiscal 1997.
OPTIONS GRANTED IN FISCAL 1997
(STOCK PURCHASE OPPORTUNITIES)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Neubauer......... -- -- -- -- -- --
James E. Ksansnak....... -- -- -- -- -- --
William Leonard......... 80,000 2.3% $18.50 January 2002 $ 262,249 $ 566,066
Martin W. Spector....... -- -- -- -- -- --
L. Frederick Suther-
land................... 50,000 1.4% $16.20 January 2002 $ 131,936 $ 283,914
</TABLE>
- --------
(1) See "The ARAMARK Ownership Program." 30,000 of the options granted to Mr.
Leonard are cumulative installment stock purchase opportunities. All other
options in the table are installment stock purchase opportunities. All
were granted at a per share exercise price equal to the Appraisal Price of
the shares at the time of grant.
(2) Realizable value refers to the assumed Appraisal Price of the underlying
shares at the time such purchase opportunity expires minus the exercise
price.
The following table sets forth information with respect to the named
executive officers concerning the exercise of options in fiscal 1997 and the
unexercised options held as of October 3, 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FY-END(2) FY-END(2)
--------------------- --------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- ----------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Joseph Neubauer......... 21,404 $ 197,559 0/500,000 $0/$3,250,000
James E. Ksansnak....... 29,960 $ 434,035 0/35,000 $0/$227,500
William Leonard......... 72,080 $ 769,114 0/202,120 $0/$1,141,246
Martin W. Spector....... 76,188 $1,207,228 0/10,000 $0/$65,000
L. Frederick Suther-
land................... 23,848 $ 141,067 0/169,000 $0/$1,050,920
</TABLE>
- --------
(1) Value realized refers to the Appraisal Price of the underlying shares at
the time the option was exercised minus the exercise price of the option.
(2) Options currently exercisable and current values of options are determined
as of October 3, 1997. Current value of an option refers to the Appraisal
Price of the underlying shares minus the exercise price of the option.
113
<PAGE>
SHAREHOLDER RETURN
The following graph compares the five year cumulative return of Class B
Common Stock (measured by the Appraisal Price) to the Standard & Poor's 500
Stock Index and the Dow Jones Consumer Non-Cyclical Index.
LOGO
Cumulative total return is stated as a percentage of the base year (1992)
stock price. Cumulative total return in a given year equals (i) the cumulative
amount of dividends paid since the base year, assuming dividend reinvestment,
plus the year-end stock price, (ii) divided by the base year stock price.
<TABLE>
<CAPTION>
DOW JONES
ARAMARK CONSUMER
FISCAL YEAR NON-
ENDED ARAMARK S&P 500 CYCLICAL
----------- ------- ------- ---------
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 128.00 112.98 89.88
1994 151.82 117.27 106.31
1995 180.88 151.19 144.26
1996 201.39 181.57 187.36
1997 248.91 252.77 251.14
</TABLE>
THE ARAMARK OWNERSHIP PROGRAM
The ARAMARK Ownership Program (the "ARAMARK Ownership Program") is designed
to provide an opportunity for selected management employees of the Company and
its subsidiaries to acquire an ownership interest in the Company and thereby
give them a more direct continuing interest in the future success of the
Company's business. Under the Ownership Program, direct ownership in the
Company has increased from 62 original management investors in December 1984 to
more than 1,000 management investors owning approximately 51% of the equity. At
October 3, 1997, management employees and directors held stock purchase
opportunities and options for 8,944,212 shares.
The Company's senior management believes that management ownership has
significantly contributed to the Company's success, and intends to continue to
use the ARAMARK Ownership Program to expand both the number of management
investors and their percentage ownership.
Through installment stock purchase opportunities and expanded ownership
purchase opportunities, the Company has granted management employees an
opportunity to invest in, or increase their investment in, the Company.
114
<PAGE>
The purchase price for shares subject to either installment stock purchase
opportunities ("ISPOs") or expanded ownership purchase opportunities (EXPOs)
is the Appraisal Price of the shares (based upon the most recent available
independent appraisal) on the date of the grant. Shares issued pursuant to the
exercise of purchase opportunities are subject to the Stockholders' Agreement.
Generally, purchase opportunities are not transferable, and each purchase
opportunity is exercisable only by the employee to whom it is granted.
Each installment stock purchase opportunity has an installment schedule that
limits the number of shares of common stock that may be purchased during each
annual installment exercise period. Unless the first installment is exercised
by its expiration date for a minimum number of shares, the entire installment
purchase opportunity is canceled. Thereafter, subsequent annual installments
may be exercised (subject to exercise of a minimum number of shares) for up to
the maximum number of shares specified in the certificate for that
installment. Any portion of an annual installment not exercised by the
appropriate expiration date is canceled. Each installment stock purchase
opportunity is exercisable only while an employee of the Company or a
subsidiary. The Company also grants cumulative ISPOs which are similar to
regular ISPOs except that if a portion of an annual installment is not
exercised during the corresponding exercise period, then it is not canceled
but rather may be exercised during any subsequent exercise period.
Each expanded ownership purchase opportunity provides that once vested, the
entire opportunity or a portion (in 100 share increments) may be exercised
during any of the specified annual exercise periods. Upon termination of
employment, an employee can exercise his or her expanded ownership purchase
opportunity if it is vested, within three months after termination (but not
beyond its expiration date). If it is not vested as such time, the entire
grant is canceled. Expanded ownership opportunities have been awarded to
management employees who had not previously been granted installment stock
purchase opportunities. The size and the structure of the expanded ownership
opportunities were approved, taking into consideration the general
compensation levels of the recipients, the size of the cash investment that
would be required, the general suitability of such an investment to recipients
generally, the goal of encouraging management investors to retain the shares
they acquire, the potential dilution to existing stockholders, and the costs
and additional administrative requirements of such expanded ownership.
In connection with the exercise of installment purchase opportunities and
non-qualified stock options, the Company has adopted a deferred payment
program whereby a portion of the purchase price for certain installments may
be deferred at the election of the employee for approximately six years. The
deferred payment obligation is a full recourse obligation of the individual,
accrues interest and is secured by a pledge of the shares of common stock
purchased. The interest rate for deferred payment obligations incurred in the
current exercise period has been set at 8.5%. More than 500 employees
(including executive officers) are currently participating in the program. At
fiscal year end, the amount of the deferred payment obligations of Messrs.
Neubauer, Ksansnak, Leonard, Spector and Sutherland were $1,157,414, $753,726,
$1,175,568, $777,862 and $571,170, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997, the Company repurchased from five executive officers and
one director 316,099 shares of common stock at an average price per share of
$16.89. The Company anticipates that it will continue to repurchase shares
held by officers and directors, through the Company's internal market, and
following their termination of employment or cessation as a director.
The Company, the members of management who are equity investors in the
Company and certain other investors (collectively, "Restricted Investors") are
parties to the Stockholders' Agreement. Restricted Investors are subject to
certain restrictions on transfer, with the Company having certain rights of
first offer in the event of any sales or dispositions by Restricted Investors
or their estates. In addition, upon death, complete disability or normal
retirement of management investors or upon death or complete disability of
other individual Restricted Investors, such persons or their estates may cause
the Company to repurchase for cash up to 30% of their shares
115
<PAGE>
at the then current Appraisal Price but only to the extent such repurchase by
the Company is permitted under the Company's credit agreement. Such
repurchased shares may be resold to others, including replacement personnel.
In addition, it is contemplated that shares which may be issued pursuant to
exercise of employee stock options and stock purchase opportunities would also
be subject to the Stockholders' Agreement.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company has employment agreements or arrangements with all of its
officers, under which they are currently being paid annual salaries ranging up
to $950,000. Generally, these are for indeterminate periods terminable by
either party upon notice ranging from eight weeks to six months. Mr.
Neubauer's agreement currently provides for services to February 1998 (with
automatic renewals for successive three year terms unless terminated) at a
current annual base salary of $950,000 and for fully vested supplemental
benefits upon his death of 25% of his highest base salary payable to his
surviving spouse, if any, annually for life or upon his retirement, disability
or termination for any other reason of 50% of his highest base salary payable
to him annually for life. Upon termination by the Company without cause, Mr.
Neubauer's management incentive bonus shall be prorated through the time of
termination; his base salary at time of termination shall continue for a
period of three years after termination; and, his supplemental benefits shall
commence at the end of such three year period. The Company has a split dollar
life insurance agreement with Mr. Neubauer. The agreement relates to life
insurance policies owned by a trust created by Mr. Neubauer. Pursuant to the
agreement, the Company pays a substantial portion of the premiums on the
policies, such amounts to be repaid from the proceeds of the policies upon
their termination. The current amount thus outstanding is $971,376. The
Company foregoes charging interest in each fiscal year on such amount.
However, the foregone interest is at least partially recaptured by the Company
by reducing the amount of the interest which would otherwise accrue on Mr.
Neubauer's deferred compensation. The Company holds a security interest in the
policies to secure the repayment of the premium amount paid by the Company.
The arrangement terminates upon the termination of Mr. Neubauer's employment
(other than by reason of his retirement). Messrs. Ksansnak, Leonard, Spector,
and Sutherland have current annual base salaries of $400,000, $500,000,
$360,000 and $365,000, respectively. Several agreements provide for the
deferral of a part of prior salary and bonus payments with interest, currently
at the Moody's long-term bond index rate, usually payable in equal monthly
installments beginning upon retirement, permanent disability, death or
termination of employment.
The Company currently has a severance pay policy, pursuant to which
severance payments are made to executive officers and certain other key
employees on the basis of continuous service, generally equal to between 3 and
18 months of pay if their employment is terminated for reasons other than
cause plus the continuation of certain other benefits during the period of
such payment.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not paid directors' fees.
Directors who are not employees receive an annual retainer of $30,000 for
serving on the Board, $3,000 for services as chairman of a Board committee and
$1,000 for otherwise serving on a committee, and they receive meeting fees of
$1,000 per day for attendance at meetings of the Board, and for each committee
meeting.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation programs are designed to support the Company's
overall commitment to continued growth and quality services to customers. The
programs are intended, among other things, to enable the Company to recruit
and retain the best performers, to provide compensation levels consistent with
the level of contribution and degree of accountability, to use performance
measures consistent with the Company's goals, to provide compensation
consistent with competitive market rates, and to include a significant portion
of incentive compensation.
116
<PAGE>
Salary. Salary levels for all salaried employees are generally reviewed
annually. Guideline increases are established generally based upon overall
financial performance of the Company, the current rate of inflation and
general compensation levels in the industries in which the Company operates.
For fiscal 1997, the guideline increase for executive officers, including the
five named individuals, was 3.5%, which was the same as for fiscal 1996. The
specific salary increases for each individual executive officer is based upon
a review of his or her individual performance and development. In the case of
Mr. Neubauer, the review is conducted independently by the Human Resources,
Compensation and Public Affairs Committee without any officers present,
subject to final review and approval by the Board; for all other executive
officers, the individual's supervisor and more senior executives, along with
the corporate human resources department, conduct the review and make a
recommendation to the Committee. Mr. Neubauer's salary was increased by 5.5%
during fiscal 1997.
Bonus. Senior executive officers participate in the Company's management
incentive bonus program. Bonuses are awarded annually based in part upon the
attainment of predetermined financial goals and in part upon the attainment of
individual objectives. Generally, non-financial objectives represent 30% of
the bonus potential and are established by the supervisor of the executive.
Financial goals generally represent 70% of the bonus potential. An employee's
bonus potential generally varies, as a percentage of total cash compensation,
dependent upon the level of responsibility of the employee's position. The
measures of financial performance used are for the business unit which is
either under the managerial direction of the participant or, if a staff
executive, is the unit on which the participant impacts most frequently and
significantly. In the case of Mr. Neubauer, the Committee awards a bonus
pursuant to the CEO Annual Performance Bonus Arrangement (the "Arrangement"),
which was approved by stockholders in February 1997. Pursuant to the
Arrangement, the Committee selected Revenue and Net Income as the financial
performance measures and set goals for each measure. The attainment of the
performance goals set by the Committee was adjusted for the sale of a majority
interest in the Company's Spectrum Healthcare Services subsidiary during
fiscal 1997. Mr. Neubauer was awarded 60% of his maximum bonus potential for
fiscal 1997.
Performance measures. The Company uses various financial measures to
evaluate the performance of the Company and its business units, with the
specific measures in some cases varying depending upon the line of business
involved. Generally, the measures used are Revenue Growth, EBIT, RONA and, in
addition, for overall corporate performance Net Income and ATROI. "EBIT" is
Earnings Before Interest and Taxes. "RONA" is Return on Net Assets. "ATROI" is
After Tax Return on Investment. Targets for each of these performance measures
are established annually in the Company's business plan, which is approved at
the beginning of the fiscal year by the Board.
Stock Purchase Opportunities. The Human Resources, Compensation and Public
Affairs Committee believes that management ownership contributes to the
Company's success, and supports senior management's goal of expanding both the
number of management investors and their percentage ownership. The Human
Resources, Compensation and Public Affairs Committee, accordingly, grants
stock purchase opportunities to selected management employees. In addition,
the Human Resources, Compensation and Public Affairs Committee oversees the
Company's expanded ownership program, to further expand the number of
management owners. The terms of the installment stock purchase opportunities
and the expanded ownership opportunities are generally described under "--The
ARAMARK Ownership Program." Individual grants are generally made by the Human
Resources, Compensation and Public Affairs Committee in connection with hires,
promotions and other recognition of performance. The amount of a grant
generally varies depending upon the level of responsibility of the employee's
position, the number of purchase opportunities previously granted, and the
number of shares owned. The individual's supervisor and other senior
executives, along with the corporate human resources department, make
recommendations to the Human Resources, Compensation and Public Affairs
Committee. The Company has in the past also made broad-based grants to
management employees.
Compensation Committee Interlocks and Insider Participation. Dr. Campbell,
who was an Executive Vice President until his retirement in September 1990, is
a member of the Human Resources, Compensation and Public Affairs Committee.
117
<PAGE>
Members of the Human Resources, Compensation and Public Affairs Committee:
Robert J. Callander, Chair Mitchell S. Fromstein
Alan K. Campbell The Honorable Thomas H. Kean
Ronald R. Davenport James E. Preston
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information as of October 3, 1997 with
respect to shares of the Common Stock of the Company beneficially owned by
each person known to the Company to be the beneficial owner of more than 5% of
either class of the Common Stock, by each director and by each named executive
officer.
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------- ---------------------------
NUMBER OF SHARES(5) PERCENT NUMBER OF SHARES(5) PERCENT
------------------- ------- ------------------- -------
<S> <C> <C> <C> <C>
Trustees for various
ARAMARK employee bene-
fit plans(1)(2)........ 922,424 47.0% 0 *
The Goldman Sachs Group,
L.P.(3)................ 163,440 8.3% 0 *
Metropolitan Life Insur-
ance Co.(4)............ 160,904 8.2% 0 *
Joseph Neubauer(1)...... 0 * 5,253,104 25.7%
James E. Ksansnak....... 0 * 704,497 3.4%
Patricia C. Barron...... 0 * 8,500 *
Robert J. Callander..... 0 * 109,790 *
Alan K. Campbell........ 0 * 240,943 1.2%
Ronald R. Davenport..... 0 * 58,000 *
Lee F. Driscoll, Jr..... 272 * 37,943 *
Mitchell S. Fromstein... 0 * 127,297 *
Edward G. Jordan........ 0 * 120,000 *
Thomas H. Kean.......... 0 * 68,200 *
Reynold C. MacDonald.... 0 * 2,500 *
James E. Preston........ 0 * 84,000 *
William Leonard......... 0 * 553,709 2.7%
Martin W. Spector....... 0 * 879,806 4.3%
L. Frederick Suther-
land................... 0 * 454,052 2.2%
All directors and
executive officers as a
group (23 persons)..... 272 * 9,331,707 45.6%
All employees** and di-
rectors as a group..... 16,416 * 20,500,992 100.0%
All employees**, direc-
tors and employee bene-
fit plans as a group... 938,840 47.9% 20,500,992 100.0%
</TABLE>
- --------
(1) The address of this stockholder is ARAMARK Corporation, ARAMARK Tower,
1101 Market Street, Philadelphia, PA 19107.
(2) The trustees are Alan K. Campbell, James E. Ksansnak and Martin W.
Spector.
(3) The address of this stockholder is 85 Broad Street, New York, New York
10004.
(4) The address of this stockholder is 200 Park Avenue, New York, New York
10166.
(5) Includes shares issuable upon the exercise of currently exercisable stock
purchase opportunities and options.
* Less than 1%.
** Includes children and other transferees for estate planning purposes.
118
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board is expected to reappoint the firm of Arthur Andersen LLP as
independent public accountants for the Company for the 1998 fiscal year. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will be offered the opportunity to make a statement if desiring to
do so and will be available to respond to appropriate questions.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company for the fiscal year
ended October 3, 1997, included in this Proxy Statement at Annex VII, have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report included herein.
PROPOSALS BY STOCKHOLDERS FOR
PRESENTATION AT THE 1999 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at future annual meetings of the Company in accordance with regulations
adopted by the Securities and Exchange Commission. For such proposals to be
considered for inclusion in the Company's proxy statement and form of proxy
for next year's annual meeting, they must be received by the Company not later
than September 10, 1998. Proposals should be directed to the attention of the
Corporate Secretary.
LEGAL OPINION
The validity of the shares of the Composite Stock and the Business Group
Stocks issuable pursuant to Share 100 will be passed upon by Milbank, Tweed,
Hadley & McCloy, who will rely as to certain matters of Delaware law on
Morris, Nichols, Arsht & Tunnell. Such counsel will assume that the Company
will not be rendered insolvent as a result of Share 100.
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board. All expenses of
this solicitation including the cost of preparing and mailing this Proxy
Statement will be borne by the Company. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of
the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses, in connection
with such solicitation.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Proxy Statement, including the
projections under "SHARE 100--Certain Projections," the ability to repay the
financing and other statements contained herein regarding matters that are not
historical facts, are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995). Because such statements
include risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited
to, those discussed in "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION."
119
<PAGE>
ANNEX I
ILLUSTRATIONS OF CERTAIN TERMS
The following illustrations demonstrate the calculations of the Composite
Group's Inter-Group Interest in the Food and Support Services Group (a
Business Group) based on the assumptions set forth herein and using (i) 20
million shares as the number of shares representing 100% of the equity value
of Food and Support Services Group ("Equity Value"), (ii) 7 million shares as
the number of shares of Food and Support Group Stock initially outstanding
(including dilutive options reflected using the treasury method) (the
"Outstanding Shares of Food and Support Group Stock") and (iii) 13 million
shares as the number of shares of Food and Support Group Stock initially
issuable with respect to the Composite Group's Inter-Group Interest in the
Food and Support Services Group (the "Number of Shares Issuable with respect
to the Inter-Group Interest"). Although the following illustrations
demonstrate the calculations of the Composite Group's Inter-Group Interest in
the Food and Support Services Group, the illustrations apply to each of the
other Business Groups (Uniform and Career Apparel Group and Educational
Resources Group). Unless otherwise stated, each illustration below should be
read independently as if none of the other transactions referred to below had
occurred.
At any time, the fractional interest in the Equity Value of the Food and
Support Services Group that is held by the holders of the outstanding Food and
Support Group Stock (the "Outstanding Food and Support Group Fraction") would
be equal to:
Outstanding Shares of Food and Support Group Stock
----------------
Outstanding Shares of Food and Support Group Stock +
Number of Shares Issuable with Respect to the Inter-Group Interest
The balance of the Equity Value of the Food and Support Services Group is
for the account of the Composite Group (the "Inter-Group Interest"), and, at
any time, the fractional interest in the Equity Value of the Food and Support
Services Group that is represented by the Inter-Group Interest (the "Inter-
Group Interest Fraction") would be equal to:
Number of Shares Issuable with Respect to the Inter-Group Interest
----------------
Outstanding Shares of Food and Support Group Stock +
Number of Shares Issuable with Respect to the Inter-Group Interest
The sum of the Outstanding Food and Support Group Fraction and the Inter-Group
Interest Fraction would always equal 100%.
FUTURE OFFERINGS OF FOOD AND SUPPORT GROUP STOCK
The following illustrations reflect the sale by the Company of 5 million
shares of Food and Support Group Stock when 7 million shares of Food and
Support Group Stock are previously issued and outstanding.
Offering for the Food and Support Services Group
Assume all of such shares are identified for the account of the Food and
Support Services Group as an additional equity interest in the Food and
Support Services Group, with the net proceeds reflected in the financial
records of the Food and Support Services Group.
I-1
<PAGE>
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Newly issued shares of Food and Support Group Stock.............. 5.0 million
------------
Total issued and outstanding after offering.................... 12.0 million
============
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest (13.0
million) would not be changed by the issuance of any shares of Food and
Support Group Stock for the account of the Food and Support Services Group.
. The total issued and outstanding shares of Food and Support Group Stock
(12.0 million) would represent an Outstanding Food and Support Group
Fraction of 48.0%, calculated as follows:
12.0 million
----------------
12.0 million + 13.0 million
. The Inter-Group Interest Fraction would accordingly be 52.0%.
. After such future offering, in the event of any dividend or other
distribution paid on the outstanding shares of Food and Support Group Stock
(other than a dividend or other distribution payable in shares of Food and
Support Group Stock), the financial records of the Composite Group would be
credited, and the financial records of the Food and Support Services Group
would be charged, with a total amount equal to 108.3% of the aggregate
amount of such dividend or distribution (representing the ratio of the
Number of Shares Issuable with respect to the Inter-Group Interest (13.0
million) to the total number of shares of Food and Support Group Stock
issued and outstanding following the public offering (12.0 million)).
Offering for the Composite Group
Assume all of such shares are identified for the account of the Composite
Group with respect to the Inter-Group Interest, with the net proceeds
reflected in the financial records of the Composite Group.
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Newly issued shares of Food and Support Group Stock.............. 5.0 million
------------
Total issued and outstanding after offering.................... 12.0 million
============
</TABLE>
. The Number of Shares Issuable with Respect to the Inter-Group Interest would
decrease by the number of any shares of Food and Support Group Stock issued
for the account of the Composite Group.
<TABLE>
<S> <C>
Number of Shares Issuable with Respect to the Inter-Group Inter-
est prior to offering.......................................... 13.0 million
Shares issued in offering....................................... (5.0 million)
------------
Number of Shares Issuable with Respect to the Inter-Group In-
terest after offering........................................ 8.0 million
============
</TABLE>
. The total issued and outstanding shares of Food and Support Group Stock
(12.0 million) would represent an Outstanding Food and Support Group
Fraction of 60.0%, calculated as follows:
12.0 million
----------------
12.0 million + 8.0 million
. The Inter-Group Interest Fraction would accordingly be 40.0%.
. In this case, in the event of any dividend or other distribution paid on the
outstanding shares of Food and Support Group Stock (other than a dividend or
other distribution payable in shares of Food and Support Group Stock), the
financial records of the Composite Group would be credited, and the
financial records of the Food and Support Services Group would be charged,
with an amount equal to 66.7% of the aggregate amount of such dividend or
distribution (representing the ratio of the Number of Shares Issuable with
Respect to the Inter-Group Interest (8.0 million) to the total number of
shares of Food and Support Group Stock issued and outstanding following the
public offering (12.0 million)).
I-2
<PAGE>
OFFERING OF CONVERTIBLE SECURITIES
If the Company were to issue any debt or preferred stock convertible into
shares of Food and Support Group Stock, the Outstanding Food and Support Group
Fraction and the Inter-Group Interest Fraction would be unchanged at the time
of such issuance. If any shares of Food and Support Group Stock were issued
upon conversion of such convertible securities, however, then the Outstanding
Food and Support Group Fraction and the Inter-Group Interest Fraction would be
affected as shown above under "Offering for the Food and Support Services
Group," if such convertible securities were allocated to the Food and Support
Services Group, or under "Offering for the Composite Group," if such
convertible securities were allocated to the Composite Group.
FOOD AND SUPPORT GROUP STOCK DIVIDENDS
The following illustrations reflect dividends of Food and Support Group
Stock on outstanding Food and Support Group Stock and outstanding Composite
Stock, respectively.
Food and Support Group Stock Dividend on Food and Support Group Stock
Assume the Company declares a dividend of one share of Food and Support
Group Stock on each outstanding share of Food and Support Group Stock.
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Newly issued shares of Food and Support Group Stock.............. 7.0 million
------------
Total issued and outstanding after dividend.................... 14.0 million
============
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest
would be increased proportionately to reflect the stock dividend payable
in shares of Food and Support Group Stock to holders of Food and Support
Group Stock.
<TABLE>
<S> <C>
Number of Shares Issuable with Respect to the Inter-Group Inter-
est prior to dividend........................................... 13.0 million
Adjustment to reflect dividend of shares on outstanding shares of
Food and Support Group Stock.................................... 13.0 million
------------
Number of Shares Issuable with respect to the Inter-Group In-
terest after dividend......................................... 26.0 million
============
</TABLE>
. The total issued and outstanding shares of Food and Support Group Stock
(14.0 million) would continue to represent an Outstanding Food and
Support Group Fraction of 35.0%, calculated as follows:
14.0 million
----------------
14.0 million + 26.0 million
. The Inter-Group Interest Fraction accordingly would continue to be 65.0%.
Food and Support Group Stock Dividend on Composite Stock
Assume 20 million shares of Composite Stock are outstanding and the Company
declares a dividend of 1/2 of a share of Food and Support Group Stock on each
outstanding share of Composite Stock.
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Newly issued shares of Food and Support Group Stock.............. 10.0 million
------------
Total issued and outstanding after dividend.................... 17.0 million
============
</TABLE>
I-3
<PAGE>
. Any dividend of shares of Food and Support Group Stock to the holders of
shares of Composite Stock will be treated as a dividend of shares
issuable with respect to the Inter-Group Interest. As a result, the
Number of Shares Issuable with respect to the Inter-Group Interest would
decrease by the number of shares of Food and Support Group Stock
dividended to the holders of Composite Stock.
<TABLE>
<S> <C>
Number of Shares Issuable with respect to the Inter-Group
Interest prior to dividend.................................... 13.0 million
Shares dividended on outstanding shares of Composite Stock..... (10.0 million)
-------------
Number of Shares Issuable with Respect to the Inter-Group In-
terest after dividend....................................... 3.0 million
=============
</TABLE>
The Company will not dividend to holders of Composite Stock shares of Food
and Support Group Stock exceeding the then Number of Shares Issuable with
Respect to the Inter-Group Interest.
. The total issued and outstanding shares (17.0 million) would represent an
Outstanding Interest Fraction of 85.0%, calculated as follows:
17.0 million
----------------
17.0 million + 3.0 million
. The Inter-Group Interest Fraction would accordingly be 15.0%. Note,
however, that after the dividend the holders of Composite Stock would
also hold 10.0 million shares of Food and Support Group Stock, which
would represent a direct interest of 50.0% in the equity value of the
Food and Support Services Group (and, together with the 15.0% Inter-Group
Interest, would continue to be a total interest in the equity value of
the Food and Support Services Group of 65.0%).
REPURCHASES OF FOOD AND SUPPORT GROUP STOCK
The following illustrations reflect the repurchase by the Company of 5
million shares of Food and Support Group Stock.
Repurchase with Food and Support Services Group Funds
Assume all such shares are identified as having been repurchased with funds
allocated to the Food and Support Services Group, with the financial records
of the Food and Support Services Group being charged with the consideration
paid for such shares:
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Shares of Food and Support Group Stock repurchased............... (5.0 million)
------------
Total issued and outstanding after repurchase.................. 2.0 million
============
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest
(13.0 million) would not be changed by the repurchase of any shares of
Food and Support Group Stock with funds allocated to the Food and Support
Services Group.
. The total issued and outstanding shares of Food and Support Group Stock
(2.0 million) would represent an Outstanding Food and Support Group
Fraction of 13.3%, calculated as follows:
2.0 million
----------------
2.0 million + 13.0 million
. The Inter-Group Interest Fraction would accordingly be 86.7%.
I-4
<PAGE>
Repurchase with Composite Group Funds
Assume all such shares are identified as having been repurchased with funds
allocated to the Composite Group, with the financial records of the Composite
Group being charged with the consideration paid for such shares:
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding..................................................... 7.0 million
Shares of Food and Support Group Stock repurchased............... (5.0 million)
------------
Total issued and outstanding after repurchase.................. (2.0 million)
============
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest
would be increased by the number of any shares of Food and Support Group
Stock repurchased with funds allocated to the Composite Group.
<TABLE>
<S> <C>
Number of Shares Issuable with respect to the Inter-Group Inter-
est prior to repurchase......................................... 13.0 million
Shares repurchased with funds allocated to Composite Group....... 5.0 million
------------
Number of Shares Issuable with respect to the Inter-Group In-
terest after repurchase....................................... 18.0 million
============
</TABLE>
. The total issued and outstanding shares of Food and Support Group Stock
(2.0 million) would represent an Outstanding Food and Support Group
Fraction of 10.0%, calculated as follows:
2.0 million
----------------
2.0 million + 18.0 million
. The Inter-Group Interest Fraction would accordingly be 90.0%.
TRANSFERS OF ASSETS BETWEEN GROUPS
Contribution of Assets from Composite Group to Food and Support Services
Group
The following illustration reflects the contribution as additional equity by
the Composite Group to the Food and Support Services Group of $10 million of
assets attributed to the Composite Group on a date on which the Fair Market
Value of Food and Support Group Stock is $35 per share.
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and
outstanding...................................................... 7.0 million
Newly issued shares of Food and Support Group Stock............... 0.0 million
-----------
Total issued and outstanding after contribution................. 7.0 million
===========
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest
would be increased to reflect the contribution to the Food and Support
Services Group of assets attributed to the Composite Group.
<TABLE>
<S> <C>
Number of Shares Issuable with respect to the Inter-Group Inter-
est prior to contribution....................................... 13.0 million
Adjustment to reflect contribution to Food and Support Services
Group of assets attributed to Composite Group................... 0.3 million
------------
Number of Shares Issuable with respect to the Inter-Group In-
terest after contribution..................................... 13.3 million
============
</TABLE>
I-5
<PAGE>
. The total issued and outstanding shares of Food and Support Group Stock
(7.0 million) would represent an Outstanding Food and Support Group
Fraction of 34.0%, calculated as follows:
7.0 million
----------------
7.0 million + 13.3 million
. The Inter-Group Interest Fraction would accordingly be 66.0%.
Transfer of Assets from Food and Support Services Group to Composite Group
The following illustration reflects the transfer by the Food and Support
Services Group to the Composite Group of $10 million of assets attributed to
the Food and Support Services Group on a date on which the Fair Market Value
of Food and Support Group Stock is $35 per share, assuming such transfer has
been determined by the Board of Directors to be treated as a reduction in the
Composite Group's equity interest in the Food and Support Services Group.
<TABLE>
<S> <C>
Shares of Food and Support Group Stock previously issued and out-
standing.......................................................... 7.0 million
Newly issued shares of Food and Support Group Stock................ 0.0 million
-----------
Total issued and outstanding after transfer...................... 7.0 million
===========
</TABLE>
. The Number of Shares Issuable with respect to the Inter-Group Interest
would be decreased to reflect the contribution to the Composite Group of
assets allocated to the Food and Support Services Group.
<TABLE>
<S> <C>
Number of Shares Issuable with respect to the Inter-Group Inter-
est prior to transfer.......................................... 13.0 million
Adjustment to reflect transfer to Composite Group of assets
allocated to Food and Support Services Group................... (0.3 million)
------------
Number of Shares Issuable with respect to the Inter-Group In-
terest after transfer........................................ 12.7 million
============
</TABLE>
. The Company will not make transfers of assets of the Food and Support
Services Group to the Composite Group the fair value of which exceeds the
Fair Market Value of the then Number of Shares Issuable with respect to
the Inter-Group Interest.
. The total issued and outstanding shares of Food and Support Group Stock
(7.0 million) would represent an Outstanding Food and Support Group
Fraction of 36.0%, calculated as follows:
7.0 million
----------------
7.0 million + 12.7 million
. The Inter-Group Interest Fraction would accordingly be 64.0%.
I-6
<PAGE>
ANNEX II
[LOGO OF JP MORGAN APPEARS HERE]
January 8, 1998
ARAMARK Corporation
The Board of Directors
ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
Attention: Joseph Neubauer
Chairman and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to certain holders of common stock of ARAMARK Corporation (the "Company")
of the consideration to be received by them in connection with the Class A
Stock Exchange, the Reclassification and the Merger described in the Proxy
Statement of the Company dated the date hereof (the "Proxy Statement").
Capitalized terms used in this letter without definitions have the meanings set
forth in the Proxy Statement.
In arriving at our opinion, we have reviewed, among other things, (i) the Proxy
Statement, (ii) the audited financial statements of the Company for the fiscal
year ended October 3, 1997, (iii) certain publicly available information
concerning the Business Groups and of certain other companies engaged in
businesses comparable to those of the Business Groups, (iv) the reported market
prices for certain other companies' securities deemed comparable to those of
the Business Groups, (v) the terms of certain other business transactions
deemed relevant by us, (vi) certain internal financial analyses and forecasts
prepared by the Company, and (vii) certain agreements with respect to
outstanding indebtedness or obligations of the Company.
In addition, we have held discussions with certain members of the management of
the Company with respect to certain aspects of the Class A Stock Exchange, the
Reclassification and the Merger, the past and current business operations of
the Company, the financial condition and future prospects and operations of the
Company, the effects of the Class A Stock Exchange, the Reclassification and
the Merger on the financial condition and future prospects of the Company, and
certain other matters we believed necessary or appropriate to our inquiry. We
have reviewed such other financial studies and analyses and considered such
other information as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all the information that was
publicly available or was furnished to us by the Company or otherwise reviewed
by us, and we have not assumed any responsibility or liability therefor. We
have not conducted any valuation or appraisal of any assets or liabilities, nor
have any such valuations or appraisals been provided to us. In relying on
financial analyses and forecasts provided to us, we have assumed that they have
J.P. Morgan Securities Inc.
60 Wall Street
New York NY
10260-0060
II-1
<PAGE>
[LOGO OF JP MORGAN APPEARS HERE]
been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments by management as to the expected future
results of operations and financial condition of the Company and the Business
Groups. We have also assumed that the Class A Stock Exchange, the
Reclassification and the Merger will have the tax consequences described in the
Proxy Statement and in discussions with, and materials furnished to us by,
representatives of the Company, and that the other transactions described in
the Proxy Statement will be consummated as described in the Proxy Statement. We
have assumed as to all legal matters relevant to rendering our opinion, without
independent verification, the accuracy of all legal opinions delivered to the
Company by its counsel in connection with the Class A Stock Exchange, the
Reclassification and the Merger.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We express no opinion as to the price at which the Company's Composite Stocks
or Business Group Stocks will be appraised or traded at any future time. We
express no opinion as to any aspects of Share 100 other than the consideration
being received by the holders of the Class A Common Stock in connection with
the Class A Stock Exchange, the Reclassification and the consideration being
received by the holders of the Class B Common Stock in connection with the
Merger. Without limiting the generality of the foregoing sentence, we express
no opinion with respect to any repurchase of Class A Common Stock pursuant to
the Call Option. We express no opinion as to the value of the Installment
Notes.
We have acted as financial advisor to the Company with respect to the proposed
transactions and will receive a fee from the Company for our services. In the
past we have provided advisory services to the Company and have acted as lead
or co-lead manager on debt offerings by the Company. Our affiliate, Morgan
Guaranty Trust Company of New York, has provided bank financing for the
Company. In each case, we or our affiliate has received customary fees for such
services. In the ordinary course of their businesses, our affiliates may
actively trade the debt securities of the Company for their own account or for
the accounts of customers and, accordingly, they may at any time hold long or
short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that (i) the consideration to be received by the holders of the
Company's Class A Common Stock in connection with the Reclassification and the
Class A Stock Exchange (whether they receive cash or Class A Composite Stock)
is fair, from a financial point of view, to such holders and (ii) the
consideration to be received by the holders of the Company's Class B Common
Stock in connection with the Merger (whether they receive cash or Group Stock)
is fair, from a financial point of view, to such holders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Class A Stock Exchange, the
Reclassification and the Merger. This opinion does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote with respect to the Reclassification or the Merger. This opinion
may be referred to and reproduced in full in any proxy or information statement
mailed to stockholders of the Company but may not otherwise be disclosed,
referred to, or communicated (in whole or in part) to any third party for any
purpose whatsoever except with our prior written consent in each instance.
Very truly yours,
J.P. Morgan Securities Inc.
II-2
<PAGE>
ANNEX III
SHARE 100--AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
SHARE 100--AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER (the "PLAN"),
dated as of January 6, 1998, by and between ARAMARK Corporation, a Delaware
corporation (the "COMPANY"), and ARAMARK Share 100, Inc., a Delaware
corporation (the "MERGING CORPORATION").
WHEREAS, the Board of Directors of the Company desires to effect a
recapitalization pursuant to the Plan;
WHEREAS, as part of the Plan, the Board of Directors of the Company and the
Board of Directors of the Merging Corporation desire that such corporations
merge (the "MERGER") pursuant to Section 251 of the General Corporation Law of
the State of Delaware (the "DGCL"), and the Board of Directors of each of such
corporations has approved the Plan; and
WHEREAS, the Board of Directors of the Company has directed that the Plan be
submitted to a vote of its stockholders entitled to vote thereon and the Board
of Directors of the Merging Corporation has directed that the Plan be
submitted to a vote of its sole stockholder;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree that the Merging Corporation shall
be merged with and into the Company, with the Company as the surviving
corporation, and the other transactions hereinafter described shall be
consummated, all under the terms and conditions herein set forth:
ARTICLE I.
THE RECLASSIFICATION; THE MERGER AND RELATED MATTERS
1.01 GENERAL. (a) Subject to the terms and conditions of the Plan, at the
Effective Time (as such term is defined in Section 1.01(b) hereof), the
Company shall be recapitalized (together with the transactions and matters
contemplated thereby and provided for herein, the "RECAPITALIZATION"). In
connection with the Recapitalization: (i) the Common Stock, Class A, $.01 par
value per share ("CLASS A COMMON STOCK"), of the Company shall be reclassified
(the "RECLASSIFICATION") in accordance with Section 1.02 hereof and the
provisions of the DGCL and redeemed in accordance with this Article I for the
appropriate Redemption Consideration (as defined in Sections 1.04(c) hereof)
and (ii) the Merging Corporation will be merged with and into the Company (the
"MERGER") in accordance with Section 1.05 hereof and the provisions of the
DGCL.
(b) The Plan shall become effective (the "EFFECTIVE TIME") at the time all
of the following documents are filed with the Secretary of State of the State
of Delaware: (i) an Amendment to the Restated Certificate of Incorporation of
the Company (the "CERTIFICATE OF INCORPORATION"), which will incorporate the
provisions contained in the first, second and fourth paragraphs of Article
FOURTH, Part 4D of Article FOURTH, Part 5C of Article FIFTH and Article SIXTH
of the Restated Charter; (ii) a Certificate of Designations, which will
incorporate the provisions contained in Part 4A and Part 4C of the Restated
Charter; (iii) an Amendment to the Certificate of Incorporation, which will
effect the provisions contained in the third paragraph of Article FOURTH of
the Restated Charter; and (iv) a Certificate of Merger, relating to the Merger
(collectively, the "SHARE 100 CERTIFICATES").
1.02 RECLASSIFICATION OF CLASS A COMMON STOCK.
(a) Pursuant to the Plan, each outstanding share of Class A Common Stock
shall, without any action on the part of the holder thereof, be reclassified
as, and changed into, one fully paid and nonassessable share of Redeemable
Transitory Participating Preferred Stock, $1.00 par value per share, of the
Company (the "REDEEMABLE TRANSITORY PARTICIPATING PREFERRED STOCK"), the terms
of which are set forth in Article
III-1
<PAGE>
FOURTH, Part 4C of the Restated Charter. Among other terms, the shares of
Redeemable Transitory Participating Preferred Stock shall be redeemable at the
option of the Company at any time for $347.50 per share in cash, without
interest (the "CLASS A CASH CONSIDERATION"); provided, however, that with
respect to holders of Redeemable Transitory Participating Preferred Stock who
meet to the Company's satisfaction certain suitability requirements described
in Section 1.08 hereof and who comply with such additional requirements as the
Company may prescribe, in lieu of the Class A Cash Consideration, the Company
shall deliver, without interest, to such qualifying holder, at the valid and
effective election of the holder (as provided for in Section 1.06(b) hereof)
(a "CLASS A ELECTION"), $347.50 principal amount of the Company's 7.25%
Guaranteed Convertible Installment Promissory Notes due 2007 (the "INSTALLMENT
NOTES"), subject to the treatment of fractional amounts described in Section
1.06(f) hereof.
(b) Holders of Class A Common Stock who (i) are individuals who at one time
owned (or their permitted transferees owned) Class B, $.01 par value per share
(the "CLASS B COMMON STOCK"), which was converted into Class A Common Stock
pursuant to the terms of the previously filed Restated Certificate of
Incorporation upon the termination of employment with the Company, and their
permitted transferees (collectively, "FORMER MANAGERS"), or (ii) are the
Company's benefit plans ("BENEFIT PLANS") which hold Class A Common Stock,
will be offered the opportunity to voluntarily exchange (the "CLASS A STOCK
EXCHANGE") certain of their Class A Common Stock, on a share for share basis,
for Common Stock, Class A--Composite Group, $.01 par value per share (the
"CLASS A COMPOSITE STOCK"). As a condition to participation in the Class A
Stock Exchange, Former Managers and Benefit Plans will be required to waive
all rights under Section 262 of the DGCL (Appraisal Rights) with respect to
the Merger. As referenced in Section 1.09, the Company will exercise its Call
Option with respect to any shares held by Former Managers and eligible for the
Class A Stock Exchange that are not so exchanged. The Class A Stock Exchange
will be consummated immediately prior to the effective time of the
Reclassification. A Former Manager shall not be entitled to participate in the
Class A Stock Exchange with respect to any shares of Class A Common Stock that
were not so converted from Class B Common Stock, and such unconverted shares
shall be eligible to be reclassified into Redeemable Transitory Participating
Preferred Stock and subsequently redeemed only for cash and/or Installment
Notes pursuant to the Reclassification.
1.03 REDEMPTION. Immediately following the effective time of the
Reclassification, all outstanding shares of Redeemable Transitory
Participating Preferred Stock shall be redeemed by the Company in accordance
with their terms and pursuant to the Class A Election, if any, validly made by
holders of Redeemable Transitory Participating Preferred Stock with respect
thereto.
1.04 NO EXCHANGE OF CLASS A COMMON STOCK; REDEMPTION OF REDEEMABLE
TRANSITORY PARTICIPATING PREFERRED STOCK. (a) Holders of Class A Common Stock
shall not be required to surrender or otherwise exchange their shares in order
to receive the Redeemable Transitory Participating Preferred Stock to which
they are entitled as a result of the Reclassification. At the effective time
of the Reclassification, each share of Class A Common Stock outstanding
immediately prior to such time, shall, without any action on the part of the
holder thereof, be reclassified as and changed into one share of Redeemable
Transitory Participating Preferred Stock, with certificates formerly
representing Class A Common Stock after the effective time of the
Reclassification representing Redeemable Transitory Participating Preferred
Stock.
(b) Upon surrender in accordance with Section 1.06(b) hereof of a
certificate or certificates (other than in the case of holders of
uncertificated shares of Class A Common Stock, who need not send any
certificates) which immediately prior to the effective time of the
Reclassification represented Class A Common Stock and which as of such
effective time represent Redeemable Transitory Participating Preferred Stock
("CERTIFICATES"), the holder of such shares shall be entitled to the following
consideration:
(i) if no valid Class A Election (as described in Section 1.06(b) hereof)
is made, a cash payment of $347.50 for each share of Redeemable Transitory
Participating Preferred Stock in respect of the redemption effected
pursuant to Section 1.03 hereof; or
III-2
<PAGE>
(ii) if the Class A Election for Installment Notes is validly made
pursuant to the procedures described in Section 1.06(b) hereof, a
certificate or certificates representing $347.50 principal amount of
Installment Notes (subject to the treatment of fractional amounts described
in Section 1.06(f) hereof) for each share of Redeemable Transitory
Participating Preferred Stock represented by such Certificates, if any, in
respect of the redemption effected pursuant to Section 1.03 hereof.
(c) The cash or (if a valid Class A Election is made) the Installment Notes
to which holders of Redeemable Transitory Participating Preferred Stock are
entitled as a result of the Recapitalization pursuant to Section 1.02(a) or
this Section 1.04 hereof is collectively referred to herein as "REDEMPTION
CONSIDERATION."
1.05 THE MERGER. (a) The terms of the Merger and the mode of carrying the
same into effect are as follows:
(i) The Merging Corporation shall merge with and into the Company. The
corporate existence of the Company, with its purposes, powers and objects,
shall continue unaffected and unimpaired by the Merger, and as the
surviving corporation in the Merger it shall succeed to all rights, assets,
liabilities and obligations of the Merging Corporation as and to the extent
provided in Section 259 of the DGCL. The separate existence of the Merging
Corporation shall cease.
(ii) The Merger shall become effective upon the filing of a Certificate
of Merger with respect to the Merger with the Secretary of State of the
State of Delaware pursuant to Section 251 of the DGCL. The time when the
Merger becomes effective is herein called the "MERGER EFFECTIVE TIME".
(iii) The Certificate of Incorporation and By-Laws of the Company in
existence and effect immediately prior to the Merger Effective Time shall
be and remain the Certificate of Incorporation of said corporation at and
after the Merger Effective Time until the same shall be thereafter altered,
amended or repealed in accordance with the DGCL or the terms thereof.
(iv) The directors and officers of the Company immediately prior to the
Merger Effective Time shall be and continue to be the directors and
officers of said corporation at and after the Merger Effective Time until
their successors are duly appointed or elected and qualified.
(v) The vote by stockholders of the Company required by Section 251 of
the DGCL shall be taken after each of the Class A Stock Exchange, the
effective time of the Reclassification and the redemption of the Redeemable
Transitory Participating Preferred Stock.
(b) The manner of converting the capital stock of the Company and the
Merging Corporation shall be as follows:
(i) At the Merger Effective Time, each share of Merging Corporation
common stock, par value $.01 per share, issued and outstanding immediately
prior to the Merger Effective Time shall, by reason of the Merger and
without any action on the part of the holder thereof, be canceled and no
shares and no cash or other consideration shall be issued in exchange
therefor.
(ii) At the Merger Effective Time, each share of the Company's capital
stock (other than the Class B Common Stock) issued and outstanding
immediately prior to the Merger Effective Time shall not in any way be
changed or converted by reason of the Merger.
(iii) At the Merger Effective Time, each share of Class B Common Stock
issued and outstanding immediately prior to the Merger Effective Time
(other than Dissenting Shares as defined in Section 1.05(e) hereof) shall,
by reason of the Merger and without any action on the part of the holders
thereof, be converted into the right to receive: (A) $29.55 per share in
cash without interest or, (B) at the election (the "CLASS B ELECTION";
together with the Class A Election, each an "ELECTION") of the holder and
based upon the holder's employment status as determined by the Board of
Directors, the consideration set forth below:
(1) employees of the Company's educational resources business
principally operated through ARAMARK Educational Resources Company and
its subsidiaries (the "EDUCATIONAL RESOURCES GROUP"), and their
permitted transferees, shall receive one share of Common Stock, Class
E--
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Educational Resources Group, $.01 par value per share (the "CLASS E
COMMON STOCK"), and one share of Common Stock, Class B--Composite
Group, $.01 par value per share (the "CLASS B COMPOSITE STOCK"), for
each two shares of Class B Common Stock, subject to the treatment of
fractional shares described in Section 1.06(f) hereof;
(2) employees of the Company's food and support services business
principally operated through ARAMARK Services, Inc. and its
subsidiaries (the "FOOD AND SUPPORT SERVICES GROUP"), and their
permitted transferees, shall receive one share of Common Stock, Class
F--Food and Support Services Group, $.01 par value per share (the
"CLASS F COMMON STOCK"), and one share of Class B Composite Stock, for
each two shares of Class B Common Stock, subject to the treatment of
fractional shares described in Section 1.06(f) hereof;
(3) employees of the Company's uniform and career apparel business
principally operated through ARAMARK Uniform Services, Inc. and its
subsidiaries (the "UNIFORM AND CAREER APPAREL GROUP"), and their
permitted transferees, shall receive one share of Common Stock, Class
U--Uniform and Career Apparel Group, $.01 par value per share (the
"CLASS U COMMON STOCK"), and one share of Class B Composite Stock, for
each two shares of Class B Common Stock, subject to the treatment of
fractional shares described in Section 1.06(f) hereof; and
(4) employees who do not work exclusively for a single Business
Group, including executive officers and other corporate staff of the
Company, and their permitted transferees, shall receive one share of
Class B Composite Stock for each share of Class B Common Stock;
provided, however, that only the holders of Class B Common Stock (the
"CONTINUING HOLDERS") other than employees of the magazine and book business
and their permitted transferees (the "MAGAZINE AND BOOK EMPLOYEES") shall be
permitted to make a Class B Election.
The Educational Resources Group, Food and Support Services Group and Uniform
and Career Apparel Group are hereinafter referred to as the "BUSINESS GROUPS,"
and each a "BUSINESS GROUP." The Class E Common Stock, Class F Common Stock
and Class U Common Stock are hereinafter referred to as "BUSINESS GROUP
STOCK." Business Group Stock with Class A Composite and Class B Composite
Stock are hereinafter referred to as the "GROUP STOCK."
(c) Upon surrender in accordance with Section 1.06(c) hereof of a
certificate or certificates representing Class B Common Stock
("CERTIFICATES"), which has been converted into the right to receive the
Merger Consideration pursuant to Section 1.05(b) hereof, the holder of such
shares shall be entitled to receive the Merger Consideration as set forth in
clause (b)(iii) above; provided, that a valid Class B Election has been made.
All shares of stock issued as Merger Consideration shall be in uncertificated
form. If no Class B Election is validly made or the holder is a Magazine and
Book Employee, such holder shall be entitled to receive a cash payment of
$29.55 without interest for each share of Class B Common Stock.
(d) Class B Composite Stock, Class E Common Stock, Class F Common Stock or
Class U Common Stock, or cash to which holders of Class B Common Stock are
entitled as a result of the Merger pursuant to Section 1.05 and 1.06(f) hereof
is referred to herein as "MERGER CONSIDERATION."
(e) Notwithstanding any provision of the Plan to the contrary, each
outstanding share of Class B Common Stock the holder of which has not voted in
favor of the Merger, has perfected such holder's right to an appraisal of such
holder's shares in accordance with the applicable provisions of the DGCL and
has not effectively withdrawn or lost such right to appraisal (a "DISSENTING
SHARE"), shall not be converted into or represent a right to receive the
Merger Consideration pursuant to Section 1.05(b), but the holder thereof shall
be entitled only to such rights as are granted by the applicable provisions of
the DGCL; provided, however, that any Dissenting Share held by a person at the
Merger Effective Time who shall, after the Merger Effective Time, withdraw the
demand for appraisal or lose the right of appraisal, in either case pursuant
to the DGCL, shall be deemed to be converted into, as of the Merger Effective
Time, the right to receive the Merger Consideration pursuant to Section
1.05(b).
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1.06 PAYMENT. (a) On or before the Closing Date (as such term is defined in
Section 1.14 hereof), the Company shall be authorized to form the Special
Exchange Agent Group, to consist of three members of management of the
Company, for the purpose of acting as the Exchange Agent with respect to the
matters set forth in this Plan (the "EXCHANGE AGENT"). Immediately following
the effective time of the Reclassification, the Company shall (i) deliver to
the Exchange Agent, in trust for the benefit of holders of Redeemable
Transitory Participating Preferred Stock who make valid Class A Elections with
respect thereto, immediately upon receipt, certificates representing the
aggregate principal amount of Installment Notes issuable to each such holder
pursuant to Sections 1.02(a) and 1.04 hereof, and (ii) irrevocably set aside
or deposit with the Exchange Agent, in a separate account on the books of the
Company specifically established for such purpose, in trust for the benefit of
holders of Class A Common Stock (which, as of the effective time of the
Reclassification, represent Redeemable Transitory Participating Preferred
Stock) and Class B Common Stock, immediately upon receipt, the aggregate
amount of cash (in immediately available funds) payable pursuant to Section
1.02, 1.04 and 1.05 hereof as the cash portion of the Redemption Consideration
and Merger Consideration. Any portion of the Redemption Consideration or
Merger Consideration remaining with the Exchange Agent on the ninetieth day
after the date of the Effective Time shall be released and repaid by the
Exchange Agent to the Company, after which time persons entitled thereto may
look, subject to applicable escheat and other similar laws, only to the
Company for payment thereof.
(b) To make an effective Election, a holder of Class A Common Stock (which,
as of the effective time of the Reclassification, represents Redeemable
Transitory Participating Preferred Stock) shall be required properly to
complete and sign a green Form of Election ("FORM OF ELECTION"), which shall
be sent to such holders with the proxy materials relating to the annual
meeting of stockholders (the "ANNUAL MEETING") to be held for the purpose of
considering and voting upon adoption of this Plan and related matters, and
return it to the Exchange Agent, prior to 10:00 A.M., Philadelphia time, on
the day of the Annual Meeting or, if the Annual Meeting is postponed or
adjourned without approval and adoption of this Plan, on the day on which this
Plan is approved and adopted by the Company's stockholders (the later of such
days being referred to herein as the "ELECTION DATE"). To make an effective
Election, a holder of Class B Common Stock must check the election box on the
proxy card delivered in connection with the Annual Meeting and sign and return
it to the Company prior to or at the Annual Meeting. Finally, for a Class A
Election for Installment Notes to be valid and effective, a holder of Class A
Common Stock (which, as of the effective time of the Reclassification,
represents Redeemable Transitory Participating Preferred Stock) must meet to
the Company's satisfaction the suitability requirements set forth in Section
1.08 hereof.
A holder of Class A Common Stock may revoke or modify his or her Election by
written notice received by the Exchange Agent no later than 10:00 A.M.,
Philadelphia time, on the Election Date, accompanied by a new Form of
Election, properly completed and signed. A Continuing Holder of Class B Common
Stock may revoke or modify such holder's Election by delivering a properly
completed and signed later-dated proxy card at or prior to the Annual Meeting.
The Company shall have the discretion, which it may delegate to the Exchange
Agent, to determine whether Forms of Election or proxy cards have been
properly completed, signed and submitted, or properly revoked or modified, and
to disregard immaterial defects in Forms of Election or proxy cards. The
decision of the Company (or of the Exchange Agent in the event discretion is
delegated) in this regard shall be conclusive and binding. Neither the Company
nor the Exchange Agent shall be required to notify any person of any defect in
a Form of Election or proxy cards. The Company may waive any procedural defect
in a Form of Election or proxy card and may seek clarification from any
stockholder with respect to any Election or Elections intended to be made by
such stockholder.
For purposes of the Class B Election by Continuing Holders, each management
investor (a "MANAGEMENT INVESTOR") and permitted transferee (a "PERMITTED
TRANSFEREE") under the Amended and Restated Stockholders' Agreement dated as
of December 14, 1984, by and among the Company and the persons named therein
(the "STOCKHOLDERS' AGREEMENT"): (a) will be deemed to have made such election
for all of their shares
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<PAGE>
if such election is made by the holders of 50% or more of the Class B Common
Stock owned by those persons; or (b) will be deemed not to have made such
election for any of their shares if such election is made by holders of less
than 50% of the Class B Common Stock owned by those persons.
(c) As promptly as practicable after the Effective Time:
(i) the Exchange Agent will mail to each holder of Class A Common Stock
(which, as of the effective time of the Reclassification, represents
Redeemable Transitory Participating Preferred Stock) who has (i) properly
completed and signed and submitted a green Form of Election for cash and
(ii) surrendered the Certificate or Certificates, cash for each such
Certificate surrendered. All consideration to be paid in cash will be paid
by check, without interest. In no case will cash be paid until the shares
of Class A Common Stock have been properly surrendered to the Exchange
Agent;
(ii) the Exchange Agent will mail to each holder of Class A Common Stock
(which, as of the effective time of the Reclassification, represents
Redeemable Transitory Participating Preferred Stock) who has (i) properly
completed and signed and timely submitted a green Form of Election for
Installment Notes and (ii) surrendered the Certificate or Certificates,
Installment Notes, in accordance with such holder's Election or Elections,
for each such Certificate surrendered. In no case will Installment Notes be
issued until the shares of Class A Common Stock have been properly
surrendered to the Exchange Agent;
(iii) the Exchange Agent will mail (a) an ownership statement or a
certificate profile report and a transmittal form to each record holder who
participated in the Class A Stock Exchange advising such holder of the
Class A Composite Stock held by such holder and (b) to each Former Manager
whose shares of Class A Common Stock were subject to the Call Option who
has (y) properly completed and signed and submitted a Green Form of
Election and (z) surrendered the Certificate, the cash payable pursuant to
the Call Option for each such Certificate surrendered. Such cash
consideration will be paid by check, without interest. In no case will cash
be paid pursuant to the Call Option until the shares of Class A Common
Stock have been properly surrendered to the Exchange Agent;
(iv) the Exchange Agent will mail an ownership statement or a certificate
profile report and a transmittal form to each record holder advising such
holder of the procedure for surrendering to the Exchange Agent the
Certificates representing the Class B Common Stock in exchange for Class B
Composite Stock and/or Business Group Stock. Each such holder of Class B
Common Stock, upon surrender of same to the Exchange Agent together with a
properly completed and signed transmittal form, will be entitled to receive
such consideration in respect of each such Certificate surrendered; and
(v) the Exchange Agent will mail (a) to each Continuing Holder who (y)
has not made a Class B Election and has properly completed and signed and
submitted a blue Form of Election for cash and (z) surrendered the
Certificates, cash for each such Certificate surrendered; and (b) to each
Magazine and Book Employee who has (y) properly completed and signed and
submitted a blue Form of Election for cash and (z) surrendered the
Certificates, cash for each such Certificate surrendered. All consideration
to be paid in cash will be paid by check, without interest. In no case will
cash be paid until the shares of Class B Common Stock have been properly
surrendered to the Exchange Agent.
(d) In the event any Certificate shall have been lost, stolen, destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Company shall issue in
exchange for such lost, stolen or destroyed Certificate, the Redemption
Consideration or Merger Consideration deliverable in respect thereof in
accordance with this Article I. When authorizing such issuance of the
Redemption Consideration or Merger Consideration, the Company may, in its
discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Company a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Company with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(e) The Company shall not issue share certificates with respect to the Group
Stock unless specifically requested by a stockholder. Instead, the Company
shall issue such shares in uncertificated form. The Company shall deliver to
each stockholder promptly after the Effective Time an ownership statement
indicating the Group
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<PAGE>
Stock held in such holder's name, which shall contain instructions detailing
the delivery of Certificates representing shares of Class A Common Stock and
Class B Common Stock.
(f) With respect to each Continuing Holder who continues to hold one share
of Class B Common Stock after giving effect to the conversion of shares
described in Section 1.05 hereof, such remaining share shall be converted into
the right to receive one share of Class B Composite Stock.
A holder of Class A Common Stock (which, as of the effective time of the
Reclassification, represents Redeemable Transitory Participating Preferred
Stock) who makes an effective Class A Election to receive consideration
consisting in whole or in part of Installment Notes will not be entitled to
receive Installment Notes in stated face amounts of less than $10,000, or in
stated face amounts in excess of $10,000 (or an integral multiple of $10,000)
but less than the next highest integral multiple of $10,000 ("FRACTIONAL
AMOUNTS"). Instead, such holder will be entitled to receive promptly from the
Exchange Agent a cash payment in lieu of any such Fractional Amounts equal to
such Fractional Amount. All cash in lieu of Fractional Amounts unclaimed after
the Effective Time, shall be held by the Company, and persons entitled thereto
may look, subject to applicable escheat and other similar laws, only to the
Company for payment thereof. Interest will be paid on the Installment Notes
only to the extent the Installment Notes by their terms involve the accrual or
payment of interest.
1.07. AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION AND STOCKHOLDERS'
AGREEMENTS. (a) As part of this Plan, in addition to the Reclassification and
the Merger, the following transactions shall be effected:
(i) the Share 100 Certificates shall be filed pursuant to the DGCL, with
the effect that the Restated Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be amended by
such Share 100 Certificates; and after implementation of the
Recapitalization, the Restated Certificate of Incorporation of the Company,
shall be restated in its entirety (the "RESTATED CHARTER") as set forth as
Exhibit A hereto, and, as so amended and restated, shall be the Restated
Charter of the Company until thereafter amended as provided therein and in
accordance with the DGCL; and
(ii) the Stockholders' Agreement, as in effect immediately prior to the
Effective Time, shall be amended and restated at the Effective Time as set
forth in Exhibit B, and, as so amended and restated, shall be the
Stockholders' Agreement with respect to the matters set forth therein until
thereafter amended in accordance with their terms.
(b) The elements of this Plan shall be submitted to stockholders at the
Annual Meeting; provided that the Merger shall not be submitted to a vote of
the holders of: (i) Class A Common Stock who will not be stockholders of the
Company when such Merger vote is taken; or (ii) the holders of Class A
Composite Stock, who are not entitled to vote thereon pursuant to the terms of
the Class A Composite Stock. Before holding the vote on the Reclassification
and the charter amendments described in Section 1.01(b)(i), the Company will
determine, based upon a preliminary count of proxies received by the Company
prior to the Annual Meeting with respect to the vote on the Merger and the
amendments to the Stockholders' Agreement, whether the Company expects such
proposals to be approved at the Annual Meeting by the holders entitled to vote
thereon. If the Company expects such approval, the votes on the
Reclassification and such charter amendments will be taken at the Annual
Meeting. If such proposals are approved by the stockholders, the Company will
implement such proposals prior to any further votes on the other proposals
relating to the Recapitalization. Each of the proposals (the Reclassification,
the Merger, the amendments incorporated in the Restated Charter, and the
amendments to the Stockholders' Agreement referred to herein) is conditioned
upon the approval, or the expected approval, of the others and this Plan will
not be implemented if any such proposal is not approved, or expected to be
approved, by stockholders. The ratification and consent to such proposals also
constitutes the ratification and consent of any and all further steps as shall
be necessary or appropriate in the judgment of the Company's management to
effect the Plan as described herein.
1.08 THE SUITABILITY REQUIREMENTS. The opportunity for any holder of Class A
Common Stock to make a Class A Election to accept the offer of the Company to
receive Installment Notes in the Reclassification shall
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<PAGE>
be offered to any holder of Class A Common Stock (which, as of the effective
time of the Reclassification, represents Redeemable Transitory Participating
Preferred Stock) who demonstrates to the Company's satisfaction, by an
affirmative representation on the Form of Election, that such holder is one of
the following:
(a) a bank, savings and loan association, trust company, insurance company,
investment company registered under the Investment Company Act of 1940,
pension or profit-sharing trust (other than a pension or profit-sharing trust
of the Company, a self-employed individual retirement plan or individual
retirement account), an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, which has total assets of not less
than $5,000,000 according to its most recent audited financial statements, a
corporation having a net worth on a consolidated basis, according to its most
recent audited financial statements, of not less than $14,000,000 or any
wholly owned subsidiary thereof;
(b) a director or executive officer of the Company;
(c) a person who makes a valid Class A Election to receive Installment Notes
in the Reclassification with an aggregate value of $150,000 or more provided
such person is able to bear the economic risk of the investment, the
investment does not exceed 10% of such person's net worth (or joint net worth
with a spouse), or such person (or with such person's professional advisor who
is unaffiliated with and not compensated by the Company or any affiliate
thereof) has the capacity to protect its own interests in connection with the
transaction;
(d) an individual who elects to receive Installment Notes in the
Reclassification whose net worth (or joint net worth with a spouse) exceeds
$1,000,000, provided such person is able to bear the economic risk of the
investment, the investment does not exceed 10% of such person's net worth (or
joint net worth with a spouse), or such person (or with such person's
professional advisor who is unaffiliated with and not compensated by the
Company or any affiliate thereof) has the capacity to protect its own
interests in connection with the transaction;
(e) an individual who elects to receive Installment Notes in the
Reclassification whose income (or whose joint income with a spouse) exceeded
$200,000 in each of the two most recent years and who reasonably expects an
income in excess of $200,000 in the current year, provided such person is able
to bear the economic risk of the investment, the investment does not exceed
10% of such person's net worth (or joint net worth with a spouse), or such
person (or with such person's professional advisor who is unaffiliated with
and not compensated by the Company or any affiliate thereof) has the capacity
to protect its own interests in connection with the transaction;
(f) a person who has preexisting personal or business contacts with the
Company or any officer, director or controlling person thereof of a nature and
duration such as would enable a reasonably prudent person to be aware of the
character, business acumen and general business and financial circumstances of
the person with whom the relationship exists;
(g) a person who, by reason of its business or financial experience or the
business or financial experience of its professional advisor (who is
unaffiliated with and is not compensated by the Company or any affiliate of
the Company), could be reasonably assumed to have the capacity to protect its
own interests in the transaction;
(h) any relative, spouse or relative of the spouse of an individual who
meets any one of the requirements of clauses (b)-(g) above and who makes a
valid Class A Election to receive Installment Notes in the Reclassification
(an "INDIVIDUAL") who has the same principal residence as such Individual (a
"RELATED PERSON"), any trust or estate in which an Individual and any Related
Person collectively own more than 50% of the beneficial interest, any
corporation or other organization of which an Individual and any Related
Person collectively are beneficial owners of more than 50% (excluding
directors' qualifying shares) of the equity securities ("RELATIVE" means a
person related by blood, marriage or adoption); or
(i) any entity in which all the equity owners are persons specified in (a),
(b), (d) or (e) above;
provided, however, that persons who are suitable purchasers only as a result
of clause (f) or (g) above shall not total more than 35 persons and in the
event that more than 35 persons rely on clause (f) or (g), the Company
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<PAGE>
shall determine which 35 persons shall be permitted so to rely. The Form of
Election shall contain a section requiring that each holder of Class A Common
Stock who desires to make a Class A Election for Installment Notes
affirmatively represent that such holder comes within one of the categories of
persons described in clauses (a) through (i) of this Section 1.08 and that
such holder is acquiring the Installment Notes for investment and not with a
view to distribution. The Company shall be entitled to request such additional
documentation or evidence with respect to such representation as it deems
appropriate, including a representation regarding investment intent. The good
faith determination by the Company that a holder of Class A Common Stock does
not meet the suitability requirements shall be conclusive as to such holder.
Holders of Class A Common Stock who fail to meet to the Company's
satisfaction, as required by the terms of the Redeemable Transitory
Participating Preferred Stock into which such Class A Common Stock is
reclassified, such suitability requirements shall be entitled to receive in
the Recapitalization only cash for all of the shares of Class A Common Stock
held by such holders immediately prior to the Effective Time.
1.09 CASH-OUT OF FORMER MANAGERS. The Company shall exercise its right,
under the Stockholders' Agreement, to call (the "CALL OPTION") those shares of
Class A Common Stock that could be, but are not, exchanged in the Class A
Stock Exchange. (A Former Manager who fails to participate in the Class A
Stock Exchange with respect to all of his or her shares that could be
exchanged is referred to as a "NONCONTINUING FORMER MANAGEMENT HOLDER.")
Pursuant to the Stockholders' Agreement, the Company will pay to all
Noncontinuing Former Management Holders $29.55 per Class B Common Stock
equivalent share upon exercise by the Company of its Call Option. The Company
shall also exercise its Call Option with respect to any Former Manager whose
Class B Common Stock is converted into Class A Common Stock after the
Reclassification and before the Merger. The closing of the repurchase of
shares pursuant to the Company's exercises of the Call Option will be, as
applicable: (i) immediately prior to the effective time of the
Reclassification and (ii) immediately prior to the effective time of the
Merger. The proxy statement to be used in connection with the Annual Meeting
shall serve as notice under the Stockholders' Agreement of the Company's
exercises of the Call Option.
1.10 TREATMENT OF CERTAIN SELLING MANAGEMENT HOLDERS. The Company shall pay
additional consideration to any holder of Class B Common Stock who sold or
sells any such shares to the Company (but only if such holder receives or
received a price per share equal to the September 1, 1997 or December 1, 1997
Appraisal Price), or who constructively sold such shares in the course of
exercising any options or purchase opportunities with respect thereto using
the stock-for-stock method of exercise, after September 1, 1997 and prior to
the Effective Time (a "SELLING HOLDER"). Accordingly, as soon as practicable
after the Effective Time, the Company shall pay to each Selling Holder with
respect to each such sale an amount equal to the product of (a) the difference
between (i) $29.55 and (ii) the appraisal price in effect at the time of such
actual or constructive sale and (b) the number of shares actually or
constructively sold with respect to each such transaction. The terms of any
such payment and any disputes arising in connection therewith shall be
resolved by the Board or a committee thereof, and all such resolutions shall
be final and binding on the Company and its stockholders.
1.11 CERTAIN CONTINGENT PAYMENTS. The Company shall pay to any holder of
Class A Common Stock who shall receive the Class A Common Stock cash
consideration or Installment Notes a contingent cash payment (a "CONTINGENT
PAYMENT") if, within two years (or two years and three months in the case of
clause (d) below) from the Effective Time, one of the following events shall
occur: (a) the Company consummates a stock sale, merger, consolidation or
business combination in which the holders of Class A Composite Stock and Class
B Composite Stock receive consideration for their shares and in which the
holders of the Company's common stock before the transaction do not hold at
least a majority of the common stock after the transaction ("FUTURE MERGER");
(b) the Company consummates a sale of all or substantially all of its assets
in which the holders of Class A Composite Stock and Class B Composite Stock
receive consideration for their shares ("SALE"); provided that any one
Business Group shall not be deemed to be substantially all of its assets; (c)
the Company consummates an underwritten public offering of more than 15% of
its Class A Composite Stock and Class B Composite Stock ("PUBLIC OFFERING");
(d) the Company repurchases one-third or more of its outstanding Class A
Composite Stock and Class B Composite Stock within any three-month period for
consideration other than its common stock, provided that such three-month
period shall have commenced within the two years after the Effective Time
("EXTRAORDINARY REDEMPTION"); and (e) the Company pays an extraordinary
dividend to
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holders of its Class A Composite Stock and Class B Composite Stock in excess
of $34.75 per share ("EXTRAORDINARY DIVIDEND"). The right to receive a
Contingent Payment, if any, shall be evidenced by a certificate issued by the
Company and delivered simultaneously with the Class A Common Stock cash
consideration or Installment Notes. For purposes of this Section 1.11, a
"FUTURE MERGER" shall not include a stock sale, merger, consolidation or
business combination involving any Business Group, and a "PUBLIC OFFERING"
shall not include any public offering, secondary offering or other
distribution of any Business Group Stock. All computations shall be done on a
Class B Composite Stock equivalent basis.
Upon consummation of a Future Merger or Sale, each such former holder of
Class A Common Stock shall be entitled to receive for each share of Class A
Common Stock for which Class A Common Stock cash consideration or Installment
Notes were received in the Recapitalization, the amount, if any, by which the
fair market value of the per share consideration received by the holders of
Class B Composite Stock exceeds the sum of $34.75 per share plus an amount
equal to simple interest at 5% annually computed on $34.75 per share from the
Effective Date to the relevant date. Upon consummation of a Public Offering,
each such former holder of Class A Common Stock shall be entitled to receive
for each share of Class A Common Stock for which Class A Common Stock cash
consideration or Installment Notes were received in the Recapitalization, the
amount, if any, by which the average of the closing prices of the Class B
Composite Stock issued in the Public Offering during the period commencing 91
days, and ending 120 days, after the consummation of the Public Offering
exceeds the sum of $34.75 per share plus an amount equal to simple interest at
5% annually computed on $34.75 per share from the Effective Date to the
relevant date. Upon the occurrence of an Extraordinary Redemption, each such
former holder of Class A Common Stock shall be entitled to receive for each
share of Class A Common Stock for which Class A Common Stock cash
consideration or Installment Notes were received in the Recapitalization, the
amount, if any, equal to the product of (a) the average purchase price of
Class B Composite Stock repurchased by the Company in the Extraordinary
Redemption, less the sum of $34.75 per share plus an amount equal to simple
interest at 5% annually computed on $34.75 per share from the Effective Date
to the relevant date and (b) a factor equal to (i) the number of shares of
Class B Composite Stock repurchased by the Company in the Extraordinary
Redemption (the "REPURCHASED SHARES") divided by (ii) the sum of (x) the
larger of the number of Repurchased Shares or the number of shares of Class B
Composite Stock tendered to the Company in connection with the Extraordinary
Redemption plus (y) the number of shares of Class A Common Stock that were
redeemed by the Company in the Recapitalization for Class A Common Stock cash
consideration or Installment Notes. Upon the occurrence of an Extraordinary
Dividend, each such former holder of Class A Common Stock will be entitled to
receive for each share of Class A Common Stock for which Class A Common Stock
cash consideration or Installment Notes were received in the Recapitalization,
the amount, if any, equal to the total amount per share distributed by the
Company in the Extraordinary Dividend, less the sum of $34.75 per share plus
an amount equal to simple interest at 5% annually computed on $34.75 per share
from the Effective Date to the relevant date. The terms of any such payment
and any disputes arising in connection therewith shall be resolved by the
Board or a committee thereof, and all such resolutions shall be final and
binding on the Company and its stockholders.
1.12 TREATMENT OF OUTSTANDING OPTIONS. The Company shall cause the Company's
1984 Stock Option Plan, Combined Stock Ownership Plan and the 1996 Director
Plan (individually, a "STOCK OPTION PLAN," and collectively, the "STOCK OPTION
PLANS") to be amended as follows:
(a) GENERAL. The exercise price per share for outstanding options will
remain unchanged; and the aggregate number of shares for which options may be
granted under the Stock Options Plans shall similarly remain unchanged. Each
outstanding option which prior to the Effective Time is exercisable in all
respects for one share of Class B Common Stock shall, after the Effective
Time, be changed into an option exercisable as described below.
(b) EMPLOYEES WHO ELECT GROUP STOCK IN THE RECAPITALIZATION. All outstanding
stock options exercisable for Class B Common Stock owned by employees who
elect Business Group Stock in the Recapitalization shall be changed into
options exercisable for the same type of, and in the same proportion as the,
Business Group Stock into which their Class B Common Stock shall be converted
in the Recapitalization.
III-10
<PAGE>
(c) EMPLOYEES RECEIVING CASH IN THE RECAPITALIZATION. Currently exercisable
(vested) options owned by employees who will receive the Class B Common Stock
cash consideration shall be changed into an amount in cash equal to $29.55 per
share (the Class B Common Stock cash consideration) less the exercise price of
such options. The Company shall pay the foregoing amounts (which shall be
taxable as ordinary compensation and so shall be reduced for required tax
withholding) to such holders at the time it makes payment to holders of Class
B Common Stock receiving the Class B Common Stock cash consideration in the
Recapitalization.
Currently unexercisable (unvested) options owned by the foregoing employees
shall be changed into: (i) options exercisable for the same type of, and in
the same proportion as the, Business Group Stock into which their Class B
Common Stock could have been exchanged in the Recapitalization had they
elected Business Group Stock or, (ii) at the election of the holder of such
options, the right to receive $29.55 per share (the Class B Common Stock cash
consideration) less the exercise price of such options. The Company shall pay
the foregoing cash amounts (which shall be taxable as ordinary compensation
and so shall be reduced for required tax withholding) to such holders, without
interest, on the day that the unvested option would have become exercisable.
No cash payment shall be due if the unvested option would not have become
exercisable because the holder is not still an employee of the Company or for
any other reason. To make an effective election regarding such unvested
options, a holder must complete and sign a blue Form of Election and return it
to the Exchange Agent prior to 10:00 A.M., Philadelphia time, on the Election
Date.
(d) EMPLOYEES WHO ARE NOT HOLDERS. Options (whether vested or unvested)
owned by employees of the Company who are not, and do not have Permitted
Transferees who are, holders of Class B Common Stock (e.g., holders of ISPOs
or EXPOs who do not also hold shares of Class B Common Stock) shall be changed
into: (i) options exercisable for the same type of, and in the same proportion
as the, Business Group Stock which they are eligible to own pursuant to the
terms of the Business Group Stock or, (ii) at the election of the holder of
such options, the right to receive $29.55 per share (the Class B Common Stock
cash consideration) less the exercise price of such options. With respect to
vested options, the Company shall pay the foregoing amounts (which shall be
taxable as ordinary compensation and so shall be reduced for required tax
withholding) to such holders at the time it makes payment to holders of Class
B Common Stock receiving the Class B Common Stock cash consideration in the
Recapitalization. With respect to unvested options, the Company will pay the
foregoing cash amount (which shall be taxable as ordinary compensation and so
shall be reduced for required tax withholding), without interest, on the day
that the unvested option would have become exercisable. No cash payment shall
be due if the unvested option would not have become exercisable because the
holder is not still an employee of the Company or for any other reason. To
make an effective election regarding such options, a holder must complete and
sign a blue Form of Election and return it to the Exchange Agent prior to
10:00 A.M., Philadelphia time, on the Election Date.
(E) MAGAZINE AND BOOK EMPLOYEES. Options (whether vested or unvested) owned
by Magazine and Book Employees will be changed into the right to receive
$29.55 per share (the Class B Common Stock cash consideration) less the
exercise price of such options. With respect to vested options, the Company
will pay the foregoing cash amounts (which will be taxable as ordinary
compensation and so will be reduced for required tax withholding) to such
holders at the time it makes payment to holders of Class B Common Stock
receiving the Class B Common Stock cash consideration in the Recapitalization.
With respect to unvested options, the Company will pay the foregoing cash
amounts (which will be taxable as ordinary compensation and so will be reduced
for required tax withholding), without interest, on the day that the unvested
option would have become exercisable. No cash payment will be due if the
unvested option would not have become exercisable because the holder is not
still an employee of the Company or for any other reason.
(F) MAGAZINE AND BOOK EXPO HOLDERS. Expanded ownership purchase
opportunities ("EXPOS") (whether vested or unvested) owned by Magazine and
Book Employees shall be changed into the right to receive $29.55 per share
(the Class B Common Stock cash consideration) less the exercise price of such
EXPOs. The Company shall pay the foregoing amounts (which shall be taxable as
ordinary compensation and so shall be reduced for required tax withholding) to
such holders at the time it makes payment to holders of Class B Common Stock
receiving the Class B Common Stock cash consideration in the Recapitalization.
III-11
<PAGE>
1.13 TREATMENT OF EMPLOYEE BENEFIT PLANS.
(A) RETIREMENT AND PROFIT SHARING PLANS. The Magazine and Book Retirement
Plan shall be amended so that the purpose of the plan shall no longer be to
invest primarily in employer stock. The Company understands that, after the
Effective Time, each Benefit Plan will make additional payments to former
employees who participated in the plan and whose employment terminated between
September 1, 1997 and the Effective Time. The payment will be in respect of
shares of Class A Common Stock which were repurchased from such former
employee's plan account after such termination. The amount of the payment will
be the difference between the appraisal price of the shares at the Effective
Time ($347.50 per share) and the price at which the shares were valued when a
distribution was made to the former employee.
(B) STOCK UNIT RETIREMENT PLAN. Deferred Common Stock Units ("DSUS") in each
participant's account for Class B Common Stock shall be converted into DSUs
for Class B Composite Stock. After the Effective Time, the Company will make
additional payments to former employees who participated in the Stock Unit
Retirement Plan and whose employment terminated between September 1, 1997 and
the Effective Time. The payment will be in respect of the shares of Class B
Common Stock distributed by the plan in connection with the termination and
concurrently repurchased by the Company. The amount of the payment will be the
difference between the appraisal price of such shares at the Effective Time
($29.55 per share) and the price at which such shares were repurchased.
1.14 CLOSING. The closing of the transactions contemplated by this Plan (the
"CLOSING") shall take place (a) at the offices of the Company, at the ARAMARK
Tower, 1101 Market Street, Philadelphia, Pennsylvania, at 3:00 P.M., local
time, on the later of (i) the day of the Annual Meeting (including any
adjournments or postponements thereof), or (ii) the day on which the last of
the conditions set forth in Article II hereof is fulfilled or waived (subject
to applicable law), or (b) at such other time and place and on such other date
as the parties shall agree (the "CLOSING DATE").
ARTICLE II.
CONDITIONS PRECEDENT
2.01 CONDITIONS PRECEDENT TO CONSUMMATION OF THE RECAPITALIZATION. The
consummation of the transactions contemplated by this Plan is subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
(A) APPROVAL OF STOCKHOLDERS. The approval and adoption of this Plan and
all actions contemplated by this Plan that require the approval or consent
of the Company's stockholders shall have been obtained in accordance with
the DGCL, the Restated Certificate of Incorporation of the Company and the
Stockholders' Agreement.
(B) FINANCING. The Company, ARAMARK Services, Inc. and ARAMARK Uniform
Services Group, Inc. shall have entered into a bank facility on terms and
conditions satisfactory to the Company, entitling the Company to receive,
at the Effective Time, cash proceeds sufficient (i) to satisfy the
Company's obligation to pay to its stockholders and benefit plans at the
Effective Time, the aggregate amount of the cash portion of the Redemption
Consideration and the Merger Consolidation; (ii) to satisfy the obligation
of the Company to make all necessary cash payments in respect of (y)
refinancing of any indebtedness, the payment of which may be accelerated by
virtue of the consummation of any of the transactions contemplated by this
Plan and (z) the payment of all fees and expenses in connection with the
Recapitalization; and (iii) to provide the Company with sufficient funds to
satisfy its working capital requirements; and all conditions to the
availability of funds under such agreements shall have been satisfied or
waived.
(C) RECEIPT OF LICENSES, PERMITS AND CONSENTS. The Company shall have
received evidence, in form and substance reasonably satisfactory to it,
that such licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to
contracts with the
III-12
<PAGE>
Company and its subsidiaries as are necessary for consummation of the
Recapitalization have been obtained and are in full force and effect (other
than those which, if not obtained, would not have a material adverse effect
on (i) the transactions contemplated hereby, (ii) the financial condition,
results of operations or business of the Company and its subsidiaries taken
as a whole or (iii) the continuation of the operations and business of the
Company and its subsidiaries after the consummation of the
Recapitalization).
(D) LITIGATION. No action, proceeding or investigation shall have been
instituted or threatened prior to the Effective Time before any court or
administrative body to restrain, enjoin or otherwise prevent the
consummation of this Plan or the transactions contemplated hereby or to
recover any damages or obtain other relief as a result of this Plan, and no
restraining order or injunction issued by any court of competent
jurisdiction shall be in effect prohibiting the consummation of this Plan.
(E) ACTIONS AND PROCEEDINGS. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by, or
incidental to, this Plan and all other related legal matters shall have
been reasonably satisfactory to and approved by the Company and its counsel
shall have been furnished with such certified copies of such corporate
actions and proceedings and such other instruments and documents as such
counsel shall have reasonably requested.
(F) APPRAISALS. The Board shall have received appraisals or similar
reports satisfactory to such Board supporting the conclusions that (a)
sufficient surplus is available to permit consummation of the transactions
contemplated by the Plan under the DGCL and (b) the fair value of the
Company's total assets will exceed the fair value of the Company's total
liabilities immediately after the Effective Time.
(G) FAIRNESS OPINION. The Board shall have received the written opinion,
in form satisfactory to it, on or prior to the submission of this Plan to
the stockholders for their approval, of an independent investment banking
firm to the effect that (i) the consideration to be received by holders of
Class A Common Stock in connection with the Reclassification and the Class
A Stock Exchange (whether they receive cash or Class A Composite Stock) is
fair, from a financial point of view, to those holders and (ii) the
consideration to be received by holders of Class B Common Stock (whether
they receive cash or Group Stock) in connection with the Merger is fair,
from a financial point of view, to those holders. No such opinion need be
expressed with respect to repurchases of Class A Common Stock pursuant to
the Call Option or as to the value of the Installment Notes.
(H) LEGAL OPINIONS. The Board shall have received, in form and substance
satisfactory to it, such legal opinions as have been agreed between the
Company and its counsel.
(I) $25 MILLION CASH LIMIT TO CONTINUING HOLDERS. Continuing Holders of
no more than $25 million of the Class B Common Stock (valued at $29.55 per
share) shall be entitled to receive cash in the Merger or have perfected
their appraisal rights under the DGCL.
(J) CONDITIONS COMPLIED WITH. All terms and conditions of this Plan
required to be complied with or satisfied prior to the Closing Date shall
have been duly complied with, satisfied or waived.
To the extent permitted by applicable law, conditions (a) through (h) and
(j) may be waived by the Board. Condition (i) may be waived by the Board only
if at least 500 record holders would own Class B Composite Stock immediately
after the Effective Time.
III-13
<PAGE>
ARTICLE III.
MISCELLANEOUS
3.01 TERMINATION AND ABANDONMENT. To the fullest extent permitted by the
DGCL and to the extent any Share 100 Certificate is not effective, this Plan
may be terminated and the transactions contemplated hereby may be abandoned by
the parties hereto, notwithstanding approval and adoption thereof by the
stockholders of the parties, at any time prior to the effectiveness of the
Share 100 Certificates to be filed with the Secretary of State of the State of
Delaware.
3.02 AMENDMENT AND MODIFICATION. At any time prior to the Effective Time and
to the extent any Share 100 Certificate is not effective, the parties hereto
may amend, modify or supplement any term of this Plan as set forth herein, add
any new term or waive any condition thereof, provided that no such
modification, amendment, addition or waiver which requires stockholder or any
other approval under the DGCL or any other applicable law, or under the
Restated Certificate of Incorporation or the Stockholders' Agreement, will
occur following the Annual Meeting unless such approval is obtained. In the
event of a material modification to this Plan, a supplement to the proxy
statement mailed in connection with the Recapitalization will be distributed
to stockholders and, if necessary, stockholders' proxies will be resolicited.
The good faith determination by the Board of Directors of the parties hereto
that an amendment, modification addition or waiver to this Plan complies with
this Section 3.02 shall be conclusive as to all stockholders of the parties.
3.03 BOARD DETERMINATIONS. The good faith determination by the Board with
respect to the interpretation or implementation of any element of this Plan
shall be conclusive as to all stockholders of the Company. The Board may
delegate any and all such matters to any committee thereof and, to the fullest
extent permitted by law, to any authorized officer or agent.
IN WITNESS WHEREOF, each party hereto has caused this Plan to be signed by
its duly authorized officer as of the day first above written.
ARAMARK Corporation
/s/ Martin W. Spector
By _____________________________
Name:Martin W. Spector
Title:Executive Vice President
ARAMARK Share 100, Inc.
/s/ Donald S. Morton
By _____________________________
Name:Donald S. Morton
Title:Vice President
III-14
<PAGE>
EXHIBITS
(TO SHARE 100--AGREEMENT AND
PLAN OF RECAPITALIZATION AND
MERGER)
Exhibit A (the Restated Charter) and Exhibit B (the Amended and Restated
Stockholders' Agreement) to Share 100--Agreement and Plan of Recapitalization
and Merger are set forth in full as Annexes V and VI, respectively, to this
Proxy Statement.
III-15
<PAGE>
ANNEX IV
THIS NOTE IS NOT TRANSFERABLE EXCEPT TO THE ESTATE OF THE PAYEE UPON DEATH OF
THE PAYEE.
FORM OF
7.25% GUARANTEED CONVERTIBLE
INSTALLMENT PROMISSORY NOTE DUE 2007
----------------
February , 1998
$
Philadelphia, Pennsylvania
1. For value received, ARAMARK SERVICES, INC., a Delaware corporation (the
"Company"), hereby promises to pay to , (the
"Payee"), the sum of $ , on August 1, 2007, and interest at the rate
of 7.25% per annum on the unpaid balance thereof.
2. PAYMENTS. Both the principal of this Note and interest thereon are
payable in lawful money of the United States of America at the principal
executive offices of the Company, or at the option of the Company, payment may
be made by check mailed to the address of the Payee set forth above or such
other address as the Payee shall designate in writing to the Company.
3. INTEREST. Interest shall be payable at the rate of 7.25% per annum from
the date of original issue in arrears in semiannual installments on the 15th
day of each December and June, beginning June 15, 1998. Interest shall be
computed on the basis of a 360-day year of 12 30-day months.
4. CONVERSION FEATURE.
(1) Conversion Privilege and Conversion Price. At the option of the
Payee, at any time after the first anniversary of the original issue of
this Note, this Note may be converted in whole at the principal amount
thereof into an equivalent principal amount of 7.10% Guaranteed Notes due
December 1, 2006 (the "PUBLICLY TRADED NOTES"). No conversion may occur at
any time when there exists a default under any indebtedness of the Company.
The Publicly Traded Notes will be issued pursuant to the existing Indenture
between the Company and The Bank of New York, as trustee, dated as of July
15, 1991 (the "INDENTURE").
(2) Exercise of Conversion Privilege. In order to exercise the conversion
privilege, the Payee shall surrender this Note, duly endorsed or assigned
to the Company or in blank, at the principal executive offices of the
Company, accompanied by written notice to the Company that the Payee
irrevocably elects to convert this Note.
(3) Effectiveness of Conversion. Unless earlier redeemed pursuant to
Section 5, the Note shall be deemed to have been converted on the 30th day
following the day of surrender of the Note for conversion in accordance
with the foregoing provisions, and at such time the rights of the Payee
under the Note shall cease, and the Payee shall be treated for all purposes
as the record holder of such Publicly Traded Notes at such time. Effective
as of the conversion date, the Company shall issue to the Payee Publicly
Traded Notes, in the principal amount of $1,000, or a whole number multiple
thereof, equal to the total aggregate principal amount to which the Payee
of Notes is entitled upon conversion. No payment or adjustment is to be
made on conversion for interest accrued hereon or for interest accrued on
the Publicly Traded Note issued on conversion.
(4) Taxes on Conversions. The Company covenants that all Publicly Traded
Notes which may be issued upon conversion of Notes will upon issue be
validly issued and binding obligations of the Company and the Company will
pay all transfer taxes, liens and charges with respect to the issue
thereof.
IV-1
<PAGE>
5. REDEMPTION. Except as provided in this Section 5, this Note may not be
prepaid without the consent of the Payee.
(1) In Lieu of Conversion. At any time after the Payee shall give written
notice to the Company that the Payee irrevocably elects to convert this
Note and prior to the conversion date, this Note may be redeemed in whole,
but not in part, at the option of the Company, by payment of a redemption
price equal to 100% of the principal amount hereof, together with accrued
interest, if any, to the date of such redemption. Upon such redemption,
this Note will be canceled and no conversion into Publicly Traded Notes
shall be effected.
(2) After June 14, 2004. At any time on or after June 15, 2004, this Note
may be redeemed in whole, but not in part, at the option of the Company, by
giving at least 30 days' prior written notice to the Payee of such
redemption (which notice may be given prior to June 15, 2004 and shall
state the redemption date and a redemption price equal to 100% of the
principal amount hereof, together with accrued interest, if any, to the
date of such redemption) and by payment of such redemption price on the
redemption date. Upon such redemption, this Note will be canceled.
6. EVENTS OF DEFAULT. The principal of this Note and accrued unpaid interest
thereon shall (if not already due and payable) upon demand by the Payee become
due and payable forthwith, if one or more of the following events of default
shall happen and be continuing at the time of such demand (except that no
demand shall be necessary in case of Clause (5) below):
(1) Nonpayment of Principal. Default shall be made in the punctual
payment of principal due hereunder when and as the same shall become due
and payable and such default shall continue for a period of 5 days.
(2) Nonpayment of Interest. Default shall be made in the payment of any
installment of interest on this Note and such default shall continue for 30
days after written notice thereof has been given to the Company by the
Payee.
(3) Covenant Default. Default shall be made in any of the covenants or
agreements made in this Note (other than those covered in paragraphs (1) or
(2)) for 30 days after written notice thereof has been given to the Company
by the Payee.
(4) Cross Default. An event or condition shall occur that results in the
acceleration of the maturity of indebtedness for money borrowed by the
Company aggregating in excess of $100,000,000, and such indebtedness shall
not have been discharged and such acceleration shall not have been
rescinded or annulled.
(5) Bankruptcy. The Company shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, be adjudicated insolvent or
bankrupt, petition or apply to any tribunal for any receiver or trustee of
the Company, commence any proceeding relating to the Company under any
bankruptcy, reorganization, re-adjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect, or there shall be commenced against the Company any such proceeding
which shall remain undismissed for a period of 60 days, or the Company by
any act shall indicate its consent to, approval of or acquiescence in any
such proceeding or the appointment of any receiver of or trustee for the
Company or any substantial part of its property, or shall suffer any such
receivership or trusteeship to continue undischarged for a period of 60
days.
7. COVENANT--ANNUAL FINANCIAL STATEMENTS. So long as this Note shall remain
unpaid, the Company will furnish to the Payee as soon as available and in any
event within 120 days after the end of each fiscal year of the Company, a copy
of the audited annual report for such year for the Company containing balance
sheets of the Company as of the end of such fiscal year and statements of
income and retained earnings of the Company for such fiscal year, together
with the report thereon of Arthur Andersen LLP or other independent certified
public accountants of recognized standing.
8. RESTRICTIONS ON TRANSFER. This Note is not transferable except to the
estate of the Payee upon death of the Payee.
IV-2
<PAGE>
9. UNSECURED. This Note shall be an unsecured obligation of the Company and
shall not have the benefit of any security.
10. NO SINKING FUND. This Note shall not have the benefit of any sinking
fund.
11. EXPENSES OF COLLECTION. The Company covenants that if any payment of
principal or interest hereunder is not paid when due and payable, it will, to
the extent that it may lawfully promise so to do, pay to the Payee such
further amount as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys of the Payee
for all services rendered in that connection.
12. COURSE OF DEALING. No course of dealing between the Company and the
Payee or any delay on the part of the Payee in exercising any rights under
this Note shall operate as a waiver of any rights of the Payee.
13. GOVERNING LAW. This Note shall be governed by the laws of the
Commonwealth of Pennsylvania.
ARAMARK SERVICES, INC.
By: _________________________________
Treasurer
IV-3
<PAGE>
GUARANTEE
ARAMARK Corporation (the "GUARANTOR") hereby unconditionally guarantees to
the Payee the due and punctual payment of the principal of, and interest, if
any (together with any additional amounts payable pursuant to the terms of
this 7.25% Guaranteed Convertible Installment Promissory Note due 2007 (this
"NOTE")), on this Note, when and as the same shall become due and payable,
whether at maturity or upon redemption or upon declaration of acceleration or
otherwise, according to the terms of this Note. The Guarantor agrees that in
the case of default by the Company in the payment of any such principal or
interest (together with any additional amounts payable pursuant to the terms
of this Note), the Guarantor shall duly and punctually pay the same. The
Guarantor hereby agrees that its obligations hereunder shall be absolute and
unconditional irrespective of any extension of the time for payment of this
Note, any modification of this Note, any invalidity, irregularity or
unenforceability of this Note, any failure to enforce the same or any waiver,
modification, consent or indulgence granted to the Company with respect
thereto by the Payee, or any other circumstances which may otherwise
constitute a legal or equitable discharge of a surety or guarantor. The
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of a merger or bankruptcy of the Company, any
right to require a demand or proceeding first against the Company, protest or
notice with respect to this Note or the indebtedness evidenced thereby and all
demands whatsoever, and covenants that this guarantee will not be discharged
as to this Note except by payment in full of the principal and interest, if
any (together with any additional amounts payable pursuant to the terms of
this Note), thereon.
The Guarantor irrevocably waives any and all rights to which it may be
entitled, by operation of law or otherwise, upon making any payment hereunder
(i) to be subrogated to the rights of the Payee against the Company with
respect to such payment or otherwise to be reimbursed, indemnified or
exonerated by the Company in respect thereof or (ii) to receive any payment,
in the nature of contribution or for any other reason, from any other obligor
with respect to such payment.
This Guarantee shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
ARAMARK CORPORATION
By: _________________________________
Treasurer
IV-4
<PAGE>
[ FORM OF CONVERSION NOTICE ]
To: ARAMARK Services, Inc.
The Payee of this Note hereby irrevocably exercises the option to convert
this Note into new 7.10% Guaranteed Notes due December 1, 2006 of ARAMARK
Services, Inc. ("PUBLICLY TRADED NOTES") in accordance with the terms of this
Note, and directs that the Publicly Traded Notes issuable and deliverable upon
the conversion, be issued and delivered to the Payee.
Dated:
-------------------------------------
Name
-------------------------------------
Address
-------------------------------------
(Please print name and address,
including zip code number)
-------------------------------------
Signature
SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFYING NUMBER
-------------------------------------
IV-5
<PAGE>
ANNEX V
RESTATED CERTIFICATE OF INCORPORATION
OF
ARAMARK CORPORATION
(ORIGINALLY INCORPORATED ON SEPTEMBER 7, 1984
UNDER THE NAME "ARA ACQUIRING COMPANY")
FIRST: The name of the Corporation is ARAMARK CORPORATION.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State
of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 210,000,000 shares,
consisting of:
(i) 10,000,000 shares of Series Preferred Stock, $1.00 par value per
share (the "SERIES PREFERRED STOCK"); and
(ii) 200,000,000 shares of Common Stock, $.01 par value per share (the
"COMMON STOCK").
The Common Stock may be issued in one or more series, which series may be
referred to in this Restated Certificate of Incorporation, or in any
Certificate of Designations with respect to such Common Stock, as classes of
Common Stock.
Upon the filing hereof, each share of Common Stock, Class A, $.01 par value
per share, of the Corporation, issued and outstanding immediately prior to
such filing, is, without any action by the holder thereof, reclassified as,
and changed into, one share of Redeemable Transitory Participating Preferred
Stock.
In addition to the classes and series of stock expressly designated and set
forth in Part 4D, the Board of Directors shall have the full authority
permitted by law to fix full or limited, or no voting power, and such other
designations, preferences and relative, participating, optional or other
special rights (including, as examples and not as a limitation, multiple
voting powers and conversion rights), and qualifications, limitations or
restrictions of any series of Preferred Stock or any class or series of Common
Stock that may be desired. A statement of the designations, preferences, and
relative, participating, optional or other special rights of each class and
series of stock, and the qualifications, limitations and restrictions in
respect thereof, is as follows:
4A. COMMON STOCK
1. DESIGNATION. The following five classes of Common Stock are designated
and consist of the number of shares as follows:
(a) 25,000,000 shares of Common Stock, Class A--Composite Group, $.01 par
value per share (the "CLASS A COMMON STOCK"), and
(b) 40,000,000 shares of Common Stock, Class B--Composite Group, $.01 par
value per share (the "CLASS B COMMON STOCK"), and
(c) 20,000,000 shares of Common Stock, Class E--Educational Resources
Group, $.01 par value per share (the "CLASS E COMMON STOCK"), and
V-1
<PAGE>
(d) 40,000,000 shares of Common Stock, Class F--Food and Support Services
Group, $.01 par value per share (the "CLASS F COMMON STOCK"), and
(e) 40,000,000 shares of Common Stock, Class U--Uniform and Career Apparel
Group, $.01 par value per share (the "CLASS U COMMON STOCK").
The Class A Common Stock and the Class B Common Stock are referred to
collectively as the "COMPOSITE COMMON STOCK"; the Class E Common Stock, the
Class F Common Stock and the Class U Common Stock (and such other Common
Stock, the terms of which shall specifically provide that such Common Stock is
Business Group Common Stock) are referred to collectively as the "BUSINESS
GROUP COMMON STOCK".
The number of shares of each such class or series may from time to time be
increased (but not above the number of shares that would cause the aggregate
number of shares of all classes of Common Stock to exceed the total number of
authorized shares of Common Stock) or decreased (but not below the number of
shares of such class then outstanding) by the Board of Directors. The Common
Stock shall be issuable only in whole shares. The preferences and rights of
each of the five classes of Common Stock designated above, and the
qualifications, limitations and restrictions thereon, shall be in all respects
identical, except as otherwise provided in this Part 4A of this Restated
Certificate of Incorporation.
2. DIVIDENDS.
Subject to any provision in this Article FOURTH with respect to any stock of
the Corporation to the contrary, out of the assets of the Corporation which
are by law available for the payment of dividends, dividends and other
distributions may be, but shall not be required to be, declared and paid upon
shares of Common Stock, subject to all of the limitations set forth below.
Subject to such limitations, the Board of Directors may declare and pay
dividends or other distributions exclusively on Composite Common Stock or on
any class of Business Group Common Stock or on any combination thereof, in
equal or unequal amounts, notwithstanding the relative Available Dividend
Amounts, the amount of dividends and other distributions previously declared
on each class, the respective voting or liquidation rights of each class or
any other factor.
(a) DISTRIBUTIONS ON THE COMPOSITE COMMON STOCK. Dividends and other
distributions on Composite Common Stock may be declared and paid only out of
the Available Dividend Amount for the Composite Common Stock. The holders of
shares of Class A Common Stock and Class B Common Stock shall be entitled to
receive the same dividends and other distributions, ratably, with the holder
of one share of Class A Common Stock entitled to receive ten times what the
holder of one share of Class B Common Stock is entitled to receive; provided,
however, that in the case of dividends or other distributions payable in
Composite Common Stock, only shares of Class B Common Stock shall be
distributed with respect to Class B Common Stock and only shares of Class A
Common Stock shall be distributed with respect to Class A Common Stock, and
any such distribution shall be made ratably, with the holder of one share of
Class A Common Stock entitled to receive the same number of shares of Class A
Common Stock as the number of shares of Class B Common Stock the holder of one
share of Class B Common Stock shall be entitled to receive.
(b) DISTRIBUTIONS ON THE BUSINESS GROUP COMMON STOCK. Dividends and other
distributions on any class of Business Group Common Stock may be declared and
paid only out of the Available Dividend Amount for such class of Business
Group Common Stock.
(c) SHARE DISTRIBUTIONS. Except as otherwise provided in this Part 4A, the
Board of Directors may not declare and pay dividends or distributions of
shares of the Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of the Common Stock) on shares of the
Common Stock or shares of the Series Preferred Stock, except as follows:
(i) dividends or distributions of shares of Composite Common Stock
(or Convertible Securities convertible into or exchangeable or
exercisable for shares of Composite Common Stock) on shares of
Composite Common Stock or shares of the Series Preferred Stock
attributed to the Composite Group;
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(ii) dividends or distributions of shares of any class of Business
Group Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of such class of Business Group
Common Stock) on shares of such class of Business Group Common Stock or
shares of the Series Preferred Stock attributed to the respective
Business Group; and
(iii) dividends or distributions of shares of any class of Business
Group Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of such class of Business Group
Common Stock) on shares of Composite Common Stock or shares of the
Series Preferred Stock attributed to the Composite Group, but only if
the sum of (1) the number of shares of such class of Business Group
Common Stock to be so issued (or the number of such shares which would
be issuable upon conversion, exchange or exercise of any Convertible
Securities to be so issued) and (2) the number of shares of such class
of Business Group Common Stock which are issuable upon conversion,
exchange or exercise of any Convertible Securities then outstanding
that are attributed to the Composite Group is less than or equal to the
applicable Number of Shares Issuable with Respect to the Inter-Group
Interest.
3. VOTING RIGHTS.
(a) Subject to the special voting rights of the holders of any other stock
of the Corporation, the Common Stock (and any other stock of the Corporation
which may be entitled to vote with the holders of Common Stock), voting as a
single class except where the classes or series of Common Stock or any of them
(and such other stock) are required by law to vote as separate classes or
series on a particular matter, shall possess all of the voting power of the
Corporation with respect to the election of directors and for all other
purposes.
(b) Except as otherwise provided in the following paragraph, each share of
Common Stock shall be entitled to one vote on all matters submitted to a vote
of the Corporation's stockholders.
(c) Upon the consummation of a Public Offering of any class of Business
Group Common Stock, each share of Class B Common Stock and Business Group
Common Stock shall be thereafter entitled to ten votes on all matters
submitted to a vote of the Corporation's stockholders; provided that the class
of Business Group Common Stock that is offered in the Public Offering shall
thereafter continue to be entitled to one vote per share on all matters
submitted to a vote of the Corporation's stockholders; provided, further, that
any class of Business Group Common Stock having ten votes per share that is
offered in a subsequent Public Offering shall, after consummation of such
Public Offering, be entitled to one vote per share on all matters submitted to
a vote of the Corporation's stockholders.
(d) In addition to and not in limitation of all rights of the Board of
Directors of the Corporation to take action with respect to any class or
series of stock by resolution pursuant to applicable Delaware law, the number
of authorized shares of any class or series of Common Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon, without a separate class or series vote
of the holders of the affected class or series, unless such a vote is
otherwise required herein or in any Certificate of Designation with respect to
such class or series.
(e) Notwithstanding anything herein to the contrary, the shares of Class A
Common Stock shall not be entitled to any vote in connection with the
consideration of the merger of a wholly-owned subsidiary of the Corporation
into the Corporation as set forth in the proxy statement mailed to holders in
connection with the consideration of the recapitalization of the Corporation
pursuant to which the Composite Common Stock was created.
4. Liquidation.
(a) LIQUIDATION VALUE. Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after provision for the
payment of creditors and after provision shall be made for holders of all
shares of stock of the Corporation having a preference upon liquidation,
dissolution or winding
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up, the remaining assets of the Corporation shall be distributed among the
holders of Common Stock and, to the extent provided in this Article FOURTH,
the holders of any other stock of the Corporation which may be entitled to
share in such distribution. Such distribution to holders of each class of
Common Stock shall be on a per share basis in proportion to the respective
liquidation units per share of such class of Common Stock. Each share of Class
A Common Stock shall have ten liquidation units, and each share of Class B
Common Stock and each share of Business Group Common Stock shall have one
liquidation unit. If the Corporation shall in any manner subdivide (by stock
split, reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of any class of Common
Stock, or declare a dividend or other distribution in shares of any class of
Common Stock to holders of such class, the per share liquidation units of such
class shall be appropriately adjusted, as determined by the Board of
Directors.
(b) ACTIONS NOT CONSIDERED LIQUIDATION. None of the following shall be
considered a liquidation, dissolution or winding up of the Corporation within
the meaning of this section: (1) a consolidation or merger of the Corporation
with or into any other corporation; (2) a merger of any other corporation into
the Corporation; (3) a reorganization of the Corporation; (4) the purchase or
redemption of all or part of the outstanding shares of any class or classes of
the Corporation; (5) a sale or transfer of all or any part of the assets of
the Corporation; or (6) a share exchange to which the Corporation is a party.
5. CONVERSION AND REDEMPTION OF COMMON STOCK.
(a) CONVERSION AT ELECTION OF THE BOARD OF DIRECTORS.
(i) CONVERSION INTO CLASS A COMMON STOCK. The Board of Directors may
at any time declare that all outstanding shares of any class of
Business Group Common Stock or of Class B Common Stock shall be
converted, as of the applicable Conversion Date, into fully paid and
nonassessable shares of Class A Common Stock at the applicable
Conversion Ratio; and no shares of such converted class of Common Stock
may be issued or reissued thereafter.
(ii) CONVERSION INTO CLASS B COMMON STOCK. The Board of Directors may
at any time declare that all outstanding shares of any class of
Business Group Common Stock shall be converted, as of the applicable
Conversion Date, into fully paid and nonassessable shares of Class B
Common Stock at the applicable Conversion Ratio; and no shares of the
class of Common Stock so converted may be issued or reissued
thereafter.
(iii) CONVERSION INTO NEW BUSINESS GROUP COMMON STOCK. During the
period after all shares of any class of Business Group Common Stock are
called for conversion as provided above, but before the applicable
Conversion Date, the holders of such shares may, at their election and
in lieu of such conversion, convert their shares into shares of a new
class of Business Group Common Stock (for substantially the same
Business Group as was the class of Business Group Common Stock being
converted), if any, that the Board of Directors may designate for the
stated purpose of having a Public Offering at the applicable Conversion
Ratio, provided that notice of such conversion shall be given in
accordance with the provisions of this Part 4A.
(b) CONVERSION UPON TRANSFER OF EMPLOYMENT. If a full-time employee of the
Corporation or any of its Subsidiaries accepts a transfer in employment from
one Group to another, then the Board of Directors may declare that all or any
part of the outstanding shares of any class of Business Group Common Stock
held by such individual (a "MANAGEMENT INVESTOR") or a Permitted Transferee of
such Management Investor shall be converted, as of the effective date of such
transfer or such later date not more than 90 days thereafter, into fully paid
and nonassessable shares of such other class or classes of Common Stock as the
Board of Directors shall determine, at the applicable Conversion Ratio,
provided that notice of such conversion shall be given in accordance with the
provisions of this Part 4A.
(c) The "CONVERSION RATIO" shall be, (i) in the case of conversion of
Class B Common Stock into Class A Common Stock, one-tenth of a share of Class
A Common Stock for each outstanding share of Class B Common Stock being
converted, and (ii) in any other case of conversion of any class of Common
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Stock (the "CONVERTING CLASS") into any other class of Common Stock (the "NEW
CLASS"), the number of shares of the New Class equal to the Appraisal Price of
the Converting Class divided by the Appraisal Price of the New Class, as
determined by the Board of Directors, for each outstanding share of such
Converting Class being converted.
(d) REDEMPTION OF COMMON STOCK FOR SUBSIDIARY STOCK. At any time at which
all of the assets and liabilities attributed to a Business Group (and no other
assets or liabilities of the Corporation or any Subsidiary thereof) are held
directly or indirectly by one or more wholly-owned Subsidiaries of the
Corporation (each, a "BUSINESS GROUP SUBSIDIARY"), the Board of Directors may,
provided that there are assets legally available therefor, redeem all of the
outstanding shares of the related Business Group Common Stock in exchange for
the number of shares of common stock of each Business Group Subsidiary equal
to the product of the Outstanding Fraction for such Business Group multiplied
by the number of shares of common stock of such Business Group Subsidiary to
be outstanding immediately following such exchange of shares, such Business
Group Subsidiary shares to be delivered to the holders of shares of the
related Business Group Common Stock on the Redemption Date either directly or
indirectly through another such Business Group Subsidiary (as a wholly-owned
subsidiary thereof) and to be divided among the holders of such Business Group
Common Stock pro rata in accordance with the number of shares of such Business
Group Common Stock held by each on such Redemption Date, each of which shares
of common stock of such Business Group Subsidiary shall be, upon such
delivery, fully paid and nonassessable.
(e) NOTICE OF CONVERSION OR REDEMPTION. Notice of conversion or redemption
of any shares of Common Stock shall be given by the Corporation by first-class
mail, and in the case of conversion pursuant to paragraph (a) or redemption
pursuant to paragraph (d), not less than 10 nor more than 60 days' prior to
the date fixed by the Board of Directors of the Corporation for such
conversion or redemption (the "CONVERSION DATE" or "REDEMPTION DATE"), to the
holders of record of the shares to be converted or redeemed at their
respective addresses then appearing on the records of the Corporation. The
notice shall state: (1) the Conversion Date or the Redemption Date; (2) the
class of Common Stock subject to such conversion or redemption (and in the
case of a conversion pursuant to paragraph (b), the number of shares of each
class of Common Stock being converted) and the class or classes of Common
Stock into which such shares are converted; (3) the applicable Conversion
Ratio(s) or the number of shares of common stock of such Business Group
Subsidiary being issued for each share of Common Stock being redeemed; (4) the
new class of Business Group Common Stock, if any, that was designated by the
Board of Directors and into which such holder may elect to convert his shares,
and the Conversion Ratio therefor; (5) that dividends on the shares of Common
Stock to be converted or redeemed shall cease to accrue on the Conversion Date
or the Redemption Date, as the case may be; and (6) the place or places where
such shares of Common Stock to be converted or redeemed are to be surrendered
for payment.
(f) PROCEDURE. In the event of any such conversion or redemption pursuant
to paragraph (a), (b) or (d), the certificate or certificates, if any,
representing shares of Common Stock being converted or redeemed held by such
holder shall thereupon and thereafter be deemed to represent the number of
whole shares of Common Stock or of common stock of such Business Group
Subsidiary issuable upon such conversion or redemption and the right to
receive cash in lieu of fractional shares pursuant to paragraph (g) hereof.
The issuance of such shares and the registration thereof upon such conversion
or redemption shall be made without charge to the holder thereof for any stamp
or other similar tax in respect of such issuance. As promptly as practicable
after the surrender for conversion or redemption of a certificate, if any,
representing shares of Common Stock, the Corporation will issue and register
the number of whole shares of Common Stock or of common stock of such Business
Group Subsidiary issuable upon such conversion or redemption, in the name of
such holder and shall deliver to such holder a cash adjustment for any
fraction of a share as provided pursuant to paragraph (g) hereof, if not
evenly convertible or redeemable. Such conversion or redemption shall be
deemed to have been made on the applicable Conversion Date or Redemption Date,
and all rights of such holder arising from ownership of such shares of Common
Stock shall cease at such time, and the person or persons in whose name or
names the shares of Common Stock or of common stock of such Business Group
Subsidiary are to be issued shall be treated for all purposes as having become
the record holder or holders of such shares at such time and shall have and
may exercise all the rights and powers appertaining thereto. No adjustments in
respect of any past dividends and
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other distributions shall be made upon the conversion or redemption of any
share of Common Stock; provided, however, that if any share of any class of
Common Stock shall be converted or redeemed subsequent to the record date for
the payment of a dividend or other distribution on shares of such class of
Common Stock but prior to such payment, the registered holder of such shares
at the close of business on such record date shall be entitled to receive the
dividend or other distribution payable to holders of such class of Common
Stock.
(g) NO FRACTIONAL SHARES. No fractions of shares of Common Stock or of
common stock of such Business Group Subsidiary are to be issued upon
conversion or redemption, but in lieu thereof the Corporation will pay
therefor in cash, a sum equal to the number of shares of Common Stock not
evenly convertible or redeemable multiplied by the per share Appraisal Price
of the shares of Common Stock being converted or redeemed.
6. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) DETERMINATIONS AUTHORIZED. The Board of Directors shall make such
determinations with respect to the assets and liabilities to be attributed to
the Groups, the application of the provisions of this Part 4A to transactions
to be engaged in by the Corporation, including, without limiting the
foregoing, the following determinations:
(i) Upon any acquisition by the Corporation or its Subsidiaries of
any assets or business, or any assumption of liabilities, outside of
the ordinary course of business of any Group, the Board of Directors
shall determine whether such assets, business and liabilities (or an
interest therein) shall be for the benefit of one or more Groups and,
accordingly, shall be attributed to such Group or Groups, as the case
may be.
(ii) Upon any issuance of any shares of any Business Group Common
Stock at a time when the Number of Shares Issuable with Respect to the
Inter-Group Interest with respect thereto is greater than zero, the
Board of Directors shall determine, based on the use of the proceeds of
such issuance and any other relevant factors, whether all or any part
of the shares of such Business Group Common Stock so issued shall
reduce the applicable Number of Shares Issuable with Respect to the
Inter-Group Interest, and the Number of Shares Issuable with Respect to
the Inter-Group Interest shall be adjusted accordingly.
(iii) Upon any issuance by the Corporation or any Subsidiary thereof
of any Convertible Securities that are convertible into or exchangeable
or exercisable for shares of any Business Group Common Stock, if at the
time such Convertible Securities are issued the Number of Shares
Issuable with Respect to the Inter-Group Interest with respect thereto
is greater than zero, the Board of Directors shall determine, based on
the use of the proceeds of such issuance of Convertible Securities in
the business of the Composite Group or such Business Group and any
other relevant factors, whether, upon conversion, exchange or exercise
thereof, the issuance of shares of such Business Group Common Stock
pursuant thereto shall, in whole or in part, reduce the applicable
Number of Shares Issuable with Respect to the Inter-Group Interest.
(iv) Upon any issuance of any shares of the Series Preferred Stock of
any series, the Board of Directors shall attribute, based on the use of
proceeds of such issuance of shares of the Series Preferred Stock in
the business of any Group or Groups and any other relevant factors, the
shares so issued to such Group or Groups in such proportion as the
Board of Directors shall determine.
(v) Upon any redemption or repurchase by the Corporation or any
Subsidiary thereof of shares of Series Preferred Stock or of other
securities or debt obligations of the Corporation, the Board of
Directors shall determine, based on the property used to redeem or
purchase such shares, other securities or debt obligations and any
other relevant factors, which, if any, of such shares, other securities
or debt obligations redeemed or repurchased shall be attributed to
which Group or Groups and, accordingly, how many of the shares of
Series Preferred Stock or of such other securities, or how much of such
debt obligations, that remain outstanding, if any, are thereafter
attributed to each Group.
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(b) DELEGATION. The Board of Directors may delegate any and all authority
under this Part 4A to any committee thereof and, to the fullest extent
permitted by law, to any authorized officer or agent.
(c) RECORD OF DETERMINATIONS. The Secretary of the Corporation shall
maintain a record of determinations made by the Board of Directors pursuant to
this Part 4A, which shall be made available for inspection by any stockholder
upon request.
(d) BOARD DETERMINATIONS BINDING. Subject to applicable law, any
determinations made by the Board of Directors under any provision of this Part
4A or otherwise in furtherance of the application of this Part 4A shall be
final and binding on all stockholders.
7. CERTAIN DEFINITIONS. The following terms as used in this Restated
Certificate of Incorporation shall be deemed to have the meanings set forth in
this section.
(a) "APPRAISAL PRICE" of shares of a class of Common Stock shall mean the
fair market value of such shares, as determined by an Appraiser according to
the most recent existing appraisal of shares of such class of Common Stock,
which appraisal shall be as of a date not more than six months prior to the
use thereof; provided that, in the case of a class of Common Stock that is
publicly traded, the Board of Directors may determine that the Appraisal Price
is a trading price or quotation as of a recent date or an average trading
price or quotation for a recent period, all as determined by the Board of
Directors.
(b) "APPRAISER" shall mean a firm headquartered in the United States of
nationally recognized standing in the business of appraisal or valuation of
securities which does not own any stock of the Corporation and which has been
selected by the Board of Directors to act as an independent appraiser.
(c) "AVAILABLE DIVIDEND AMOUNT" with respect to any Business Group, on any
date, shall mean the assets attributed to such Business Group which would be
by law available for the payment of dividends if such Business Group were a
separate corporation, as determined by the Board of Directors. "AVAILABLE
DIVIDEND AMOUNT" with respect to the Composite Group, on any date, shall mean
the assets attributed to the Composite Group which would be by law available
for the payment of dividends if each Business Group were a separate
corporation and the Composite Group owned, with respect to each such Business
Group, the Number of Shares Issuable with respect to the Inter-Group Interest,
as determined by the Board of Directors.
(d) "BUSINESS GROUP" shall mean the Education Group, the Food and Support
Services Group, the Uniform Group, or any other Group as may be designated as
such by the Board of Directors, as the case may be. A Business Group, as of
any date, shall comprise:
(i) all businesses, assets and liabilities of the related Business
Group Companies, as of the date hereof;
(ii) all assets and liabilities of the Corporation and its
Subsidiaries attributed by the Board of Directors to such Business
Group, whether or not such assets or liabilities are or were also
assets and liabilities of any of such Business Group Companies;
(iii) all properties and assets transferred to such Business Group
from any other Group pursuant to transactions in the ordinary course of
business of both such Business Group and such other Group or otherwise
as the Board of Directors may have directed;
(iv) all properties and assets transferred to such Business Group
from the Composite Group in connection with an increase in the related
Number of Shares Issuable with Respect to the Inter-Group Interest; and
(v) the interest of the Corporation or any of its Subsidiaries in any
business or asset acquired and any liabilities assumed by the
Corporation or any of its Subsidiaries outside of the ordinary course
of business and attributed to such Business Group, as determined by the
Board of Directors;
provided that (1) from and after the payment date of any dividend or other
distribution with respect to shares of the related Business Group Common Stock
(other than a dividend or other distribution payable in shares of such
Business Group Common Stock, with respect to which adjustment shall be made in
the related Number of Shares
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Issuable with Respect to the Inter-Group Interest, or in securities of the
Corporation attributed to such Business Group, for which provision shall be
made as set forth in clause (2) of this proviso), such Business Group shall no
longer include an amount of assets or properties previously attributed to such
Business Group as have a Fair Value on the record date for such dividend or
distribution equal to the product of (a) the Fair Value on such record date of
the aggregate of such dividend or distribution to holders of shares of such
Business Group Common Stock declared multiplied by (b) a fraction the
numerator of which is equal to the Inter-Group Interest Fraction for such
Business Group in effect on the record date for such dividend or distribution
and the denominator of which is equal to the Outstanding Fraction for such
Business Group in effect on the record date for such dividend or distribution,
(2) if the Corporation shall pay a dividend or make some other distribution
with respect to shares of such Business Group Common Stock payable in
securities of the Corporation that are attributed to such Business Group
(other than such Business Group Common Stock), there shall be excluded from
such Business Group an interest in such Business Group equivalent to the
number or amount of such securities that is equal to the product of the number
or amount of securities so distributed to holders of such Business Group
Common Stock multiplied by the fraction specified in clause (b) of this
proviso (determined as of the record date for such distribution) (and such
interest in such Business Group shall be attributed to the Composite Group)
and, to the extent interest is or dividends are paid on the securities so
distributed, such Business Group shall no longer include a corresponding
ratable amount of assets paid as such interest or dividends as would have been
paid in respect of the securities equivalent to such interest in such Business
Group deemed held by the Composite Group if the securities equivalent to such
interest were outstanding (and in such eventuality such assets as are no
longer included in such Business Group shall be attributed to the Composite
Group) and (3) from and after any transfer of any assets or properties from
such Business Group to the Composite Group, such Business Group shall no
longer include such assets or properties so contributed or transferred. The
Corporation may also, to the extent a dividend or distribution on such
Business Group Common Stock has been paid in Convertible Securities that are
convertible into or exchangeable or exercisable for such Business Group Common
Stock, cause such Convertible Securities as are deemed to be held by the
Composite Group for purposes of calculating the Number of Shares Issuable with
Respect to the Inter-Group Interest to be deemed to be converted, exchanged or
exercised for purposes of such calculations, in which case such Convertible
Securities shall no longer be deemed to be held by the Composite Group.
(e) "BUSINESS GROUP COMPANIES" shall mean, as of any date, the Educational
Resources Group Companies with respect to the Educational Resources Group, the
Food and Support Services Group Companies with respect to the Food and Support
Services Group, the Uniform and Career Apparel Group Companies with respect to
the Uniform and Career Apparel Group, or the respective companies included in
any Business Group as may be designated by the Board of Directors.
(f) "COMPOSITE GROUP" shall mean, as of any date:
(i) the interest of the Corporation or any of its Subsidiaries on
such date in all of the assets, liabilities and businesses of the
Corporation or any of its Subsidiaries (and any successor companies),
other than any assets, liabilities and businesses attributed to any
Business Group;
(ii) a proportionate undivided interest in each and every business,
asset and liability attributed to a Business Group equal to the Inter-
Group Interest Fraction for such Business Group as of such date;
(iii) all properties and assets transferred to the Composite Group
from any Business Group pursuant to transactions in the ordinary course
of business of both the Composite Group and such Business Group or
otherwise as the Board of Directors may have directed;
(iv) all properties and assets transferred to the Composite Group
from any Business Group in connection with a reduction of the Number of
Shares Issuable with Respect to the Inter-Group Interest for such
Business Group;
(v) the interest of the Corporation or any of its Subsidiaries in any
business or asset acquired and any liabilities assumed by the
Corporation or any of its Subsidiaries outside the ordinary course of
business and attributed to the Composite Group, as determined by the
Board of Directors; and
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(vi) from and after the payment date of any dividend, redemption or
other distribution with respect to shares of any Business Group Common
Stock (other than a dividend or other distribution payable in shares of
such Business Group Common Stock, with respect to which adjustment
shall be made in the related Number of Shares Issuable with Respect to
the Inter-Group Interest, or in securities of the Corporation
attributed to such Business Group, for which provision shall be made as
provided below), an amount of assets or properties previously
attributed to such Business Group as were paid in such dividend or
other distribution with respect to shares of such Business Group Common
Stock as have a Fair Value on the record date for such dividend or
distribution equal to the product of (1) the Fair Value on such record
date of the aggregate of such dividend or distribution to holders of
shares of such Business Group Common Stock declared multiplied by (2) a
fraction the numerator of which is equal to the Inter-Group Interest
Fraction in effect on the record date for such dividend or distribution
and the denominator of which is equal to the Outstanding Fraction for
such Business Group in effect on the record date for such dividend or
distribution; provided that from and after any transfer of any assets
or properties from the Composite Group to such Business Group, the
Composite Group shall no longer include such assets or properties so
transferred (other than as reflected in respect of such a transfer by
the Inter-Group Interest Fraction).
If the Corporation shall pay a dividend or make some other distribution with
respect to shares of such Business Group Common Stock payable in securities of
the Corporation that are attributed to such Business Group (other than such
Business Group Common Stock), the Composite Group shall be deemed to hold an
interest in such Business Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of securities
so distributed to holders of such Business Group Common Stock multiplied by a
fraction the numerator of which is equal to the Inter-Group Interest Fraction
in effect on the record date for such dividend or distribution and the
denominator of which is equal to the Outstanding Fraction for such Business
Group in effect on the record date for such dividend or distribution and, to
the extent interest is or dividends are paid on the securities so distributed,
the Composite Group shall include, and there shall be transferred thereto from
such Business Group, a corresponding ratable amount of assets paid as such
interest or dividends as would have been paid in respect of such securities so
deemed to be held by the Composite Group if such securities were outstanding.
The Corporation may also, to the extent the securities so paid as a dividend
or other distribution to the holders of such Business Group Common Stock are
Convertible Securities and at the time are convertible into or exchangeable or
exercisable for shares of such Business Group Common Stock, treat such
Convertible Securities as are so deemed to be held by the Composite Group to
be deemed to be converted, exchanged or exercised, and shall do so to the
extent such Convertible Securities are mandatorily converted, exchanged or
exercised (and to the extent the terms of such Convertible Securities require
payment of consideration for such conversion, exchange or exercise, the
Composite Group shall then no longer include an amount of properties or assets
required to be paid as such consideration for the amount of Convertible
Securities deemed converted, exchanged or exercised (and such Business Group
shall be attributed such properties or assets)), in which case, from and after
such time, the securities into or for which such Convertible Securities so
deemed to be held by the Composite Group were so considered converted,
exchanged or exercised shall be deemed held by the Composite Group and such
Convertible Securities shall no longer be deemed to be held by the Composite
Group.
(g) A "CONTRIBUTION" or "TRANSFER" of assets or properties from one Group
to another shall refer to the reattribution of such assets or properties from
the contributing or transferring Group to the other Group and correlative
phrases shall have correlative meanings.
(h) "CONVERTIBLE SECURITIES" at any time shall mean any securities of the
Corporation or of any Subsidiary thereof (other than shares of Common Stock),
including warrants but not including employee stock options, outstanding at
such time that by their terms are convertible into or exchangeable or
exercisable for or evidence the right to acquire any shares of any class of
Common Stock, whether convertible, exchangeable or exercisable at such time or
a later time or only upon the occurrence of certain events, but in respect of
antidilution provisions of such securities only upon the effectiveness
thereof.
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(i) "EDUCATION GROUP" shall mean, as of any date, the Business Group that
on the date hereof included the Education Group Companies. The Education
Group's related Business Group Common Stock is the Class E Common Stock.
(j) "EDUCATION GROUP COMPANIES" shall mean each of ARAMARK Educational
Resources Company, a Delaware corporation and its Subsidiaries as of the date
hereof.
(k) "FAIR VALUE" of any business or assets shall mean the fair market
value determined by the Board of Directors. In making such determination, the
Board of Directors may rely on an appraisal prepared by an independent
investment banking or appraisal firm experienced in valuation matters.
(l) "FOOD AND SUPPORT SERVICES GROUP" shall mean, as of any date, the
Business Group that on the date hereof included the Food and Support Services
Group Companies. The Food and Support Services Group's related Business Group
Common Stock is the Class F Common Stock.
(m) "FOOD AND SUPPORT SERVICES GROUP COMPANIES" shall mean each of ARAMARK
Services, Inc., a Delaware corporation and its Subsidiaries as of the date
hereof.
(n) "GROUP" shall mean, as of any date, any of the Composite Group and the
Business Groups.
(o) "INTER-GROUP INTEREST FRACTION" as of any date for any Business Group
shall mean a fraction the numerator of which shall be the Number of Shares
Issuable with Respect to the Inter-Group Interest for such Business Group on
such date and the denominator of which shall be the sum of (A) such Number of
Shares Issuable with Respect to the Inter-Group Interest and (B) the aggregate
number of shares of the related Business Group Common Stock outstanding on
such date (including the dilutive impact of outstanding employee stock options
calculated using the treasury stock method).
(p) "NUMBER OF SHARES ISSUABLE WITH RESPECT TO THE INTER-GROUP INTEREST"
for any Business Group shall be determined by the Board of Directors at the
time of the first issuance of shares of the related Business Group Common
Stock, and shall be equal to the Fair Value of such Business Group divided by
the Appraisal Price of such Business Group Common Stock, minus the aggregate
number of shares of such Business Group Common Stock outstanding as of such
date (including the dilutive impact of outstanding employee stock options
calculated using the treasury stock method); provided, however, that such
number shall from time to time thereafter be:
(i) adjusted as determined by the Board of Directors to be
appropriate to reflect equitably any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise) of such
Business Group Common Stock or any dividend or other distribution of
shares of such Business Group Common Stock to holders of shares of such
Business Group Common Stock or any reclassification of such Business
Group Common Stock;
(ii) decreased (but to not less than zero) by action of the Board of
Directors by (1) the number of shares of such Business Group Common
Stock issued or sold by the Corporation that, immediately prior to such
issuance or sale, were included in the Number of Shares Issuable with
Respect to the Inter-Group Interest, (2) the number of shares of such
Business Group Common Stock issued upon conversion, exchange or
exercise of Convertible Securities that, immediately prior to the
issuance or sale of such Convertible Securities, were included in the
Number of Shares Issuable with Respect to the Inter-Group Interest, (3)
the number of shares of such Business Group Common Stock issued by the
Corporation as a dividend or other distribution (including in
connection with any reclassification or exchange of shares) to holders
of Composite Common Stock, (4) the number of shares of such Business
Group Common Stock issued upon the conversion, exchange or exercise of
any Convertible Securities issued by the Corporation as a dividend or
other distribution (including in connection with any reclassification
or exchange of shares) to holders of Composite Common Stock, or (5) the
number (rounded, if necessary, to the nearest whole number) equal to
the quotient of (a) the aggregate Fair Value as of the date of
contribution of properties or assets (including cash) transferred from
such Business Group to the Composite Group in consideration for a
reduction in the Number of Shares Issuable with Respect to the Inter-
Group Interest divided by (b) the Appraisal Price of one share of such
Business Group Common Stock as of the date of such transfer; and
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(iii) increased by (1) the number of outstanding shares of such
Business Group Common Stock repurchased by the Corporation for
consideration that is attributed to the Composite Group and (2) the
number (rounded, if necessary, to the nearest whole number) equal to
the quotient of (a) the Fair Value of properties or assets (including
cash) theretofore attributed to the Composite Group that are
contributed to such Business Group in consideration of an increase in
the Number of Shares Issuable with Respect to the Inter-Group Interest,
divided by (b) the Appraisal Price of one share of such Business Group
Common Stock as of the date of such contribution and (3) the number of
shares of such Business Group Common Stock into or for which
Convertible Securities are deemed converted, exchanged or exercised
pursuant to the penultimate sentence of the definition of "Composite
Group."
(q) "OUTSTANDING FRACTION", as of any date, for any Business Group means
the fraction the numerator of which shall be the number of shares of the
related Business Group Common Stock outstanding on such date (including the
dilutive impact of outstanding employee stock options calculated using the
treasury stock method) and the denominator of which shall be the sum of the
number of shares of such related Business Group Common Stock outstanding on
such date (including the dilutive impact of outstanding options calculated
using the treasury stock method) and the Number of Shares Issuable with
Respect to the Inter-Group Interest for such Business Group on such date.
(r) "PERMITTED TRANSFEREE" shall have the meaning as defined in the
Stockholders' Agreement.
(s) "PUBLIC OFFERING" shall mean any underwritten offering for cash to the
public, either on behalf of the Corporation or any of its securityholders,
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(t) "STOCKHOLDERS' AGREEMENT" shall mean the Amended and Restated
Stockholders' Agreement dated as of December 14, 1984, by and among the
Corporation and the persons named therein as the same has been and may be
amended and a copy of which is on file with the Secretary of the Corporation
and will be provided to any stockholder upon request.
(u) "SUBSIDIARY" shall mean any corporation or other entity of which the
Corporation shall, directly or indirectly, own 50% or more of the equity, as
determined by the Board of Directors and any other corporation or other entity
in which the Corporation shall directly or indirectly have an equity
investment and which the Board of Directors shall in its sole discretion
designate.
(v) "UNIFORM GROUP" shall mean, as of any date, the Business Group that on
the date hereof included the Uniform Group Companies. The Uniform Group's
related Business Group Common Stock is the Class U Common Stock.
(w) "UNIFORM GROUP COMPANIES" shall mean each of ARAMARK Uniform Services,
Inc., a Delaware corporation and its Subsidiaries as of the date hereof.
4B. SERIES D STOCK
1. DESIGNATION. There shall be a series of Series Preferred Stock which
shall consist of 20,000 shares and shall be designated as Adjustable Rate
Callable Nontransferable Series D Preferred Stock (the "SERIES D STOCK"). The
number of authorized shares of Series D Stock may be increased by resolution
of the Board of Directors.
2. RANK.
(a) RANK OF SERIES D STOCK. To the extent and in the manner provided in
this Part 4B, the Series D Stock shall, with respect to dividend rights and
rights on liquidation, rank (i) junior to or on parity with, as the case may
be, any other stock of the Corporation, the terms of which shall specifically
provide that such stock shall rank senior to, or on parity with, as the case
may be, the Series D Stock with respect to dividend rights or rights on
liquidation or both and (ii) senior to any other stock of the Corporation.
(b) CERTAIN DEFINITIONS. The following terms as used in this Part 4B shall
be deemed to have the meanings set forth in this section.
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(i) The term "PARTICIPATING STOCK" shall mean the Common Stock and
any other stock of the Corporation of any class which has the right to
participate in dividends and distributions of the Corporation without
limit as to the amount or percentage.
(ii) The term "PARITY STOCK" with respect to Series D Stock shall
mean the Series D Stock and all other stock of the Corporation ranking
equally therewith as to the payment of dividends or the distribution of
assets upon liquidation. The term "DIVIDEND PARITY STOCK" with respect
to Series D Stock shall mean the Series D Stock and all other stock of
the Corporation ranking equally therewith as to the payment of
dividends. The term "LIQUIDATION PARITY STOCK" with respect to Series D
Stock shall mean the Series D Stock and all other stock of the
Corporation ranking equally therewith as to distribution of assets upon
liquidation.
(iii) The term "JUNIOR STOCK" with respect to Series D Stock shall
mean the Participating Stock and all other stock of the Corporation
ranking junior thereto as to the payment of dividends and the
distribution of assets upon liquidation. The term "DIVIDEND JUNIOR
STOCK" with respect to Series D Stock shall mean the Participating
Stock and all other stock of the Corporation ranking junior thereto as
to the payment of dividends. The term "LIQUIDATION JUNIOR STOCK" with
respect to Series D Stock shall mean the Participating Stock and all
other stock of the Corporation ranking junior thereto as to
distribution of assets upon liquidation.
(iv) The term "SENIOR STOCK" with respect to Series D Stock shall
mean all stock of the Corporation ranking senior thereto as to the
payment of dividends or distribution of assets upon liquidation.
3. DIVIDENDS.
(a) CUMULATIVE DIVIDENDS. The holders of record of Series D Stock shall be
entitled to receive, as and if declared by the Board of Directors, cumulative
cash dividends thereon at the per annum rate per share equal to the
Established Dividend Rate (as defined in paragraph (c)), and no more, but only
out of funds legally available for the payment of such distributions under the
General Corporation Law of the State of Delaware. Dividends on the Series D
Stock shall not be payable unless and until declared by the Board of
Directors. Dividends shall accrue from the date of original issuance.
Accumulations of dividends shall not bear interest.
(b) LIMITATIONS UPON DIVIDEND ARREARAGE. Unless dividends that have been
declared and are payable upon the Series D Stock have been paid, no dividend
or other distribution (except in Junior Stock) shall be declared or paid on
Dividend Junior Stock and no amount shall be set aside for or applied to the
redemption, purchase or other acquisition of (i) any Dividend Junior Stock or
Liquidation Junior Stock other than by exchange therefor of Junior Stock or
out of the proceeds of a substantially concurrent sale of shares of Junior
Stock or (ii) any Parity Stock except in accordance with a purchase or
exchange offer made simultaneously by the Corporation to all holders of record
of Parity Stock which, considering the annual dividend rates and the other
relative rights and preferences of such shares, in the opinion of the Board of
Directors (whose determination shall be conclusive), will result in fair and
equitable treatment among all such shares.
(c) The "ESTABLISHED DIVIDEND RATE" shall initially be $25.00, and shall
be reset as provided in this paragraph. On each December 16, beginning
December 16, 1998 and continuing so long as any shares of Series D Stock shall
be outstanding, the Established Dividend Rate shall be reset at a rate equal
to $1,000 multiplied by 50% of the One Year Treasury Rate that shall have been
in effect at the close of business on the December 1 next preceding (or if
such December 1 shall not have been a business day, the business day next
preceding such December 1), rounded up to the nearest $1.00; provided,
however, that the Established Dividend Rate shall in no event be greater than
$50.00. For purposes of the preceding sentence, the "ONE YEAR TREASURY RATE"
shall mean the rate for direct obligations of the United States having a
constant maturity of 1-year, as published in H.15(519) under the heading
"Treasury Constant Maturities", or, if not so published by such December 16,
such rate as determined in good faith by the Corporation, which determination
absent manifest error shall be
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conclusive. The Corporation shall file with the duly appointed transfer agent
for the Series D Stock a certificate stating the new Established Dividend Rate
determined as provided in this paragraph and showing the computation thereof,
and will cause a notice stating the new Established Dividend Rate and the
computation thereof to be mailed to the holders of shares of Series D Stock.
4. LIQUIDATION RIGHTS.
(a) LIQUIDATION VALUE. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of
Series D Stock shall be entitled to receive from the assets of the
Corporation, payment in cash, of $1,000 per share, plus a further amount equal
to unpaid cumulative dividends on Series D Stock accrued to the date when such
payments shall be made available to the holders thereof, and no more, before
any amount shall be paid or set aside for, or any distribution of assets shall
be made to the holders of Liquidation Junior Stock. If, upon such liquidation,
dissolution or winding up, the amounts available for distribution to the
holders of all Liquidation Parity Stock shall be insufficient to permit the
payment in full to such holders of the preferential amounts to which they are
entitled, then such amounts shall be paid ratably among the shares of
Liquidation Parity Stock in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with respect
thereto if paid in full.
(b) ACTIONS NOT CONSIDERED LIQUIDATION. None of the following shall be
considered a liquidation, dissolution or winding up of the Corporation within
the meaning of this section: (1) a consolidation or merger of the Corporation
with or into any other corporation; (2) a merger of any other corporation into
the Corporation; (3) a reorganization of the Corporation; (4) the purchase or
redemption of all or part of the outstanding shares of any class or classes of
the Corporation; (5) a sale or transfer of all or any part of the assets of
the Corporation; or (6) a share exchange to which the Corporation is a party.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Series D Stock may be called for redemption
and redeemed out of funds legally available therefor at the option of the
Corporation by resolution of the Board of Directors, in whole at any time or
in part at any time or from time to time upon the notice hereinafter provided
for in paragraph (c), by the payment therefor of the redemption price per
share of $1,000 plus an amount equal to the accrued and unpaid cumulative
dividends thereon to the date fixed by the Board of Directors as the
redemption date. In addition, the Corporation may so call for redemption at
any time all, but not less than all, of the shares of Series D Stock held by
any person or entity.
(b) NO MANDATORY REDEMPTION. There is no mandatory sinking fund for, or
other required redemption of, the Series D Stock.
(c) MANNER OF REDEMPTION.
(i) If less than all of the outstanding shares of Series D Stock
shall be called for redemption (and such redemption is not pursuant to
the second sentence of paragraph (a)), the particular shares to be
redeemed shall be selected by lot or by such other equitable manner as
may be prescribed by resolution of the Board of Directors.
(ii) Notice of redemption of any shares of Series D Stock shall be
given by the Corporation by first-class mail, not less than 10 nor more
than 60 days prior to the date fixed by the Board of Directors of the
Corporation for redemption (the "REDEMPTION DATE"), to the holders of
record of the shares to be redeemed at their respective addresses then
appearing on the records of the Corporation. The notice of the
redemption shall state: (1) the redemption date; (2) the redemption
price; (3) if less than all outstanding shares of Series D Stock of the
holder are to be redeemed, the identification of the shares of Series D
Stock to be redeemed; (4) that dividends on the shares to be redeemed
shall cease to accrue on the redemption date; and (5) the place or
places where such shares of Series D Stock to be redeemed are to be
surrendered for payment of the redemption price.
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(iii) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption), dividends on the shares of Series D Stock so
called for redemption shall cease to accrue, and from and after the
redemption date or such earlier date as funds shall be set aside for
payment of the redemption price (unless default shall be made by the
Corporation in providing money for the payment of the redemption price
of the shares called for redemption) said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in
accordance with said notice of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid.
(iv) Shares of Series D Stock redeemed by the Corporation shall be
restored to the status of authorized and unissued shares of Series
Preferred Stock, undesignated as to series, and, except as otherwise
provided by the express terms of any outstanding series, may be
reissued by the Corporation as shares of one or more series of Series
Preferred Stock.
6. VOTING RIGHTS.
(a) NO VOTING RIGHTS GENERALLY. Except as expressly provided to the
contrary in this Part 4B or as otherwise required by law, the holders of
Series D Stock shall have no right to vote at, or to participate in, any
meeting of stockholders of the Corporation, or to receive any notice of such
meeting.
(b) RIGHTS UPON DIVIDEND ARREARAGE.
(i) In the event dividends that have been declared and are payable
upon the Series D Stock shall be in arrears, the number of directors
constituting the full board shall be increased by two, and the holders
of the Series D Stock voting noncumulatively and separately as a single
series together with the holders of any other shares of Series
Preferred Stock having the right to elect directors as a series under
circumstances when dividends are in arrears, shall be entitled to elect
two members of the Board of Directors of the Corporation at the next
annual meeting of stockholders of the Corporation or at a special
meeting called as hereinafter provided in this section. Such voting
rights of the holders of Series D Stock shall continue until all
declared and unpaid dividends thereon shall have been paid in full,
whereupon such special voting rights of the holders of Series D Stock
shall cease (and the respective terms of the two additional directors
shall thereupon expire and the number of directors constituting the
full board shall be decreased by two) subject to being again revived
from time to time upon the recurrence of the conditions described in
this section as giving rise thereto.
(ii) At any time when such right of holders of Series D Stock to
elect two additional directors shall have so vested, the Corporation
may, and upon the written request of the holders of record of not less
than 10% of the Series D Stock then outstanding (or 10% of all Series
Preferred Stock having the right to vote for such directors in case
holders of shares of other series of Series Preferred Stock shall also
have the right to elect directors as a series in circumstances when
dividends are in arrears) shall, call a special meeting of holders of
such Series D Stock (and other series of Series Preferred Stock, if
applicable) for the election of directors. In the case of such a
written request, such special meeting shall be held within 60 days
after the delivery of such request, and, in either case, at the place
and upon the notice provided by law and in the bylaws of the
Corporation; except that the Corporation shall not be required to call
such a special meeting if such request is received less than 120 days
before the date fixed for the next ensuing annual meeting of
stockholders of the Corporation; provided, that the holders of Series D
Stock receive notice of such meeting and their right to vote thereat.
(iii) Whenever the number of directors of the Corporation shall have
been increased by two as provided in this section, the number as so
increased may thereafter be further increased or decreased in such
manner as may be permitted by the bylaws of the Corporation and without
the vote of the holders
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of Series D Stock. No such action shall impair the right of the holders
of Series D Stock to elect and to be represented by two directors as
provided in this section.
(iv) The two directors elected as provided in this section shall
serve until the next annual meeting of stockholders of the Corporation
and until their respective successors shall be elected and qualified or
the earlier expiration of their terms as provided in this section. No
such director may be removed without the vote or consent of holders of
a majority of the shares of Series D Stock (or holders of a majority of
shares of Series Preferred Stock having the right to vote in the
election of such director in case holders of shares of other series of
Series Preferred Stock shall also have the right to elect such director
as a class). If, prior to the expiration of the term of any such
director, a vacancy in the office of such director shall occur, such
vacancy shall, until the expiration of such term, in each case be
filled by appointment made by the remaining director elected as
provided in this section.
7. RESTRICTIONS ON TRANSFER. The shares of Series D Stock shall not be
transferable (other than by will or the laws of descent), except that such
shares may be transferred with the consent of the Board of Directors of the
Corporation.
8. NO CONVERSION RIGHTS. The holders of shares of Series D Stock shall not
have the right to convert such shares into other securities of the
Corporation.
4C. REDEEMABLE TRANSITORY PARTICIPATING PREFERRED STOCK
1. DESIGNATION. There shall be a series of Series Preferred Stock which
shall consist of 2,000,000 shares and shall be designated as Redeemable
Transitory Participating Preferred Stock, $1.00 par value per share (the
"REDEEMABLE TRANSITORY PARTICIPATING PREFERRED STOCK"). The number of
authorized shares of Redeemable Transitory Participating Preferred Stock may
be increased by resolution of the Board of Directors.
2. RANK. The Redeemable Transitory Participating Preferred Stock shall, with
respect to dividend rights and rights on liquidation, rank: (i) junior to, or
on parity with, as the case may be, any other stock of the Corporation, the
terms of which shall specifically provide that such series shall rank senior
to, or on parity with, as the case may be, the Redeemable Transitory
Participating Preferred Stock with respect to dividend rights and rights on
liquidation, including the Series D Stock, as to which the Redeemable
Transitory Participating Preferred Stock shall rank junior with respect to
dividend rights and rights on liquidation, (ii) senior to any other stock of
the Corporation with respect to rights on liquidation, except with respect to
the Class A Common Stock, as to which rights the Redeemable Transitory
Participating Preferred Stock shall rank on a parity with the Class A Common
Stock, and (iii) senior to any other stock of the Corporation with respect to
dividend rights, except with respect to the Class A Common Stock, as to which
rights the Redeemable Transitory Participating Preferred Stock shall rank on a
parity with the Class A Common Stock. (All of such stock of the Corporation to
which the Redeemable Transitory Participating Preferred Stock ranks prior is
at times referred to collectively for purposes of this Part 4C as the "JUNIOR
SECURITIES.")
3. DIVIDENDS. Except as otherwise provided herein, the holders of the shares
of Redeemable Transitory Participating Preferred Stock shall not be entitled
to receive any dividends or other distributions. If the Board of Directors
declares any dividend or other distribution on the Class A Common Stock as
permitted under the General Corporation Law of the State of Delaware, whether
of cash, other assets, evidences of indebtedness or other securities of the
Corporation or another corporation, or rights to subscribe therefor
(collectively, "DIVIDENDS"), then concurrently therewith the Board of
Directors shall declare, and each share of Redeemable Transitory Participating
Preferred Stock shall be entitled to receive out of funds legally available
therefor, a Dividend equal to the amount and kind of Dividend per share
declared on the Class A Common Stock. The record date and payment date for
such Dividends on the Redeemable Transitory Participating Preferred Stock
shall be the same as for the Dividend declared on the Class A Common Stock.
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4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, the holders of Redeemable
Transitory Participating Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for distribution to its
stockholders for each share of Redeemable Transitory Participating Preferred
Stock then outstanding an amount in cash equal to the amount each share of
Class A Common Stock would receive, plus an amount in cash equal to all
declared but unpaid Dividends thereon to the date fixed for liquidation, and
no more, before any payment shall be made or any assets distributed to the
holders of any of the Junior Securities; provided however, that the holders of
outstanding shares of Redeemable Transitory Participating Preferred Stock
shall not be entitled to receive such liquidation payment until the
liquidation payments on all outstanding shares of any stock of the Corporation
having liquidation rights ranking senior to the Redeemable Transitory
Participating Preferred Stock shall have been paid in full. If the assets of
the Corporation are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of Redeemable Transitory
Participating Preferred Stock and any outstanding shares of any other stock of
the Corporation having liquidation rights on parity with the Redeemable
Transitory Participating Preferred Stock, then the holders of all such shares
shall share ratably in such distribution of assets in accordance with the
amount which would be payable on such distribution if the amounts to which the
holders of outstanding shares of Redeemable Transitory Participating Preferred
Stock and the holders of such other outstanding shares of stock of the
Corporation are entitled were paid in full. Thereafter, the holders of
Redeemable Transitory Participating Preferred Stock will share ratably with
the holders of the Class A Common Stock all additional assets legally
available for distribution to holders of Class A Common Stock.
(b) None of the following shall be considered a liquidation, dissolution
or winding up of the Corporation within the meaning of this section: (1) a
consolidation or merger of the Corporation with or into any other corporation;
(2) a merger of any other corporation into the Corporation; (3) a
reorganization of the Corporation; (4) the purchase or redemption of all or
part of the outstanding shares of any class or classes of the Corporation; (5)
a sale or transfer of all or any part of the assets of the Corporation; or (6)
a share exchange to which the Corporation is a party.
5. REDEMPTION.
(a) Subject to any restriction applicable to the redemption pursuant to
the General Corporation Law of the State of Delaware, the Corporation, at its
option, by resolution of the Board of Directors, may redeem the Redeemable
Transitory Participating Preferred Stock, in whole but not in part, at any
time after the issuance thereof, upon the notice hereinafter provided for in
paragraph (b) below, by payment therefor of a redemption price of $347.50 per
share in cash, without interest (the "CASH REDEMPTION PRICE"); provided,
however, that if the Board of Directors determines by resolution, the
Corporation may offer, as alternative redemption consideration per share,
without interest to holders of Redeemable Transitory Participating Preferred
Stock who meet to the Corporation's satisfaction certain suitability
requirements described in (d) below and who comply with such additional
procedural requirements as the Corporation may prescribe, in lieu of the
$347.50 per share cash redemption price, to pay or deliver to such qualifying
holder, at the election of the holder, $347.50 principal amount of the
Corporation's 7.25% Guaranteed Convertible Installment Promissory Notes due
2007 (the "INSTALLMENT NOTES"). In addition, in connection with the election
of alternative redemption consideration which the Corporation may offer to
qualifying holders of shares of Redeemable Transitory Participating Preferred
Stock, the Board of Directors may prescribe procedures for making a proper and
timely election with the result that the failure of any holder of Redeemable
Transitory Participating Preferred Stock to comply with the prescribed
procedures will result in the loss of the election option for such holder and
such holder shall in such case be entitled to receive only the redemption
price in cash as set forth above.
Holders of shares of Redeemable Transitory Participating Preferred Stock who
qualify to make an election to receive the alternative redemption
consideration set forth above, may make such election with respect to any or
all of their shares; provided, however, that the Corporation shall not issue
Installment Notes with a face principal amount other than $10,000 or integral
multiples thereof. Each such holder who would otherwise be
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entitled to receive any amount of an Installment Note other than $10,000 or
integral multiples thereof shall receive the amount of such fractional
interest of an Installment Note in cash.
(b) Notice of redemption of shares of Redeemable Transitory Participating
Preferred Stock shall be given by the Corporation by first-class mail, not
less than 10 nor more than 60 days prior to the date and time (a "REDEMPTION
DATE") fixed by the Board of Directors for the redemption, to the holders of
record of Redeemable Transitory Participating Preferred Stock at their
respective addresses then appearing on the records of the Corporation; such
notice may be made in advance of the date of issuance to the persons who will
become the holders of Redeemable Transitory Participating Preferred Stock on
the date on which the Redeemable Transitory Participating Preferred Stock
shall be issued, and shall be adequate if included in the proxy statement
mailed to holders in connection with consideration of the recapitalization of
the Corporation pursuant to which the Redeemable Transitory Participating
Preferred Stock will be issued. The Board of Directors may specify an exact
time for the redemption or may specify a time in relation to other corporate
actions occurring on the redemption date, which time shall be included in the
term "REDEMPTION DATE". The notice of redemption shall state: (1) the
redemption date; (2) the redemption consideration; (3) the place or places
where the shares of Redeemable Transitory Participating Preferred Stock are to
be redeemed for payment of the redemption consideration; (4) the procedures
for making a proper and timely election for any of the redemption
consideration other than the redemption price, including the time and date by
which such election must be made to be effective, which may be a time and date
prior to the date of issuance; and (5) that failure by an otherwise qualified
holder (or person who will become the holder, as the case may be) to make such
proper and timely election will result in loss of the election option, and
such person in such case shall be entitled to receive only the cash redemption
price.
(c) Notice having been mailed as aforesaid, from and after the redemption
date or such earlier date as funds shall be set aside for payment of the
redemption consideration (unless default shall be made by the Corporation in
providing cash, Installment Notes or any of them, for the payment of the
redemption consideration of the shares called for redemption) said shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from
the Corporation the redemption consideration) shall cease. On the redemption
date, such shares shall be redeemed by the Corporation for the redemption
consideration aforesaid.
(d) QUALIFICATION TO ELECT INSTALLMENT NOTES. If the Corporation chooses,
by resolution of the Board of Directors, to offer to holders of shares of
Redeemable Transitory Participating Preferred Stock which have been called for
redemption the option to elect to receive Installment Notes in lieu of cash,
then in order to qualify to make an election for Installment Notes, each
holder must demonstrate to the Corporation's satisfaction, and it shall be a
further qualification that such holder shall so have demonstrated, that such
holder is one of the following:
(i) a bank, savings and loan association, trust company, insurance
company, investment company registered under the Investment Company Act
of 1940, pension or profit-sharing trust (other than a pension or
profit-sharing trust of the Corporation, a self-employed individual
retirement plan or individual retirement account), an organization
described in Section 501(c)(3) of the Internal Revenue Code, which has
total assets of not less than $5,000,000 according to its most recent
audited financial statements, a corporation having a net worth on a
consolidated basis, according to its most recent audited financial
statements, of not less than $14,000,000 or any wholly owned subsidiary
thereof;
(ii) a director or executive officer of the Corporation;
(iii) a person who makes a valid election to receive Installment
Notes with an aggregate value of $150,000 or more provided such person
is able to bear the economic risk of the investment, the investment
does not exceed 10% of such person's net worth (or joint net worth with
a spouse), or such person (or with such person's professional advisor
who is unaffiliated with and not compensated by the Corporation or any
affiliate thereof) has the capacity to protect its own interests in
connection with the transaction;
(iv) an individual who elects to receive Installment Notes whose net
worth (or joint net worth with a spouse) exceeds $1,000,000, provided
such person is able to bear the economic risk of the
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investment, the investment does not exceed 10% of such person's net
worth (or joint net worth with a spouse), or such person (or with such
person's professional advisor who is unaffiliated with and not
compensated by the Corporation or any affiliate thereof) has the
capacity to protect its own interests in connection with the
transaction;
(v) an individual who elects to receive Installment Notes whose
income (or whose joint income with a spouse) exceeded $200,000 in each
of the two most recent years and who reasonably expects an income in
excess of $200,000 in the current year, provided such person is able to
bear the economic risk of the investment, the investment does not
exceed 10% of such person's net worth (or joint net worth with a
spouse), or such person (or with such person's professional advisor who
is unaffiliated with and not compensated by the Corporation or any
affiliate thereof) has the capacity to protect its own interests in
connection with the transaction;
(vi) a person who has preexisting personal or business contacts with
the Corporation or any officer, director or controlling person thereof
of a nature and duration such as would enable a reasonably prudent
person to be aware of the character, business acumen and general
business and financial circumstances of the person with whom the
relationship exists;
(vii) a person who, by reason of its business or financial experience
or the business or financial experience of its professional advisor
(who is unaffiliated with and is not compensated by the Corporation or
any affiliate of the Corporation), could be reasonably assumed to have
the capacity to protect its own interests in the transaction;
(viii) any relative, spouse or relative of the spouse of an
individual who meets any one of the requirements of clauses (ii)-(vii)
above and who makes a valid election to receive Installment Notes (an
"INDIVIDUAL") who has the same principal residence as such Individual
(a "RELATED PERSON"), any trust or estate in which an Individual and
any Related Person collectively own more than 50% of the beneficial
interest, any corporation or other organization of which an Individual
and any Related Person collectively are beneficial owners of more than
50% (excluding directors' qualifying shares) of the equity securities
("RELATIVE" means a person related by blood, marriage or adoption); or
(ix) any entity in which all the equity owners are persons specified
in (i), (ii), (iv) or (v) above;
provided, however, that persons who qualify only as a result of clause (vi)
or (vii) above shall not total more than 35 persons and in the event that more
than 35 persons rely on clause (vi) or (vii), the Corporation shall determine
which 35 persons shall be permitted so to rely. The Corporation may request
such documentation or evidence with respect to such qualifications as it deems
appropriate. The good faith determination by the Corporation that a holder of
Redeemable Transitory Participating Preferred Stock does not meet the
foregoing requirements shall be conclusive as to such holder.
6. VOTING RIGHTS. Subject to the special voting rights of the holders of any
other stock of the Corporation and except as required by law to vote as a
separate series, the Redeemable Transitory Participating Preferred Stock,
shall vote with the Class A Common Stock (and any other stock of the
Corporation entitled to vote therewith) with respect to the election of
directors and for all other purposes. Each share of Redeemable Transitory
Participating Preferred Stock will be entitled to cast one vote on all matters
submitted to a vote of the holders of Class A Common Stock.
7. EFFECT OF REDEMPTION. Shares of Redeemable Transitory Participating
Preferred Stock redeemed by the Corporation shall be restored to the status of
authorized and unissued shares of Series Preferred Stock, undesignated as to
series.
4D. CONTINUING COMMON STOCK
1. CLASSES.
The following two classes of Common Stock are designated and consist of the
number of shares as follows:
(a) 5,000,000 shares of Common Stock, Class A, $.01 par value per share
(the "CONTINUING CLASS A COMMON STOCK"), and
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(b) 25,000,000 shares of Common Stock, Class B, $.01 par value per share
(the "CONTINUING CLASS B COMMON STOCK").
The Continuing Class A Common Stock and the Continuing Class B Common Stock
shall have the powers, preferences and rights and the qualifications,
limitations and restrictions thereon set forth in this Part 4D and shall not
have the powers, preferences and rights and the qualifications, limitations
and restrictions thereon set forth in this Restated Certificate of
Incorporation with respect to any other class or series of Common Stock
designated by the Board of Directors. The powers, preferences and rights of
the Continuing Class A Common Stock and the Continuing Class B Common Stock,
and the qualifications, limitations and restrictions thereon, shall be in all
respects identical, except as otherwise provided in this Part 4D.
2. DIVIDENDS.
Subject to any provision in this Article FOURTH with respect to any stock of
the Corporation to the contrary, out of the assets of the Corporation which
are by law available for the payment of dividends, dividends and other
distributions may be, but shall not be required to be, declared and paid upon
shares of Continuing Class A Common Stock and Continuing Class B Common Stock,
and the holders of shares of Continuing Class A Common Stock and Continuing
Class B Common Stock shall be entitled to receive the same dividends and other
distributions, ratably with the holder of one share of Continuing Class A
Common Stock entitled to receive ten times what the holder of one share of
Continuing Class B Common Stock is entitled to receive; provided, however,
that in the case of dividends or other distributions payable in Common Stock,
only shares of Continuing Class B Common Stock shall be distributed with
respect to Continuing Class B Common Stock and only shares of Continuing Class
A Common Stock shall be distributed with respect to Continuing Class A Common
Stock, and any such distribution shall be made ratably, with the holder of one
share of Continuing Class A Common Stock entitled to receive the same number
of shares of Continuing Class A Common Stock as the number of shares of
Continuing Class B Common Stock the holder of one share of Continuing Class B
Common Stock shall be entitled to receive; and provided further, that the
Board of Directors, may declare and pay dividends and other distributions with
respect to the Continuing Class A Common Stock without declaring or paying any
dividend or other distribution with respect to the Continuing Class B Common
Stock.
3. VOTING RIGHTS.
(a) Subject to the special voting rights of the holders of any other stock
of the Corporation, the Continuing Class A Common Stock and the Continuing
Class B Common Stock shall be entitled to vote with other classes or series of
Common Stock with respect to the election of directors and for all other
purposes.
(b) Each share of Continuing Class A Common Stock and Continuing Class B
Common Stock shall be entitled to one vote on all matters submitted to a vote
of the Corporation's stockholders.
4. LIQUIDATION.
Upon the liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after provision for the payment of creditors and
after provision shall be made for holders of all shares of stock of the
Corporation having a preference upon liquidation, dissolution or winding up,
the remaining assets of the Corporation shall, subject to Part 4A, be
distributed among the holders of all class of Common Stock, with the holder of
one share of Continuing Class A Common Stock entitled to receive ten times
what the holder of one share of Continuing Class B Common Stock is entitled to
receive (with the holder of one share of Continuing Class B Common Stock
entitled to receive the same as a holder of one share of Class B Common Stock
is entitled to receive).
5. CONVERSION OF CONTINUING CLASS B COMMON STOCK.
(a) Each share of Continuing Class B Common Stock may at any time, but
only with the prior approval of the Board of Directors, be converted at the
election of the holder thereof into one-tenth of a fully paid and
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nonassessable share of Continuing Class A Common Stock. Subject to the terms
of any such approval, the holder of shares of Continuing Class B Common Stock
may elect to convert any or all of such shares at one time or at various times
in such holder's discretion. Such right shall be exercised by the surrender of
the certificate representing each share of Continuing Class B Common Stock to
be converted to the agent for the registration of transfer of shares of
Continuing Class B Common Stock at its office, or to the Corporation at its
principal executive offices, accompanied by a written notice of the election
by the holder thereof to convert and (if so required by the transfer agent or
by the Corporation) by instruments of transfer, in form satisfactory to the
transfer agent and to the Corporation, duly executed by such holder or the
holder's duly authorized attorney.
(b) If a holder of Continuing Class B Common Stock ceases to be either a
director or full-time employee of the Corporation or any of its Subsidiaries
(a "MANAGEMENT INVESTOR") or a Permitted Transferee of a person who is then a
Management Investor, then each share of Continuing Class B Common Stock held
by such holder shall thereupon be converted into one-tenth of a share of
Continuing Class A Common Stock effective immediately. No share of Continuing
Class B Common Stock may be issued other than to a Management Investor or a
person who would be a Permitted Transferee of a Management Investor, and any
such share issued to any other person shall ipso facto be converted into one-
tenth of a share of Continuing Class A Common Stock effective at the time of
the purported issuance. For purposes hereof, "SUBSIDIARY" shall have the
meaning set forth in Part 4A(7).
(c) At any time when the Board of Directors authorizes and directs the
conversion of all the Continuing Class B Common Stock into Continuing Class A
Common Stock, then, at the time designated by the Board for the occurrence of
such event, each outstanding share of Continuing Class B Common Stock shall be
converted into one-tenth of a share of Continuing Class A Common Stock and no
further shares of Continuing Class B Common Stock may be issued thereafter.
(d) In the event of any such conversion pursuant to paragraph (a), (b) or
(c), the certificate or certificates representing shares of Continuing Class B
Common Stock held by such holder shall thereupon and thereafter be deemed to
represent the number of whole shares of Continuing Class A Common Stock
issuable upon such conversion and the right to receive cash in lieu of
fractional shares pursuant to paragraph (f) hereof. Upon the surrender of any
such certificate to the agent for the registration of transfer of shares of
Continuing Class B Common Stock at its office, or to the Corporation at its
principal executive offices, such certificate shall be canceled and a
certificate for the number of whole shares of Continuing Class A Common Stock
to which he shall be entitled, together with a cash adjustment for any
fraction of a share if not evenly convertible pursuant to paragraph (f)
hereof, shall be issued and delivered to the holder thereof as hereinafter
provided.
(e) The issuance of a certificate for shares of Continuing Class A Common
Stock upon conversion of shares of Continuing Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name other
than that of the holder of the share or shares of Continuing Class B Common
Stock converted, the person or persons requesting issuance thereof shall pay
to the transfer agent or to the Corporation the amount of any tax which may be
payable in respect of any such transfer, or shall establish to the
satisfaction of the transfer agent or of the Corporation that such tax has
been paid. As promptly as practicable after the surrender for conversion of a
certificate representing shares of Continuing Class B Common Stock and the
payment of any tax as herein before provided, the Corporation will deliver or
cause to be delivered at the office of the transfer agent to, or upon the
written order of, the holder of such certificate, a certificate or
certificates representing the number of whole shares of Continuing Class A
Common Stock issuable upon such conversion, issued in such name or names as
such holder may direct together with a cash adjustment for any fraction of a
share as provided pursuant to paragraph (f) hereof, if not evenly convertible.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of the surrender of the certificate representing
shares of Continuing Class B Common Stock (if on such date the transfer books
of the Corporation shall be closed, then immediately prior to the close of
business on the first date thereafter that said books shall be open) or, in
the case of a conversion under paragraph (b) or (c) of this Section,
immediately upon the event giving rise to the conversion, and all rights of
such holder arising from ownership of shares of Continuing Class B Common
Stock shall cease at such time, and the person or persons in whose name or
names the certificate representing shares of Continuing Class A
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Common Stock are to be issued shall be treated for all purposes as having
become the record holder or holders of such shares of Continuing Class A
Common Stock at such time and shall have and may exercise all the rights and
powers appertaining thereto. No adjustments in respect of any past dividends
and other distributions shall be made upon the conversion of any share of
Continuing Class B Common Stock; provided, however, that if any share of
Continuing Class B Common Stock shall be converted subsequent to the record
date for the payment of a dividend or other distribution on shares of
Continuing Class B Common Stock but prior to such payment, the registered
holder of such shares at the close of business on such record date shall be
entitled to receive the dividend or other distribution payable to holders of
Continuing Class B Common Stock. The Corporation shall at all times reserve
and keep available, solely for the purpose of issue upon conversion of
outstanding shares of Continuing Class B Common Stock, such number of shares
of Continuing Class A Common Stock as may be issuable upon the conversion of
all such outstanding shares of Continuing Class B Common Stock, provided that
the Corporation may deliver shares of Continuing Class A Common Stock held in
the treasury of the Corporation.
(f) No fractions of shares of Continuing Class A Common Stock are to be
issued upon conversion, but in lieu thereof the Corporation will pay therefor
in cash, a sum equal to the number of shares of Continuing Class B Common
Stock not evenly convertible multiplied by the per share fair market value of
the Continuing Class B Common Stock, as determined by an Appraiser according
to the most recent existing appraisal; provided, however, that such appraisal
shall be as of a date not more than six months prior to its use hereunder.
FIFTH: Subject to the rights of holders of Series Preferred Stock to elect
additional directors under certain circumstances, the Corporation shall be
governed in accordance with the following provisions:
5A. NUMBER OF DIRECTORS
The Board of Directors of the Corporation shall consist of not less than
nine and not more than 19 members and the Chief Executive Officer of the
Corporation shall always be one of the members. The exact number of directors
within such minimum and maximum shall be fixed by the Board of Directors.
5B. ELECTION
Directors need not be elected by written ballot.
5C. CLASSIFICATION
Upon the consummation of a Public Offering (as defined in Part 4A(7)) of any
class of Common Stock, the directors of the Corporation, other than those
directors, if any, elected by the holders of any series of Series Preferred
Stock or any other series or class of stock as set forth in this Restated
Certificate of Incorporation, shall be divided into three classes as nearly
equal in number as possible, and designated as Class I, Class II and Class
III. The initial assignment of directors to such classes shall be made by the
Board of Directors and the terms of all such directors shall expire at the
first annual meeting of stockholders following the Public Offering, or earlier
at a special meeting called for the purpose of electing directors to such
classes, after which Class I directors shall have a term expiring at the next
annual meeting of stockholders following such meeting; Class II directors
shall have a term expiring at the second annual meeting of stockholders
following such meeting; and Class III directors shall have a term expiring at
the third annual meeting of stockholders following such meeting. At each such
succeeding annual meeting of stockholders of the Corporation, the successors
of the class of directors whose term expires at that meeting shall be elected
by a plurality vote of all votes cast at such meeting to hold office for a
term expiring at the annual meeting of stockholders held in the third year
following the year of their election, and until their successors are elected
and qualified. Notwithstanding anything contained in this Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80 percent of the voting power of the then outstanding Common Stock,
voting together as a single class, shall be required to alter, amend or
repeal, or adopt any provision inconsistent with, this Part 5C.
SIXTH: Subject to the rights of the holders of Series Preferred Stock to
elect additional directors under certain circumstances or to consent to
actions taken by the Corporation which specifically require the approval
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of such holders, after the consummation of a Public Offering (as defined in
Part 4A(7)) of any class of Common Stock, any action required or permitted to
be taken by the stockholders of the Corporation must be effected at an annual
or special meeting of stockholders of the Corporation and may not be effected
by any consent in writing in lieu of a meeting of such stockholders.
Notwithstanding anything in this Restated Certificate of Incorporation to the
contrary, the affirmative vote of at least 80 percent of the voting power of
the then outstanding Common Stock, voting together as a single class, shall be
required to alter, amend or repeal, or adopt any provision inconsistent with,
this Article SIXTH.
SEVENTH: The by-laws of the Corporation may be made, altered, amended,
changed, added to or repealed by the Board of Directors of the Corporation
without the assent or vote of the stockholders.
EIGHTH: Each person who was or is made a party or is threatened to be made a
party to or is involuntarily involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative ("PROCEEDING"), by
reason of the fact that he or a person of whom he is the legal representative
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer or representative or in any other capacity while serving as
a director, officer or representative shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended, against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith; provided,
however, that the Corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if such action, suit or proceeding (or part
thereof) was authorized by the Board of Directors. Such right shall be a
contract right and shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition upon delivery to the Corporation of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if it should be
determined ultimately that such person is not entitled to be indemnified under
this section or otherwise.
If a claim under this Article is not paid in full by the Corporation within
ninety days after a written claim has been received by the Corporation, the
claimant unpaid may at any time thereafter bring suit against the Corporation
to recover the unpaid amount of the claim and if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claim, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant had not met the applicable standard of
conduct.
The rights conferred by this Article shall not be exclusive of any other
right which such person may have or hereafter acquire under any statute,
provision of this Restated Certificate of Incorporation, by-laws, agreement,
vote of stockholders or disinterested directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself
and any such director, officer or representative against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify him against such expense, liability or loss under the Delaware
General Corporation Law.
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NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
TENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
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 the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed by the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the 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 the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
stockholders or class of stockholders of the Corporation, as the case may be,
and also on the Corporation.
ELEVENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as director.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and also further amends the Corporation's Certificate
of Incorporation, as heretofore amended and restated, having been duly adopted
pursuant to the provisions of Section 242 and 245 of the General Corporation
Law of the State of Delaware, has been duly executed this day of February,
1998.
Aramark Corporation
/s/ Martin W. Spector
By___________________________________
MARTIN W. SPECTOR Executive Vice
President
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ANNEX VI
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT OF ARAMARK CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of the day of
February, 1998, which further amends and restates the Amended and Restated
Stockholders' Agreement dated as of December 14, 1984 (the "AGREEMENT"), by
and among ARAMARK CORPORATION (formerly The ARA Group, Inc. and ARA Holding
Company), a Delaware corporation ("ARAMARK"), and the parties identified on
the books of ARAMARK as "MANAGEMENT INVESTORS" or their "PERMITTED
TRANSFEREES" or as "OUTSIDE INVESTORS".
In consideration of the terms and conditions herein contained, the parties
hereto mutually agree as follows:
The parties hereto (other than ARAMARK) and any other person who hereafter
acquires equity securities of ARAMARK pursuant to the provisions of, and
subject to the restrictions and rights set forth in, this Agreement are
sometimes hereinafter referred to collectively, as the "STOCKHOLDERS" or,
individually, as a "STOCKHOLDER." The Management Investors and their Permitted
Transferees are sometimes hereinafter referred to collectively as the
"MANAGEMENT INVESTOR GROUP." Unless otherwise explicitly set forth herein, the
term "MANAGEMENT INVESTORS" shall mean only those individuals so identified on
the books of ARAMARK, exclusive of such individuals' respective heirs,
Permitted Transferees (as identified on the books of ARAMARK) or other
Transferees (as defined in Section 2.03(a) hereof); provided that the Board of
Directors of ARAMARK may, from time to time and in its sole discretion,
designate any Stockholder then employed by ARAMARK or its Subsidiaries a
"MANAGEMENT INVESTOR." Stockholders who are Permitted Transferees are
identified as such on the books of ARAMARK, along with the identity of their
respective transferors. Where a full-time employee or director has acquired or
acquires equity securities of ARAMARK in joint tenancy with their spouses or
in any other manner other than sole direct ownership, such employee or
director is deemed to be a Management Investor and such record owner is deemed
to be his or her Permitted Transferee.
A Transferee who is not already a party to this Agreement, by executing the
document referred to in Section 2.03(a) hereof, shall thereby become entitled
to the benefits of this Agreement and shall be deemed to be an "OUTSIDE
INVESTOR", except: if such Transferee is an employee of ARAMARK, then he or
she shall be deemed to be a "MANAGEMENT INVESTOR"; if such Transferee is a
Transferee pursuant to Section 3.01 of a Management Investor (or of his or her
Permitted Transferee), then he or she shall be deemed to be a "PERMITTED
TRANSFEREE" of such Management Investor. Determination of the classification
of a Stockholder by the Board of Directors shall be conclusive and binding on
all parties hereto.
ARAMARK's Common Stock, Class A--Composite Group, $.01 par value per share
(the "CLASS A COMMON STOCK"), Common Stock, Class B--Composite Group, $.01 par
value per share (the "CLASS B COMMON STOCK"), Common Stock, Class E--
Educational Resources Group, $.01 par value per share (the "CLASS E COMMON
STOCK"), Common Stock, Class F--Food and Support Services Group, $.01 par
value per share (the "CLASS F COMMON STOCK"), and Common Stock, Class U--
Uniform and Career Apparel Group, $.01 par value per share (the "CLASS U
COMMON STOCK"), along with any other class of common stock of ARAMARK
designated after the date hereof and determined by the Board of Directors to
be subject to this Agreement are collectively referred to herein as the
"COMMON STOCK," and when so referred to shall be treated as one class to which
all the provisions of this Agreement apply.
For purposes of this Agreement only, the employment of a Management Investor
shall be deemed terminated if he or she shall cease to be a director or an
active, full-time employee of ARAMARK or its Subsidiaries. Such termination of
employment shall not change the designation of such person as a Management
Investor.
The parties hereto desire to restrict the sale, assignment, transfer,
encumbrance or other disposition of the Common Stock, including issued and
outstanding shares of Common Stock as well as shares of Common Stock which may
be issued hereafter, or which may become issuable pursuant to the exercise of
options, and to provide for certain rights and obligations with respect
thereto as hereinafter provided.
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1. CERTAIN DEFINITIONS.
1.01 "AFFILIATE" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with another Person.
1.02 "APPRAISAL PRICE" of shares of any class of Common Stock shall mean the
fair market value of such shares, as determined by an Appraiser according to
the most recent existing appraisal of shares of such class of Common Stock,
which appraisal shall be as of a date not more than six months prior to the
use thereof. Such determination by the Appraiser shall be conclusive and
binding on all Stockholders and ARAMARK. Notwithstanding the foregoing, for
purposes of this Agreement, the "APPRAISAL PRICE" of the Class A Common Stock
shall mean ten times the Appraisal Price of the Class B Common Stock.
1.03 "APPRAISER" shall mean a firm headquartered in the United States of
nationally recognized standing in the business of appraisal or valuation of
securities which does not own any stock of ARAMARK and which has been selected
by the Board of Directors to act as an independent appraiser. The Board of
Directors shall review its selection of an Appraiser annually.
1.04 "CALL" or "CALLED" shall mean ARAMARK's option to purchase Common Stock
from the holder thereof referred to in Sections 6 and 7 hereof.
1.05 "COMPLETELY DISABLED" and "COMPLETE DISABILITY" shall mean a "permanent
and total disability" as now defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "CODE").
1.06 "NORMAL RETIREMENT" shall mean voluntary termination of employment with
ARAMARK after attaining the age of 60, on at least 90 days prior written
notice of such termination, where the retiree does not intend to, at the time
of termination, and in fact does not, engage in full-time employment following
such termination other than employment that is with a governmental or a
charitable, non-profit organization and that is not competitive with ARAMARK.
1.07 "PERSON" shall mean a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
1.08 "PROMISSORY NOTE" shall mean a subordinated installment note of ARAMARK
substantially in the form of Exhibit A to this Agreement, with a stated annual
rate of interest equal to the Applicable Federal Rate (as such term is defined
in the Code) as of the issue date of the Promissory Note, as determined by
ARAMARK; with equal annual installments of principal equal in amount to the
least of (1) 10% of the original principal amount of the Promissory Note, (2)
the Management Investor's highest annual base salary as an employee of
ARAMARK, or (3) $100,000; and with the final installment of principal equal to
the outstanding balance and due at the final maturity; and with the first
installment of principal due on the April 15 or October 15 occurring closest
to the first anniversary of the issue date of the Promissory Note; and with
the final maturity no later than the tenth anniversary of the Management
Investor's termination of employment; and with such other insertions as
ARAMARK shall reasonably make.
1.09 "PUT" shall mean the option of the holder to cause ARAMARK to purchase
Common Stock referred to in Section 5 hereof.
1.10 "SUBSIDIARY" shall mean any corporation or other entity of which
ARAMARK shall, directly or indirectly, own 50% or more of the equity, as
determined for purposes of this Agreement by the ARAMARK Board of Directors
and any other corporation or other entity in which ARAMARK shall directly or
indirectly have an equity investment and which the ARAMARK Board of Directors
shall in its sole discretion designate.
2. LIMITATIONS ON TRANSFERS OF SHARES.
2.01 TRANSFERS PROHIBITED UNLESS SPECIFICALLY PERMITTED. No Stockholder
shall transfer any shares of Common Stock at any time, unless such sale,
assignment, pledge or encumbrance or other transfer shall have been effected
in accordance with the terms of Section 3, 4, 5, 6 or 7 of this Agreement.
ARAMARK shall not transfer upon its books any shares of Common Stock held or
owned by any of the Stockholders to any person except in accordance with this
Agreement.
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2.02 INCONSISTENT AGREEMENTS PROHIBITED. Unless approved by the Board of
Directors, no Stockholder shall grant any proxy or enter into or agree to be
bound by any voting trust with respect to Common Stock nor shall any
Stockholder enter into any stockholder agreement or arrangement of any kind
with any person with respect to Common Stock inconsistent with the provisions
of this Agreement (whether or not such agreement and arrangement is with other
Stockholders or holders of Common Stock that are not parties to this
Agreement), including but not limited to, any agreement or arrangement with
respect to the acquisition, disposition or voting of shares of Common Stock,
or act, for any reason, as a member of a group or in concert with any other
persons in connection with the acquisition, disposition or voting of shares of
Common Stock in any manner which is inconsistent with the provisions of this
Agreement.
2.03 REQUIREMENTS FOR ALL TRANSFERS.
(a) TRANSFEREE MUST AGREE TO BE BOUND BY AGREEMENT. Unless otherwise
explicitly provided herein, no Stockholder shall sell, assign, pledge,
encumber or otherwise transfer any shares of Common Stock to any person
(all such persons, regardless of the method of transfer, shall be referred
to collectively as "TRANSFEREES" and individually as a "TRANSFEREE") unless
(a) such Transferee shall have executed, as a condition to its acquisition
of shares (or, in the case of a Transferee by will or the laws of descent,
record ownership on the books of ARAMARK) of Common Stock, an appropriate
document confirming that such Transferee takes such shares subject to all
the terms and conditions of this Agreement and (b) such document shall have
been delivered to and approved by ARAMARK prior to such Transferee's
acquisition of shares (or, in the case of a Transferee by will or the laws
of descent, record ownership on the books of ARAMARK) of Common Stock.
ARAMARK shall not unreasonably withhold or delay its approval of any such
document.
(b) TRANSFER MUST COMPLY WITH SECURITIES LAWS. No Stockholder shall sell,
assign, pledge, encumber or otherwise transfer any shares of Common Stock
at any time if such action would constitute a violation of any federal or
state securities or blue sky laws or a breach of the conditions to any
exemption from registration of the Common Stock under any such laws or a
breach of any undertaking or agreement of such Stockholder entered into
pursuant to such laws or in connection with obtaining an exemption
thereunder. Any Stockholder who proposes to sell, assign, pledge, encumber
or transfer any shares of Common Stock may deliver to ARAMARK an opinion of
counsel that such action would not result in any such violation or breach.
The delivery of such opinion shall be deemed to establish compliance with
the provisions of this Section 2.03(b) unless, within ten days after the
receipt by ARAMARK of such opinion, counsel for ARAMARK shall deliver an
opinion that such action would result in any such violation or breach (such
opinion to state the basis of the legal conclusions reached therein).
(c) ENDORSEMENT OF STOCK CERTIFICATES. Each certificate representing
shares of Common Stock shall bear endorsements reading substantially as
follows:
The securities represented by this certificate are subject to the right of
the Corporation to repurchase such securities on the terms and conditions
set forth in a Stockholders' Agreement dated as of December 14, 1984, as
the same may be amended from time to time, a copy of which may be obtained
from the Corporation or from the holder of this instrument. No transfer of
such securities will be made on the books of the Corporation unless
accompanied by evidence of compliance with the terms of such Agreement.
Such certificate shall bear any additional endorsement which may be
required for compliance with federal or state securities or blue sky laws.
In the case of uncertificated shares of Common Stock, the books of ARAMARK
shall bear appropriate notations reflecting the foregoing.
(d) TRANSFER MUST BE PROPORTIONATE. No stockholder shall sell, assign,
pledge, encumber or otherwise transfer any shares of Common Stock without
simultaneously selling, assigning, pledging, encumbering or otherwise
transferring to the same Transferee a proportionate number of shares of
each class of Common Stock owned by such selling stockholder. The initial
proportionate number shall be one share for one share; subject to increase
or decrease for any single transfer or class of transfer as may be
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determined by the Board of Directors with respect to the various classes of
Common Stock as a result of any change in the relative Appraisal Price, or
any subdivision or consolidation of shares, stock dividend, stock split,
recapitalization, reclassification or similar capital adjustment or for any
other reason.
3. CERTAIN PERMITTED TRANSFERS OF SHARES.
3.01 ESTATE PLANNING TRANSFERS, ETC. Subject to the restrictions set forth
in Section 2.03 and Section 4.05, a Stockholder shall be entitled to make the
following transfers of shares of Common Stock: (A) if made for nominal
consideration or as gifts: (i) any transfer or assignment to any one or more
of the following relatives of the Stockholder--spouse, child, grandchild,
parent - or to a trust of which there are and continue to be, during the term
of this Agreement no principal beneficiaries other than one or more of such
relatives; (ii) any transfer to any charitable organization which qualifies as
such under Section 501 (c) (3) or any successor provision of the Code; (iii)
any transfer to a legal representative in the event any Stockholder becomes
mentally incompetent; (iv) any transfer of record title to any nominee or
custodian, provided that the Stockholder so transferring such shares remains
the beneficial owner thereof; and (B) any transfer among members of a family,
their trusts or other entities, if approved by the Board of Directors.
3.02 PERMITTED PLEDGES. A Stockholder shall be entitled to pledge his or her
shares of Common Stock to ARAMARK, a commercial bank, savings and loan
institution or any other lending or financial institution as security for any
indebtedness of such Stockholder to such lender; provided that such lender
shall first agree not to dispose of such shares except in compliance with the
provisions of this Agreement.
3.03 AUTHORITY OF BOARD OF DIRECTORS TO APPROVE TRANSFERS; ACTIONS BY BOARD
OF DIRECTORS. Notwithstanding any other provision of this Agreement, the Board
of Directors shall have the authority to approve any transfer, or class,
category or type of transfer, of Common Stock. Such authority of the Board of
Directors shall extend to, among other things, (i) the authority to create an
internal market for shares of the Company's stock pursuant to which Management
Investors would be offered the opportunity to sell a portion of their shares
at the times and on the terms set by the Board of Directors, and (ii) the
authority to waive entirely the restrictions (including, without limitation,
restrictions relating to rights of first offer and reoffer, calls upon
termination of employment and sales, transfers and other dispositions of
shares) set forth in this Agreement. Any such approval may be revoked by the
Board of Directors at any time without notice and such revocation shall be
effective with respect to any action, including any or all transfers or
proposed transfers, unless, prior to such revocation, the shares have been
presented to the transfer agent for the purpose of registering such transfer,
in proper form and satisfying the requirements of Section 8-401 of the Uniform
Commercial Code or such other applicable law relating to the duty of an issuer
to register securities transfers.
The Board of Directors may delegate any and all authority it has under this
Agreement to any committee thereof and/or to any authorized officer or agent.
4. RIGHTS OF FIRST OFFER AND REOFFER OF SHARES.
4.01 TRANSFERS BY STOCKHOLDERS.
(a) A Stockholder may sell shares of Common Stock, by complying with the
terms of this Section 4. The selling Stockholder shall first give written
notice (a "NOTICE") to ARAMARK stating such selling Stockholder's desire to
make such transfer, the numbers and classes of shares of Common Stock to be
transferred (the "OFFERED SHARES"), and the price which the selling
Stockholder proposes to be paid for the Offered Shares, which proposed
price shall not be greater than the Appraisal Price of such shares of
Common Stock (the "FIRST OFFER PRICE").
(b) Upon receipt of the Notice, ARAMARK shall have the irrevocable and
exclusive option to buy up to all of the Offered Shares at the First Offer
Price; provided, however, that ARAMARK shall not have the right to purchase
any of the Offered Shares unless either (i) ARAMARK purchases all such
Offered Shares, or (ii) such selling Stockholder consents to the purchase
of less than all of the Offered Shares. ARAMARK's option under this Section
4.01(b) shall be exercisable by a written notice to such selling
Stockholder, given within 45 days from the date of receipt of the Notice.
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4.02 TRANSFER OF OFFERED SHARES TO THIRD PARTIES. If the Notice required to
be given pursuant to Section 4.01 has been duly given, and ARAMARK determines
not to exercise its option to purchase the Offered Shares or determines (with
the consent of the Stockholder who has made the First Offer) to exercise its
option to purchase less than all the Offered Shares, then the Stockholder who
has made such First Offer shall be free, for a period of 90 days from the
earlier of (i) the expiration of the option period with respect to such First
Offer pursuant to Section 4.01 or (ii) the date such Stockholder shall have
received written notice from ARAMARK stating that ARAMARK intends not to
exercise in whole or in part the option granted under Section 4.01 to sell to
any third-party Transferees the remaining Offered Shares, at a price equal to
or greater than the First Offer Price but not greater than the Appraisal
Price; provided, however, that the Transferee complies with the provisions of
Section 2.03; and provided further that, in the case where such selling
Stockholder is a Management Investor or a Permitted Transferee, such
Transferee shall have been approved by ARAMARK as a suitable investor in a
privately-owned services management company. ARAMARK shall not unreasonably
withhold or delay such approval.
4.03 REOFFERS. In the event the proposed purchase price of a third-party
Transferee for the Offered Shares is less than the First Offer Price, the
Stockholder desiring to sell at such lesser price shall not sell or otherwise
transfer any of the Offered Shares unless such selling Stockholder shall first
reoffer the Offered Shares at such lesser price to ARAMARK by giving written
notice (the "REOFFER NOTICE") to ARAMARK of such selling Stockholder's
intention to make such transfer at such lower price (the "REOFFER PRICE").
ARAMARK shall then have an irrevocable and exclusive option to purchase all or
part of the Offered Shares at the Reoffer Price, exercisable in the same
manner as provided in Section 4.01. In the event ARAMARK does not then elect
to purchase all the remaining Offered Shares, or ARAMARK elects (with the
consent of the Stockholder desiring to sell) to purchase less than all the
remaining Offered Shares, the remaining Offered Shares may be sold by such
selling Stockholder within 30 days following the earlier of (i) the expiration
of the option period with respect to such Reoffer pursuant to Section 4.01, or
(ii) the last date on which such selling Stockholder shall have received
written notice from ARAMARK stating that ARAMARK intends not to exercise in
whole or in part the option granted in this Section 4.03, at a price equal to
or greater than the Reoffer Price but not greater than the Appraisal Price;
provided, however, that the Transferee complies with the provisions of Section
2.03; and provided further that, in the case where such selling Stockholder is
a Management Investor or a Management Investor's Permitted Transferee, such
Transferee shall have been approved by ARAMARK as a suitable investor in a
privately-owned services management company. ARAMARK shall not unreasonably
withhold or delay such approval.
4.04 WAITING PERIOD WITH RESPECT TO SUBSEQUENT TRANSFERS. In the event that
ARAMARK does not exercise its option to purchase any or all of the Offered
Shares at the First Offer Price or at the Reoffer Price, and the Stockholder
desiring to sell shall not have sold the remaining Offered Shares to any
Transferee for any reason before the expiration of the 30 day period described
in Section 4.03 in the event of a Reoffer, or, if no Reoffer Notice is given,
the 90 day period described in Section 4.02, then such selling Stockholder
shall not sell any shares of Common Stock to any Transferee or other
Stockholder (other than to Permitted Transferees pursuant to Section 3.01) at
any price for a period of three months from the last day of such 30 or 90 day
period, as the case may be.
4.05 NO SALES OF CONTROL.
(a) Subject to Section 4.05(b) and except as provided in Section 3.03
(transfers approved by the Board of Directors), no Person or group of
Persons, as defined in Section 13 (d) (3) of the Securities Exchange Act of
1934 (the "EXCHANGE ACT"), including for the purposes of this paragraph as
part of such Person's group, Transferees pursuant to Section 3.01, shall
become (whether through the purchase of shares pursuant to this Agreement
or otherwise or through any other action) the holder, directly or
indirectly, of 10% or more of the outstanding shares of any class of Common
Stock. Any transaction resulting in a violation of this Section 4.05(a)
shall be void, and of no effect against ARAMARK, and ARAMARK shall not
record any such purported transfer on its books. Two or more Stockholders
owning in the aggregate 10% or more of such outstanding shares shall not be
deemed to be a group of Persons for the purposes of this Section 4.05
solely because such Stockholders are parties to this Agreement or because
such Stockholders are related by blood or marriage and/or because such
Stockholders are officers or directors of ARAMARK.
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(b) The provisions of Section 4.05(a) shall not apply to the acquisition
by ARAMARK, directly or indirectly, of shares of Common Stock,
notwithstanding that as a result of such acquisition any Person or group of
Persons acting in concert would own 10% or more of such outstanding shares
subsequent to such an acquisition, but shall apply to any subsequent
acquisition or other action by such Person or group of Persons.
4.06 FORM OF CONSIDERATION FOR SHARES. No offer to purchase or to sell
shares of Common Stock shall be deemed to be a valid offer under this Section
4 unless the purchase price of such offer is payable in cash or securities
that can be readily valued by reference to quoted trading prices. The purchase
price of shares upon exercise of an option under this Section 4 in respect of
a Notice which specifies only cash as the form of consideration shall be
payable only in cash.
4.07 MERGER TRANSACTION. Subject to any applicable provisions of the
Certificate of Incorporation or any loan agreement or instruments to which
ARAMARK is a party, ARAMARK may enter into any agreement of merger to merge
with or into any other corporation; and, in such event, Sections 4.01 through
4.06 of this Agreement shall not be applicable to such merger and all shares
may be transferred for such consideration as approved by the Board of
Directors and the Stockholders in accordance with applicable law.
5. PUT OF SHARES UPON DEATH, COMPLETE DISABILITY OR NORMAL RETIREMENT.
5.01 PUT IN EVENT OF DEATH, COMPLETE DISABILITY OR NORMAL
RETIREMENT. Subject to any instruments or agreements of ARAMARK from time to
time in effect restricting or otherwise governing the repurchase or retirement
of shares of ARAMARK's capital stock (the "LOAN AGREEMENTS") and to applicable
law, unless a Call pursuant to Section 6.01 shall have been exercised by
ARAMARK, upon the death, Complete Disability or Normal Retirement of any
Management Investor Group member, at the option of such Management Investor
Group member, such Management Investor Group member's estate, heirs or
personal representative, and such Management Investor Group member's Permitted
Transferees (other than Permitted Transferees specified in Section
3.01(A)(ii)) (collectively, the "HOLDERS" of such Management Investor Group
member's shares) and within 30 days of receipt by ARAMARK of a Notice from
such Holders, which notice must be given within 30 days from the date of the
appointment of a personal representative of such Management Investor Group
member, the date he or she became Completely Disabled, or the date of his or
her Normal Retirement, ARAMARK shall purchase from such Holders the shares of
Common Stock held by such Holders specified in such Notice up to 30% of such
shares so held at a purchase price determined in accordance with Section 5.02.
ARAMARK shall be under no obligation to purchase such shares unless it shall
have received a Notice from such Holders in accordance with this Section 5.01.
5.02 PURCHASE PRICE OF PUT SHARES. The purchase price for the shares of
Common Stock purchased pursuant to Section 5.01 shall be the Appraisal Price
of such shares. ARAMARK shall satisfy its obligation to purchase shares upon
the exercise of any Put granted under Section 5.01 with cash.
6. CALL OF SHARES UPON TERMINATION OF EMPLOYMENT.
6.01 CALL IN EVENT OF TERMINATION. Unless the shares of Common Stock held by
a Management Investor and his or her Permitted Transferees have been earlier
sold pursuant to Section 4 (rights of first offer and reoffer), including the
earlier recording of the transfer of such shares on the books of ARAMARK,
ARAMARK shall have an exclusive and irrevocable option, at any time and from
time to time during the period of 10 years following the termination of
employment of such Management Investor for any reason whatsoever (including
without limitation death, Complete Disability or Normal Retirement) to make a
purchase or purchases of up to all of the shares of Common Stock owned by such
Management Investor and his or her Permitted Transferees, at a purchase price,
with respect to any such exercise, determined in accordance with Section 6.02.
6.02 PURCHASE PRICE. The purchase price per share for any shares of Common
Stock purchased pursuant to Section 6.01 shall be the lesser of (i) the
Appraisal Price of such shares of Common Stock at the time ARAMARK gives
notice that it is exercising its Call option and (ii) the Appraisal Price of
such shares of
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Common Stock at the date of termination of employment, plus in the case where
ARAMARK gives notice it is exercising its Call option more than 120 days after
the date of termination of employment, 8% simple interest on such amount from
the date of termination of employment through the date ARAMARK gives notice
that it is exercising its Call option. ARAMARK shall satisfy its obligations
to purchase shares upon the exercise of such Calls with cash up to the least
of $100,000, or the Management Investor's highest annual base salary as an
employee of ARAMARK, or 10% of the aggregate purchase price for such Called
shares and, at the Company's option, with cash and/or Promissory Notes valued
at their principal amount for the remainder.
7. INVOLUNTARY TRANSFER OF SHARES.
7.01 CERTAIN INVOLUNTARY TRANSFERS; SELLER'S NOTICE. Except for involuntary
transfers (by foreclosure or otherwise) to ARAMARK of shares of Common Stock
pledged to ARAMARK, in the event a Stockholder shall involuntarily transfer
directly or indirectly any or all of his or her shares, for any reason other
than as a result of those events specified in Section 6, such Stockholder
shall give written notice within 30 days of such involuntary transfer (the
"STOCKHOLDER NOTICE") to ARAMARK, with a copy to the Transferee, stating the
fact that the involuntary transfer occurred, the reason therefor, the date of
the transfer, the name and address of the Transferee and the number of shares
acquired by the Transferee (the "ACQUIRED SHARES"). For purposes of this
Section 7 an involuntary transfer shall include, without limitation, a court-
ordered transfer, constructive trust or other device designed to transfer
economic benefit of share ownership.
7.02 RIGHT TO REPURCHASE. For a period of 60 days from the date of receipt
of the Stockholder Notice or, failing receipt of such notice, 60 days from the
date ARAMARK sends written notice to the Transferee that the transfer is
deemed to be an involuntary transfer subject to repurchase under this
Agreement, ARAMARK shall have an irrevocable and exclusive option to buy all
of the Acquired Shares, exercisable in the same manner as provided in Section
4.01, and the provisions of such applicable Section shall be followed in their
entirety except that the purchase price shall be as provided in Section 7.03.
7.03 PURCHASE PRICE. The purchase price for shares purchased pursuant to
Section 7.02 shall be payable in cash and shall be equal to the Appraisal
Price such shares of Common Stock at the time ARAMARK gives notice that it is
exercising its Call option.
8. LIMITED ACCESS TO INFORMATION.
8.01 NO DUTY TO DISCLOSE INFORMATION. Each of the parties to this Agreement
acknowledges and agrees that it is in the best interests of ARAMARK and the
Stockholders taken as a whole for ARAMARK to be able to conduct orderly
transactions in Common Stock on a continual basis (including in connection
with the internal market and repurchases upon termination of employment and
otherwise), and for ARAMARK concurrently to be able to consider from time to
time on a confidential basis potential transactions which could affect the
fair market value and/or the Appraisal Price of the Common Stock. Each of the
parties to this Agreement acknowledges and agrees that, at the time of a sale
by a Stockholder of shares of Common Stock pursuant to this Agreement, there
may have occurred or be proposed or pending an event or a transaction that
could affect the Appraisal Price of the Common Stock, and that the Appraisal
Price of the Common Stock (and, accordingly, the repurchase price) may be
substantially less than the fair market value as of the current date, and
further acknowledges and agrees that ARAMARK may have valid business reasons
not to, and in any case shall not be required to, disclose any event or
transaction that may have occurred or be proposed or pending at the time of
any such sale.
8.02 SALE OF ARAMARK FOLLOWING CALL. In the event that any entity, person,
or any group of persons acting in concert (excluding the Management Investors
as a group), acquires in any manner shares of Common Stock with 50% of the
ordinary voting rights of the outstanding shares of Common Stock or in the
event of the redemption or repurchase of all the shares of Common Stock in
connection with a sale of all or substantially all the assets of ARAMARK, or
the winding up, dissolution or liquidation of ARAMARK, within 90 days from the
date of a sale pursuant to Section 6.01 then, subject to the Loan Agreements,
ARAMARK and/or the purchaser of such shares of Common Stock with 50% of the
ordinary voting rights of the outstanding shares of Common Stock shall pay to
the Holders whose shares have been so purchased the excess, if any, of the
amount per share
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realized by ARAMARK's stockholders upon such acquisition, redemption,
repurchase, winding up, dissolution or liquidation over the purchase price per
share paid to such Holders pursuant to Section 6 less the interest paid on any
Promissory Notes paid as consideration for such stock and less a financing
cost for carrying such stock for any cash received, based on an interest rate
equal to the rate paid by ARAMARK under the Loan Agreements at the date of
payment hereunder, for the period from the date of payment to such Holders
pursuant to Section 6 to the date of such acquisition, redemption, repurchase,
winding up, dissolution or liquidation, for each share purchased by ARAMARK.
Determination of whether or not any such payment is appropriate, and the
amount of such payment, shall be made by the Board of Directors; and such
determination shall be conclusive and binding on all parties hereto.
9. NO RIGHT TO CONTINUED EMPLOYMENT. Neither this Agreement nor the ownership
of Common Stock by a Management Investor shall confer upon any Management
Investor any right to continue in the employ of ARAMARK or any of its
Subsidiaries or limit in any respect the right of ARAMARK or its Subsidiaries
to terminate his or her employment at any time.
10. CLOSING.
10.01 CLOSING DATE; PURCHASE PRICE. Any selling Stockholder and ARAMARK, as
purchaser, of shares of Common Stock pursuant to Section 4, 5, 6 or 7 shall
mutually determine a closing date (the "CLOSING DATE") which, unless this
Agreement otherwise explicitly provides, shall be not more than 60 business
days after ARAMARK gives notice that it will purchase such shares; provided,
however, that absent agreement, the Closing Date shall be the business day
determined by ARAMARK. In respect of shares of Common Stock distributed by any
employee benefit plan upon termination of employment, the Closing Date shall
be such date selected by ARAMARK consistent with the orderly administration of
such plan.
Notwithstanding anything in this Agreement to the contrary, the Closing Date
may be delayed in any case in which ARAMARK cannot, in compliance with the
Loan Agreements or applicable law, purchase any shares of Common Stock that it
is otherwise obligated to purchase until the earliest practicable date when
such closing may be effected in compliance with such Loan Agreements or
applicable law. The closing shall be held at 11:00 a.m., local time, at the
offices of ARAMARK or at such other time or place as the parties may agree.
The determination date of the Appraisal Price shall be appropriately changed
if the Closing Date is delayed in accordance with the foregoing paragraph.
10.02 SHARES NO LONGER OUTSTANDING. If a selling Stockholder shall fail to
deliver the certificates representing the shares of Common Stock to be sold or
shall otherwise fail to perform any obligation required to be performed at the
closing and ARAMARK shall have been ready to purchase such shares at the
closing, then effective at the closing, such shares shall no longer be deemed
to be outstanding, and all rights of the holder thereof as stockholder of
ARAMARK (except the right to receive from ARAMARK the purchase price therefor)
shall cease.
10.03 DELIVERIES AT CLOSING; METHOD OF PAYMENT OF PURCHASE PRICE. On the
Closing Date, any selling Stockholder shall deliver certificates with
appropriate transfer tax stamps affixed and with stock powers endorsed in
blank, representing the shares of Common Stock to be purchased, and ARAMARK,
as purchaser shall deliver to such Stockholder the purchase price which is
payable in cash (or by wire transfer or check) and the other consideration, if
any, to be given in exchange for such shares. In addition, if the person
selling shares is the personal representative of a deceased Stockholder, the
personal representative shall also deliver to the purchaser or purchasers (i)
copies of letters testamentary or letters of administration evidencing his or
her appointment and qualification, (ii) a certificate issued by the Internal
Revenue Service pursuant to Section 6325 of the Code discharging the shares
being sold from liens imposed by the Code and (iii) an estate tax waiver
issued by the state of the decedent's domicile.
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11. TERM. The terms and provisions of this Agreement may be terminated by an
instrument in writing signed by Management Investors who hold, in combination
with their Permitted Transferees, at least the majority of the Common Stock
held by Management Investors and their Permitted Transferees and by ARAMARK.
Notwithstanding the foregoing, the Board of Directors may terminate the
restrictive terms and provisions set forth herein with respect to any class of
Common Stock, effective upon or after the occurrence of a sale of shares of
such class of Common Stock to the public pursuant to an underwritten,
registered public offering under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
12. REGISTRATION OF COMMON STOCK. In the event of any registration under the
Securities Act and public offering of Common Stock, each Stockholder shall, at
a meeting convened for the purpose of amending the Certificate of
Incorporation, vote to increase the authorized number of shares of Common
Stock and, if necessary, to subdivide the outstanding shares of Common Stock
of ARAMARK, in both instances as recommended by a majority of the members of
the Board of Directors in order to effectuate such public offering.
13. INJUNCTIVE RELIEF. It is acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the
event of any such failure, an aggrieved person will be irreparably damaged and
will not have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
14. NOTICES. All notices, statements, instructions or other documents required
to be given hereunder, shall be in writing and shall be given either
personally, or by mailing the same in a sealed envelope, first-class mail,
postage prepaid, addressed to ARAMARK at its principal offices to the
attention of the General Counsel and to the other parties at their addresses
reflected in the stock records of ARAMARK, or sent by telegram, telex,
telecopy or similar form of telecommunication. All notices, statements,
instructions and other documents hereunder that are mailed shall be deemed to
have been given on the date of mailing.
15. COOPERATION. ARAMARK agrees that it will use all reasonable efforts under
the circumstances to help any Stockholder desiring to dispose of its Common
Stock pursuant to the provisions of this Agreement to do so.
16. MISCELLANEOUS.
16.01 SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties, and their respective successors and
assigns. The provisions of this Agreement are for the sole benefit of the
parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other persons. If any Transferee of any
Stockholder shall acquire any shares of Common Stock, in any manner, whether
by operation of law or otherwise, such shares shall be held subject to all of
the terms of this Agreement, and by taking and holding such shares such person
shall be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement.
ARAMARK may assign to any other Person its rights with respect to any
specific transaction pursuant to Section 4, 5, 6 or 7, provided that Person
complies with the provisions of Section 2.03.
16.02 GOVERNING LAW. Regardless of the place of execution, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware applicable to agreements made and to be wholly performed in such
State.
16.03 HEADINGS. Paragraph headings are inserted herein for convenience only
and do not form a part of this Agreement.
16.04 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions
contemplated herein, supersedes all prior written agreements
VI-9
<PAGE>
and negotiations and oral understandings, if any, and may not be amended,
supplemented or discharged except by performance or by an instrument in
writing signed by Management Investors who hold (in combination with their
Permitted Transferees) at least a majority of the Common Stock held by
Stockholders, and by ARAMARK. In the event of the amendment or modification of
this Agreement in accordance with its terms, the Stockholders shall cause the
Board of Directors of ARAMARK to meet within 30 days following such amendment
or modification or as soon thereafter as is practicable for the purpose of
amending the Certificate of Incorporation and By-Laws of ARAMARK, as may be
required as a result of such amendment or modification, and proposing such
amendments to the stockholders of ARAMARK entitled to vote thereon, and such
action shall be the first action to be taken at such meeting.
16.05 INSPECTION. A copy of this Agreement shall be filed with the Secretary
of ARAMARK and kept with the records of ARAMARK and shall be made available
for inspection by any stockholder of ARAMARK at the principal offices of
ARAMARK.
16.06 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature Pages Omitted]
VI-10
<PAGE>
EXHIBIT A
(TO AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT)
THIS NOTE IS NOT TRANSFERABLE UNLESS AS A CONDITION PRECEDENT TO THE
EFFECTIVENESS OF ANY TRANSFER THE PAYEE HAS OBTAINED THE WRITTEN
CONSENT OF THE COMPANY AS TO THE PROPOSED TRANSFER.
$
Philadelphia, Pennsylvania
, 19
SUBORDINATED INSTALLMENT NOTE
1. For value received, ARAMARK CORPORATION (formerly The ARA Group, Inc. and
ARA Holding Company), a Delaware corporation (the "COMPANY"), hereby promises
to pay to (the "PAYEE") the sum of $ in equal, annual installments
of $ and one final installment of $ on each [April/October] 15
commencing on [April/October] 15, 19 , and to pay simple interest at the rate
of % per annum on the unpaid balance thereof, semi-annually in arrears on
each April 15 and October 15.
2. The Payee may not sell, assign or otherwise transfer or encumber any
portion of this Note or interest herein without first procuring the written
consent of the Company, which consent the Company is under no obligation to
provide. No transfer of this Note shall be effective unless such transfer is
in compliance with the foregoing, including the requirements set forth in the
legend provided for above.
3. Both the principal of this Note and interest thereon are payable in
lawful money of the United States of America at 1101 Market Street,
Philadelphia, PA 19107, or such address of any subsequent principal executive
office of the Company within the United States of America as the Company shall
designate in writing to the Payee, or at the option of the Company, by check
mailed to the Payee at such address for the Payee as is indicated on the books
of the Company.
4. This Note may be prepaid in full, or in part, any time, without premium
or penalty. All prepayments shall be applied first to accrued interest and
then to installments of principal in the order of their maturities.
5. The indebtedness evidenced by this Note and the payment of the principal
of and interest on this Note are hereby expressly subordinated, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all
Senior Indebtedness.
5.1 "SENIOR INDEBTEDNESS" means the principal of, premium, if any, interest
and any other amounts due on (1) all Indebtedness incurred, assumed or
guaranteed by the Company, either before or after the date hereof, (excluding
any debt which by the terms of the instrument creating or evidencing the same
is not superior in right of payment to this Note), including, without
limitation, (a) any amount payable with respect to any lease, conditional sale
or installment sale agreement or other financing instrument or agreement which
in accordance with generally accepted accounting principles is, at the date
hereof or at the time the lease, conditional sale or installment sale
agreement or other financing instrument or agreement is entered into, or
assumed or guaranteed by, directly or indirectly, the Company, required to be
reflected as a liability on the face of the balance sheet of the Company, (b)
any amounts payable in respect to any interest rate exchange agreement,
currency exchange agreement or similar agreement and (c) any subordinated
indebtedness of a corporation merged with or into or acquired by the Company;
and (2) any renewals or extensions or refunding of any such Senior
Indebtedness or evidences of indebtedness issued in exchange for such Senior
Indebtedness.
5.2 "INDEBTEDNESS" means (a) all items, except items of capital stock or of
surplus or of general contingency reserves or of reserves for deferred income
taxes, which in accordance with generally accepted accounting principles in
effect on the date hereof should be included in determining total liabilities
as shown on
VI-11
<PAGE>
the liability side of a balance sheet of the Company as at the date of which
Indebtedness is to be determined, (b) all indebtedness secured by any
mortgage, pledge, lien or conditional sale or other title retention agreement
existing on any property or asset owned or held by the Company, whether or not
such indebtedness shall have been assumed, and (c) all indebtedness of others
which the Company has directly or indirectly guaranteed, endorsed, discounted
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which the Company has agreed to supply or advance
funds or otherwise to become liable directly or indirectly with respect
thereto, including, without limitation, indebtedness arising out of the sale
or transfer of accounts or notes receivable or any moneys due or to become
due.
6. In the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether voluntary or involuntary and whether in
bankruptcy, insolvency or receivership proceedings, or upon an assignment for
the benefit of creditors or any readjustment of debt, arrangement or
composition among creditors or any other marshalling of the assets and
liabilities of the Company or otherwise), then holders of Senior Indebtedness
shall first be paid in full, or provision made for such payment, before any
payment or distribution, directly or indirectly (including by way of set off)
is made upon the principal of or interest on this Note, and to that end the
holders of Senior Indebtedness shall be entitled to receive in payment thereof
any payment or distribution of assets of the Company, whether in cash or
property or securities, which may be payable or deliverable in any such
proceeding in respect of this Note. The Payee irrevocably authorizes, empowers
and directs all receivers, custodians, trustee, liquidators, conservators and
others having authority in the premises to effect all such payments and
deliveries. Notwithstanding any statute, including without limitation the
Federal Bankruptcy Code, any rule of law or bankruptcy procedures to the
contrary, the right of the holders of the Senior Indebtedness to have all of
the Senior Indebtedness paid and satisfied in full prior to the payment of any
amounts due the payee under this Note shall include, without limitation, the
right of the holders of the Senior Indebtedness to be paid in full all
interest accruing on the Senior Indebtedness due them after the filing of any
petition by or against the Company in connection with any bankruptcy or
similar proceeding or any other proceeding referred to in paragraph 6 hereof,
prior to the payment of any amounts in respect of the Note, including, without
limitation, any interest due to the Payee accruing after such date.
7. No payment, directly or indirectly (including by way of set off), shall
be made by the Company with respect to the principal of or interest on this
Note if (i) an event of default has happened with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding which if occurring prior to the stated maturity of such Senior
Indebtedness, permits holders thereof upon the giving of notice or passage of
time, or both, to accelerate the maturity thereof ("SENIOR INDEBTEDNESS
DEFAULT") and has not been cured, (ii) a payment by the Company to or for the
benefit of Payee would, immediately after giving effect thereto, result in a
Senior Indebtedness Default, or (iii) full payment of all amounts then due for
principal of (or premium, if any), interest or any other amounts due on Senior
Indebtedness shall not then have been made or duly provided for. Upon the
occurrence of any events described in (i), (ii) or (iii) described above,
notwithstanding any event of default under this Note by the Company, the Payee
may not accelerate the maturity of all or any portion of this Note, or take
any action towards collection of all or any portion of this Note or
enforcement of any rights, powers or remedies under this Note, or applicable
law until the earlier of the date on which a Senior Indebtedness Default (or
in the case of (iii) required payments shall have been duly provided for) have
been cured or such Senior Indebtedness has been paid in full.
8. In the event that, notwithstanding the foregoing, the Company shall make
any payment prohibited by Section 6 or 7, then, except as hereinafter in this
Section otherwise provided, unless and until any such Senior Indebtedness
Default shall have been cured or waived or shall cease to exist, such payment
shall be held in trust for the benefit of and shall be paid over to the
holders of Senior Indebtedness or their representative or representatives or
to the trustee or trustees under any indenture under which any instrument
evidencing the Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay in full all Senior
Indebtedness then due, after giving effect to any concurrent payment to the
holders of such Senior Indebtedness.
VI-12
<PAGE>
9. Subject to the payment in full of all Senior Indebtedness at the time
outstanding, the Payee shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of assets of the
Company applicable to the Senior Indebtedness until this Note shall be paid in
full, and no payments or distributions to the holders of Senior Indebtedness
by or on behalf of the Company from the proceeds that would otherwise be
payable to the Payee, or by or on behalf of the Payee, shall as between the
Company and the Payee, be deemed to be a payment by the Company to or for the
account of holders of Senior Indebtedness.
10. No holder of Senior Indebtedness shall be prejudiced in his or her right
to enforce subordination of this Note by any act on the part of the Company.
The above provisions in regard to subordination are intended solely for the
purpose of defining the relative rights of the Payee on the one hand, and the
holders of Senior Indebtedness, on the other hand, and nothing contained in
this Note is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness and the Payee, the
obligation of the Company, which is absolute and unconditional, to pay to the
Payee, subject to the rights of the holders of Senior Indebtedness, the
principal of and interest on this Note as and when the same shall become due
and payable in accordance with its terms, subject to the rights, if any, under
the above subordination provisions, of holders of Senior Indebtedness to
receive cash, property or securities of the Company payable in respect
thereof.
11. The principal of this Note and accrued unpaid interest thereon shall (if
not already due and payable) upon written demand by the Payee become due and
payable forthwith, if there shall have been a default in the payment of any
interest on, or principal of, this Note when it becomes due and payable (but
only if such payment is not prohibited by the provisions of this Note), and
such default shall have continued for a period of 30 days after written notice
of such default shall have been given to the Company and shall be continuing
at the time of such written demand.
12. No course of dealing between the Company and the Payee or any delay on
the part of the Payee in exercising any rights under this Note shall operate
as a waiver of any rights of the Payee.
13. All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered, or deposited in the mails,
first-class, postage prepaid, or delivered to a telegraph office for
transmission, if to the Payee, at such address for the Payee as is indicated
on the books of the Company or if to the Company, at the address of the
principal executive offices of the Company as provided above.
14. This Note shall be governed by the laws of the State of Delaware.
ARAMARK CORPORATION
By:
----------------------------------
Treasurer
VI-13
<PAGE>
ANNEX VII
ARAMARK CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Public Accountants................................. VII-3
Consolidated Balance Sheets:
As of October 3, 1997 and September 27, 1996............................. VII-4
Consolidated Statements of Income:
Fiscal Years 1997, 1996 and 1995......................................... VII-6
Consolidated Statements of Cash Flows:
Fiscal Years 1997, 1996 and 1995......................................... VII-7
Consolidated Statements of Shareholders' Equity:
Fiscal Years 1997, 1996 and 1995......................................... VII-8
Notes to Consolidated Financial Statements............................... VII-11
</TABLE>
VII-1
<PAGE>
[This page intentionally left blank]
VII-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ARAMARK Corporation:
We have audited the accompanying consolidated balance sheets of ARAMARK
Corporation (a Delaware corporation) and subsidiaries as of October 3, 1997
and September 27, 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended October 3, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ARAMARK Corporation and
subsidiaries as of October 3, 1997 and September 27, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended October 3, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Philadelphia, Pennsylvania
November 10, 1997
VII-3
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 27,352 $ 25,283
Receivables (less allowances: 1997, $23,158; 1996,
$16,973).............................................. 517,035 594,579
Inventories............................................ 366,515 340,107
Prepayments and other current assets................... 67,314 68,651
---------- ----------
Total current assets................................. 978,216 1,028,620
---------- ----------
Property and Equipment, at Cost:
Land, buildings and improvements....................... 507,775 446,240
Service equipment and fixtures......................... 1,170,230 1,139,262
Leased property under capital leases................... 10,992 12,489
---------- ----------
1,688,997 1,597,991
Less-Accumulated depreciation........................ 821,821 770,327
---------- ----------
867,176 827,664
---------- ----------
Goodwill................................................. 623,841 683,814
---------- ----------
Other Assets............................................. 284,346 304,684
---------- ----------
$2,753,579 $2,844,782
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-4
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings........... $ 18,517 $ 26,092
Accounts payable..................................... 459,847 506,803
Accrued payroll and related expenses................. 156,216 163,806
Other accrued expenses and current liabilities....... 302,171 281,027
---------- ----------
Total current liabilities.......................... 936,751 977,728
---------- ----------
Long-Term Borrowings:
Senior............................................... 1,100,819 1,183,047
Subordinated......................................... 129,027 161,189
Obligations under capital leases..................... 2,615 3,846
---------- ----------
1,232,461 1,348,082
Less-current portion................................. 18,517 26,092
---------- ----------
Total long-term borrowings......................... 1,213,944 1,321,990
---------- ----------
Deferred Income Taxes and Other Noncurrent
Liabilities........................................... 209,583 230,249
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement................. 23,254 18,614
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Class A common stock, par value $.01; authorized:
25,000,000 shares; issued: 1997--1,961,413 shares;
1996--1,978,326 shares.............................. 20 20
Class B common stock, par value $.01; authorized:
150,000,000 shares; issued: 1997--20,450,100 shares;
1996--22,732,673 shares............................. 205 227
Earnings retained for use in the business............ 394,090 309,437
Cumulative translation adjustment.................... (1,014) 5,131
Impact of potential repurchase feature of common
stock............................................... (23,254) (18,614)
---------- ----------
Total.............................................. 370,047 296,201
---------- ----------
$2,753,579 $2,844,782
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-5
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED OCTOBER 3, 1997, SEPTEMBER 27, 1996 AND SEPTEMBER
29, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $6,310,417 $6,122,500 $5,600,645
---------- ---------- ----------
Costs and Expenses:
Cost of services provided................. 5,715,402 5,565,038 5,094,179
Depreciation and amortization............. 191,732 182,785 156,869
Selling and general corporate expense..... 83,079 82,354 72,602
Other expense (income), net............... (11,655) (2,850) --
---------- ---------- ----------
5,978,558 5,827,327 5,323,650
---------- ---------- ----------
Operating income........................ 331,859 295,173 276,995
Interest Expense, net....................... 116,012 116,014 109,418
---------- ---------- ----------
Income before income taxes.............. 215,847 179,159 167,577
Provision For Income Taxes.................. 69,739 66,931 67,388
---------- ---------- ----------
Income Before Extraordinary Item............ 146,108 112,228 100,189
Extraordinary Item Due to Early
Extinguishment of Debt (net of income taxes
of $1,839 in 1996 and $4,458 in 1995)...... -- 2,758 6,686
---------- ---------- ----------
Net Income.................................. $ 146,108 $ 109,470 $ 93,503
========== ========== ==========
Earnings Per Share:
Income before extraordinary item.......... $ 3.28 $ 2.37 $ 2.01
Net income................................ $ 3.28 $ 2.31 $ 1.88
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-6
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED OCTOBER 3, 1997, SEPTEMBER 27, 1996 AND SEPTEMBER
29, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 146,108 $ 109,470 $ 93,503
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 191,732 182,785 156,869
Income taxes deferred....................... (11,049) (27,604) 4,920
Extraordinary item.......................... -- 2,758 6,686
Changes in noncash working capital:
Receivables................................. (19,934) (62,239) (25,162)
Inventories................................. (32,428) (9,734) (13,992)
Prepayments................................. (5,740) (209) 13,244
Accounts payable............................ (61,348) 28,973 25,186
Accrued expenses............................ 48,364 27,245 22,737
Changes in other noncurrent liabilities...... (1,651) (461) (6,525)
Changes in other assets...................... (9,727) (9,217) 4,020
Other, net................................... (14,261) (2,494) (2,232)
--------- --------- ---------
Net cash provided by operating activities.. 230,066 239,273 279,254
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment.......... (197,835) (190,896) (193,470)
Disposals of property and equipment.......... 27,641 13,099 16,063
Sale of investments.......................... 9,284 -- 16,203
Divestiture of certain businesses............ 119,152 51,285 1,719
Purchase of subsidiary stock................. -- -- (20,491)
Acquisition of certain businesses:
Working capital other than cash acquired..... (74) (29,042) (12,227)
Property and equipment....................... (4,163) (11,105) (36,261)
Additions to intangibles and other assets.... (5,688) (72,616) (306,067)
Other........................................ (8,020) (8,362) (2,268)
--------- --------- ---------
Net cash used in investing activities...... (59,703) (247,637) (536,799)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from additional long-term
borrowings.................................. 127,323 155,510 486,844
Payment of long-term borrowings including
premiums.................................... (242,944) (95,510) (209,742)
Redemption of preferred stock................ -- (6,359) (1,984)
Proceeds from issuance of common stock....... 14,338 13,949 9,718
Repurchase of common stock................... (65,463) (54,849) (26,435)
Payment of preferred stock dividend.......... -- (1,067) (1,049)
Other........................................ (1,548) (1,109) (4,151)
--------- --------- ---------
Net cash (used in)/provided by financing
activities................................ (168,294) 10,565 253,201
--------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................. 2,069 2,201 (4,344)
Cash and cash equivalents, beginning of year.. 25,283 23,082 27,426
--------- --------- ---------
Cash and cash equivalents, end of year........ $ 27,352 $ 25,283 $ 23,082
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-7
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 3, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
IMPACT OF
POTENTIAL
CLASS A CLASS B CUMULATIVE REPURCHASE
COMMON COMMON CAPITAL RETAINED TRANSLATION FEATURE OF
STOCK STOCK SURPLUS EARNINGS ADJUSTMENT COMMON STOCK
------- ------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 27,
1996................... $20 $227 $ -- $309,437 $ 5,131 $(18,614)
Net income.............. 146,108
Issuance of Class A
common stock to
employee
benefit plans.......... 384
Issuance of Class B com-
mon stock.............. 24 25,025
Retirement of common
stock.................. (46) (25,409) (61,455)
Change during the peri-
od..................... (6,145) (4,640)
--- ---- -------- -------- ------- --------
Balance, October 3,
1997................... $20 $205 $ -- $394,090 $(1,014) $(23,254)
=== ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-8
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
IMPACT OF
POTENTIAL
SERIES C CLASS A CLASS B CUMULATIVE REPURCHASE
PREFERRED COMMON COMMON CAPITAL RETAINED TRANSLATION FEATURE OF
STOCK STOCK STOCK SURPLUS EARNINGS ADJUSTMENT COMMON STOCK
--------- ------- ------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 29,
1995................... $14,965 $21 $235 $ -- $247,805 $8,318 $(19,060)
Net income.............. 109,470
Dividends on preferred
stock.................. (769)
Issuance of Class A
common stock to
employee benefit
plans.................. 5,728
Issuance of Class B com-
mon stock.............. 25 30,519
Retirement of common and
preferred stock........ (14,965) (1) (33) (36,247) (47,069)
Change during the peri-
od..................... (3,187) 446
------- --- ---- ------- -------- ------ --------
Balance, September 27,
1996................... $ -- $20 $227 $ -- $309,437 $5,131 $(18,614)
======= === ==== ======= ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-9
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
IMPACT OF
POTENTIAL
SERIES C CLASS A CLASS B CUMULATIVE REPURCHASE
PREFERRED COMMON COMMON CAPITAL RETAINED TRANSLATION FEATURE OF
STOCK STOCK STOCK SURPLUS EARNINGS ADJUSTMENT COMMON STOCK
--------- ------- ------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1994................... $16,949 $21 $243 $ -- $178,587 $7,550 $(20,791)
Net income.............. 93,503
Dividends on preferred
stock.................. (1,046)
Issuance of Class A
common stock to
employee benefit
plans.................. 6,576
Issuance of Class B com-
mon stock.............. 31 20,637
Retirement of common and
preferred stock........ (1,984) (39) (27,213) (23,239)
Change during the peri-
od..................... 768 1,731
------- --- ---- -------- -------- ------ --------
Balance, September 29,
1995................... $14,965 $21 $235 $ -- $247,805 $8,318 $(19,060)
======= === ==== ======== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII-10
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Company's fiscal year is the fifty-two or fifty-three week period which
ends on the Friday nearest September 30th. The fiscal year ended October 3,
1997, September 27, 1996 and September 29, 1995 are fifty-three, fifty-two and
fifty-two week periods, respectively.
Principles of Consolidation, etc.
The consolidated financial statements include the accounts of the Company
and all its subsidiaries. All significant intercompany balances and
transactions have been eliminated. Certain reclassifications were made to the
prior year financial statements to conform to the fiscal 1997 presentation.
In fiscal 1998, the Company is required to adopt the provisions of Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS
No. 128 requires the disclosure of "basic" and "diluted" earnings per share.
For the fiscal year ended October 3, 1997, pro forma basic earnings per share
under SFAS No. 128 would be $3.49. Diluted earnings per share would not be
materially different from reported earnings per share.
In fiscal 1999, the Company is required to adopt the provisions of SFAS No.
130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company is currently
assessing the impact the adoption will have on the consolidated financial
statements. The Company will complete its analysis of the disclosure
requirements of these standards in fiscal 1998.
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. Actual results could differ from those estimates.
Currency Translation
Gains and losses resulting from the translation of financial statements of
non-U.S. subsidiaries are reflected as a currency translation adjustment in
shareholders' equity. Currency transaction gains and losses included in
operating results for fiscal 1997, 1996 and 1995 were not significant.
Current Assets
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories are valued at the lower of cost (principally the first-in,
first-out method) or market. The LIFO (last-in, first-out) method of
determining cost is used to value directly marketed career apparel and public
safety clothing and equipment. The stated value of inventories determined
using the LIFO method is not significantly different from replacement or
current cost. Personalized work apparel and linens in service are recorded at
cost and are amortized over their estimated useful lives, approximately two
years. In accordance with industry practice, magazines and books are sold to
retailers with the right to return unsold items for ultimate credit from the
publishers.
VII-11
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
The components of inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Food........................................................... 21.1% 22.5%
Career apparel, safety equipment and linens.................... 64.5% 62.2%
Magazines and books............................................ 6.7% 7.0%
Parts, supplies and novelties.................................. 7.7% 8.3%
----- -----
100.0% 100.0%
===== =====
</TABLE>
Property and Equipment
Property and equipment are stated at cost and are depreciated over their
estimated useful lives on a straight-line basis. Gains and losses on
dispositions are included in operating results. Maintenance and repairs are
charged to operations currently, and replacements and significant improvements
are capitalized. The estimated useful lives for the major categories of
property and equipment are 10 to 40 years for buildings and improvements and 3
to 10 years for service equipment and fixtures. Depreciation expense in fiscal
1997, 1996 and 1995 was $136.1 million, $129.1 million and $116.4 million,
respectively.
Goodwill
Goodwill, which represents the excess of cost over fair value of the net
assets of acquired businesses, is being amortized on a straight-line basis
principally over 40 years. The Company develops operating income projections
for each of its lines of business and evaluates the recoverability and
amortization period of goodwill using these projections. In fiscal 1997, the
Company wrote off certain intangible assets as discussed in Note 2. Based upon
management's current assessment, the estimated remaining amortization period
of goodwill is appropriate and the remaining balance is fully recoverable.
Accumulated amortization at October 3, 1997 and September 27, 1996 was $162.2
million and $150.5 million, respectively.
Other Assets
Other assets consist primarily of investments in less than 50% owned
entities, contract rights, customer lists, and long-term receivables.
Investments in which the Company owns more than 20% but less than a majority
are accounted for using the equity method. Investments in which the Company
owns less than 20% are accounted for under the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" or the cost
method, as applicable. Contract rights and customer lists are being amortized
on a straight-line basis over the expected period of benefit, 3 to 20 years.
Other Liabilities
Other noncurrent liabilities consist primarily of deferred compensation,
insurance accruals, deferred gains arising from sale and leaseback
transactions and subordinated installment notes arising from repurchases of
common stock.
The Company is self-insured for a limited portion of the risk retained under
its general liability and workers' compensation arrangements. Self-insurance
reserves are determined based on actuarial analyses. The self-insurance
reserves for workers' compensation insurance are accrued on a present value
basis using a discount rate which approximates a risk-free rate.
Earnings Per Share
Earnings per share is reported on a fully diluted Common Stock, Class B
equivalent basis (which reflects Common Stock, Class A shares converted to a
Class B basis, ten for one) and is based upon the weighted average
VII-12
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
number of common shares outstanding during the respective periods, plus the
common equivalent shares, if dilutive, that would result from the exercise of
stock options. Fully diluted earnings per share approximates primary earnings
per share and is equivalent to fully diluted earnings per share under the
"two-class" method.
Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Interest Paid........................................... $106.4 $108.1 $107.4
Income Taxes Paid....................................... $ 63.0 $ 91.4 $ 53.5
</TABLE>
Significant noncash investing and financing activities are as follows:
. During fiscal 1997, 1996 and 1995, the Company contributed $0.4 million,
$5.7 million and $6.6 million, respectively, of Class A Common Stock to
its employee benefit plans to fund previously accrued obligations. In
addition, during fiscal 1997, 1996 and 1995, the Company contributed $2.3
million, $1.7 million and $1.8 million, respectively, of stock units to
its stock unit retirement plan in satisfaction of its accrued
obligations. See Note 5.
. During fiscal 1997, 1996 and 1995, the Company received $10.5 million,
$7.2 million and $9.4 million, respectively, of employee notes under its
Deferred Payment program as partial consideration for the issuance of
Common Stock Class B. Also, during fiscal 1997, 1996 and 1995, the
Company issued subordinated installment notes of $21.9 million, $26.8
million and $22.5 million, respectively, as partial consideration for
repurchases of Common Stock. See Note 7.
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.:
In the second quarter of fiscal 1997, the Company sold an approximate 83%
interest in its Spectrum Healthcare Services, Inc. subsidiary (Spectrum).
Total consideration was approximately $158 million and included cash ($125
million), notes and a warrant. The transaction resulted in a pre-tax gain of
$72.4 million, net of transaction costs and reserves established for
indemnification of certain matters related to insurance, legal and other
matters ($20 million), and is included in "Other expense/income" in the
accompanying consolidated statements of income. No income taxes have been
provided on the gain due to permanent differences in the underlying book and
tax basis of Spectrum. In fiscal 1996, the business had approximately $500
million in annual revenues and a normalized operating margin of approximately
4%. Cash proceeds from the divestiture were used to repay borrowings under the
$1 billion credit facility. Also reflected in other expense/income, are pre-
tax charges of $69.8 million, primarily to write off certain intangible assets
in the Food and Support Services and Distributive segments. These charges were
partially offset by a gain of $9.1 million on the sale of an investment in
Brylane, Inc., acquired in connection with the fiscal 1996 King-Size
divestiture described below.
The amount of the charges applicable to the Food and Support Services
segment was approximately $30 million due primarily to recognize an impairment
of goodwill in a European operation and to reduce certain other assets to net
realizable value. Operating results at the subsidiary have continued to be
significantly below management's expectations and as a result, at year-end,
future operations have been reassessed. The goodwill impairment was determined
based on a discounted cash flow basis. Also, as a result of increased
competition and consolidation in the magazine wholesale distribution industry
and continuing operating losses in the Distributive segment, management
recently finalized a plan to reposition the distributive business, including
the divestiture of certain operations with a book value at October 3, 1997 of
approximately $29 million including intangibles. This resulted in a $34
million pre-tax charge. The asset write-down was determined based on estimates
of discounted future cash flows. The impairment loss on operations to be
divested was based on preliminary indications of value for those operations
and their sale is expected to be completed during fiscal 1998.
VII-13
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.--(CONTINUED):
In the first quarter of fiscal 1996, the Company sold the King-Size division
of its Uniform and Career Apparel business. The net selling price was
approximately $51 million in cash plus "warrants" in Brylane, Inc. and
resulted in a pre-tax gain of $37 million, which was offset by other charges
related to asset realization ($20 million) and insurance, legal and other
matters ($14 million), including a $2 million charge for environmental
liabilities, and is reflected as "Other expense/income" in the accompanying
consolidated statements of income. The environmental liabilities related to
several minor remediation projects involving properties no longer in service.
These remediation projects will not have any material ongoing financial impact
on the Company's financial statements. The King-Size operations were not
material to the Company's consolidated revenues or operating income.
At fiscal 1996 yearend, the Company acquired Crest Uniform Company, a
provider of uniform apparel to the hospitality and healthcare markets for cash
of approximately $95 million. The acquisition was accounted for under the
purchase method of accounting. The Company's pro forma results of operations
for fiscal 1996 and 1995 would not have been materially different assuming the
acquisition had occurred as of the beginning of the respective periods.
During fiscal 1995, the Company acquired the following businesses: Harry M.
Stevens, a provider of food and support services to stadiums and arenas late
in the first quarter for approximately $125 million in cash; two magazine and
book distribution companies, Meader Distributing Co., Inc. and Rainer News,
Inc., one in the first quarter and one late in the third quarter for
approximately $28 million in cash; Todd Uniform, Inc., a uniform rental
business late in the fourth quarter for approximately $120 million in cash;
and Gall's, Inc. a direct marketer of public safety clothing and equipment
late in the fourth quarter for approximately $87 million in cash. The
acquisitions were accounted for under the purchase method of accounting and
the fiscal 1995 financial statements reflect the results of operations and
cash flows of the acquired companies from the dates of the acquisitions. Had
these acquisitions occurred as of the beginning of the fiscal period, pro
forma consolidated revenues, income before extraordinary items, net income and
earnings per share, would have been approximately $5.8 billion, $91.1 million,
$84.4 million and $1.69, respectively. These pro forma results are unaudited
and are based on historical results, adjusted for the impact of certain
acquisition related adjustments, such as: increased amortization of
intangibles, increased interest expense on acquisition debt, and the related
income tax effects. Pro forma results do not reflect any synergies that might
be achieved from combined operations and therefore, in management's opinion,
are not indicative of what actual results would have been if the acquisitions
had occurred at the beginning of the respective periods. In addition, they are
not intended to be a projection of future results.
NOTE 3. EXTRAORDINARY ITEM:
During fiscal 1996, the Company redeemed its $80 million 8.25% senior notes
for a premium. The debt extinguishment was financed through the issuance of a
$125 million 6.79% senior note. Additionally, the Company replaced its credit
facility with a new $1 billion credit facility (See Note 4), writing off the
unamortized balance of financing costs related to the old credit facility. The
resultant extraordinary charge on these transactions was $2.8 million or $0.06
per share.
During fiscal 1995, the Company redeemed its $125 million 12% subordinated
debentures and its $50 million 10.25% senior note for a premium. The debt
extinguishment was financed through the issuance of 8.15% and 8% senior notes
(see Note 4). The resultant extraordinary charge was $6.7 million or $0.13 per
share.
VII-14
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. BORROWINGS:
Long-term borrowings at October 3, 1997 and September 27, 1996 are
summarized in the following table:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Senior:
Credit facility borrowings......................... $ 370,000 $ 596,400
Canadian credit facility........................... 39,350 45,123
6.79% note, payable in installments through 2003... 125,000 125,000
7.10% notes, due December 2006..................... 124,827 --
7.25% notes and debentures due August 2007......... 32,160 --
8% notes, due April 2002........................... 100,000 100,000
8.15% notes, due May 2005.......................... 150,000 150,000
10 5/8% notes, due August 2000..................... 100,000 100,000
Other.............................................. 59,482 66,524
---------- ----------
1,100,819 1,183,047
---------- ----------
Subordinated:
8.5% subordinated notes, due June 2003............. 100,000 100,000
10% exchangeable debentures and notes, due August
2000.............................................. 26,689 58,849
Other.............................................. 2,338 2,340
---------- ----------
129,027 161,189
---------- ----------
Obligations under capital leases..................... 2,615 3,846
---------- ----------
1,232,461 1,348,082
Less-current portion................................. 18,517 26,092
---------- ----------
$1,213,944 $1,321,990
========== ==========
</TABLE>
The non-amortizing $1.0 billion revolving credit facility ("Credit
Agreement") is provided by a group of banks and matures in June 2001. Interest
under the Credit Agreement is based on the Prime Rate, LIBOR plus a spread of
.15% to .625% (as of October 3, 1997--.33%) or the Certificate of Deposit Rate
plus a spread of .25% to .725% (as of October 3, 1997--.43%), at the option of
the Company. The Company pays a fee of .10% to .375% (as of October 3, 1997--
.17%) on the entire credit facility. The spread and fee margins are based on
certain financial ratios as defined.
The non-amortizing C$80 million Canadian revolving credit facility provides
for either U.S. dollar or Canadian dollar borrowings and matures in June 2001.
Interest on this facility is based on the Canadian Bankers Acceptance Rate,
U.S. Prime Rate, Canadian Prime Rate or LIBOR plus a spread of up to 5/8%, as
defined. As of October 3, 1997, all borrowings under this facility are payable
in Canadian dollars, with a weighted average interest rate of 4.0%. The
Company pays a fee of .17% on the entire credit facility.
The Company's Children's World Learning Centers, Inc. (CWLC) subsidiary also
has a $125 million revolving credit facility with a group of banks. The credit
facility matures in August 2003, with quarterly commitment reductions of $5
million starting in September 2001, which increase to $6.25 million starting
September 2002. Interest under the credit facility is based on the Prime Rate
plus a spread of 0% to 1/4% or LIBOR plus a spread of 1/2% to 1%, at the
option of CWLC. CWLC pays a fee of .2% to .375% (as of October 3, 1997--.225%)
on the unborrowed portion of the credit facility. The spread and fee margins
are based on certain financial ratios as defined. As of October 3, 1997 there
were no borrowings outstanding under this credit facility.
VII-15
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. BORROWINGS--(CONTINUED):
The 6.79% note is payable in $25 million annual installments beginning
January 1999, with a final maturity of January 2003.
The 7.25% notes and debentures may be exchanged, at par, beginning in June
1998, in whole or in part, at the option of the holder, for 7.10% senior notes
due December 2006. The Company has the right to redeem these notes and
debentures, at par, upon being presented with a notice of conversion or at any
time after June 2004.
The 10 5/8% senior notes require a sinking fund payment of $50 million in
August 1999 with a final maturity in August 2000.
The 8 1/2% subordinated notes may be redeemed at the Company's option, in
whole or in part, beginning June 1998 at a price equal to 104.25% of their
principal amount and thereafter at prices declining to par in 2002, together
with accrued interest.
The 10% subordinated exchangeable debentures and notes may be exchanged at
any time in whole or part, at the option of the holder, for 10 5/8% senior
notes due August 2000 at an exchange ratio of .93.
Accrued interest on borrowings totaling $27.7 million at October 3, 1997 and
$24.3 million at September 27, 1996 is included in current liabilities as
"Other accrued expenses."
The Company utilizes derivative financial instruments, such as interest rate
swap and forward exchange agreements to manage changes in market conditions
related to debt obligations and foreign currency exposures. At October 3, 1997
and September 27, 1996, the Company has $197 million and $250 million,
respectively, of interest rate exchange agreements fixing the rate on a like
amount of borrowings under the Credit Agreement at an average effective rate
of 6.7% and 6.2%, respectively. As of October 3, 1997, interest rate exchange
agreements remain in effect for periods ranging from 3 to 25 months. All
interest rate swaps are accounted for as hedges under the accrual method with
the net payments under the terms of the swap agreements recognized currently
in income as a component of interest expense. Gains or losses on the
termination of interest rate swaps are deferred and amortized over the
remaining life of the terminated swap agreement. Interest rate swaps, for
which the designated debt instrument being hedged is extinguished, are
accounted for on the fair value method from the extinguishment date, if not
concurrently terminated, with gains and losses recognized currently in the
consolidated statement of income. The Company has a $24 million foreign
currency swap agreement maturing in August 2000. This swap hedges the currency
exposure of its net investment in Spain and accordingly, gains and losses on
the currency swap are recorded as a component of the cumulative translation
adjustment. The counterparties to the above derivative agreements are major
international banks. The Company continually monitors its positions and credit
ratings of its counterparties, and does not anticipate nonperformance by the
counterparties.
The following summarizes the fair value of the Company's financial
instruments as of October 3, 1997 and September 27, 1996. The fair values were
computed using market quotes, if available, or based on discounted cash flows
using market interest rates as of the end of the respective periods.
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
ASSET/(LIABILITY) IN MILLIONS AMOUNT VALUE AMOUNT VALUE
----------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Long-term debt.................. $(1,232.5) $(1,263.5) $(1,348.1) $(1,364.6)
Interest rate swap agreements... -- (0.7) -- 0.1
Foreign currency swap agree-
ment........................... 3.6 2.8 0.4 0.1
</TABLE>
VII-16
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. BORROWINGS--(CONTINUED):
The Credit Agreement contains restrictive covenants which provide, among
other things, limitations on liens, dispositions of material assets and
repurchases of capital stock. The terms of the Credit Agreement also require
that the Company maintain certain specified minimum ratios of cash flow to
fixed charges and to total borrowings and certain minimum levels of net worth
(as defined). At October 3, 1997, the Company was in compliance with all of
these covenants. Assets with a net book value of $2.2 million at October 3,
1997, are subject to liens under several of the Company's borrowing
arrangements.
Long-term borrowings maturing in the next five years, excluding capital
lease obligations, are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1998.......................................................... $ 17,812
1999.......................................................... 78,568
2000.......................................................... 109,183
2001.......................................................... 460,209
2002.......................................................... 125,291
</TABLE>
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
In the United States, the Company maintains qualified contributory and non-
contributory retirement plans for eligible employees, with Company
contributions to the plans based on earnings performance or salary level.
Qualified non-contributory profit sharing plans are maintained by certain
businesses, with annual contributions determined by management. The Company
has a non-qualified stock unit retirement plan for certain employees. The
total expense of the above plans for fiscal 1997, 1996 and 1995 was $15.5
million, $15.7 million and $15.3 million, respectively. During fiscal 1997,
1996 and 1995, the Company contributed 1,995 shares, 32,475 shares and 41,114
shares, respectively, of Common Stock, Class A to these plans to partially
fund previously accrued obligations. In addition, during fiscal 1997, 1996 and
1995, the Company contributed to the stock unit retirement plan 121,185 stock
units, 104,938 stock units and 120,700 stock units, respectively, which are
convertible into Common Stock, Class B, in satisfaction of its accrued
obligations. The value of the stock units was credited to capital surplus. The
Company participates in various multi-employer union administered pension
plans. Contributions to these plans, which are primarily defined benefit
plans, result from contractual provisions of labor contracts and were $14.4
million, $13.6 million and $13.1 million for fiscal 1997, 1996 and 1995,
respectively.
Additionally, the Company maintains several contributory and noncontributory
defined benefit pension plans, primarily in Canada and the United Kingdom. The
projected benefit obligation of these plans as of October 3, 1997, which is
fully funded, was $48.6 million. Pension expense related to these plans is not
material to the consolidated financial statements.
NOTE 6. INCOME TAXES:
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires deferred tax assets or
liabilities to be recognized for the estimated future tax effects of temporary
differences between the financial reporting and tax bases of the Company's
assets and liabilities based on the enacted tax law and statutory tax rates
applicable to the periods in which the temporary differences are expected to
affect taxable income. In June 1996 the Company settled certain prior years'
tax returns.
VII-17
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED):
The components of income before income taxes, including the effects of other
expense/income (See Note 2), by source of income are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States.................................... $221,710 $172,572 $159,851
Non-U.S.......................................... (5,863) 6,587 7,726
-------- -------- --------
$215,847 $179,159 $167,577
======== ======== ========
</TABLE>
The provision for income taxes, including the effects of other
expense/income (See Note 2), consists of:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal....................................... $ 60,370 $ 73,919 $ 46,579
State and local............................... 13,366 17,335 12,064
Non-U.S....................................... 7,052 3,281 3,825
-------- -------- --------
80,788 94,535 62,468
-------- -------- --------
Deferred:
Federal....................................... (8,027) (23,210) 3,189
State and local............................... (3,494) (5,379) 739
Non-U.S....................................... 472 985 992
-------- -------- --------
(11,049) (27,604) 4,920
-------- -------- --------
$ 69,739 $ 66,931 $ 67,388
======== ======== ========
</TABLE>
The provision for income taxes varies from the amount determined by applying
the United States Federal statutory rate to pre-tax income as a result of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- ----
(% OF PRE-
TAX INCOME)
<S> <C> <C> <C>
United States statutory income tax rate................. 35.0% 35.0% 35.0%
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit........ 3.0 4.3 4.7
Permanent book/tax difference related to the sale of
Spectrum............................................. (11.3) -- --
Permanent book/tax differences, primarily resulting
from purchase accounting............................. 8.4 2.1 1.7
Favorable impact of June 1996 tax settlement.......... -- (2.8) --
Tax credits and other................................. (2.8) (1.2) (1.2)
----- ---- ----
Effective income tax rate............................... 32.3% 37.4% 40.2%
===== ==== ====
</TABLE>
VII-18
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED):
As of October 3, 1997 and September 27, 1996, the components of deferred
taxes are as follows:
<TABLE>
<CAPTION>
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Property and equipment.................................. $57,720 $ 61,095
Inventory............................................... 5,066 5,549
Investments............................................. 15,709 12,813
Other................................................... 11,928 10,837
------- --------
Gross deferred tax liability.......................... 90,423 90,294
------- --------
Deferred tax assets:
Insurance............................................... $11,815 $ 26,455
Employee compensation and benefits...................... 36,077 34,889
Accruals and allowances................................. 33,159 30,638
Intangibles............................................. -- 3,415
Other................................................... 6,561 8,709
Valuation allowance..................................... -- (815)
------- --------
Net deferred tax asset................................ 87,612 103,291
------- --------
Net deferred tax liability/(asset).................... $ 2,811 $(12,997)
======= ========
</TABLE>
NOTE 7. CAPITAL STOCK:
There are two classes of common stock authorized and outstanding, Common
Stock, Class A and Common Stock, Class B. Each Class A and Class B Share is
entitled to one vote on all matters submitted to shareholders, voting together
as a single class except where otherwise required by law. Each Class A Share
is entitled to ten times the dividends and other distributions payable on each
Class B Share. Class B Shares may be held only by employees, directors and
their family members, and upon termination of employment each Class B Share is
automatically converted into 1/10 of a Class A Share.
During fiscal 1996, the Company redeemed, at par, all its outstanding Series
C Preferred Stock for $6.4 million in cash and the issuance of $8.6 million of
Common Stock, Class B. During fiscal 1995 the Company repurchased 1,984
preferred shares for $2.0 million.
As of October 3, 1997, the Company's stock option plans provided for the
issuance of up to 44,861,642 options to purchase shares of Common Stock, Class
B. The Company granted installment stock purchase opportunities under its
stock ownership program in fiscal 1997, 1996 and 1995 which provide for the
purchase of shares of Common Stock, Class B. Installment stock purchase
opportunities are exercisable in six annual installments with the exercise
price of each purchase opportunity equal to the current fair market value at
the time the purchase opportunity is granted. The Company has a program to
grant non-qualified stock options to additional qualified employees on an
annual basis. Under the program, options vest after three years and may be
exercised for a period of three years after vesting. The exercise price of
each option is equal to the current fair market value at the date of grant. In
fiscal 1997, 1996 and 1995, the Company granted cumulative installment stock
purchase opportunities under its existing stock ownership program which are
similar to the installment stock purchase opportunities discussed above,
however, any purchase opportunities not exercised during an installment period
may be carried forward to subsequent installment periods. The Company has a
Deferred Payment Program which enables holders of non-qualified stock options
and installment purchase opportunities
VII-19
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. CAPITAL STOCK--(CONTINUED):
to defer a portion of the total amount required to exercise the options.
Interest currently accrues on deferred payments at 8.25% compounded annually
and is payable when the deferred payments are due. At October 3, 1997 and
September 27, 1996, the receivables from individuals under the Deferred
Payment Program were $26.6 million and $19.0 million, respectively, which are
reflected as a reduction of Shareholders' Equity. The Company holds as
collateral all shares purchased in which any portion of the purchase price is
financed under the Deferred Payment Program until the deferred payment is
received from the individual by the Company. Status of the options, including
installment stock purchase opportunities, under the various ownership programs
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES AVERAGE OPTION PRICE
-------------------------------- --------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 10,367,984 10,107,199 10,383,764 $12.17 $10.47 $ 8.05
Options granted......... 3,457,000 4,133,100 4,409,920 $16.61 $14.75 $13.11
Options exercised....... 2,429,783 1,938,142 3,084,830 $ 9.70 $ 8.83 $ 6.17
Canceled/Forfeited...... 2,450,989 1,934,173 1,601,655 $12.92 $11.68 $10.51
Outstanding at end of
year................... 8,944,212 10,367,984 10,107,199 $14.22 $12.17 $10.47
Exercisable at end of
year................... 64,392 539,720 514,696 $ 8.87 $ 3.72 $ 2.14
</TABLE>
The exercise prices on outstanding options at October 3, 1997 range from
$8.34 to $18.50 with a weighted average remaining life of approximately three
years. The Company has reserved 9,637,714 shares of Common Stock, Class B at
October 3, 1997 for issuance of stock pursuant to its employee ownership and
benefit programs.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plans. Accordingly, no compensation expense has been
recognized related to the plans described above. If compensation cost for
these plans had been determined using the fair-value method prescribed by SFAS
No. 123, "Accounting for Stock Based Compensation," the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net Income
As reported............................................. $146,108 $109,470
Pro forma............................................... 143,570 108,199
Fully diluted earnings per share
As reported............................................. $ 3.28 $ 2.31
Pro forma............................................... $ 3.23 $ 2.29
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to fiscal 1996, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The weighted average fair value of options granted in fiscal 1997 and 1996
was $2.65 and $2.46, respectively. As the Company's stock is not publicly
traded, the fair value of each option was estimated on the grant date using
the minimum value method (which excludes a volatility assumption), with the
following assumptions:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Risk-free interest rate.................................... 5.2-6.1% 5.4-5.9%
Expected life in years..................................... 3.2 3.5
Dividend yield............................................. 0% 0%
</TABLE>
VII-20
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. CAPITAL STOCK--(CONTINUED):
The Company and its shareholders are parties to an Amended and Restated
Shareholders' Agreement. Pursuant to this agreement, holders of common stock
who are individuals, upon their death, complete disability or normal
retirement, may cause the Company to repurchase up to 30% of their shares for
cash at the then appraised value, but only to the extent such repurchase by
the Company is permitted under the Credit Agreement. Under this Credit
Agreement restriction, repurchases of capital stock cannot exceed an aggregate
limit, which amount was $23.3 million at October 3, 1997 and $18.6 million at
September 27, 1996. Pursuant to interpretations of its rules related to
"Redeemable Preferred Stock," the Securities and Exchange Commission has
requested that these amounts representing the Company's potential repurchase
of its Common Stock be presented as a separate item and accordingly, the
Company's Shareholders' Equity reflects this reclassification in the
consolidated financial statements. Also, the Shareholders' Agreement provides
that the Company may, at its option, repurchase shares from individuals who
are no longer employees. Such repurchased shares may be resold to others
including replacement personnel at prices equal to or greater than the
repurchase price. Generally, payment for shares repurchased can be, at the
Company's option, in cash or subordinated installment notes, which are
subordinated to all other indebtedness of the Company. Interest on these notes
is payable semi-annually and principal payments are made annually over varying
periods not to exceed ten years. The noncurrent portion of these notes ($50.9
million as of October 3, 1997 and $49.2 million as of September 27, 1996) is
included in the consolidated balance sheets as "Other Noncurrent Liabilities"
and the current portion of these notes ($19.9 million as of October 3, 1997
and $13.4 million as of September 27, 1996) is included in the consolidated
balance sheets as "Accounts Payable."
NOTE 8. COMMITMENTS AND CONTINGENCIES:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Facilities under capital leases............................. $10,992 $12,489
Less-accumulated amortization............................... 8,961 9,269
------- -------
$ 2,031 $ 3,220
======= =======
</TABLE>
Rental expense for all operating leases was $129.7 million, $128.6 million
and $124.2 million for fiscal 1997, 1996 and 1995, respectively.
Following is a schedule of the future minimum rental commitments under all
noncancelable leases as of October 3, 1997:
<TABLE>
<CAPTION>
FISCAL YEAR OPERATING CAPITAL
----------- --------- -------
(IN THOUSANDS)
<S> <C> <C>
1998....................................................... $151,578 $ 982
1999....................................................... 84,681 802
2000....................................................... 71,076 652
2001....................................................... 63,361 275
2002....................................................... 49,743 148
Subsequent years........................................... 144,362 115
-------- ------
Total minimum rental obligations........................... $564,801 2,974
========
Less-amount representing interest.......................... 359
------
Present value of capital leases............................ 2,615
Less-current portion....................................... 705
------
Noncurrent obligations under capital leases................ $1,910
======
</TABLE>
VII-21
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. COMMITMENTS AND CONTINGENCIES--(CONTINUED):
The Company has capital commitments of approximately $20 million at October
3, 1997 in connection with several long-term concession contracts at stadiums
and arenas. The Company is party to certain claims and litigation arising in
the ordinary course of business. The Company believes it has meritorious
defenses to these claims and is of the opinion that adequate reserves have
been provided for the ultimate resolution of these matters.
NOTE 9. ARAMARK SERVICES, INC. AND SUBSIDIARIES:
The following financial information has been summarized from the separate
consolidated financial statements of ARAMARK Services, Inc. (a wholly owned
subsidiary of ARAMARK Corporation) and the subsidiaries which it currently
owns. ARAMARK Services, Inc. is the borrower under the Credit Agreement and
certain other senior debt described in Note 4 and incurs the interest expense
thereunder. This interest expense is only partially allocated to all of the
other subsidiaries of ARAMARK Corporation.
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................... $3,464,051 $3,200,388 $2,975,397
Cost of services provided.................. 3,256,787 3,024,136 2,808,554
Net income................................. 20,690 15,503 14,749
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current assets........................................ $ 407,978 $ 395,243
Noncurrent assets..................................... 1,558,010 1,630,023
Current liabilities................................... 507,179 495,147
Noncurrent liabilities................................ 1,333,759 1,419,648
</TABLE>
VII-22
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. QUARTERLY RESULTS (UNAUDITED):
The following table summarizes quarterly financial data for fiscal 1997 and
1996:
<TABLE>
<CAPTION>
FISCAL QUARTER
-------------------------------------------
1997 FIRST SECOND(1) THIRD FOURTH(2) YEAR
---- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C>
Revenues................ $1,686,751 $1,458,017 $1,531,614 $1,634,035 $6,310,417
Cost of services
provided............... 1,540,226 1,336,421 1,384,834 1,453,921 5,715,402
Net income.............. 27,655 87,952 30,134 367 146,108
Earnings per share:
Net income............ $ .61 $ 1.95 $ .69 $ .01 $ 3.28
<CAPTION>
FISCAL QUARTER
-------------------------------------------
1996 FIRST SECOND THIRD FOURTH YEAR
---- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C>
Revenues................ $1,549,374 $1,464,626 $1,546,296 $1,562,204 $6,122,500
Cost of services
provided............... 1,413,632 1,343,275 1,407,732 1,400,399 5,565,038
Income before
extraordinary item..... 24,989 15,299 29,805 42,135 112,228
Extraordinary item (3).. -- 1,589 1,169 -- 2,758
Net income.............. 24,989 13,710 28,636 42,135 109,470
Earnings per share:
Income before
extraordinary item... $ .52 $ .32 $ .64 $ .92 $ 2.37
Net income............ $ .52 $ .28 $ .61 $ .92 $ 2.31
</TABLE>
- --------
(1) Fiscal 1997 second quarter results reflect the sale of Spectrum (See Note
2).
(2) Fiscal 1997 fourth quarter results reflect charges primarily related to
asset realization (See Note 2).
(3)See Note 3.
In the first and second fiscal quarters, within the Food and Support
Services segment there is a lower level of activity at the higher margin
leisure and recreational food service operations which is partly offset by
increased activity in the educational market. In addition, there is a seasonal
increase in volume of directly marketed work clothing during the first
quarter. Whereas in the third and fourth fiscal quarters, there is a
significant increase at leisure and recreational accounts which is partially
offset by the effect of summer closings in the educational market.
VII-23
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BUSINESS SEGMENTS:
The Company provides or manages services in the following business segments:
Food and Support Services--Food, refreshment, specialized dietary and
support services, including maintenance and housekeeping, provided to
business, educational, governmental and medical institutions and in
recreational and other facilities serving the general public. Fiscal 1997
operating income includes charges of approximately $30 million related
primarily to asset realization (See Note 2). The 1995 segment operating
results were adversely impacted by the Major League Baseball and National
Hockey League strikes in the U.S. and Canada. Additionally, the fiscal 1995
segment operating results were adversely impacted by a decrease in average
attendance at Major League Baseball games subsequent to the resumption of the
season in April 1995. Had the hockey strike and baseball situation not
occurred, it is estimated that segment reported results for revenues and
operating income would have been approximately 2% and 10% greater in fiscal
1995. Also, total Company operating income and income before extraordinary
items would have been approximately 5% and 8% higher in fiscal 1995,
respectively.
Uniform and Career Apparel--Rental of personalized work apparel and linens
for business and institutions on a contract basis and the direct marketing of
work clothing, safety equipment and accessories. Fiscal 1997 operating income
includes a $9 million gain on the sale of an investment and charges of
approximately $6 million, related primarily to asset realization (See Note 2).
Fiscal 1996 operating income includes the $37 million gain on the sale of a
division and charges of approximately $5 million related to changes in
estimates regarding asset realization and environmental matters (See Note 2).
The divested division was not material to segment revenues and contributed
approximately 5% of fiscal 1995 segment operating income.
Health and Educational Resources--Provider of educational and child care
services at both company operated and customer facilities. In 1997 the Company
sold an approximate 83% interest in Spectrum, a provider of general management
and specialized services to emergency rooms, and other hospital specialties,
and medical services to correctional institutions (See Note 2). The Spectrum
operations contributed 29%, 63% and 64% of segment revenues and 4%, 32% and
35% of segment operating income in fiscal 1997, 1996 and 1995, respectively.
Fiscal 1997 operating income includes the gain of $72 million from the sale of
Spectrum. Fiscal 1996 operating income includes charges of approximately $13
million for insurance claims and real estate exposures (See Note 2).
Distributive--Wholesale distribution of magazines and other published
materials to retail locations patronized by the general public. In fiscal 1997
and 1996, the Distributive Segment operating results were severely impacted by
higher operating costs related to servicing customers and reduced margins
resulting from increased competition and consolidation in the magazine
wholesale distribution industry. As a result of management's plans to
reposition the distributive business, and the resultant changes in estimates
of future cash flows, fiscal 1997 includes charges of approximately $34
million related to asset realization (See Note 2).
Revenues by segment are substantially comprised of services to unaffiliated
customers and clients. Operating income reflects expenses directly related to
individual segments plus an allocation of expenses applicable to more than one
segment. General corporate expenses include expenses not specifically
identifiable with an individual segment. The increase in fiscal 1996 General
Corporate expenses is due primarily to reserves established for asset
realization, legal and other matters (See Note 2). Direct selling expenses are
approximately 1% of revenues for fiscal 1997, 1996 and 1995. Corporate assets
consist principally of goodwill not allocable to any individual segment and
other noncurrent assets.
VII-24
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BUSINESS SEGMENTS--(CONTINUED):
<TABLE>
<CAPTION>
REVENUES DEPRECIATION AND AMORTIZATION
-------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Food and Support Servic-
es..................... $4,131.4 $3,816.0 $3,521.2 $ 100.2 $ 96.5 $ 89.7
Uniform and Career Ap-
parel.................. 1,252.2 1,049.2 893.4 58.4 52.2 40.7
Health and Educational
Resources.............. 466.0 781.0 742.9 18.2 19.6 18.2
Distributive............ 460.8 476.3 443.1 12.3 8.3 3.5
Corporate............... -- -- -- 2.6 6.2 4.8
-------- -------- -------- --------- --------- ---------
Total................. $6,310.4 $6,122.5 $5,600.6 $ 191.7 $ 182.8 $ 156.9
======== ======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OPERATING INCOME
----------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Food and Support Services........................... $170.4 $166.9 $138.9
Uniform and Career Apparel.......................... 124.0 140.2 99.3
Health and Educational Resources.................... 103.5 26.8 27.3
Distributive........................................ (49.6) (6.0) 26.8
------ ------ ------
348.3 327.9 292.3
General Corporate and Other Expenses................ (16.4) (32.7) (15.3)
------ ------ ------
Operating Income.................................... 331.9 295.2 277.0
Interest Expense, Net............................... (116.0) (116.0) (109.4)
------ ------ ------
Income Before Income Taxes and Extraordinary Item... $215.9 $179.2 $167.6
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES IDENTIFIABLE ASSETS
-------------------- --------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Food and Support Services..... $ 97.3 $ 99.5 $128.2 $1,258.8 $1,286.4 $1,264.5
Uniform and Career Apparel.... 66.7 57.7 66.7 1,042.0 1,000.8 891.2
Health and Educational Re-
sources...................... 36.0 39.2 26.6 210.4 308.3 272.0
Distributive.................. 1.5 4.6 3.9 138.0 174.1 131.5
Corporate..................... .5 1.0 4.3 104.4 75.2 84.1
------ ------ ------ -------- -------- --------
$202.0 $202.0 $229.7 $2,753.6 $2,844.8 $2,643.3
====== ====== ====== ======== ======== ========
</TABLE>
Most services are provided in the United States, with operations also being
conducted in Belgium, Canada, the Czech Republic, Germany, Hungary, Japan,
Korea, Mexico, Spain and the United Kingdom. The Company's non-U.S. operations
for each year contributed approximately 15% of total revenues and 8% of total
operating income (excluding the effect of other expense/income), and
identifiable assets for these operations were approximately 9% of the total.
VII-25
<PAGE>
ANNEX VIII
EXCERPT FROM DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to (S)228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the
stockholder's shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share" mean and
include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
VIII-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
VIII-2
<PAGE>
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated
VIII-3
<PAGE>
stock forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing such
stock. The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
VIII-4
<PAGE>
ARAMARK CORPORATION
[LOGO OF ARAMARK APPEARS HERE]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
FEBRUARY 10, 1998
The undersigned, having received the Notice of Annual Meeting of Stockholders
and Proxy Statement dated January 8, 1998, hereby appoints Joseph Neubauer,
Martin W. Spector and Donald S. Morton, and each of them, proxies, with full
power of substitution, and hereby authorizes them to represent and vote the
shares of Common Stock of ARAMARK Corporation (the "Company"), which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, February 10,
1998, at 12:00 P.M., Philadelphia time, and any adjournment thereof, and
especially to vote as set forth below and on the reverse hereof.
1. Approval of the amendment to the Restated Certificate of Incorporation
to provide for the reclassification of each share of the Company's Class
A Common Stock.
[_] FOR [_] AGAINST [_] ABSTAIN 1
2. Approval of the Merger pursuant to which the Company's Class B Common
Stock will be converted into cash or stock.
[_] FOR [_] AGAINST [_] ABSTAIN 2
Only holders of Class B Common Stock are entitled to vote on Proposal 2.
3. Approval of the amendments to the Restated Certificate of Incorporation:
(a) To increase the number of shares of Common Stock authorized for
issuance from 175,000,000 to 200,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN 3
(b) To give the Board of Directors of the Company the authority to issue
common stock in series and to fix the terms of such series.
[_] FOR [_] AGAINST [_] ABSTAIN 4
(c) To amend the terms of the Class A Common Stock and Class B Common
Stock by reducing the number of authorized shares and by making
conforming changes to defined terms and cross-references.
[_] FOR [_] AGAINST [_] ABSTAIN 5
(d) To provide that, upon consummation of any public offering of the
Company's common stock, stockholder action may be taken only at an
annual meeting of stockholders or at a special meeting of
stockholders and stockholder action by written consent shall be
prohibited.
[_] FOR [_] AGAINST [_] ABSTAIN 6
(e) To provide that, upon consummation of any public offering of the
Company's common stock, the Board of Directors shall be classified
into three classes, each of which, after a transitional arrangement,
will serve for three years, with one class being elected each year.
[_] FOR [_] AGAINST [_] ABSTAIN 7
4. Approval of the amendments to, and the restatement of, the Amended and
Restated Stockholders' Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN 8
Only Management Investors are entitled to vote on Proposal 4.
5. Election of the following directors for the ensuing year:
<TABLE>
<S> <C> <C>
Joseph Neubauer Alan K. Campbell Edward G. Jordan
James E. Ksansnak Ronald R. Davenport Thomas H. Kean
Patricia C. Barron Lee F. Driscoll, Jr. Reynold C. MacDonald
Robert J. Callander Mitchell S. Fromstein James E. Preston
</TABLE>
[_] FOR [_] WITHHOLD
[_] WITHHOLD for Directors Written Below: 9
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(CONTINUED AND TO BE SIGNED ON REVERSE)
<PAGE>
6. IN THEIR DISCRETION, the proxies are authorized to vote upon such
other business as may properly come before the meeting and at any
adjournments thereof.
IF YOU SPECIFY A CHOICE AS TO THE ACTION TO BE TAKEN ON A PROPOSAL, THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH SUCH CHOICE. IF YOU DO NOT SPECIFY A
CHOICE, IT WILL BE VOTED FOR PROPOSALS 1-5 AND AT THE DISCRETION OF THE PROXY
HOLDER AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
Any proxy or proxies previously given for the meeting are revoked.
- ---------------------FOLD HERE AND RETURN IN WHITE ENVELOPE---------------------
For all holders of Class B Common Stock, except Magazine and Book Employees:
IF YOU WANT TO RECEIVE THE GROUP STOCK CONSIDERATION IN THE MERGER, YOU
MUST MAKE THE FOLLOWING ELECTION:
[_] I ELECT THE GROUP STOCK CONSIDERATION.
IF YOU WANT TO RECEIVE THE CLASS B CASH CONSIDERATION IN THE MERGER, YOU
MUST NOT MAKE THE FOREGOING ELECTION.
You should decide whether to make the foregoing election even if you vote
against the Merger. 10
------------------------------------------------------------
(Signature)
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(Signature if held jointly)
Telephone Number: Home Business
Dated: _________________________
Please sign exactly as the name appears hereon. If shares are held as joint
tenants, both joint tenants should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporation officers or others signing in
a representative capacity should indicate the capacity in which they are
signing.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.
