1
1994 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
/X/ Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1994 or
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to
__________
Commission file number: 1-8827
ARAMARK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2319139
(State of incorporation) (I.R.S. Employer Identification No.)
ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
(Address of principal executive offices)
Telephone Number: 215-238-3000
The ARA Group, Inc.
(Former name, if changed since last report)
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
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13% Subordinated Debentures Due 1997 Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $.01 par value
Adjustable Rate Callable Nontransferable Series C Preferred Stock,
$1.00 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by nonaffiliates: $554 million
Common stock outstanding at October 28, 1994:
Class A Common stock - 2,074,947 shares
Class B Common stock - 24,233,590 shares
Documents incorporated by reference: Portions of the registrant's Proxy
Statement for the 1995 annual meeting of stockholders are incorporated by
reference in Part III of this Report.
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Effective as of October 10, 1994, The ARA Group, Inc. changed its name to
ARAMARK Corporation, and ARA Services, Inc. changed its name to ARAMARK
Services, Inc. There was no change in ownership or control of the Company. As
used herein, references to the "Company" shall mean ARAMARK Corporation and its
subsidiaries (including ARAMARK Services, Inc.) unless the context otherwise
requires. References to "ARAMARK" shall mean ARAMARK Services, Inc. and its
subsidiaries unless the context otherwise requires.
PART I
Item 1. Business
Description of Business Segments
The Company is engaged in providing or managing services, including food,
leisure and support services, uniform services, health and education services
and distributive services. ARAMARK was organized in 1959 in Delaware. The
Company was formed in September 1984 by the management of ARAMARK and acquired
ARAMARK 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.
Financial information by business segment and geographic area appears in
note 11 to the consolidated financial statements. The businesses of the Company
have been grouped into the segments described below.
Food, Leisure & Support Services
The Company provides food, refreshment, specialized dietary and support
services (including maintenance and housekeeping) to business, educational,
governmental and medical institutions. These services (and to a lesser extent,
merchandise operations) are also provided at leisure and other public facilities
such as convention centers, stadiums, parks, arenas, race tracks and
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
leisure and other public facilities generally are for fixed contract terms well
in excess of one year. The Company's food, leisure and support services are
performed under various financial arrangements including a management-fee basis
and a profit-and-loss basis. See note 2 to the consolidated financial
statements.
In most instances, 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.
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There is a high level of competition in the food, leisure and support
services business from local, regional and national 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, leisure and support services in the United States,
Spain, Germany, Belgium and Canada, but that its volume of such business is
small in relation to the total market. See note 10 to the consolidated financial
statements for information relating to the seasonal aspects of this business
segment.
Subsequent to yearend, the Company entered into agreements to acquire
certain Food, Leisure & Support Services businesses. See note 2 to the
consolidated financial statements.
Uniform Services
The Company rents, 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.
The Company also operates one of the largest direct marketers of
personalized work clothing, uniforms, casual apparel and related accessories,
primarily in the United States.
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 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 sale of work clothing 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 services business are
the quality of services provided to customers and the prices charged for such
services.
Health & Education Services
The Company provides management services (including physician staffing
and other specialized services) to hospital emergency and other departments and
to military healthcare facilities and clinics as well as medical services to
correctional institutions. The Company also provides child care services
primarily at Company-operated facilities, and to a lesser extent on customer
sites and in before and after school programs.
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Revenues from emergency and primary care management services are received
generally from the hospitals and clinics at which the care is provided under
contracts generally with a term of one or more years and from third party
payors. Revenues from medical services to correctional institutions are received
directly from governmental authorities under contracts with terms of one or more
years.
Child care services are provided to and are primarily paid for on a
weekly basis directly by individual families under short-term agreements. The
Company leases a significant number of its child care facilities under long-term
arrangements.
The Company believes it is a significant provider of emergency and
primary care management services, medical services to correctional institutions
and child care services in the United States.
Competition in all phases of this business segment is from both national
and local providers of health and education services as well as from private and
public institutions which provide for their own health and education services.
Significant competitive factors in the Company's health and education services
businesses 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.
Distributive Services
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,
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. 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 units makes it a significant wholesale distributor.
Subsequent to yearend the Company acquired a wholesale magazine and book
distribution business. See note 2 to consolidated financial statements.
Employees
The Company employs approximately 133,000 persons, both full and part
time, including approximately 30,000 employees outside the United States.
Approximately 22,700 employees in the United States are represented by various
labor unions.
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Item 2. Properties
The principal property and equipment of the Company are its service
equipment and fixtures (including vehicles) and real estate.
The service equipment and fixtures include vending, commissary, warehouse
and janitorial and maintenance equipment used primarily by the food, leisure and
support services segment, and laundry equipment used by the uniform services
segment. The vehicles include automobiles and delivery trucks used in the food,
leisure and support services segment and in the distributive services and
uniform services segments. The service equipment and fixtures represent
approximately 61% of the net book value of all fixed assets as of September 30,
1994.
The Company's real estate is comprised of child care facilities, of which
a significant number are held under long-term operating leases. The Company also
maintains other real estate and leasehold improvements which it uses in its
distributive services and uniform services segments and in commissary and
distribution operations in its food, leisure and support services segment.
Additional information concerning property and equipment (including other real
estate leases and noncancelable lease commitments) is included in notes 1 and 8
to the consolidated financial statements. No individual parcel of real estate
owned or leased is of material significance to the Company's total assets.
See note 11 to the consolidated financial statements for information
concerning the identifiable assets of the Company's business segments.
Item 3. Legal Proceedings
The Company and its subsidiaries are not parties to any lawsuits (other
than ordinary routine litigation incidental to its business) which are material
to the Company's business or financial condition. See note 8 to the consolidated
financial statements for additional information concerning legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 4A. Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>
Name (Age as of November 1, 1994) Office Held Director/Officer Since
<S> <C> <C>
Joseph Neubauer (53)................................Chairman, President...................................1979
and Director
Robert J. Callander (63)............................Director..............................................1986
Alan K. Campbell (71)...............................Director..............................................1980
Ronald R. Davenport (58)............................Director..............................................1980
Davre J. Davidson (83)..............................Director..............................................1959
Philip L. Defliese (79).............................Director..............................................1979
Lee F. Driscoll, Jr. (68)...........................Director..............................................1973
Mitchell S. Fromstein (66)..........................Director..............................................1990
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</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Edward G. Jordan (64)...............................Director..............................................1980
Thomas H. Kean (59).................................Director..............................................1994
Reynold C. MacDonald (76)...........................Director..............................................1977
James E. Preston (61)...............................Director..............................................1993
Julian L. Carr, Jr. (48)............................Executive Vice President..............................1988
John R. Farquharson (56)............................Executive Vice President..............................1976
James E. Ksansnak (54)..............................Executive Vice President..............................1986
and Chief Financial Officer
William Leonard (46)................................Executive Vice President..............................1992
Martin W. Spector (56)..............................Executive Vice President,.............................1976
General Counsel and Secretary
L. Frederick Sutherland (42)........................Executive Vice President ............................1983
Richard H. Vent (53)................................Executive Vice President..............................1982
Brian J. Gail (48)..................................Senior Vice President.................................1994
Dean E. Hill (43)...................................Vice President........................................1993
John P. Kallelis (56)...............................Vice President........................................1982
Brian G. Mulvaney (38)..............................Vice President........................................1993
Anthony J. Tanzola (55).............................Vice President........................................1976
Alan J. Griffith (40)...............................Controller and Chief..................................1994
Accounting Officer
Melvin M. Mahoney (46)..............................Treasurer.............................................1985
Joan C. Mazzotti (44)...............................Assistant Secretary and...............................1994
Associate General Counsel
Donald S. Morton (46)...............................Assistant Secretary and...............................1985
Associate General Counsel
Richard M. Thon (38)................................Assistant Treasurer .................................1994
</TABLE>
The principal occupations of the Company's directors and directorships
currently held by directors are as follows:
Mr. Neubauer has been president and chief executive officer of the
Company since February 1983 and the chairman since April 1984. He is a director
of Bell Atlantic - Pennsylvania, Inc., Federated Department Stores, Inc., First
Fidelity Bancorporation, Penn Mutual Life Insurance Co. and Versa Services Ltd.
Mr. Callander was vice chairman of Chemical Bank from February 1987 until
August 1990. 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, New Asia Fund,
Omnicom Group, Inc., and Scudder World Income Opportunities Fund.
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.
Mr. Davenport has been the chairman and president of Sheridan
Broadcasting Corporation since 1972. He is a director of Bell Atlantic -
Pennsylvania, Inc.
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Mr. Davidson founded ARAMARK in 1959, and was its chief executive officer
and chairman until his retirement in July 1977.
Mr. Defliese was the chairman and managing partner of Coopers & Lybrand
prior to his retirement in 1977 and is currently Professor Emeritus, Graduate
School of Business, Columbia University.
Mr. Driscoll was a partner in the Philadelphia law firm of Ballard,
Spahr, Andrews & Ingersoll from January 1984 until December 1990. He is a
director of Versa Services Ltd.
Mr. Fromstein has been chief executive officer and president of Manpower
Inc. since March 1976. He is a director of Manpower Inc. and ARI Network
Services, Inc.
Mr. Jordan served as the president of The American College from October
1982 until December 1987. He is a director of Acme Steel Company and Pittston,
Inc.
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 International and United Health Care Corporation.
Mr. MacDonald serves as a consultant to Acme Steel Company. He was
chairman of Acme Steel Company from June 1986 until May 1992. He is a director
of Acme Steel Company and Kaiser Resources.
Mr. Preston has been the chairman, president, chief executive officer and
a director of Avon Products, Inc. since 1989. He is a director of F. W.
Woolworth Company and Reader's Digest Association.
Except as set forth below, the principal occupations of the executive officers
throughout the past five years have been the performance of the functions of the
corporate offices shown above.
Mr. Carr was vice president of the Company from November 1988 until
February 1991 when he was elected to his current position.
Mr. Farquharson was vice president of the Company from 1976 until
February 1991 when he was elected to his current position.
Mr. Gail was elected senior vice president of the Company in August 1994.
Prior to joining the Company in May 1994, he was president and chief executive
officer and prior thereto senior vice president of FCB - Philadelphia.
Mr. Ksansnak was senior vice president of the Company from May 1986 until
February 1991 when he was elected to his current position.
Mr. Leonard was president of ARAMARK Uniform Services from 1984 until
March 1992 when he was elected to his current position.
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Mr. Sutherland was vice president and treasurer of the Company from 1983
until February 1991 when he was elected senior vice president. In May 1993 he
was elected to his current position.
Mr. Vent was vice president of the Company from 1982 until February 1991
when he was elected to his current position.
Mr. Hill was elected vice president of the Company in January 1993. Prior
to joining the Company in 1993, he was vice president of Farley Industries, Inc.
and Fruit of the Loom, Inc.
Mr. Mulvaney was vice president of ARAMARK Uniform Services from 1988
until February 1993 when he was elected to his current position.
Mr. Tanzola was vice president and controller of the Company from 1978
until 1993 when he assumed new responsibilities as vice president, controls.
Mr. Griffith was assistant controller of the Company from May 1985 until
November 1991 when he became the director of corporate planning. In December
1993 he became controller and chief accounting officer of the Company.
Mr. Mahoney was elected treasurer of the Company in February 1991. He had
been assistant treasurer since 1985.
Mr. Thon was elected assistant treasurer of the Company in August 1994.
Previously he held various treasury analyst positions since joining the Company
in 1987.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There are currently 1,147 record holders of Class B common stock of the
Company, all of whom are employees or directors of the Company (or members of
their families or trusts created by them). There are currently 132 record
holders of the Class A common stock of the Company, all of whom are
institutional investors, Company benefit plans or individuals not employed by
the Company.
There is no established public trading market for the common stock of the
Company. However, employees of the Company are able to sell shares of common
stock through various programs maintained by the Company. See note 7 to the
consolidated financial statements for information regarding the Company's
shareholders' agreement.
Under the Company's primary credit agreement, there are various covenants
that restrict the amount of cash dividends that may be paid to the holders of
outstanding common stock of the Company and which also limit the amount of funds
that may be transferred by ARAMARK to the Company for such purpose. See note 4
to the consolidated financial statements.
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Item 6. Selected Financial Data
The following table presents summary consolidated financial data for the
Company. The following data should be read in conjunction with the consolidated
financial statements and the related notes thereto and Management's Discussion
and Analysis of Results of Operations and Financial Condition, each included
elsewhere herein.
<TABLE>
<CAPTION>
ARAMARK Corporation and Subsidiaries
--------------------------------------------------------------
Fiscal Year Ended on or near
September 30
----------------------------------------------------------------
1994 1993 1992(1) 1991 1990
------ ------ -------- ------ -----
(In millions, except per share amounts and ratios)
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Revenues...................................... $5,161.6 $4,890.7 $4,865.3 $4,774.4 $4,595.5
Earnings before interest
and income taxes( 2) ....................... 272.0 268.9 261.6 260.2 257.0
Interest expense, net......................... 108.5 125.7 137.9 142.3 49.8
Income before extraordinary item
and cumulative effect of
change in accounting for income
taxes (3).................................. 95.0 84.3 70.7 64.2 51.8
Net income.................................... 86.1 77.1 67.4 64.2 51.8
Earnings per share: (4).......................
Income before extraordinary item
and cumulative effect of
change in accounting for income
taxes ( 3)............................... $1.87 $1.64 $1.40 $1.23 $.91
Net income................................. $1.69 $1.49 $1.33 $1.23 $.91
Ratio of earnings to fixed charges (5)........ 2.1x 1.9x 1.7x 1.6x 1.5x
Balance Sheet Data (at period end):
Total assets.................................. $2,122.0 $2,040.6 $2,005.0 $2,002.6 $1,917.2
Long-term borrowings: (6)
Senior...................................... 691.5 533.8 629.5 722.1 728.7
Subordinated................................ 290.4 474.9 413.5 415.1 369.1
Common stock subject to potential
repurchase (7).............................. 20.8 21.7 20.4 17.7 17.5
Shareholders' equity........................... 182.6 124.1 103.8 40.6 49.3
</TABLE>
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(1) Fiscal 1992 is a fifty-three week period. See note 1 to the
consolidated financial statements.
(2) See note 2 to the consolidated financial statements.
(3) See notes 3 and 6 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 purposes 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 (including capitalized interest) plus that
portion of operating lease rentals representative of the interest
factor (deemed to be one-third of operating lease rentals).
(6) See note 4 to the consolidated financial statements.
(7) See note 7 to the consolidated financial statements.
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Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Fiscal 1994 Compared to Fiscal 1993
Overview. Revenues for the fiscal year ended September 30, 1994 were $5.2
billion, a 6% increase over fiscal 1993. Earnings before interest and taxes of
$272 million increased 1% compared to the prior year. Each of the Company's
business segments reflected improvements in operating earnings. However, the
1994 results were adversely impacted by the Major League Baseball strike in the
United States and Canada and costs associated with several corporate development
and strategic initiatives, including costs related to a change in corporate
identity. See note 11 to the consolidated financial statements. Earnings before
interest and taxes for both fiscal 1994 and fiscal 1993 include other income of
$5.8 million and $5.0 million, respectively, and in fiscal 1994 a gain of $4.7
million on the issuance of stock by an affiliate. See note 2 to the consolidated
financial statements.
The Company's operating income margin decreased to 5.2% from 5.5%. The
decrease in margin is due primarily to the baseball strike and increased general
corporate expenses referred to above.
Interest expense declined $17.2 million or 14%, due primarily to lower
borrowing levels and the impact of refinancing certain of the Company's
indebtedness. Fiscal 1994 and 1993 net income include an extraordinary item for
the early extinguishment of debt of $7.7 million and $7.2 million, respectively,
as described in note 3 to the consolidated financial statements. Fiscal 1994 net
income also includes a charge of $1.3 million related to the cumulative effect
of adopting Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. See note 6 to the consolidated financial statements.
Segment Results. Food, Leisure and Support Services segment revenues were
4% greater than prior year. Increases related to new accounts, primarily in the
U.S. business and education markets, and an acquisition of a company in Spain
were partially offset by the effects of a divestiture in late fiscal 1993 and
the baseball strike in fiscal 1994. See notes 2 and 11 to the consolidated
financial statements. Uniform Services segment revenues increased 11% as a
result of increased volume in both the uniform rental and direct marketing
businesses. Health and Education Services segment revenues increased 9% as a
result of new contracts at correctional institutions and hospitals and continued
enrollment growth in the child care services business. Revenues for the
Distributive Services segment increased 3% due to increased volume.
Operating income for the Food, Leisure and Support Services segment
increased 1% over the prior year. Increased earnings in the U.S. business dining
market and the gain from the sale of stock of an affiliate were offset by the
impact of the baseball strike, start-up costs on new contracts, and continued
sluggish economic conditions in selected European markets. Depreciation and
amortization in this segment increased by $9 million due to acquisition related
amortization and depreciation on recent capital projects. Uniform
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Services operating income increased 9% as a result of the revenue growth.
Operating income for the Health and Education Services segment increased 11%
due to revenue growth plus improvements in operating efficiency due to
leveraging of overhead costs. Distributive Services operating income increased
7%, primarily due to increased volume with costs remaining relatively constant.
At the time of the filing of this Annual Report, the Major League Baseball
strike, as well as the National Hockey League strike continue in the U.S. and
Canada. Due to the uncertainty as to the length of the strikes, the Company
cannot determine the potential impact on fiscal 1995 financial results. In
fiscal 1994, management estimates that consolidated operating income and income
before extraordinary item would have been approximately 3% and 5% higher,
respectively, had the baseball strike not occurred. See note 11 to the
consolidated financial statements.
Fiscal 1993 Compared to Fiscal 1992
Overview. Revenues for the fiscal year ended October 1, 1993 were $4.9
billion. Operating income for fiscal 1993 was $269 million, an increase of $7
million or 3% over fiscal 1992. Excluding the unfavorable impact of currency
translation, revenues and operating income increased 2% and 4%, respectively,
over fiscal 1992. Operating results for fiscal 1993 and fiscal 1992 include
other income of $5.0 million and $4.2 million, respectively. See note 2 to the
consolidated financial statements.
The Company's operating margin increased from 5.4% in fiscal 1992 to 5.5%
in fiscal 1993 reflecting declines in cost of services provided and selling and
general corporate expenses as a percentage of revenues. The declines are
primarily due to the favorable impact of effective controls of costs relative to
revenue growth plus the impact of unusual costs included in fiscal 1992 selling
and general corporate expenses in connection with a potential acquisition and
several special development programs.
Interest expense declined $12.2 million or 9% due primarily to lower
interest rates and the impact of refinancing the Company's senior notes and
subordinated debentures. Fiscal 1993 and 1992 net income includes an
extraordinary item due to early extinguishments of debt of $7.2 million and $3.3
million, respectively. See note 3 to the consolidated financial statements for a
description of the debt refinancings and extraordinary item. Income before the
extraordinary item for fiscal 1993 was $84.3 million, which exceeded the prior
year by 19%.
Segment Results. Food, Leisure and Support Services segment revenues
approximated prior year. The impact of new accounts in international and
domestic markets for this segment was offset by the adverse effect of economic
conditions in the United States and Canada on selected business dining and other
accounts and a 2% revenue decline attributable to unfavorable currency exchange
rates. Uniform Services segment revenues increased 15% due to the acquisition of
WearGuard in fiscal 1992 and growth in volume at uniform rental operations which
accounted for 3% of the increase. Health and Education Services segment
revenues, excluding the revenues of Living Centers which was divested in fiscal
1992, increased 12% due primarily to new contracts at correctional institutions
and hospitals, continued enrollment growth at Children's World and a fiscal 1992
acquisition of a business providing management services to hospital
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emergency departments. Revenues for the Distributive Services segment declined
slightly due to the continued adverse effect of the economic slowdown on
consumer spending particularly in southern California.
Operating income for the Food, Leisure and Support Services segment
increased 3% over the prior year. The positive effects of new business,
operating efficiencies, and effective controls over product and overhead costs
plus a fiscal 1993 divestiture gain, described in note 2, contributed to the
increase. This was partially offset by the previously described impact of
adverse economic conditions, start-up costs at new accounts, a 2% decline in
operating income attributable to unfavorable currency exchange rates and the
reserve established for potential adjustments described in note 2. Uniform
Services operating income increased 15% due to the acquisition of WearGuard in
fiscal 1992 and revenue growth coupled with higher operating margins at uniform
rental operations which accounted for 6% of the increase. Depreciation and
amortization expense increased by $7.5 million for this segment due primarily to
the acquisition of WearGuard in fiscal 1992. Excluding the fiscal 1992 operating
results and divestiture gain related to Living Centers, operating income for the
Health and Education Services segment increased 4% as higher revenues plus an
increase in operating income due to the fiscal 1992 acquisition described above
were partially offset by higher operating costs. Distributive Services operating
income declined 8% reflecting lower operating margins as a result of the impact
of the economic slowdown coupled with an increase in operating costs.
FINANCIAL CONDITION AND LIQUIDITY
Cash flows generated from operating activities during fiscal 1994 were
more than sufficient to finance capital expenditures, acquisitions and common
and preferred stock repurchases during the year. 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 facility. As of September 30, 1994, the
Company has capital commitments of approximately $52 million related to several
long-term concession contracts at stadiums and arenas.
During fiscal 1994, the Company amended its credit facility, increasing
the maximum borrowing amount from $650 million to $800 million, and extending
the final maturity to October 2001. See note 4 to the consolidated financial
statements. Currently the Company has approximately $325 million of unused
committed credit availability under its credit facility. Subsequent to yearend,
the Company has entered into definitive agreements for the acquisition of three
businesses and is in the process of completing a tender offer for the remaining
minority interest of its Canadian subsidiary. See note 2 to the consolidated
financial statements. Although the credit availability is sufficient to fund
these transactions, the Company intends to increase the amount of the credit
facility to provide additional financing availability.
During fiscal 1994, the Company redeemed $182.3 million of its 12-1/2%
subordinated debentures. See note 3 to the consolidated financial statements.
During fiscal 1994, the Company repurchased $17.6 million of its Series C
Preferred Stock, repurchased $29.7 million of its Class B Common Stock and
issued $13.2 million of subordinated installment notes as partial consideration.
The Company also purchased $9.2
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million of its Class A Common Stock. Additionally, the Company issued $12.4
million of Class B Common Stock to eligible employees, primarily through the
exercise of installment stock purchase opportunities.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Schedules at page S-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Items 10, 11, 12, and 13 of Part III are incorporated by reference to the
registrant's Proxy Statement for its 1995 Annual Stockholders' Meeting to be
filed with the Commission pursuant to Regulation 14A (except for the stock price
performance graph and the committee report on executive compensation in the
Company's Proxy Statement).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Index to Financial Statements
See Index to Financial Statements and Schedules at page S-1.
(b) Reports on Form 8-K
None.
(c) Exhibits Required by Item 601 of Regulation S-K
See Index to Exhibits.
(d) Financial Statement Schedules
See Index to Financial Statements and Schedules at page S-1.
-12-
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ARAMARK CORPORATION
By: Alan J. Griffith
----------------------
Alan J. Griffith
Controller and Chief
Accounting Officer
November 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on November 22, 1994.
Signature Title
- --------- -----------------------------------
Joseph Neubauer Chairman and President and Director
Joseph Neubauer (Principal Executive Officer)
James E. Ksansnak Executive Vice President
James E. Ksansnak (Principal Financial Officer)
Alan J. Griffith Controller
Alan J. Griffith (Principal Accounting Officer)
Robert J. Callander
Alan K. Campbell
Ronald R. Davenport
Davre J. Davidson
Philip L. Defliese
Lee F. Driscoll, Jr. Directors
Mitchell S. Fromstein
Edward G. Jordan
Thomas H. Kean
Reynold C. MacDonald
James E. Preston
Martin W. Spector
Martin W. Spector
Attorney-in-Fact
-13-
15
ARAMARK CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Report of Independent Public Accountants S-2
Report of Chartered Accountants S-3
Consolidated Balance Sheets - As of September 30, 1994
and October 1, 1993 S-4
Consolidated Statements of Income - Fiscal Years 1994, 1993
and 1992 S-6
Consolidated Statements of Cash Flows - Fiscal Years 1994, 1993
and 1992 S-7
Consolidated Statements of Shareholders' Equity - Fiscal
Years 1994, 1993 and 1992 S-8
Notes to Consolidated Financial Statements S-11
Consolidated Supporting Schedules Filed:
Schedule
Number
- --------
III - Condensed Financial Information of Registrant S-26
V - Property and Equipment S-30
VI - Accumulated Depreciation and Amortization of
Property and Equipment S-33
VIII - Valuation and Qualifying Accounts and Reserves S-36
X - Supplementary Income Statement Information S-37
All other schedules are omitted because they are not applicable, not
required, or the information required to be set forth therein is included in the
consolidated financial statements or in notes thereto.
S-1
16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ARAMARK Corporation:
We have audited the accompanying consolidated balance sheets of ARAMARK
Corporation (a Delaware corporation) (formerly The ARA Group, Inc.) and
subsidiaries as of September 30, 1994 and October 1, 1993, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended September 30, 1994. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits. We did not audit the financial statements of Versa Services Ltd., the
Company's Canadian subsidiary, which statements reflect assets representing 3.6%
of consolidated assets as of both September 30, 1994 and October 1, 1993, and
revenues representing 5.6%, 6.3% and 7.4% of consolidated revenues for the
fiscal years 1994, 1993 and 1992, respectively. Those statements were audited by
other auditors whose report has been furnished to us and our opinion, insofar as
it relates to the amounts included for Versa Services Ltd., is based solely on
the report of the other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of ARAMARK Corporation and subsidiaries as of September
30, 1994 and October 1, 1993, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended September 30, 1994,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
As discussed in Note 6 to the consolidated financial statements, ARAMARK
Corporation changed its method of accounting for income taxes in fiscal 1994.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 7, 1994
S-2
17
REPORT OF CHARTERED ACCOUNTANTS
To The Directors of Versa Services Ltd.:
We have audited the consolidated balance sheets of Versa Services Ltd. as at
September 28, 1994 and September 29, 1993 and the consolidated statements of
income and retained earnings and cash flows for the fifty-two week period ended
September 28, 1994, the fifty-two week period ended September 29, 1993, and the
fifty-three week period ended September 30, 1992 (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 28,
1994 and September 29, 1993, and the results of its operations and the changes
in its financial position for the fifty-two week period ended September 28,
1994, the fifty-two week period ended September 29, 1993 and the fifty-three
week period ended September 30, 1992 in accordance with accounting principles
generally accepted in Canada.
Mississauga, Canada ERNST & YOUNG
November 16, 1994 Chartered Accountants
S-3
18
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1994 and October 1, 1993
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 27,426 $ 27,801
Short-term investments held by the
Canadian subsidiary 16,203 --
Receivables (less allowances: 1994, $12,423;
1993, $10,242) 433,550 388,768
Inventories 256,950 249,858
Prepayments and other current assets 69,865 63,381
- --------------------------------------------------------------------------------
Total current assets 803,994 729,808
- --------------------------------------------------------------------------------
Property and Equipment, at Cost:
Land, buildings and improvements 379,671 355,744
Service equipment and fixtures 888,134 783,393
Leased property under capital leases 8,204 8,204
- --------------------------------------------------------------------------------
1,276,009 1,147,341
Less-Accumulated depreciation 594,102 498,962
- --------------------------------------------------------------------------------
681,907 648,379
- --------------------------------------------------------------------------------
Goodwill 438,725 446,261
- --------------------------------------------------------------------------------
Other Assets 197,324 216,193
- --------------------------------------------------------------------------------
$2,121,950 $2,040,641
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-4
19
ARAMARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings $ 9,391 $ 15,615
Accounts payable 372,908 329,129
Accrued payroll and related expenses 142,911 132,045
Other accrued expenses and current liabilities 231,991 208,677
- ------------------------------------------------------------------------------------------------
Total current liabilities 757,201 685,466
- ------------------------------------------------------------------------------------------------
Long-Term Borrowings:
Senior 697,695 544,971
Subordinated 290,414 474,875
Obligations under capital leases 3,231 4,443
- ------------------------------------------------------------------------------------------------
991,340 1,024,289
Less-current portion 9,391 15,615
- ------------------------------------------------------------------------------------------------
Total long-term borrowings 981,949 1,008,674
- ------------------------------------------------------------------------------------------------
Deferred Income Taxes and Other Noncurrent Liabilities 168,638 182,693
Minority Interest 10,812 18,084
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,791 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption value $1,000;
authorized: 40,000 shares; issued: 1994 - 16,949 shares;
1993 - 34,596 shares 16,949 34,596
Class A common stock, par value $.01; authorized:
25,000,000 shares; issued: 1994 - 2,074,251 shares;
1993 - 2,068,396 shares 21 21
Class B common stock, par value $.01; authorized:
150,000,000 shares; issued: 1994 - 24,338,494 shares;
1993 - 24,276,512 shares 243 243
Earnings retained for use in the business 178,587 104,827
Cumulative translation adjustment 7,550 6,037
Impact of potential repurchase feature of common stock (20,791) (21,651)
- ------------------------------------------------------------------------------------------------
Total 182,559 124,073
- ------------------------------------------------------------------------------------------------
$2,121,950 $2,040,641
================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-5
20
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Years Ended September 30, 1994, October 1, 1993 and
October 2, 1992
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 5,161,578 $ 4,890,738 $ 4,865,343
- -------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of services provided 4,686,086 4,432,840 4,412,374
Depreciation and amortization 143,763 130,511 125,798
Selling and general corporate expense 70,196 63,406 69,760
Other expense (income) (5,792) (4,955) (4,174)
- -------------------------------------------------------------------------------------------------
4,894,253 4,621,802 4,603,758
- -------------------------------------------------------------------------------------------------
Operating income 267,325 268,936 261,585
Gain on Issuance of Stock by an Affiliate 4,658 -- --
- -------------------------------------------------------------------------------------------------
Earnings before interest and income taxes 271,983 268,936 261,585
Interest Expense, net 108,499 125,671 137,862
- -------------------------------------------------------------------------------------------------
Income before income taxes 163,484 143,265 123,723
Provision For Income Taxes 67,119 57,526 51,507
Minority Interest 1,332 1,405 1,518
- -------------------------------------------------------------------------------------------------
Income Before Extraordinary Item and Cumulative
Effect of Change in Accounting for Income Taxes 95,033 84,334 70,698
Extraordinary Item Due to Early Extinguishments
of Debt (net of income taxes of $5,118 in 1994,
$4,660 in 1993 and $1,943 in 1992) 7,677 7,202 3,317
Cumulative Effect of Change in Accounting for
Income Taxes 1,277 -- --
- -------------------------------------------------------------------------------------------------
Net Income $ 86,079 $ 77,132 $ 67,381
=================================================================================================
Earnings Per Share:
Income before extraordinary item and
cumulative effect of change in
accounting for income taxes $1.87 $1.64 $1.40
Net income $1.69 $1.49 $1.33
=================================================================================================
The accompanying notes are an integral part of these financial statements.
S-6
21
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended September 30, 1994, October 1, 1993 and
October 2, 1992 (in thousands)
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 86,079 $ 77,132 $ 67,381
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 143,763 130,511 125,798
Income taxes deferred (2,174) 6,058 13,695
Minority interest 1,332 1,405 1,518
Cumulative effect of accounting change 1,277 -- --
Gain on issuance of stock by affiliate (4,658) -- --
Extraordinary item 7,677 7,202 3,317
Changes in noncash working capital:
Receivables (40,557) (933) (31,451)
Inventories (6,915) (6,425) (9,901)
Prepayments (15,675) 53,288 10,265
Accounts payable 36,956 (11,395) 18,855
Accrued expenses 36,926 (198) 8,814
Changes in noncurrent liabilities (1,368) 8,541 (14,940)
Changes in other assets (6,445) 4,106 4,338
Other (9,186) (5,604) (6,822)
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 227,032 263,688 190,867
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (145,935) (142,121) (157,313)
Disposals of property and equipment 11,525 11,348 11,073
Sale of investments 13,543 15,945 --
Divestiture of certain businesses 7,297 11,928 180,765
Increase in short-term investments (16,203) -- --
Purchase of subsidiary stock (17,623) -- --
Acquisition of certain businesses:
Working capital other than cash acquired (3,066) 8,697 (25,450)
Property and equipment (573) (4,544) (32,896)
Additions to intangibles (6,734) (45,547) (75,085)
Assumed borrowings -- 2,885 1,994
Other 7,758 (5,368) (3,241)
- ------------------------------------------------------------------------------------------
Net cash used in investing activities (150,011) (146,777) (100,153)
- ------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 167,329 108,174 5,076
Payment of long-term borrowings including premiums (210,511) (157,407) (85,647)
Redemption of preferred stock (17,647) (137) --
Proceeds from issuance of common stock 12,416 9,462 8,675
Repurchase of common stock (25,729) (45,795) (14,644)
Payment of special dividend -- (24,157) --
Payment of preferred stock dividend (1,917) -- --
Other (1,337) (3,035) (126)
- ------------------------------------------------------------------------------------------
Net cash used in financing activities (77,396) (112,895) (86,666)
- ------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (375) 4,016 4,048
Cash and cash equivalents, beginning of year 27,801 23,785 19,737
- ------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 27,426 $ 27,801 $ 23,785
==========================================================================================
The accompanying notes are an integral part of these financial statements.
S-7
22
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
(in thousands)
</TABLE>
<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, October 1, 1993 $ 34,596 $ 21 $ 243 $ -- $ 104,827 $ 6,037 $ (21,651)
Net income 86,079
Dividends on preferred stock (1,337)
Issuance of Class A common stock to
employee benefit plans 1 8,881
Issuance of Class B common stock 25 18,910
Retirement of common and preferred stock (17,647) (1) (25) (27,791) (10,982)
Change during the period 1,513 860
--------- --------- --------- ------- --------- --------- ---------
Balance, September 30, 1994 $ 16,949 $ 21 $ 243 $ -- $ 178,587 $ 7,550 $ (20,791)
========= ========= ========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-8
23
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
(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, October 2, 1992 $ -- $ 6 $ 53 $ -- $ 113,091 $ 11,070 $ (20,437)
Net income 77,132
Special dividend 34,733 (59,514)
Dividends on preferred stock (883)
Issuance of Class A common stock to
employee benefit plans 10,688
Issuance of Class B common stock 11 18,420
Retirement of common and preferred stock (137) (1) (3) (29,108) (24,801)
Common stock split 16 182 (198)
Change during the period (5,033) (1,214)
--------- --------- --------- --------- --------- --------- ---------
Balance, October 1, 1993 $ 34,596 $ 21 $ 243 $ -- $ 104,827 $ 6,037 $ (21,651)
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-9
24
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
(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, 1991 $ 5 $ 56 $ -- $ 46,134 $ 12,081 $(17,662)
Net income 67,381
Issuance of Class A common stock to
employee benefit plans 1 8,619
Issuance of common stock 4 12,648
Retirement of common stock (7) (21,267) (424)
Change during the period (1,011) (2,775)
-------- -------- ------- -------- --------- --------
Balance, October 2, 1992 $ 6 $ 53 $ -- $113,091 $ 11,070 $(20,437)
======== ======== ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-10
25
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Effective October 10, 1994 the Company changed its name from The ARA Group, Inc.
to ARAMARK Corporation.
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 years ended September 30, 1994,
October 1, 1993 and October 2, 1992 are fifty-two, fifty-two and fifty-three
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 and net income is reduced by the portion of income
applicable to minority shareholders of less than wholly-owned subsidiaries.
Certain 1993 items have been reclassified to conform to the 1994 presentation.
In fiscal 1995, the Company is required to adopt the provisions of Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits," and SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Adoption of these standards will not have a
material impact on the consolidated financial statements.
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 1994, 1993 and 1992 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. At September 30, 1994,
securities having maturities in excess of three months, all of which were owned
by the Company's Canadian subsidiary, are classified as short-term investments
and are recorded at cost which approximates market value.
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 work clothing and casual apparel. 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.
The components of inventories as of the respective yearends are as follows:
1994 1993
- -------------------------------------------------------------------------------
Food 24.9% 29.0%
Work apparel, casual apparel and linens 60.9% 55.7%
Magazines and books 5.6% 4.7%
Parts, supplies and novelties 8.6% 10.6%
- -------------------------------------------------------------------------------
100.0% 100.0%
- -------------------------------------------------------------------------------
S-11
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
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.
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. 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 September
30, 1994 and October 1, 1993 is $113.7 million and $97.4 million, respectively.
OTHER ASSETS
Other assets consist primarily of investments in less than 50% owned entities,
contract rights, customer lists, long-term receivables and noncurrent marketable
equity securities. Investments in which the Company owns more than 20% but less
than a majority are accounted for using the equity method. Contract rights and
customer lists are being amortized on a straight-line basis over the expected
period of benefit, 5 to 20 years. Noncurrent marketable equity securities are
stated at the lower of aggregate cost or market. At September 30, 1994 and
October 1, 1993 the cost and market value of the Company's noncurrent marketable
equity securities approximated $2 million and $5 million, respectively.
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 insurance arrangements.
Self-insurance reserves are actuarially determined based on the estimated timing
of future insurance claim payments associated with the Company's retained risk.
The current and noncurrent portions of 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 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.
S-12
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
1994 1993 1992
------ ------ ------
(in millions)
Interest Paid $108.2 $113.5 $127.3
Income Taxes Paid $ 54.0 $ 41.0 $ 39.0
Significant noncash investing and financing activities are as follows:
o During fiscal 1994, 1993, and 1992, the Company contributed $8.9 million,
$10.7 million, and $8.6 million, respectively, of Class A Common Stock to
its employee benefit plans to fund previously accrued obligations. In
addition, during fiscal 1994, 1993 and 1992 the Company contributed $1.8
million, $1.7 million and $1.7 million, respectively, of stock units to its
stock unit retirement plan in satisfaction of its accrued obligations. See
Note 5 to the consolidated financial statements.
o During the third quarter of fiscal 1993, the Company paid a special
dividend on its common stock which included $34.7 million of new Series C
Preferred Stock. See Note 7 to the consolidated financial statements.
o During fiscal 1994 and 1993, the Company received $4.0 million and $5.9
million, respectively, of employee notes under its Deferred Payment program
as partial consideration for the issuance of Common Stock Class B. Also,
during fiscal 1994, 1993, and 1992, the Company issued subordinated
installment notes of $13.2 million, $8.3 million and $7.1 million,
respectively, as part consideration for repurchases of Common Stock. See
Note 7 to the consolidated financial statements.
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.:
During the fourth quarter of fiscal 1994, an affiliate, 33% owned by the
Company, sold common stock through a public offering. The Company sold
approximately 9% of its equity investment in connection with the public
offering, receiving net proceeds of $6.9 million and recorded a gain of $5.8
million, which is included in "Other expense (income)." At the time a
subsidiary/affiliate sells its stock to third parties, the Company recognizes
the resultant change in its net investment in the subsidiary/affiliate through
the income statement in accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 51 (SAB No. 51). In accordance with SAB No. 51,
the Company recognized a pre-tax gain of $4.7 million, and recorded a related
tax provision of $1.9 million, representing the increase in book value of the
Company's remaining investment created by the sale of the incremental new shares
in the public offering. The Company's percentage ownership of the affiliate
after the transaction is 28%.
S-13
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: (Continued)
In September 1993, the Company acquired an 80% interest in the contract food
service division of the HUSA Group ("HUSA"), a provider of food services to
hospitals, schools and governmental facilities located in Spain, for aggregate
consideration, including all costs, of approximately $30 million. The purchase
price of the HUSA acquisition was allocated principally to contract rights and
goodwill. The Company's unaudited pro forma results of operations for fiscal
1993 and 1992 would not be materially different assuming the acquisition
occurred as of the beginning of the respective periods.
During the fourth quarter of fiscal 1993, the Company sold Encore Service
Systems, Inc. for approximately $20 million resulting in a gain of approximately
$15 million. In addition, all of the Company's remaining shares of Living
Centers of America common stock were sold during fiscal 1993 for approximately
$16 million, resulting in a gain of approximately $8 million. These gains have
been included in "Other expense (income)" in the accompanying consolidated
statements of income. Also included in "Other expense (income)" is an amount of
$18 million to establish a reserve for potential adjustments related to certain
cost-based food service contracts. This resulted from a 1993 internal review of
billing procedures covering primarily insurance and employee fringe benefits.
The review revealed some past inconsistencies between the billings and the
literal contractual language.
During the second quarter of fiscal 1992, the Company acquired the assets of
WearGuard Corporation ("WearGuard"), a direct marketer of work clothing and
casual apparel and late in the third quarter acquired the business of
Coordinated Health Services, Inc. ("CHS"), a provider of physician staffing and
patient billing services for hospital emergency departments for aggregate
consideration of $124 million. Also in the second quarter of 1992, the Company
divested approximately 90% of its interest in Living Centers of America, Inc.
("Living Centers") in a sale of stock through a public offering. The net effect
of these transactions resulted in a reduction of the Company's indebtedness of
approximately $69 million. "Other expense (income)" of $4.2 million in fiscal
1992 represents a gain of $13 million on the Living Centers divestiture
transaction partially offset by charges for insurance and related matters.
The Company's fiscal 1992 financial statements reflect results of operations and
cash flows for WearGuard and CHS for seven months and four months, respectively.
The Company's unaudited pro forma results of operations for fiscal 1992 would
not be materially different assuming the acquisitions occurred as of the
beginning of the period.
Subsequent to fiscal yearend 1994, the Company has entered into definitive
agreements for the acquisition of three businesses (two are in the Food, Leisure
and Support business segment and one in the Distributive segment) for total
consideration, in the form of cash and preferred stock, of approximately $260
million. Revenues of these businesses would increase the Company's total
revenues by approximately 5.5%. The cash portion of the consideration will be
financed through the Company's existing Credit Agreement. The acquisitions,
subject to certain third party approvals, are presently expected to close by the
end of calendar year 1994.
In the fourth quarter of fiscal 1994, the Company initiated a tender offer for
the 30% minority interest of its Canadian subsidiary. The transaction is
expected to be completed by the end of calendar year 1994 for total
consideration of approximately $33 million, of which $17.6 million has been paid
as of September 30, 1994.
NOTE 3. EXTRAORDINARY ITEM:
The following items have been reflected as extraordinary items in the
consolidated financial statements.
During fiscal 1994, the Company redeemed the remaining $182.3 million of its
12-1/2% subordinated debentures for a premium. The debt extinguishment was
financed through borrowings under the Company's revolving credit facility. The
resultant extraordinary charge was $7.7 million or $0.15 per share.
S-14
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EXTRAORDINARY ITEM: (Continued)
During fiscal 1993, the Company repurchased the entire $100 million of its
10.55% senior notes for a premium and concurrently issued $100 million of 8-1/4%
senior notes. The Company also paid a premium to redeem $38.6 million of its
12-1/2% subordinated debentures.
During fiscal 1992, the Company exchanged $28.6 million of 10% subordinated
debentures plus a premium for $28.6 million of its 13% subordinated debentures
and paid a premium to redeem $1.5 million of its 12-1/2% subordinated
convertible notes.
NOTE 4. BORROWINGS:
Long-term borrowings at September 30, 1994 and October 1, 1993 are summarized in
the following table:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(in thousands)
<S> <C> <C>
SENIOR:
Credit facility borrowings $401,600 $ 260,700
10-1/4% note, due April 1998 50,000 50,000
8-1/4% notes, payable in installments through 1999 100,000 100,000
10-5/8% notes, due August 2000 100,000 100,000
Other, including mortgages and notes payable 46,095 34,271
- --------------------------------------------------------------------------------
697,695 544,971
- --------------------------------------------------------------------------------
SUBORDINATED:
8-1/2% subordinated notes, due June 2003 100,000 100,000
10% exchangeable debentures and notes, due August 2000 59,299 61,465
12% debentures, due April 2000 125,000 125,000
12-1/2% debentures, due July 2001 -- 182,295
12-1/2% convertible notes, due February 2000 2,340 2,340
13% debentures, due January 1997 3,775 3,775
- --------------------------------------------------------------------------------
290,414 474,875
- --------------------------------------------------------------------------------
OBLIGATIONS UNDER CAPITAL LEASES 3,231 4,443
- --------------------------------------------------------------------------------
991,340 1,024,289
Less-current portion 9,391 15,615
- --------------------------------------------------------------------------------
$ 981,949 $1,008,674
================================================================================
</TABLE>
The $800 million revolving credit facility ("Credit Agreement") is provided by a
group of banks and matures in October 2001 with quarterly commitment reductions
of $12.5 million starting in December 1995 which increase annually thereafter.
Interest under the credit agreement is based on the Prime Rate plus a spread of
0% to 5/8% (as of September 30, 1994 - 0%), London Inter-Bank Offered Rate
(LIBOR) plus a spread of 1/8% to 1-1/8% (as of September 30, 1994 - 1/2%) or the
Certificate of Deposit Rate plus a spread of 1/4% to 1-1/4% (as of September 30,
1994 - 5/8%), at the option of the Company. The spread is based on certain
financial ratios and borrowing levels as defined. The Company pays a fee of 1/4
of 1% on the entire credit facility.
The 8-1/4% notes are payable in $20 million annual installments commencing March
1995 with a final maturity of March 1999. The $20 million installment due in
fiscal 1995 has been classified as non-current in the accompanying consolidated
balance sheet as the Company has the ability and intent to finance it through
additional borrowings under the Credit Agreement.
S-15
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (Continued)
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.
The 12% subordinated debentures may be redeemed at the Company's option, in
whole or in part, beginning April 1995 at a price equal to 105% of the principal
amount and thereafter at prices declining to par in April 1997, together with
accrued interest.
The 12-1/2% subordinated convertible notes are convertible at par, in whole, at
the option of the holder, into a series of the Company's 13% subordinated
debentures due January 1997. At any time on or after January 15, 1998, the
Company may, at its option, redeem the notes, in whole or in part, at a price
equal to 100% of their principal amount plus accrued interest.
The 13% subordinated debentures may be redeemed by the Company on or after
January 15, 1996, in whole or in part, at a price equal to 100% of their
principal amount plus accrued interest.
The fair value of the Company's aggregate senior and subordinated debt, based
primarily on quoted market prices, was $705 million and $291 million,
respectively at September 30, 1994 and $568 million and $511 million,
respectively, at October 1, 1993. Accrued interest on borrowings totaling $23.6
million in 1994 and $29.2 million in 1993 is included in current liabilities as
"Other accrued expenses."
At September 30, 1994, the Company has $200 million of interest rate exchange
agreements fixing the rate on a like amount of borrowings under the Credit
Agreement at an average effective rate of 5.7% for remaining periods ranging
between 1 and 34 months. The counterparties to the interest rate exchange
agreements are major international banks. The Company continually monitors its
positions and the credit ratings of its counterparties, and does not anticipate
nonperformance by the counterparties. All interest rate agreements are accounted
for as hedges and the related gains or losses are recognized in income as a
component of interest expense over the period being hedged. As of October 1,
1993 the Company had $202 million of interest rate exchange agreements fixing
the rate on a like amount of variable rate borrowings at an average effective
rate of 6.3%. During fiscal 1993, the Company entered into a $28 million foreign
currency swap agreement maturing in August 1996, which hedges the currency
exposure of its net investment in Spain. See Note 2 to the consolidated
financial statements.
The fair value of the Company's swap agreements as of September 30, 1994 is
approximately $5.5 million. At October 1, 1993, the fair value of the swap
agreements was not significant.
The Credit Agreement contains restrictive covenants which provide, among other
things, limitations on the incurrence of debt, dispositions of material assets,
payment of dividends and repurchases of capital stock. The terms of the Credit
Agreement also limit the transfer of funds to the Company by its subsidiaries
and 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 September 30, 1994, the Company was in compliance with
all of these covenants.
S-16
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (Continued)
Long-term borrowings maturing in the next five years, excluding capital lease
obligations, are as follows:
Amount
-------------
(in thousands)
1995 $ 8,701
1996 22,080
1997 25,571
1998 71,771
1999 85,015
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
The Company maintains contributory and non-contributory defined benefit pension
plans, primarily in Canada and the United Kingdom, providing retirement benefits
to eligible employees not covered by collective bargaining agreements. Total
pension expense under these plans for fiscal 1994, 1993 and 1992 was $1.4
million, $1.3 million and $1.1 million, respectively. The Company's policy is to
fund the minimum contribution required under the applicable law.
Defined benefit pension expense for 1994, 1993 and 1992 includes the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,791 $ 1,628 $ 1,758
Interest cost on projected benefit obligations 2,459 2,309 2,228
Change in market valuation and return on plan assets (37) (5,071) (675)
Net amortization and deferral (2,857) 2,456 (2,194)
------- ------- -------
$ 1,356 $ 1,322 $ 1,117
======= ======= =======
Assumptions:
Discount rate 8.4% 8.2% 8.2%
Compensation increase 5.3% 5.4% 5.4%
Rate of return on assets 8.4% 8.3% 8.4%
</TABLE>
The discount rates and rates of return on assets represent weighted averages
that reflect the combined assumptions of plans located primarily in Canada and
the United Kingdom.
The defined benefit pension plans' funded status at September 30, 1994 and
October 1, 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Pension plan obligations:
Accumulated benefits (including vested benefits
of $26,805 and $24,047 in 1994 and 1993,
respectively) $ 26,983 $ 24,374
======== ========
Projected benefits $ 33,728 $ 31,050
Market value of assets (primarily listed
securities and government obligations) 35,179 32,665
-------- --------
Funded status 1,451 1,615
Unrecognized net loss (gain) 96 (767)
Unrecognized net transition asset (2,905) (3,206)
Unrecognized prior service cost 1,565 1,658
-------- -------
Prepaid (accrued) pension cost $ 207 $ (700)
======== =======
</TABLE>
S-17
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS: (Continued)
In the United States, the Company also 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 1994, 1993 and 1992 was $14.5 million,
$14.1 million and $13.6 million, respectively. During fiscal 1994, 1993 and
1992, the Company contributed 59,919 shares, 86,184 shares and 75,684 shares,
respectively, of Common Stock, Class A to these plans to fund previously accrued
obligations. In addition, during fiscal 1994, 1993 and 1992, the Company
contributed to the stock unit retirement plan 143,125 stock units, 159,144 stock
units and 175,596 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 $11.9 million, $10.2 million and $10.3 million for
fiscal 1994, 1993 and 1992, respectively.
NOTE 6. INCOME TAXES:
Effective October 2, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." Prior to fiscal 1994, the Company followed the provisions of
Accounting Principles Board Opinion No. 11. 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. The cumulative effect of this change in accounting
principle was a charge of $1.3 million, or $0.03 per share, in the first quarter
of fiscal 1994.
The components of income before income taxes by source of income are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
United States $143,052 $121,818 $ 99,582
Non-U.S. 20,432 21,447 24,141
- ---------------------------------------------------------------------------------------------------------------
$163,484 $143,265 $123,723
===============================================================================================================
The provision for income taxes consists of:
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Current:
Federal $51,935 $34,345 $22,737
State and local 11,827 7,024 5,614
Non-U.S. 5,531 10,099 9,461
- ---------------------------------------------------------------------------------------------------------------
69,293 51,468 37,812
- ---------------------------------------------------------------------------------------------------------------
Deferred:
Federal (1,516) 5,230 11,034
State and local (351) 736 1,499
Non-U.S. (307) 92 1,162
- ---------------------------------------------------------------------------------------------------------------
(2,174) 6,058 13,695
- ---------------------------------------------------------------------------------------------------------------
$67,119 $57,526 $51,507
===============================================================================================================
</TABLE>
S-18
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (Continued)
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>
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(% of pre-tax income)
<S> <C> <C> <C>
United States statutory income tax rate 35.0% 34.8% 34.0%
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit 4.6 3.7 4.2
Permanent book/tax differences, primarily
resulting from purchase accounting 3.0 2.4 4.6
Tax credits (1.5) (1.5) (2.4)
Other, net (.1) .8 1.2
- ---------------------------------------------------------------------------------------------------------------
Effective income tax rate 41.0% 40.2% 41.6%
===============================================================================================================
</TABLE>
As of September 30, 1994, the components of the net deferred tax asset are as
follows:
Deferred tax liabilities:
Property and equipment $64,718
Inventory 5,484
Other 4,725
-------
Gross deferred tax liability 74,927
-------
Deferred tax assets:
Insurance 17,797
Employee compensation and benefits 30,228
Accruals and allowances 20,648
Intangibles 9,954
Other 2,254
Valuation allowance (1,000)
------
Net deferred tax asset 79,881
------
Net deferred tax asset $ 4,954
======
The Company does not provide for U.S. or foreign taxes on the undistributed
earnings of non-U.S. subsidiaries that are considered to be permanently
reinvested. At September 30, 1994, undistributed earnings of these foreign
subsidiaries or affiliates totaled $38.7 million, which will not be subject to
U.S. tax until distributed as dividends. Foreign tax credits will be available
to reduce U.S. taxes on this income upon distribution. Determination of the
unrecognized deferred tax liability for temporary differences related to the
undistributed earnings is not practicable.
S-19
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (Continued)
The components of deferred income taxes for years prior to the adoption of SFAS
No. 109 are as follows:
1993 1992
---- ----
(in thousands)
Excess of tax over book depreciation $ 1,905 $ 5,445
Accrued vacation 52 (3,272)
Provision for insurance costs (3,009) (1,668)
Tax vs. book basis of dispositions 5,598 12,755
Other 1,512 435
------- -------
$ 6,058 $13,695
======= =======
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 stockholders, 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 the third quarter of fiscal 1993, the Company paid a special dividend of
$5 per Class B equivalent share on all shares of its Common Stock owned as of
April 19, 1993, with $2 per Class B equivalent share, or $24.2 million, paid in
cash and $3 per Class B equivalent share, or $34.7 million, in new Series C
Preferred Stock ("Preferred Stock"). Concurrent with the dividend, the Company
repurchased for cash 55,495 shares of its Class A Common Stock for $28.9
million.
Holders of the Preferred Stock are entitled to cumulative dividends payable
semi-annually; voting rights in the event of failure to pay dividends for four
consecutive periods (two years); and upon liquidation, $1,000 per share plus
accrued and unpaid dividends. The current dividend rate on the Preferred Stock
is $60 per share and is reset annually in December of each year at a rate equal
to $1,000 multiplied by 80% of Chemical Bank's announced prime rate of interest,
but not less than $60 per share nor greater than $100 per share. The Preferred
Stock may be repurchased, in whole or in part, at any time only at the Company's
option at a price equal to $1,000 per share plus accrued and unpaid dividends.
During fiscal 1994 the Company repurchased 17,647 preferred shares for $17.6
million.
On November 9, 1993, the Company's Board of Directors declared a four-for-one
split of the Class B and Class A Common Stock effected in the form of a stock
dividend to shareholders of record on November 10. The Company issued 18,158,097
shares of Common Stock, Class B and 1,544,868 shares of Common Stock, Class A in
connection with the stock split. The stated par value of $.01 per share of Class
B and Class A common stock was not changed.
As of September 30, 1994 the Company's stock option plans provided for the
issuance of up to 33,001,148 options to purchase shares of Common Stock, Class
B. The Company granted installment stock purchase opportunities under its stock
ownership program in fiscal 1994, 1993 and 1992 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. During fiscal 1994, the Company implemented a program to
extend non-qualified stock options to additional qualified employees. 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 1993, the Company implemented
the Deferred Payment Program which enables holders of non-qualified stock
options and installment purchase opportunities to defer a portion of the total
amount required to exercise the options. Interest currently
S-20
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. CAPITAL STOCK: (Continued)
accrues on deferred payments at 6% compounded annually and is payable when the
deferred payments are due. At September 30, 1994 and October 1, 1993 the
receivables from individuals under the Deferred Payment Program were $9.8
million and $5.9 million, respectively, which are classified in the consolidated
balance sheet 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
---------------------------------- ---------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Options granted 4,314,635 2,776,296 3,716,400 $11.19 $9.14 $8.13
Options exercised 2,588,030 4,904,360 1,757,568 $6.33 $3.14 $4.95
Options outstanding 10,383,764 10,030,024 12,500,840 $8.05 $6.26 $4.88
</TABLE>
At September 30, 1994, 1,129,160 of the outstanding option shares were
exercisable at an average option price of $1.81. The Company has reserved
11,063,004 shares of Common Stock, Class B at September 30, 1994 for issuance of
stock pursuant to its employee ownership and benefit programs.
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
$20.8 million at September 30, 1994 and $21.7 million at October 1, 1993.
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
($24.9 million as of September 30, 1994, $20.4 million as of October 1, 1993) is
included in the consolidated balance sheets as "Other Noncurrent Liabilities"
and the current portion of these notes ($8.7 million as of September 30, 1994
and $6.2 million as of October 1, 1993) is included in the consolidated balance
sheets as "Accounts Payable."
NOTE 8. COMMITMENTS AND CONTINGENCIES:
1994 1993
- -------------------------------------------------------------------------------
(in thousands)
Facilities under capital leases $8,204 $8,204
Less-accumulated amortization 5,590 4,891
- -------------------------------------------------------------------------------
$2,614 $3,313
===============================================================================
Rental expense for all operating leases was $121.2 million, $119.4 million and
$118.5 million for fiscal 1994, 1993 and 1992, respectively.
S-21
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENCIES: (Continued)
Following is a schedule of the future minimum rental commitments under all
noncancelable leases as of September 30, 1994:
Fiscal Year Operating Capital
- -----------------------------------------------------------------------
(in thousands)
1995 $115,003 $ 962
1996 71,781 778
1997 63,407 695
1998 58,555 551
1999 53,384 368
Subsequent years 218,265 743
- ------------------------------------------------------------------------
Total minimum rental obligations $580,395 4,097
===============================================
Less-amount representing interest 866
- ------------------------------------------------------------------------
Present value of capital leases 3,231
Less-current portion 690
- -------------------------------------------------------------------------
Noncurrent obligations under capital leases $2,541
=========================================================================
The Company has capital commitments of approximately $52 million at September
30, 1994 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, including a dispute with a former insurance carrier
involving certain coverages relating to prior years. The Company believes it has
meritorious defenses to the insurance and other 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>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Revenues $2,763,098 $2,607,630 $2,613,564
Cost of services provided 2,594,291 2,439,471 2,446,908
Net income (loss) 18,677 (357) 2,864
1994 1993
---- ----
(in thousands)
Current assets $ 355,841 $ 339,920
Noncurrent assets 1,223,750 1,221,164
Current liabilities 398,814 364,653
Noncurrent liabilities 1,093,563 1,126,087
Minority interest 10,812 18,084
S-22
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. QUARTERLY RESULTS (Unaudited):
The following table summarizes quarterly financial data for fiscal 1994 and
1993.
</TABLE>
<TABLE>
<CAPTION>
Fiscal Quarter
---------------------------------------------------
1994 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues $1,292,020 $1,257,614 $1,309,085 $1,302,859 $5,161,578
Cost of services provided 1,179,726 1,156,230 1,185,363 1,164,767 4,686,086
Income before extraordinary item
and cumulative effect of
accounting change 18,387 13,124 27,121 36,401 95,033
Extraordinary item (1) 702 117 2,518 4,340 7,677
Net income (2) 16,408 13,007 24,603 32,061 86,079
Earnings per share:
Income before extraordinary item
and cumulative effect of
accounting change $.36 $.25 $.53 $.73 $1.87
Net income $.32 $.25 $.48 $.64 $1.69
</TABLE>
<TABLE>
<CAPTION>
Fiscal Quarter
---------------------------------------------------
1993 First Second Third Fourth Year
- ----------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues $1,214,882 $1,188,456 $1,242,155 $1,245,245 $4,890,738
Cost of services provided 1,110,111 1,090,870 1,124,615 1,107,244 4,432,840
Income before extraordinary item 16,192 11,634 22,280 34,228 84,334
Extraordinary item (1) 4,297 -- 902 2,003 7,202
Net income 11,895 11,634 21,378 32,225 77,132
Earnings per share:
Income before extraordinary item $.32 $.23 $.44 $.68 $1.64
Net income $.24 $.23 $.42 $.64 $1.49
</TABLE>
(1) See Note 3.
(2) Includes cumulative effect of change in accounting for income taxes of
$1,277 in the fiscal 1994 first quarter. See Note 6.
In the first and second fiscal quarters, within the Food, Leisure 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 and casual apparel 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.
S-23
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS:
The Company provides or manages services in the following business segments:
Food, Leisure 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 1994 operating income includes a
$5.8 million gain on the sale of stock of an affiliate and the 1993 operating
income includes a $15 million gain from a divestiture and a reserve of
approximately $18 million for potential adjustments as described in Note 2. The
1994 segment operating results have been adversely impacted by the U.S. Major
League Baseball strike which began on August 12. Had the strike not occurred, it
is estimated that segment revenues and operating income would have been
approximately 2% and 6% greater than the reported results, respectively. Also,
total Company operating income and income before extraordinary items would have
been approximately 3% and 5% higher, respectively.
Uniform Services - Rental of personalized work apparel and linens for business
and institutions on a contract basis and the direct marketing of work clothing,
casual apparel, and accessories.
Health and Education Services - General management of child care centers, and
specialized services to emergency rooms, and other hospital specialties, and
medical services to correctional institutions. As described in Note 2, the
Company divested Living Centers, the operator of nursing care facilities, in
February 1992 and sold its remaining Living Centers common stock during fiscal
1993. Revenues related to Living Centers for fiscal 1992 were $132.8 million.
The Health and Education Services segment operating income for fiscal 1992
includes a divestiture gain of $13 million, as described in Note 2.
Approximately 40% of the segment operating income for fiscal 1992 was related to
Living Centers, including the 1992 divestiture gain. The operating income of
this segment, excluding Living Centers results, was $32.5 million in 1992.
Distributive Services - Wholesale distribution of magazines and other published
materials to retail locations patronized by the general public.
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. Fiscal 1994 expenses include unusual
costs related to several corporate development and strategic initiatives,
including costs related to a change in corporate identity. In 1992 unusual costs
were incurred in connection with a potential acquisition and several special
development programs. Direct selling expenses are approximately 1% of revenues
for fiscal 1994, 1993 and 1992. Corporate assets consist principally of goodwill
not allocable to any individual segment and other noncurrent assets.
<TABLE>
<CAPTION>
Revenues Operating Income
--------------------------------- -----------------------------------
1994 1993 1992 1994 1993 1992
----- ---- ---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Food, Leisure &
Support Services $3,274.3 $3,149.6 $3,151.8 $138.4 $137.4 $133.2
Uniform Services 810.5 731.0 632.9 96.0 87.6 76.5
Health & Education 673.3 619.3 687.3 37.2 33.7 53.0
Distributive 403.5 390.8 393.3 26.5 24.8 27.1
-------- -------- -------- ------ ------ -------
Total $5,161.6 $4,890.7 $4,865.3 298.1 283.5 289.8
======== ======== ========
General Corporate and Other Expenses (30.8) (22.6) (28.2)
Gain on Sale of Remaining Living Centers Common Stock - 8.0 -
------ ------ -------
Operating Income 267.3 268.9 261.6
Gain on Issuance of Stock by an Affiliate 4.7 - -
Interest expense, net (108.5) (125.7) (137.9)
------ ------- -------
Income Before Income Taxes, Minority Interest,
Extraordinary Item, and Accounting Change $163.5 $ 143.2 $ 123.7
====== ======= =======
</TABLE>
S-24
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS: (Continued)
Depreciation and Amortization, Capital Expenditures and Identifiable Assets
<TABLE>
<CAPTION>
Depreciation Capital
and Amortization Expenditures
------------------------------- ---------------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Food, Leisure &
Support Services $ 85.5 $ 76.6 $ 75.9 $ 83.2 $ 82.4 $104.2
Uniform Services 36.3 33.9 26.4 39.9 37.9 67.1
Health & Education 16.5 15.1 18.5 18.4 22.5 15.6
Distributive 2.3 2.1 2.2 2.0 1.4 1.8
------ ------ ------ ------ ------ ------
140.6 127.7 123.0 143.5 144.2 188.7
Corporate 3.2 2.8 2.8 3.0 2.5 1.5
------ ------ ------ ------ ------ ------
$143.8 $130.5 $125.8 $146.5 $146.7 $190.2
====== ====== ====== ====== ====== ======
</TABLE>
Identifiable Assets
-------------------------------------
1994 1993 1992
---- ---- ----
(in millions)
Food, Leisure &
Support Services $1,085.7 $1,054.6 $1,046.5
Uniform Services 608.7 570.7 567.6
Health & Education 280.2 261.3 241.0
Distributive 74.2 65.6 69.1
-------- -------- --------
2,048.8 1,952.2 1,924.2
Corporate 73.2 88.4 80.8
-------- -------- --------
$2,122.0 $2,040.6 $2,005.0
======== ======== ========
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 9% of total
operating income, and identifiable assets for these operations were
approximately 11% of the total.
S-25
40
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ARAMARK CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1994 AND OCTOBER 1, 1993
(in thousands)
ASSETS
1994 1993
----------- ----------
Current Assets:
Receivables $ 498 $ 341
Inventories 187 270
Prepayments 2,032 1,411
----------- ----------
Total current assets 2,717 2,022
----------- ----------
Property & Equipment, net 9,436 7,857
Investment in Subsidiaries 634,154 611,573
Notes Receivable from ARAMARK Services, Inc. 225,000 400,000
Other Assets 6,634 6,304
----------- ----------
$ 877,941 $1,027,756
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,832 $ 10,457
Accrued expenses 23,093 25,760
----------- ----------
Total current liabilities 35,925 36,217
---------- ----------
Long-Term Borrowings 290,414 474,875
Other Noncurrent Liabilities 45,217 39,048
Payable to Subsidiaries 303,035 331,892
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,791 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption
value $1,000 16,949 34,596
Class A common stock, par value $.01 21 21
Class B common stock, par value $.01 243 243
Earnings retained for use in the business 178,587 104,827
Cumulative translation adjustment 7,550 6,037
Impact of potential repurchase feature of
common stock (20,791) (21,651)
---------- ----------
Total 182,559 124,073
---------- ----------
$ 877,941 $1,027,756
========== ==========
The accompanying notes are an integral part of these financial statements.
S-26
41
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- ---------
<S> <C> <C> <C>
Equity in Net Income of Subsidiaries $86,079 $ 67,640 $ 67,381
------- -------- --------
Gain on Divestiture of an affiliate - 14,570 -
------- -------- --------
Management Fee Income 67,571 49,592 48,426
------- -------- --------
General and Administrative Expenses 45,808 27,652 26,156
------- -------- --------
Interest (Income) Expense -
Intercompany interest income (38,778) (36,774) (37,481)
Interest expense 47,746 54,503 54,491
------- -------- --------
Interest Expense, net 8,968 17,729 17,010
------- -------- --------
Income before income taxes 98,874 86,421 72,641
Provision for Income Taxes 5,118 6,748 1,943
------- -------- --------
Income Before Extraordinary Item 93,756 79,673 70,698
Extraordinary Item Due to Early Extinguishments
of Debt (net of income taxes of $5,118
in 1994, $1,670 in 1993 and $1,943 in 1992) 7,677 2,541 3,317
------- ------- --------
Net income $86,079 $77,132 $67,381
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-27
42
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 86,079 $ 77,132 $ 67,381
Equity in net income of subsidiaries (86,079) (67,640) (67,381)
Extraordinary item 7,677 2,541 3,317
Gain on divestiture - (14,570) -
Other, primarily noncash working capital (8,408) 4,298 (547)
------- ------- -------
Net cash provided by (used in) operating activities (731) 1,761 2,770
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment (3,023) (2,486) (1,480)
Other 2,072 120 140
------- ------- -------
Net cash used in investing activities (951) (2,366) (1,340)
------- ------- -------
Cash flows from financing activities:
Proceeds from additional long-term borrowings - 100,000 -
Payment of long-term borrowings including
premiums (194,694) (45,470) (3,952)
Change in notes receivable from
ARAMARK Services, Inc. 175,000 (100,000) -
Change in intercompany payable to
subsidiaries 54,253 106,702 8,491
Redemption of preferred stock (17,647) (137) -
Proceeds from issuance of common stock 12,416 9,462 8,675
Repurchase of common stock (25,729) (45,795) (14,644)
Payment of special dividend - (24,157) -
Dividends paid to preferred shareholders (1,917) - -
------- ------- -------
Net cash provided by (used in) financing activities 1,682 605 (1,430)
------- ------- -------
Change in cash $ - $ - $ -
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-28
43
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1.
These statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto beginning on page S-4.
Property and equipment are stated at cost and are depreciated over
their estimated useful lives on a straight-line basis.
Other assets consist primarily of long-term receivables arising from
the divestiture of subsidiaries.
Other noncurrent liabilities consist primarily of deferred compensation
and subordinated installment notes arising from repurchases of common stock.
Note 2.
During fiscal 1993, certain subsidiaries of the Company made a dividend
distribution totaling approximately $140 million. This transaction resulted in a
reduction in the payable to subsidiaries.
Note 3.
The Company has guaranteed certain obligations of ARAMARK Services,
Inc., its wholly-owned subsidiary, primarily those incurred pursuant to the
Credit Agreement borrowings. See Note 4 to the Company's consolidated
financial statements. Total guarantees were $725 million on September 30, 1994.
S-29
44
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Additions, at Cost
------------------------------
Balance, as of Acquisition Retirements, Balance, as of
October 1, of Including September 30,
Classification 1993 Businesses(1) Other Divestitures Other(2) 1994
- -------------- --------------- -------------- ----------- ------------ -------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Land, buildings and improvements $ 355,744 $ -- $ 24,815 $ 13,716 $ 12,828 $ 379,671
Service equipment and fixtures 783,393 573 121,120 17,064 112 888,134
Leased property under capital
leases 8,204 -- -- -- -- 8,204
---------- ---------- ---------- ----------- ---------- ----------
Total $1,147,341 $ 573 $ 145,935 $ 30,780 $ 12,940 $1,276,009
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects primarily the adoption of SFAS No. 109 and the impact of
currency translation.
S-30
45
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
<TABLE>
<CAPTION>
Additions, at Cost
------------------------
Balance, as of Acquisition Retirements, Balance, as of
October 2, of Including October 1,
Classification 1992 Businesses(1) Other Divestitures Other(2) 1993
- -------------- ------------- ------------- ------- ------------- -------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Land, buildings and improvements $ 349,648 $ 9 $ 30,875 $ 12,285 $ (12,503) $ 355,744
Service equipment and fixtures 672,753 4,535 111,246 14,512 9,371 783,393
Leased property under capital
leases 9,956 -- -- 1,752 -- 8,204
---------- ----------- ----------- ----------- ----------- ----------
Total $1,032,357 $ 4,544 $ 142,121 $ 28,549 $ (3,132) $1,147,341
========== ========== ========== ========== =========== ==========
</TABLE>
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects the impact of currency translation and reclassification of
assets between categories.
S-31
46
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
<TABLE>
<CAPTION>
Additions, at Cost
------------------------
Balance, as of Acquisition Retirements, Balance, as of
September 27, of Including October 2,
Classification 1991 Businesses(1) Other Divestitures Other(2) 1992
- -------------- -------------- ------------ ----- ------------ -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Land, buildings and improvements $ 426,944 $ 13,038 $ 33,755 $ 123,425 $ (664) $ 349,648
Service equipment and fixtures 572,141 17,864 123,558 40,683 (127) 672,753
Leased property under capital
leases 10,213 1,994 -- 2,251 -- 9,956
----------- ------------ ----------- ------------ ----------- -----------
Total $1,009,298 $ 32,896 $ 157,313 $ 166,359 $ (791) $1,032,357
=========== =========== =========== ============ =========== ==========
</TABLE>
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects the impact of currency translation.
S-32
47
<TABLE>
<CAPTION>
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
Balance, as of Charged Retirements, Balance, as of
October 1, to Including September 30,
Classification 1993 Income(1) Divestitures 1994
- -------------- -------------- ---------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Buildings and improvements $103,888 $ 17,564 $ 4,299 $117,153
Service equipment and fixtures 390,183 89,243 8,067 471,359
Leased property under capital leases 4,891 699 -- 5,590
-------- --------- -------- --------
Total $498,962 $107,506 $ 12,366 $594,102
========= ========= ======== ========
</TABLE>
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
S-33
48
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
<TABLE>
<CAPTION>
Balance, as of Charged Retirements, Balance, as of
October 2, to Including October 1,
Classification 1992 Income(1) Divestitures Other (2) 1993
- -------------- --------------- -------- ------------- ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Buildings and improvements $ 97,822 $ 15,547 $ 7,282 $(2,199) $103,888
Service equipment and fixtures 315,128 82,987 10,131 2,199 390,183
Leased property under capital leases 4,772 441 322 -- 4,891
--------- -------- --------- ------- --------
Total $417,722 $ 98,975 $ 17,735 $ -- $498,962
======== ======== ========= ======= ========
</TABLE>
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
(2) Reflects reclassification between categories.
S-34
49
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
<TABLE>
<CAPTION>
Balance, as of Charged Retirements, Balance, as of
September 27, to Including October 2,
Classification 1991 Income(1) Divestitures 1992
- -------------- -------------- --------- ------------ --------------
(in thousands)
<S> <C> <C> <C> <C>
Buildings and improvements $ 93,368 $ 18,014 $ 13,560 $ 97,822
Service equipment and fixtures 254,575 79,740 19,187 315,128
Leased property under capital leases 4,309 1,367 904 4,772
--------- --------- ---------- ---------
Total $352,252 $ 99,121 $ 33,651 $417,722
========= ========= ========== ========
</TABLE>
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
S-35
50
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
<TABLE>
<CAPTION>
Additions Reductions
---------------------- ------------------------
Balance, Acquisition Divestiture Deductions Balance,
Beginning of of Charged to of from End of
Description Fiscal Year Businesses Income Businesses Reserves (1) Fiscal Year
- ----------- ------------- ------------ ---------- ----------- ------------ -----------
(in thousands)
Fiscal Year 1994
<S> <C> <C> <C> <C> <C> <C>
Reserve for doubtful accounts,
advances & current notes receivable $10,242 $ 1,288 $ 6,141 $ -- $ 5,248 $12,423
======= ======= ======= ======= ======= ========
Fiscal Year 1993
Reserve for doubtful accounts,
advances & current notes receivable $ 9,881 $ 37 $ 7,425 $ 19 $ 7,082 $10,242
======= ======= ======= ======== ======= ========
Fiscal Year 1992
Reserve for doubtful accounts,
advances & current notes receivable $13,178 $ 730 $ 7,136 $ 2,939 $ 8,224 $ 9,881
======= ======= ======= ======== ======= ========
</TABLE>
(1) Allowances granted and amounts determined not to be collectible.
S-36
51
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Maintenance and repairs $ 47,190 $ 42,104 $ 46,241
Depreciation and amortization of intangible assets 143,763 130,511 125,798
Rents 121,176 119,372 118,475
Taxes, other than payroll and income taxes (1) -- -- --
Royalties (1) -- -- --
Advertising Costs (1) -- -- --
</TABLE>
(1) Not presented because each amount was less than one percent of revenues.
S-37
52
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
3.1 Restated Certificate of Incorporation.
3.2 Corporate By-laws, as amended, are incorporated by reference to the
Company's Registration Statement of Form S-8 (No. 33-14365).
4.1 Amended and Restated Stockholders' Agreement.
4.2 Amended and Restated Registration Rights Agreement is incorporated by reference to the
Company's quarterly report on Form 10-Q for the fiscal quarter ended April 1, 1988.
Long-term debt instruments authorizing debt which does not exceed 10% of
the total consolidated assets of the Company are not filed herewithin but will
be furnished on request of the Commission.
10.1 Agreement relating to employment and post-employment competition dated December 21, 1983 with
Richard H. Vent is incorporated by reference to the Company's Annual Report on
Form 10K for the fiscal year ended October 2, 1987.
10.2 Summary Employment, Consulting and Retirement Agreement dated October 16, 1984 with
Davre J. Davidson is incorporated by reference to ARAMARK's Annual Report on Form
10K for the fiscal year ended September 28, 1984.
10.3 Agreement relating to employment and post-employment competition dated May 6, 1986 with
James E. Ksansnak is incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 29, 1989.
10.4 Agreement relating to employment and post-employment competition dated October 4, 1991 with
William Leonard is incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended October 1, 1993.
10.5 Restated Employment Agreement dated November 13, 1991 with Joseph Neubauer is incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal year ended
September 27, 1991.
10.6 Agreement relating to employment and post-employment competition dated October 1, 1991
with Julian L. Carr, Jr.
10.7 Amended and Restated Credit and Guaranty Agreement dated as of March 12, 1993.
11 Computation of Earnings Per Share.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Ernst & Young, Chartered Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
1
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 185,000,000 shares,
consisting of (i) 10,000,000 shares of Series Preferred Stock, $1.00 par
value per share (the "Series Preferred Stock"), and (ii) 25,000,000 shares
of Common Stock, Class A, $.01 par value per share (the "Class A Common
Stock"), and (iii) 150,000,000 shares of Common Stock, Class B, $.01 par
value per share (the "Class B Common Stock"). The Class A Common Stock and
the Class B Common Stock are referred to collectively as the "Common
Stock".
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, powers, preferences, and relative, participating, optional,
special or other rights (including, as examples and not as a limitation,
multiple voting powers and conversion rights), and qualifications,
limitations or restrictions of any series of the class of Series Preferred
Stock that may be desired.
4A. Common Stock
A statement of the designations, powers, preferences, and rights
of the Common Stock, and the qualifications, limitations and restrictions
in respect thereof, is as follows:
1. Classes.
The Common Stock shall be divided into two classes, the
Class A Common Stock and the Class B Common Stock. The Common Stock shall
be issuable only in whole shares. The powers, preferences and rights of the
Class A Common Stock and the Class B Common Stock, and the qualifications,
limitations and restrictions thereon, shall be in all respects identical,
except as otherwise provided in this Part 4A.
2
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, and 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
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; and
provided further, that the Board of Directors, may declare and pay
dividends and other distributions with respect to the Class A Common Stock
without declaring or paying any dividend or other distribution with respect
to the 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 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
Class A Common Stock and the Class B Common Stock (and such other stock)
are required by law to vote as separate classes, shall possess all of the
voting power of the Corporation with respect to the election of directors
and for all other purposes.
(b) Each share of Common Stock, whether
Class A Common Stock or 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 be
distributed among the holders of Common Stock, 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, 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.
5. Conversion of Class B Common Stock.
(a) Each share of 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
3
fully paid and nonassessable share of Class A Common Stock. Subject to the
terms of any such approval, the holder of shares of 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 Class B Common
Stock to be converted to the agent for the registration of transfer of
shares of 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 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 Class B Common Stock held by such holder shall
thereupon be converted into one-tenth of a share of Class A Common Stock
effective immediately. No share of 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 Class
A Common Stock effective at the time of the purported issuance.
(c) At any time when the Board of Directors
authorizes and directs the conversion of all the Class B Common Stock into
Class A Common Stock, then, at the time designated by the Board for the
occurrence of such event, each outstanding share of Class B Common Stock shall
be converted into one-tenth of a share of Class A Common Stock and no further
shares of 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 Class B Common Stock held by such holder shall thereupon and
thereafter be deemed to represent the number of whole shares of 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 Class B Common Stock at its office, or to the
Corporation at its principal executive offices, such certificate shall be
cancelled and a certificate for the number of whole shares of 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 Class A Common Stock upon conversion of shares of 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
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 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 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
4
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 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 Class B
Common Stock shall cease at such time, and the person or persons in whose
name or names the certificate representing shares of Class A Common Stock
are to be issued shall be treated for all purposes as having become the
record holder or holders of such shares of 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 Class B
Common Stock; provided, however, that if any share of Class B Common Stock
shall be converted subsequent to the record date for the payment of a
dividend or other distribution on shares of 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 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 Class B Common
Stock, such number of shares of Class A Common Stock as may be issuable
upon the conversion of all such outstanding shares of Class B Common Stock,
provided that the Corporation may deliver shares of Class A Common Stock
held in the treasury of the Corporation.
(f) No fractions of shares of 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 Class B Common Stock not evenly convertible multiplied by the per share
fair market value of the 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.
4B. Series C Stock
A statement of the powers, designations, preferences, rights,
qualifications, limitations and restrictions of 40,000 shares of Series
Preferred Stock is as follows:
1. Designation. There shall be a series of Series
Preferred Stock which shall consist of 40,000 shares and shall be
designated as Adjustable Rate Callable Nontransferable Series C Preferred
Stock (the "Series C Stock"). The number of authorized shares of Series C
Stock may be increased by resolution of the Board of Directors.
2. Rank.
(a) Rank of Series C Stock. To the extent
and in the manner provided in this Part 4B, the Series C 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 C
Stock with respect to dividend rights or rights on liquidation or both, and
(ii) senior to any other stock of the Corporation.
5
(b) Certain Definitions. The following
terms as used in this Part 4B, shall be deemed to have the meanings set
forth in this section.
(i) The term "Participating Stock"
shall mean the Class A Common Stock and the Class B Common Stock and any
other stock of the Corporation of any class which has the right to
participate in the distribution of either earnings or assets of the
Corporation without limit as to the amount or percentage.
(ii) The term "Parity Stock" with
respect to Series C Stock shall mean the Series C 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 C Stock shall mean the
Series C 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 C Stock shall mean the Series C 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 C 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 C 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 C 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 C 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 C 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 C Stock
shall be payable semi-annually on June 15 and December 15 in each year.
Dividends shall accrue from the date of original issuance. Accumulations of
dividends shall not bear interest.
(b) Limitations Upon Dividend Arrearage.
Unless full cumulative dividends upon the Series C 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
6
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. In the event that stated dividends on all Dividend Parity Stock
(including, by way of example and not as a limitation, full cumulative
dividends on the Series C Stock) are not paid in full, all shares of
Dividend Parity Stock shall participate ratably in the payment of
dividends, including accumulations, if any, in accordance with the sums
which would be payable thereon if all dividends thereon were declared and
paid in full.
(c) The "Established Dividend Rate" shall
initially be $60.00, and shall be reset as provided in this paragraph.
On each December 16, beginning December 16, 1993 and continuing so long as
any shares of Series C Stock shall be outstanding, the Established Dividend
Rate shall be reset at a rate equal to $1,000 multiplied by 80% of the
Prime 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 less than $60.00 nor greater than $100.00. For
purposes of the preceding sentence, the "Prime Rate" shall mean the rate of
interest publicly announced from time to time by Chemical Bank at its main
office in New York City as its Prime Rate. The Corporation shall file with
the duly appointed transfer agent for the Series C 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 C 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 C 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 C
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.
7
5. Redemption.
(a) Optional Redemption. The Series C Stock
may be called for redemption and redeemed 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 after January 1, 1994 all, but not less than all, of
the shares of Series C Stock held by any person, but only if such person is
not also a holder of shares of either Class A Common Stock or Class B
Common Stock.
(b) No Mandatory Redemption. There is no
mandatory sinking fund for, or other required redemption of, the Series
C Stock.
(c) Manner of Redemption.
(i) If less than all of the
outstanding shares of Series C 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 C Stock shall be given by the Corporation by
first-class mail, not less than 30 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 C Stock of the holder are to be redeemed, the identification of the
shares of Series C 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 C Stock to be redeemed are to
be surrendered for payment of the redemption price.
(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 C 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 C 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 the
series redeemed or of any other outstanding series, may be reissued by the
8
Corporation as shares of one or more series of Series Preferred Stock other
than Series C Stock.
6. Voting Rights.
(a) No Voting Rights Generally. Except as
expressly provided to the contrary in this resolution or as otherwise
required by law, the holders of Series C 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 that dividends
upon the Series C Stock shall be in arrears in an amount equal to four
full semi-annual dividends thereon, the number of directors constituting
the full board shall be increased by two, and the holders of the Series C
Stock voting noncumulatively and separately as a single class together with
the holders of any other shares of Series Preferred Stock having the right
to elect directors as a class under such circumstances, 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 C Stock shall continue until all accumulated and
unpaid dividends thereon shall have been paid in full, whereupon such
special voting rights of the holders of Series C 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 C 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 C 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 class in such
circumstances) shall, call a special meeting of holders of such Series C
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.
(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 of Series C Stock. No such
action shall impair the right of the holders of Series C 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
9
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 C 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 C Stock
shall not be transferable prior to February 1, 1997 (other than by will or
the laws of descent), except that such shares may be transferred to the
Corporation pursuant to a redemption or purchase thereof. On and after
February 1, 1997, the shares of Series C Stock shall be freely transferable
at any time, at the option of the holder.
8. No Conversion Rights. The holders of shares of
Series C Stock shall not have the right to convert such shares into
other securities of the Corporation.
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.
SIXTH: The following terms shall have the accompanying defined
meanings:
1. "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.
2. "Permitted Transferee" shall have the meaning as
defined in the Stockholders' Agreement.
3. "Stockholders' Agreement" shall mean the Amended and
Restated Stockholders' Agreement dated as of April 7, 1988, by and among
the Corporation and the persons named therein as the same may be amended
and a copy of which is on file with the Secretary of the Corporation.
4. "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
10
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.
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 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 the Certificate of Incorporation, By-Laws, agreement,
vote of stockholders or disinterested directors or otherwise.
11
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.
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.
12
IN WITNESS WHEREOF, this Restated Certificate of Incorporation,
which restates and integrates but does not further amend the Corporation's
Certificate of Incorporation, as heretofore amended and restated, having
been duly adopted pursuant to the provisions of Section 245 of the General
Corporation Law of the State of Delaware, has been duly executed this 8th
day of November, 1994.
ARAMARK CORPORATION
Attest:/s/ Donald S. Morton By: /s/ Martin W. Spector
--------------------------- --------------------------
Donald S. Morton Martin W. Spector
Assistant Secretary Executive Vice President
1
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
OF
ARAMARK CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of the 14th
day of December, 1994, 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 "Individual Investors" or
"Institutional 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 the
Individual Investors are sometimes hereinafter referred to collectively as
the "Investor Group." Institutional Investors and Individual Investors are
sometimes hereinafter referred to collectively as "Outside Investors."
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 "Institutional 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 an Individual
2
Investor, then he or she shall be deemed to be an "Individual 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 Class B Common Stock, par value $.01 per share ("Class B
Common Stock"), and Class A Common Stock, par value $.01 per share ("Class
A Common Stock") 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.
Pursuant to ARAMARK's Restated Certificate of Incorporation (the
"Certificate of Incorporation"), upon the termination of employment of a
Management Investor, the shares of Class B Common Stock held by such
Management Investor and his or her Permitted Transferees shall be converted
into shares of Class A Common Stock; and upon any transfer of shares of
Class B Common Stock in accordance with the terms of this Agreement other
than to a Management Investor or Permitted Transferee of a Management
Investor, such shares shall be converted into shares of Class A Common
Stock. Shares so converted shall continue to be subject to the terms and
conditions of this Agreement.
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.
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 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 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. With respect to shares of Class A
Common Stock resulting from the conversion of shares of Class B Common
Stock pursuant to the terms of the Certificate of Incorporation, the
"Appraisal Price of (an equivalent number of) shares of Class B Common
Stock" shall mean the Appraisal Price, had the conversion not occurred, of
such shares of Class B Common Stock.
3
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 ARA 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.
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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.
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
5
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.
3. Certain Permitted Transfers of Shares.
3.01 Estate Planning Transfers, etc. Subject to the restrictions
set forth in Section 2.03 and Section 4.06, 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; (B) any
transfer among members of a family, their trusts or other entities, if
approved by the Board of Directors; (C) any transfer among Institutional
Investors which became Stockholders in December 1984; and (D) with respect
to a corporate or partnership Stockholder transfer between an Affiliate and
such corporate or partnership Stockholder (it being understood with respect
to such Affiliate that the later sale of such Affiliate as part of a sale
or series of sales of substantial assets other than Common Stock would not
constitute an indirect sale of Common Stock by such corporate or
partnership Stockholder, and need not be made within the terms of this
Agreement, provided that an officer of such institution certifies that such
sale is not being undertaken to evade the transfer restrictions herein).
6
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 which relate to Management Investors and which do not relate to
Outside Investors. Any such approval may be revoked by the Board 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 Management Investors.
(a) A Management Investor or Permitted Transferee may sell
shares of Common Stock, by complying with the terms of this
Section 4. The selling Management Investor shall first give
written notice (a "Management Investor's Notice") to ARAMARK
stating such selling Management Investor's desire to make
such transfer, the number of shares of Common Stock to be
transferred (the "Offered Management Shares"), and the price
which the selling Management Investor proposes to be paid
for the Offered Management Shares, which proposed price
shall not be greater than the Appraisal Price of (an
equivalent number of) shares of Class B Common Stock (the
"First Offer Price").
(b) Upon receipt of the Management Investor's Notice, ARAMARK
shall have the irrevocable and exclusive option to buy up to
all of the Offered Management Shares at the First Offer
Price; provided, however, that ARAMARK shall not have the
right to purchase any of the Offered Management Shares
unless either (i) ARAMARK purchases all such Offered
Management Shares, or (ii) such selling Management Investor
7
consents to the purchase of less than all of the Offered
Management Shares. ARAMARK's option under this Section
4.01(b) shall be exercisable by a written notice to such
selling Management Investor, given within 45 days from the
date of receipt of the Management Investor's Notice.
4.02 Transfers by Outside Investors.
(a) An Outside Investor may sell shares of Common Stock,
including pursuant to the registration rights under Section
2.1 of ARAMARK's Amended and Restated Registration Rights
Agreement amended and restated as of April 7, 1988 (the
"Registration Rights Agreement"), by complying with the
terms of this Section 4. The selling Outside Investor shall
first give written notice (a "Seller's Notice") to ARAMARK
stating such selling Outside Investor's desire to make such
transfer, the number of shares of Common Stock to be
transferred (the "Offered Investors' Shares"), and the price
which the selling Outside Investor proposes to be paid for
the Offered Investors' Shares (the "First Offer Investors'
Price").
(b) Upon receipt of the Seller's Notice, ARAMARK shall have
the irrevocable and exclusive option to buy up to all of the
Offered Investors' Shares at the First Offer Investors'
Price; provided, however, that ARAMARK shall not have the
right to purchase any of the Offered Investors' Shares
unless either (i) ARAMARK purchases all such Offered
Investors' Shares, or (ii) such selling Outside Investor
consents to the purchase of less than all of the Offered
Investors' Shares. ARAMARK's option under this Section
4.02(b) shall be exercisable by a written notice to such
selling Outside Investor, given within 45 days from the date
of the receipt of Seller's Notice.
4.03 Transfer of Offered Shares to Third Parties. If the Management
Investor's Notice or the Seller's Notice (collectively, the "Notice")
required to be given pursuant to Section 4.01 or 4.02, as the case may be,
has been duly given, and ARAMARK determines not to exercise its option to
purchase the Offered Management Shares or the Offered Investors' Shares
(collectively, 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 4.02, as the case may be, 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 or 4.02, as the case may be, to sell to any
third-party Transferees the remaining Offered Shares, at a price equal to
or greater than the First Offer Price, in the case of Management Investors
or their Permitted Transferees, and the First Offer Investors' Price, in
the case of Outside Investors; 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. Anything
8
herein to the contrary notwithstanding, the 90-day period described in this
Section 4.03 shall be extended until the completion of all sales pursuant
to a registration statement, a request for which was made substantially
concurrently with the Notice.
4.04 Reoffers. In the event the proposed purchase price of a
third-party Transferee for the Offered Shares is less than the First Offer
Price or the First Offer Investors' Price, as the case may be, 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 or 4.02, as the
case may be. 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
4.02, as the case may be, 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 4.04, at a price equal to or greater than the Reoffer 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.
4.05 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 the First Offer Investors'
Price, as the case may be, 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 4.04 in the event of a Reoffer, or, if no Reoffer
Notice is given, the 90 day period described in Section 4.03, 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.
4.06 No Sales of Control.
(a) Subject to Section 4.06(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
9
action) the holder, directly or indirectly, of 10% or more
of either the outstanding shares of Class A Common Stock or
the outstanding shares of Class B Common Stock. Any
transaction resulting in a violation of this Section 4.06(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 4.06 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.
(b) The provisions of Section 4.06(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.
4.07 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.
4.08 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 4.07 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.
4.09 Transfers in a Public Offering. In the event a request is made
under Section 2.1 of the Registration Rights Agreement for a demand
registration, then the procedures set forth in Sections 4.02 through 4.05
shall be modified in the following respects:
(a) Such request shall also provide the information required
to be stated in a Seller's Notice, and shall also constitute
a Seller's Notice.
(b) Prior to the expiration of the 21 day period under the
Registration Rights Agreement within which ARAMARK is to
file a registration statement covering the shares the holder
of which requested a demand registration, ARAMARK shall have
the irrevocable and exclusive option to buy all (and only
all) of the Offered Investors' Shares at the First Offer
Investors' Price, which shall be the proposed public
offering price after reduction for commissions, discounts
and the like.
10
(c) In the event the public offering price (after reduction
for commissions, discounts and the like) is more than 10%
lower than the First Offer Investors' Price, or the number
of shares included in the offering is reduced to less than
75% of the shares as to which the Seller's Notice was
delivered (otherwise than by reason of a cut down by the
Underwriter) then Section 4.04 shall apply, but such section
shall not otherwise apply to any sale pursuant to a
registration statement.
(d) In the event all of the Offered Investors' Shares are
elected to be purchased, the demand registration shall be
held in abeyance pending the closing of such purchase in
accordance with this Agreement.
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 Investor Group member, at the option of such Investor
Group member, such Investor Group member's estate, heirs or personal
representative, and such Investor Group member's Permitted Transferees
(other than Permitted Transferees specified in Section 3.01(A)(ii))
(collectively, the "Holders" of such Investor Group member's shares) and
within 30 days of receipt by ARAMARK of a Seller's Notice from such
Holders, which notice must be given within 30 days from the date of the
appointment of a personal representative of such 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 Seller's 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 Seller's 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 (an equivalent number of) shares of Class B Common
Stock, for the shares of a Holder of a Management Investor's shares, and
shall be the Appraisal Price of shares of Class A Common Stock for the
shares of a Holder of an Individual Investor's 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
11
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 (an equivalent number of) shares of Class B Common
Stock at the time ARAMARK gives notice that it is exercising its Call
option and (ii) the Appraisal Price of (an equivalent number of) shares of
Class B 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 of (an equivalent number of) shares of Class B Common Stock
at the time ARAMARK gives notice that it is exercising its Call option.
12
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 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.
13
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.
11. Term. The terms and provisions of this Agreement which relate to
Management Investors 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. The terms and
provisions of this Agreement which relate to Outside Investors shall
terminate on April 7, 2008 or, if earlier, on the
14
closing date of the first to occur of (i) any merger or other business
combination of ARAMARK with or into any other corporations, except a merger
or other business combination in which the stockholders of ARAMARK
immediately prior thereto constitute more than a majority of the
stockholders (by value of equity securities held) following such merger,
and (ii) the sale of shares of Class A Common Stock to the public pursuant
to an underwritten, registered public offering under the Securities Act of
1993, as amended (the "Securities Act") as a result of which offering the
public (including for this purpose all purchasers in the underwriting
irrespective of any relationship with ARAMARK) owns 10% or more of the
outstanding shares of Class A Common Stock, provided such shares have a
fair market value equal to at least $25,000,000 at the time of the
offering.
Notwithstanding the foregoing, the restrictive terms and provisions
set forth herein with respect to the rights and obligations of Management
Investors shall terminate, effective upon or after the occurrence of a
public offering pursuant to clause (ii) above, to the extent the existence
of such terms and provisions would impair the ability of ARAMARK to list
its Common Stock on the New York Stock Exchange or, in the written opinion
of the lead underwriter, significantly impair the value of the Common Stock
proposed to be sold in a public offering.
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 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. Each Stockholder, by
written notice given to ARAMARK in accordance with this Section 14 may
change the address to which notices, statements, instructions or other
documents are to be sent to such Stockholder. 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.
15
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 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 the holders of at least three-fourths of the Common Stock
held by the Institutional and Individual Investors (taken as a whole), and
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, 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.
This amended and restated Agreement shall become effective upon the
later of (i) December 14, 1994 and (ii) the date ARAMARK has received and
holds duly executed (and not previously rescinded) instruments in writing
approving such amended and restated Agreement from the required parties as
provided in this Section 16.04.
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
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]
17
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 ofand 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.
18
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 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.
19
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.
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.
20
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
1
AGREEMENT RELATING TO EMPLOYMENT AND
POST-EMPLOYMENT COMPETITION*
This Agreement is between the undersigned individual ("Employee") and
ARA Services, Inc. ("ARA").
RECITALS
--------
A. ARA is a service management company which provides a variety of services
to business and industry, private and public institutions, and the general
public primarily in the following markets: food and refreshment services;
healthcare; childcare, periodical distribution, uniform rental and
maintenance.
B. ARA has a proprietary interest in its business methods and systems
("Systems") which include, but are not limited to, policy and procedure
manuals, computer programs, financial forms and information, supplier
information, supplier information, recipes, accounting forms and procedures,
personnel policies and information on the needs of clients, all of which
information is not publicly disclosed and is considered by ARA to be
confidential trade secrets; and
C. ARA intends to employ Employee in a position where Employee will have
access to information relating to ARA's Systems and ARA will encourage
Employee to develop personal relationships with ARA's clients and prospective
clients; and
D. ARA will be vulnerable to unfair post-employment competition by Employees
since Employee will have access to ARA Systems and will have a personal
relationship with ARA's clients and prospective clients; and
E. In consideration of the severance and other employment benefits provided
for herein, Employee was willing to enter into this Agreement with ARA as a
condition of employment, pursuant to which Employee will limit his right to
compete against ARA following termination of employment for any reason to the
limited extent set forth in this Agreement.
* This Agreement covers individuals in Grade N or Higher.
2
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
Article 1. NON-DISCLOSURE AGREEMENT: ARA may, pursuant to Employee's
employment hereunder provide and confide to Employee ARA's Systems,
techniques and methods of operation developed at great expense by ARA and
which Employee recognizes to be unique assets of ARA's business. Employee
shall not, during or after the term of employment, directly or indirectly,
in any manner utilize or disclose to any person, firm, corporation,
associaiton or other entity, except where required by law: (a) any such
Systems, techniques and methods of operation; (b) any sales prospects,
customer lists, products, research or data of any kind; or (c) any information
relating to strategic plans, sales costs, profits or the financial condition
of ARA or any of its customers or prospective customers, which is not
generally known to the public or recognized as standard practice in the
industries in which ARA shall be engaged.
Article 2. NONCOMPETITION AGREEMENT:
A. Subject to the provisions of Paragraphs B and E, below, Employee, for a
period of two (2) years folowing termination of his employment, shall not,
without ARA's written permission, directly or indirectly, on Employee's behalf
or on behalf of any other person, firm, corporation, association or other
entity, engage in, or in any way be concerned with or negotiate for, or
acquire or maintain any ownership interest in any business or activity which
is the same, similar to or competitive with that conducted by, engaged in or
developed for later implementation by ARA at any time during the term of
Employee's employment.
B. The provisions set forth in Paragraph A, above, shall apply to (i) all
fifty states and (ii) each foreign country, possession or territory in which
ARA may be engaged in business at the termination of Employee's employment or
at any time within twelve (12) months prior thereto; but only if Employee was
directly or indirectly involved or exposed to plans for such business at any
time within twelve (12) months prior to termination.
C. Employee further agrees that Employee shall not for a period of two
years, directly or indirectly, at any time in any manner, induce or attempt
to influence any employees of ARA to terminate their employment with ARA.
D. Employee acknowledges that in the event of any violation by Employee of
the provisions set forth in Article 1 above or this Article 2, ARA will
sustain serious, irreparable and substantial harm to its business, the extent
of which will be difficult to determine and impossible to remedy by an action
at law for money damages. Accordingly,
3
Employee agrees that, in the event of such violation or threatened violation
by Employee, ARA shall be entitled to an injunction before trial from any
court of competent jurisdiction as a matter of course upon the posting of not
more than a nominal bond, in addition to all such other legal and equitable
remedies as may be available to ARA. Employee further agrees that, in the
event any of the provisions of this Agreement are determined by a court of
competent jurisdiciton to be contrary to any applicable statute, law or rule,
or for any reason unenforceable as written, such court may modify any of
such provisions so as to permit enforcement therefor as thus modified.
E. Notwithstanding anything to the contrary in this Agreement, if ARA elects
to terminate Employee's employment for any reason other than good and
sufficient cause, then, in such event the term of the non-competition
provision set forth in Paragrph A above shall be reduced to the number of
months that Employee is entitled to severance pursuant to the Following
Article 4A, below.
Article 3. EXECUTIVE CORPS PROGRAMS: Employee shall be eligible to
participate in the following Executive Corps programs while a member of the
Executive Corps to the extent ARA continues to make such programs available
to Executive Corps members:
* Executive Corps Health Care Plan
* Executive Corps Long Term Disability Insurance
* Survivor Income Protection Plan
* Executive Corps Automobile Program
Such Executive Corps programs may be amended or revoked at any time, without
notice to Employee, in the sole discretion of ARA.
Article 4. SEVERANCE BENEFITS: If Employee is terminated by ARA for any
reason other than good and sufficient cause, Employee shall be entitled to
the following severance benefits:
A. Severance Pay: Employee shall receive severance payments equivalent to
4
Employee's base salary rate for the number of months set forth below:
Years of ARA Continuous Service
Completed from Last Hire Date
- -----------------------------
10 or
2 3 4 5 6 7 8 9 more
- - - - - - - - -----
9 9 10 11 12 13 14 16 18
Severance payments shall be made in installments in accordance with ARA's
normal payroll cycle.
B. Other Severance Benefits:
(1) Group medical and life insurance coverages shall continue under
then prevailing terms as long as severance payments are being made to
Employee. Deductions for Employee's share of the premiums will be made
from Employee's severance payments. Group medical coverage provided during
such period shall be applied against ARA's obligation to continue group
medical coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"). Upon termination of group medical and life insurance
coverages, Employee may convert, at his cost, to individual policies.
(2) Employee's eligibility to receive or participate in all other benefit
and compensation plans, including, but not limited to Management Incentive
Bonus, Long Term Disability, Retirement Savings, and Stock Option Plans,
shall terminate as of the effective date of Employee's termination unless
provided otherwise under the terms of a particular benefit or compensation
plan, provided, however, participation in programs made available solely to
Executive Corps members shall cease as of the effective date of Employee's
termination or the date Employee's Executive Corps membership ceases,
whichever should occur first.
C. Termination for good and sufficient cause: shall include termination for
such things as fraud or dishonesty, willful failure to perform assigned
duties, willful violation of ARA's Business Conduct Policy, or intentionally
working against the best interests of ARA.
5
D. If Employee is terminated by ARA, for reasons other than good and
sufficient cause, Employee will receive severance payments and benefits for
the number of months set forth above in Paragraph A, whether or not Employee
commences other non-competitive employment while he is receiving such
payments and benefits, provided, however, ARA reserves the right to terminate
all severance payments and benefits if Employee violates the covenants set
forth in Article 2, above.
E. ARA expressly reserves the right to revoke or amend, in whole or in part,
the severance provisions set forth in this agreement at any time, for any
reason, provided, however, in the event Employee is terminated for reasons
other than good and sufficient cause subsequent to such revocation or
amendment, Employee shall be entitled to no less than the monthly severance
payments which Employee would have received under this Agreement had he
been terminated by ARA on the date ARA elected to revoke or amend the
severance provisions.
F. During any period of disability following termination of Employment,
Employee agrees that disability payments received by him pursuant to health
and accident or disability policies, whether on account of total or partial
disability, shall be credited against the severance payments due him
hereunder.
Article 5. TERM OF EMPLOYEMENT: Employee acknowledges that ARA has the
right to terminate Employee's employment at any time for any reason
whatsoever, provided, however, that any termination by ARA for reasons other
than good and sufficient cause shall result in the severance benefits
described in Article 4, above, to become due in accordance with the terms
of this Agreement. Employee further acknowledges that the severance
payments made and other benefits provided by ARA are in full satisfaction
of any claims that Employee may have against ARA resulting from ARA's
exercise of its right to terminate Employee's employment, except for those
fringe benefits which are intended to survive termination such as the right
to receive payments pursuant to retirement plans and similar rights.
Article 6. MISCELLANEOUS:
A. As used throughout this Agreement, ARA shall include The ARA Group,
Inc., a Delaware corporation, and its subsidiaries and affiliates, or any
corporation, joint venture, or other entity in which The ARA Group Inc. or
its subsidiaries or affiliates has an equity interest in excess of ten
percent (10%).
6
B. Reference to the masculine gender shall include the feminine gender.
C. This Agreement shall supercede and substitute for any previous
employment agreement between employee and ARA, and is entered into in
consideration of the mutual undertakings of the parties, the cancellation of
all previous agreements, and the release of the parties of their respective
rights and obligations under any previous employment agreement, excepting
only such rights and obligations which by their nature are intended to
survive termination or cancellation of such employment agreement. In the
event Employee's previous employment agreement provided for a longer
severance period than set forth in this Agreement, then the Employee's
right to severance set forth in the previous employment agreement shall
survive, but any payments made shall be credited against the severance
payments otherwise due under the provisions of Article 4A, hereof.
D. Employee and ARA acknowledge that for purpose of Article 4 Employee's
last hire date with ARA is April 22, 1978.
IN WITHNESS WHEREOF, the parties hereto have caused this Agreement to be
signed.
/s/ JULIAN L. CARR, JR.
--------------------------
JULIAN L. CARR, JR.
ARA SERVICES, INC. ("ARA")
By: /s/ JAMES E. KSANSNAK
--------------------------
JAMES E. KSANSNAK
Date: October 1, 1991
---------------
09/91
1
CONFORMED COPY
$800,000,000
AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT
dated as of
March 12, 1993
among
ARA SERVICES, INC.,
as Borrower
THE ARA GROUP, INC.,
as Parent Guarantor
THE BANKS LISTED HEREIN
and
CHEMICAL BANK
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agents
2
TABLE OF CONTENTS*
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations. . . . . . . 23
SECTION 1.03. Types of Borrowings. . . . . . . . . . . . . . . 23
SECTION 1.04. Investment Grade Status. . . . . . . . . . . . . 23
ARTICLE II
THE LOANS
SECTION 2.01. Commitments to Lend. . . . . . . . . . . . . . . 24
SECTION 2.02. Notice of Committed Borrowings . . . . . . . . . 24
SECTION 2.03. Money Market Borrowings. . . . . . . . . . . . . 26
SECTION 2.04. Swingline Advances . . . . . . . . . . . . . . . 28
SECTION 2.05. Notice to Banks; Funding of Loans. . . . . . . . 29
SECTION 2.06. Maturity of Loans. . . . . . . . . . . . . . . . 30
SECTION 2.07. Notes. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.08. Interest . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.09. Facility Fees. . . . . . . . . . . . . . . . . . 36
SECTION 2.10. Reduction of Commitments . . . . . . . . . . . . 37
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . 39
SECTION 2.12. Payments . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . 40
SECTION 2.14. Withholding Tax Exemption. . . . . . . . . . . . 41
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. . . . . . . . . . . . . . . . . . 42
SECTION 3.02. Conditions to Borrowing. . . . . . . . . . . . . 43
SECTION 3.03. Representation by Borrower . . . . . . . . . . . 44
SECTION 3.04. Transitional Provisions. . . . . . . . . . . . . 44
----------
*The Table of Contents is not a part of this Agreement.
3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Page
----
SECTION 4.01. Corporate Existence and Power. . . . . . . . . . 45
SECTION 4.02. Corporate and Governmental Authori-
zation; No Contravention . . . . . . . . . . 45
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . 46
SECTION 4.04. Financial Information. . . . . . . . . . . . . . 46
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . 47
SECTION 4.06. Compliance with ERISA. . . . . . . . . . . . . . 47
SECTION 4.07. Environmental Matters. . . . . . . . . . . . . . 47
SECTION 4.08. Taxes. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.09. Compliance with Laws . . . . . . . . . . . . . . 48
SECTION 4.10. Not an Investment Company. . . . . . . . . . . . 48
SECTION 4.11. No Defaults. . . . . . . . . . . . . . . . . . . 48
SECTION 4.12. Possession of Franchises, Licenses,
etc. . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
COVENANTS
SECTION 5.01. Information. . . . . . . . . . . . . . . . . . . 49
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . 52
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . 53
SECTION 5.04. Conduct of Business and Maintenance
of Existence . . . . . . . . . . . . . . . . 53
SECTION 5.05. Inspection of Property, Books and
Records. . . . . . . . . . . . . . . . . . . 54
SECTION 5.06. Maintenance of Stock of Subsidiaries . . . . . . 54
SECTION 5.07. Limitation on Subsidiary Debt. . . . . . . . . . 54
SECTION 5.08. Negative Pledge. . . . . . . . . . . . . . . . . 55
SECTION 5.09. Consolidations, Mergers and Sales of
Assets . . . . . . . . . . . . . . . . . . . 56
SECTION 5.10. Restricted Payments. . . . . . . . . . . . . . . 57
SECTION 5.11. Fixed Charge Coverage. . . . . . . . . . . . . . 59
SECTION 5.12. Debt Coverage. . . . . . . . . . . . . . . . . . 59
SECTION 5.13. Minimum Consolidated Net Worth . . . . . . . . . 60
SECTION 5.14. Subordinated Debt. . . . . . . . . . . . . . . . 60
SECTION 5.15. Transactions with Affiliates . . . . . . . . . . 60
SECTION 5.16. Use of Proceeds. . . . . . . . . . . . . . . . . 61
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . 61
SECTION 6.02. Notice of Default. . . . . . . . . . . . . . . . 64
4
ARTICLE VII
THE AGENTS
Page
----
SECTION 7.01. Appointment and Authorization. . . . . . . . . . 65
SECTION 7.02. Agents and Affiliates. . . . . . . . . . . . . . 65
SECTION 7.03. Action by Agents . . . . . . . . . . . . . . . . 65
SECTION 7.04. Consultation with Experts. . . . . . . . . . . . 65
SECTION 7.05. Liability of Agents. . . . . . . . . . . . . . . 65
SECTION 7.06. Indemnification. . . . . . . . . . . . . . . . . 66
SECTION 7.07. Credit Decision. . . . . . . . . . . . . . . . . 66
SECTION 7.08. Agency Fees. . . . . . . . . . . . . . . . . . . 66
SECTION 7.09. Successor Agents . . . . . . . . . . . . . . . . 66
ARTICLE VIII
CHANGES IN CIRCUMSTANCES
AFFECTING FIXED RATE LOANS
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair . . . . . . . . . . . . 67
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . 68
SECTION 8.03. Increased Cost . . . . . . . . . . . . . . . . . 68
SECTION 8.04. Base Rate Loans Substituted for
Affected Fixed Rate Loans. . . . . . . . . . 70
ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee. . . . . . . . . . . . . . . . . . 71
SECTION 9.02. Guarantee Unconditional. . . . . . . . . . . . . 71
SECTION 9.03. Discharge Only Upon Payment in Full;
Reinstatement in Certain
Circumstances. . . . . . . . . . . . . . . . 73
SECTION 9.04. Waiver . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.05. Subrogation and Contribution . . . . . . . . . . 73
SECTION 9.06. Stay of Acceleration . . . . . . . . . . . . . . 73
ARTICLE X
JUDICIAL PROCEEDINGS
SECTION 10.01. Consent to Jurisdiction . . . . . . . . . . . . 73
SECTION 10.02. Enforcement of Judgments. . . . . . . . . . . . 74
SECTION 10.03. Service of Process. . . . . . . . . . . . . . . 74
SECTION 10.04. No Limitation on Service or Suit. . . . . . . . 74
5
ARTICLE XI
MISCELLANEOUS
Page
----
SECTION 11.01. Notices . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.02. No Waiver . . . . . . . . . . . . . . . . . . . 75
SECTION 11.03. Expenses; Documentary Taxes;
Indemnification for Litigation . . . . . . . 75
SECTION 11.04. Amendments and Waivers. . . . . . . . . . . . . 76
SECTION 11.05. Sharing of Set-Offs . . . . . . . . . . . . . . 77
SECTION 11.06. New York Law. . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Successors and Assigns. . . . . . . . . . . . . 78
SECTION 11.08. Collateral. . . . . . . . . . . . . . . . . . . 79
SECTION 11.09. Counterparts. . . . . . . . . . . . . . . . . . 79
SECTION 11.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . 80
6
Schedule I - Commitment Reduction Schedule
Schedule II - Debt
Exhibit A - Note
Exhibit B - Opinion of Counsel of the
Borrower and the Parent Guarantor
(See Tab 1)
Exhibit C - Opinion of Special Counsel for the Agents
(See Tab 2)
Exhibit D - Amended and Restated Stock Pledge Agreement
(See Tab 3)
Exhibit E - Amended and Restated Subsidiary Guaranty Agreement
(See Tab 4)
Exhibit F - Management Equity Note
Exhibit G - Invitation for Money Market Quotes
Exhibit H - Money Market Quote
7
AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT
AGREEMENT dated as of March 12, 1993 (the
"Agreement") among ARA SERVICES, INC., a Delaware corporation
(the "Borrower"), THE ARA GROUP, INC., a Delaware corporation
(the "Parent Guarantor"), the BANKS party hereto and CHEMICAL
BANK and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agents.
WHEREAS, the parties hereto have previously entered
into a Credit and Guaranty Agreement dated as of March 12,
1993 (the "Original Agreement");
WHEREAS, the parties hereto wish to amend the
Original Agreement to make mutually satisfactory changes in
the terms of the Original Agreement;
WHEREAS, in such connection, the Borrower desires to
be entitled to borrow up to $800,000,000 on a revolving credit
basis pursuant to this Agreement;
WHEREAS, when all of the conditions specified in
Section 3.01 have been satisfied, the Original Agreement will
be automatically amended and restated to read in full as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as
used herein, have the following meanings:
"Adjusted CD Rate" has the meaning set forth in
Section 2.08(c).
"Administrative Agent" means Chemical Bank in its
capacity as administrative agent for the Banks hereunder.
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the form
requested by the Administrative Agent that is submitted to the
Administrative Agent (with a copy to the other Agent and the
Borrower) duly completed by such Bank.
"Affiliate" means any Person (other than the Parent
Guarantor or a Subsidiary) which controls, is controlled by or
is under common control with the Parent Guarantor. As used
herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
8
"Agents" means Chemical Bank and Morgan Guaranty
Trust Company of New York, in their respective capacities as
agents for the Banks hereunder, including, in the case of the
Administrative Agent, its administrative capacities hereunder.
"Agreement" means the Original Agreement, as amended
and restated by this Amended Agreement and as the same may be
further amended or restated from time to time in accordance
with the terms hereof.
"Amended Agreement" means this Amended and Restated
Credit Agreement dated as of March 12, 1993 among ARA
Services, Inc., the Parent Guarantor, the Banks and the
Agents.
"Applicable Discount" has the meaning set forth in
Section 2.08(g).
"Applicable Margin" has the meaning set forth in
Section 2.08(g).
"Applicable Pricing Adjustment Percentage" has the
meaning set forth in Section 2.08(h).
"Assessment Rate" has the meaning set forth in
Section 2.08(c).
"Asset Reduction Amount" means, at any date (the
"Date of Determination"), an amount equal to 75% of the
excess, if any, of (a) the aggregate Net Cash Proceeds
received by the Parent Guarantor or any Restricted Subsidiary
(x) during the period beginning on March 12, 1993 and ending
one year prior to the Date of Determination in respect of
Major Asset Sales consummated during such period, (y) after
March 12, 1993, in respect of Dispositions of accounts
receivable (except for any such Disposition which is excluded
from the scope of article 9 of the Uniform Commercial Code as
in effect on the Effective Date in the State of New York by
section 9-104(f) thereof) and (z) after March 12, 1993, in
respect of Major Sale and Leaseback Transactions over (b) the
sum of (i) $400,000,000 plus (ii) the aggregate amount
invested in Major Asset Acquisitions during the period
beginning on March 12, 1993 and ending on the Date of
Determination plus (iii) 133-1/3% of the amount of any
previous commitment reduction pursuant to Section 2.10(c)(i).
"Bank" means each bank listed on the signature pages
hereof as having a Commitment, and (subject to Section 11.07)
its successors and assigns, and "Banks" means all of the
foregoing.
"Base Level Priority Debt" means Priority Debt
permitted pursuant to subparagraphs (i) through (vii),
inclusive, of subsection 5.07(b) and subsections (a) through
(g), inclusive, of Section 5.08.
"Base Overdue Interest Rate" has the meaning set
forth in Section 2.08(b).
9
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day and
(ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such
day.
"Base Rate Loan" means a Committed Loan made or to
be made by a Bank as a Base Rate Loan in accordance with the
applicable Notice of Committed Borrowing or pursuant to
Article VIII.
"Benefit Arrangement" means at any time an employee
benefit plan within the meaning of Section 3(3) of ERISA which
is not a Plan or a Multiemployer Plan and which is maintained
or otherwise contributed to by any member of the ERISA Group.
"Borrowing" has the meaning set forth in Section
1.03.
"Capital Lease" means a lease that would be
capitalized on a balance sheet of the lessee prepared in
accordance with generally accepted accounting principles.
"CD Base Rate" has the meaning set forth in Section
2.08(c).
"CD Loan" means a Committed Loan made or to be made
by a Bank as a CD Loan in accordance with the applicable
Notice of Committed Borrowing.
"CD Reference Banks" means Morgan Guaranty Trust
Company of New York, Chemical Bank and CoreStates Bank, N.A.
"Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Collateral" means the "Collateral" as defined in
the Stock Pledge Agreement.
"Collateral Agent" means Chemical Bank in its
capacity as collateral agent under the Stock Pledge Agreement.
"Collateral Documents" means the Stock Pledge
Agreement, and all supplementary assignments, security
agreements, pledge agreements and other documents delivered or
to be delivered pursuant hereto or thereto.
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the
signature pages of this Amended Agreement (or, in the case of
an Assignee, the portion of the transferor Bank's Commitment
assigned to such Assignee pursuant to Section 11.07), in each
case, as such amount may be reduced from time to time pursuant
to Section 2.10 or changed as a result of an assignment
pursuant to Section 11.07.
"Commitment Reduction Date" means each of the dates
set forth in Schedule I.
"Committed Loan" means a loan made by a Bank
pursuant to Section 2.01.
10
"Committed Outstandings" means the aggregate
outstanding principal amount of Committed Loans.
"Common Stock" means the Common Stock, par value
$.01 per share, of the Parent Guarantor.
"Consolidated Capital Funds" means at any date (the
"Date of Determination") the sum of Consolidated Net Worth as
of the Date of Determination and the lesser of (i) the aggre-
gate principal amount of Subordinated Debt outstanding as of
the Date of Determination and (ii) $375,000,000.
"Consolidated Cash Flow Available for Fixed Charges"
means for any period EBITDA for such period, plus the excess
(if any) of (x) the aggregate amounts deducted in determining
Consolidated Net Income for such period in respect of rental
expense over (y) the aggregate amounts included in determining
such Consolidated Net Income in respect of rental income
(excluding any portion of such rental expense or rental income
in respect of leases having a term of one year or less or in
respect of Capital Leases).
"Consolidated Fixed Charges" means for any period
(the "Applicable Period") the sum of, without duplication, (i)
the Consolidated Interest Charges accrued in the Applicable
Period, (ii) the excess (if any) of (x) the aggregate amounts
deducted in determining Consolidated Net Income for the Appli-
cable Period in respect of rental expense over (y) the aggre-
gate amounts included in determining such Consolidated Net
Income in respect of rental income (excluding any portion of
such rental expense or rental income in respect of leases
having a term of one year or less or in respect of Capital
Leases) and (iii) the aggregate amount of dividends accrued in
the Applicable Period in respect of Series Preferred Stock.
"Consolidated Interest Charges" means for any period
the aggregate interest expense (net of interest income) of the
Parent Guarantor and its Consolidated Subsidiaries for such
period including, without limitation, (i) the portion of any
obligation under Capital Leases allocable to interest expense
in accordance with generally accepted accounting principles,
and (ii) the portion of any debt discount or premium arising
at issuance of such debt that shall be amortized in such
period.
"Consolidated Net Income" means for any period the
consolidated net income of the Parent Guarantor and its Con-
solidated Subsidiaries for such period, adjusted by (i) sub-
tracting therefrom any portion thereof attributable to the
direct or indirect investment by the Parent Guarantor or any
of its Consolidated Subsidiaries in any Investment Subsidiary
and (ii) adding thereto the aggregate amount of dividends
(other than stock dividends) paid by any Investment Subsidiary
to the Parent Guarantor or any of its other Subsidiaries
during such period.
"Consolidated Net Worth" means at any date (the
"Date of Determination") without duplication (i) the consoli-
dated shareholders' equity (exclusive of (x) the cumulative
11
foreign currency translation adjustment as determined in
accordance with generally accepted accounting principles and
(y) any portion of such consolidated shareholders' equity
attributable to retained earnings of any Investment Subsidiary
or undistributed profits of the general partnership in which
any Investment Subsidiary holds a general partnership inter-
est) of the Parent Guarantor and its Consolidated Subsidiaries
as of the Date of Determination plus (ii) the principal amount
of all Management Equity Notes outstanding on the Date of
Determination. For purposes of this definition, consolidated
shareholders' equity includes Common Stock subject to
potential repurchase pursuant to the Stockholders' Agreement,
as reflected in the consolidated financial statements of the
Parent Guarantor and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means, at any date with
respect to any Person, any Subsidiary or other entity the
accounts of which would be consolidated with those of such
Person in the consolidated financial statements of such Person
as of such date.
"Consolidated Total Assets" means at any date the
consolidated assets of the Parent Guarantor and its
Consolidated Subsidiaries determined as of such date.
"Contingent Liability" means any quantifiable
obligation or liability which is of a type required to be
disclosed as a contingent liability in the consolidated
financial statements of the Parent Guarantor and its
Consolidated Subsidiaries in accordance with generally
accepted accounting principles; provided that Guarantees
constitute Debt and not Contingent Liabilities. To the extent
that any "holdback" or similar deferred contingent payment
obligation of a purchaser of accounts receivable in connection
with a disposition thereof subject to Section 2.10(c)(i) is
reflected as an asset of the Parent Guarantor or one of its
Subsidiaries in such consolidated financial statements, a
corresponding Contingent Liability shall be deemed to exist
for purposes of this definition.
"Credit" means any Loan or Swingline Advance.
"Current Quarter" has the meaning set forth in
Section 2.08(h).
"Debt" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the
ordinary course of business, (iv) all obligations of such
Person as lessee under Capital Leases, (v) all obligations of
such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar
securities, (vi) all noncontingent obligations (and, for
purposes of Section 5.08, all contingent obligations) of such
Person to reimburse any other Person for amounts which have
12
been drawn under a letter of credit or similar instrument,
(vii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such
Person (such Debt to have a principal amount, for purposes of
determinations under this Agreement, not exceeding the net
unencumbered carrying value of such asset under generally
accepted accounting principles), and (viii) all Debt of others
Guaranteed by such Person (such Debt to have a principal
amount, for purposes of determinations under this Agreement,
not exceeding the portion of such Debt Guaranteed by such
Person); provided that each obligation of a general
partnership that constitutes Debt of an Investment Subsidiary
solely by reason of such Investment Subsidiary's status as a
general partner thereof shall be considered Debt of such
Investment Subsidiary in an amount equal to (a) the amount of
such obligation times (b) the percentage of the ownership
interests in such general partnership owned by such Investment
Subsidiary.
"Default" means any condition or event that consti-
tutes an Event of Default or that with the giving of notice or
lapse of time or both would, unless cured or waived, become an
Event of Default.
"Deferred Stock Units" means Deferred Stock Units
representing the right to receive shares of Common Stock, and
issued under any Restricted Subsidiary's Stock Unit Retirement
Plan, as amended from time to time.
"Derivatives Obligations" of any Person means all
obligations of such Person in respect of any rate swap
transaction, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect
to any of the foregoing transactions) or any combination of
the foregoing transactions.
"Disposition" means the sale, assignment, transfer
or other disposition by any Person of any asset or assets in a
transaction or a series of related transactions.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in New
York City (or, when used with reference to any Swingline
Advance, in the city in which the lending Bank is located) are
authorized or required by law to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its Administra-
tive Questionnaire (or identified in its Administrative Ques-
tionnaire as its Domestic Lending Office) or such other office
as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Administrative Agent;
provided that any Bank may so designate separate Domestic
13
Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the
context may require.
"Domestic Loan" means a CD Loan or a Base Rate Loan.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.08(c).
"EBITDA" means for any period Consolidated Net
Income for such period, excluding therefrom any extraordinary
items of gain or loss, plus the aggregate amounts deducted in
determining Consolidated Net Income for such period in respect
of (i) income taxes, (ii) Consolidated Interest Charges and
(iii) depreciation, amortization and other similar non-cash
charges. If the period for which EBITDA is calculated
includes a date on which the Parent Guarantor or any of its
Consolidated Subsidiaries made a Major Asset Acquisition or
Major Asset Sale, then, EBITDA for such period shall be
calculated (A) on a pro forma basis as if such acquisition or
sale had occurred on the first day thereof and (B) exclusive
of any gain or loss on account of any Major Asset Sale.
"Effective Date" means the date this Amended
Agreement becomes effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees,
plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on
human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into
the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up
or other remediation thereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, the Parent
Guarantor and any other Subsidiary and all members of a
controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which,
together with the Borrower, the Parent Guarantor or any other
Subsidiary, are treated as a single employer under Section 414
of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar deposits)
in London.
14
"Euro-Dollar Lending Office" means, as to each Bank,
its office, branch or affiliate located at its address set
forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Euro-Dollar Lending
Office by notice to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan made or to
be made as a Euro-Dollar Loan pursuant to the applicable
Notice of Committed Borrowing.
"Euro-Dollar Overdue Interest Rate" means a rate of
interest determined pursuant to Section 2.08(f).
"Euro-Dollar Reference Banks" means the principal
London offices of Morgan Guaranty Trust Company of New York,
Chemical Bank and CoreStates Bank, N.A.
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the
maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or
in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents).
"Events of Default" has the meaning set forth in
Section 6.01.
"Excess Contingent Liabilities" means at any time
all Contingent Liabilities of the Parent Guarantor and its
Subsidiaries other than:
(a) surety or fidelity bonds or letters of credit
issued on behalf of the Parent Guarantor or any of its
Subsidiaries issued in the normal course of business of
the Parent Guarantor or such Subsidiary, as the case may
be; and
(b) other Contingent Liabilities in an aggregate
amount not exceeding $60,000,000.
"Excess Priority Debt" means Priority Debt other
than Base Level Priority Debt.
"Excluded Dividend" means a dividend on shares of
the capital stock of any Restricted Subsidiary held by the
Parent Guarantor (and not by another Subsidiary), which
dividend is comprised of assets which are to be (and in fact
are) reinvested (including through intercompany accounts in
accordance with normal practice) by the Parent Guarantor
substantially simultaneously in (i) the Borrower, (ii) a Spin-
Off Subsidiary, (iii) a Wholly Owned Subsidiary of the
15
Borrower or of a Spin-Off Subsidiary or (iv) another Wholly
Owned Subsidiary of the Parent Guarantor which is a party to
the Subsidiary Guaranty Agreement and all of whose capital
stock is pledged to the Collateral Agent under the Stock
Pledge Agreement.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York
on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business Day,
the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and
(ii) if no such rate is so published on such next succeeding
Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Chemical Bank on such day
on such transactions as determined by the Administrative
Agent.
"Financing Documents" means this Agreement, the
Notes, the Collateral Documents and the Subsidiary Guaranty
Agreement.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or Money Market Loans or any combination of the
foregoing.
"Fixed Rate Outstandings" means the aggregate
outstanding principal amount of CD Loans and Euro-Dollar
Loans.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt of any other Person and, without
limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, including petroleum,
its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of
the foregoing characteristics.
16
"Interest Period" means:
(1) with respect to each Euro-Dollar Borrowing, the
period commencing on the date of such Euro-Dollar
Borrowing and ending one, two, three or six months
thereafter, or (subject to paragraph (e) of Section 2.08)
12 months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period that would otherwise
end on a day that is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day unless such day falls in another
calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period that begins on the
last Euro-Dollar Business Day of a calendar month
(or on a day for which there is no numerically
corresponding day in the calendar month at the end
of such Interest Period) shall, subject to the
provisions of paragraph (a) of this proviso, end on
the last day of a calendar month; and
(c) if any Interest Period includes a
Commitment Reduction Date but does not end on such
date, then (i) the principal amount (if any) of each
Euro-Dollar Loan required to be repaid on such date
shall have an Interest Period ending on such date
and (ii) the remainder (if any) of each such
Euro-Dollar Loan shall have an Interest Period
determined as set forth above;
(2) with respect to each CD Borrowing, the period
commencing on the date of such Borrowing and ending 30,
60, 90 or 180 days thereafter, as the Borrower may elect
in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an
Interest Period determined pursuant to clause (b)(i)
below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a
Commitment Reduction Date but does not end on such
date, then (i) the principal amount (if any) of each
CD Loan required to be repaid on such date shall
have an Interest Period ending on such date and (ii)
the remainder (if any) of each such CD Loan shall
have an Interest Period determined as set forth
above;
(3) with respect to each Base Rate Borrowing, the
period commencing on the date of such Borrowing and
ending on the next succeeding Commitment Reduction Date;
provided that any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day;
17
(4) with respect to each Money Market Borrowing,
the period commencing on the date of such Borrowing and
ending such number of days thereafter (but not less than
7 nor more than 270 days) as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period (other than an
Interest Period determined pursuant to clause (b)
below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) no Interest Period for any such Borrowing
shall end on a date after a Commitment Reduction
Date unless, after giving effect thereto, the
aggregate principal amount of Credits having
Interest Periods ending after such Commitment
Reduction Date would not exceed the aggregate
Commitments after giving effect to the scheduled
reduction of the Commitments on such Commitment
Reduction Date; and
(5) with respect to each Swingline Advance, the
period commencing on the date of such Swingline Advance
and ending on the applicable Swingline Maturity Date.
"Interest Rate Agreement" means an agreement under
the International Swap Dealers Association, Inc. Master
Agreement (or any predecessor or successor agreement), or any
other interest rate swap agreement or similar agreement
between the Borrower and one or more of the Banks.
"Investment" means with respect to any Person (the
"Investor"), any investment or series of related investments
in the same Person or an affiliate thereof, whether
individually or in the aggregate in excess of $1,000,000 and,
in the case of any series of investments, without regard to
any differences between or among the types of investments
comprising such series, by the Investor in any other Person,
whether by means of share purchase, capital contribution,
loan, purchase of Debt, time deposit or otherwise; provided,
that the performance by any Person of its obligations under
any guarantee shall not be considered an Investment; and
provided further that non-convertible, non-participating Debt
of any Person received as consideration by the Parent
Guarantor or any of its Subsidiaries in connection with a
Disposition shall not be considered an Investment.
"Investment Grade Status" has the meaning set forth
in Section 1.04.
"Investment Subsidiary" means any Subsidiary formed
for the purpose of holding a general partnership interest in
Spectacor Management Group, a general partnership ("SMG"), or
in any other general partnership which is principally engaged
in the management of arenas and other public assembly facili-
ties; provided that (i) such general partnership interest
represents one-half or less of the ownership interests in such
general partnership and constitutes substantially all of the
18
assets of such Subsidiary, (ii) such Subsidiary engages in no
substantial business other than owning such general partner-
ship interest and taking actions as a general partner of such
general partnership, (iii) no other Subsidiary owns a general
partnership interest in such general partnership and (iv) in
the case of any general partnership other than SMG, (A) at
least 15% of the ownership interests in such general partner-
ship are owned by one or more Persons (other than such Subsi-
diary or any Affiliate) that are also partners in SMG or
affiliates thereof and (B) the partners of SMG and their
affiliates own in the aggregate 50% or more of the ownership
interests in such general partnership.
"Lending Office" means, as to any Bank, its Domestic
Lending Office, its Euro-Dollar Lending Office or its Money
Market Lending Office, as the context may require.
"Leverage Ratio" means on any date ("the Date of
Determination") the ratio of (A) EBITDA for the four most
recent fiscal quarters of the Parent Guarantor ended on or
prior to the Date of Determination to (B) Total Borrowed Funds
as of the last day of the most recent fiscal quarter of the
Parent Guarantor ended on or prior to the Date of
Determination.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset. For the
purpose of this Agreement, the Parent Guarantor or any of its
Subsidiaries shall be deemed to own subject to a Lien any
asset that it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement or
other title retention agreement relating to such asset or any
Capital Lease.
"Loan" means a Domestic Loan or a Euro-Dollar or a
Money Market Loan, and "Loans" means Domestic Loans or Euro-
Dollar Loans or Money Market Loans or any combination of the
foregoing.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.08(d).
"Major Asset Acquisition" means any acquisition for
cash or other consideration by the Parent Guarantor or any of
its Restricted Subsidiaries, or any series of such acquisi-
tions of (a) any asset, (b) any group of related assets or (c)
any shares of capital stock or any other ownership interest in
any Person; provided that in the case of any such acquisition,
or such series of acquisitions, the aggregate of all
consideration (including cash and the fair market value (as
certified by a Principal Officer of the Parent Guarantor) of
all other consideration paid by the Parent Guarantor or any of
its Restricted Subsidiaries) for or in respect of such
acquisition, or such series of acquisitions, exceeds
$25,000,000; and provided further that no such acquisition or
series of acquisitions from the Parent Guarantor or any
Subsidiary of the Parent Guarantor shall constitute a Major
Asset Acquisition.
19
"Major Asset Sale" means any Disposition by the
Parent Guarantor or any of its Restricted Subsidiaries of a
Single Asset; provided that in the case of any such
Disposition the aggregate of all cash and the fair market
value (as certified by a Principal Officer of the Parent
Guarantor) of all property received by the Parent Guarantor or
any of its Restricted Subsidiaries from or in respect of such
Disposition exceeds $25,000,000; and provided further that (i)
no such Disposition by any Wholly Owned Restricted Subsidiary
of the Parent Guarantor to any other Wholly Owned Restricted
Subsidiary of the Parent Guarantor shall constitute a Major
Asset Sale, (ii) no Sale and Leaseback Transaction shall
constitute a Major Asset Sale and (iii) for purposes of
Section 2.10(c)(i), no Disposition of any account receivable
(except for any such Disposition which is excluded from the
scope of article 9 of the Uniform Commercial Code as in effect
on the Effective Date in the State of New York by section
9-104(f) thereof) shall constitute a Major Asset Sale.
"Major Sale and Leaseback Transaction" means any
Sale and Leaseback Transaction, or any series of related Sale
and Leaseback Transactions, in respect of which the aggregate
of all cash and the fair market value (as certified by a
Principal Officer of the Parent Guarantor) of all property
received by the Parent Guarantor or any of its Restricted
Subsidiaries from or in respect of such transaction or series
of transactions exceeds $2,000,000; provided that a Sale and
Leaseback Transaction consummated not later than the last day
of the fiscal year of the Parent Guarantor following the
fiscal year during which the acquisition of the related
property was effected or construction of the related property
was completed shall not be deemed a Major Sale and Leaseback
Transaction.
"Management Equity Note" means a subordinated
promissory note of the Parent Guarantor carrying an interest
rate no higher than the market interest rate payable in
respect of debt with comparable terms issued by comparable
issuers, substantially in the form of Exhibit F hereto, issued
to management or former management (including directors) of
the Parent Guarantor in exchange for shares of Common Stock
pursuant to the Stockholders' Agreement or in exchange for
Series Preferred Stock.
"Material Financial Obligations" means a principal
or face amount of Debt and/or payment or collateralization
obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in
the aggregate $10,000,000.
"Maximum Money Market Aggregate Amount" means at any
time an amount equal to the aggregate Commitments at such
time; provided that at any time the Maximum Money Market
Aggregate Amount shall be reduced by the lesser of
$400,000,000 or the amount of the aggregate Commitments at
such time if the Reference Ratio is not more than 0.30 to 1.
"Money Market Auction" means a solicitation of Money
Market Quotes setting forth Money Market Rates pursuant to
Section 2.03.
20
"Money Market Lending Office" means, as to each
Bank, its Domestic Lending Office or such other office, branch
or affiliate of such Bank as it may hereafter designate as its
Money Market Lending Office by notice to the Borrower and the
Administrative Agent.
"Money Market Loan" means a loan made or to be made
by a Bank pursuant to a Money Market Auction.
"Money Market Quote" means an offer by a Bank to
make a Money Market Loan in accordance with Section 2.03.
"Money Market Rate" has the meaning set forth in
Section 2.03(c).
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3)
of ERISA to which any member of the ERISA Group is then making
or accruing an obligation to make contributions or has within
the preceding five plan years made contributions, including
for these purposes any Person which ceased to be a member of
the ERISA Group during such five-year period.
"Net Cash Proceeds" means, in the case of any Major
Asset Sale, Major Sale and Leaseback Transaction or
Disposition of accounts receivable, the cash proceeds received
by the Parent Guarantor or any of its Restricted Subsidiaries,
at any time or from time to time, from or in respect thereof
(including, without limitation, cash received on or in respect
of any instrument evidencing an obligation of the purchaser to
make payments to the Parent Guarantor or such Restricted
Subsidiary), less (x) any expenses reasonably incurred by the
Parent Guarantor or such Restricted Subsidiary in respect
thereof and (y) any taxes paid or payable by the Parent
Guarantor or such Restricted Subsidiary (as certified by a
Principal Officer of the Parent Guarantor) in respect of the
receipt of such cash.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Loans and the
Swingline Advances, and "Note" means any one of such
promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed
Borrowing or a Notice of Money Market Borrowing.
"Notice of Committed Borrowing" has the meaning set
forth in Section 2.02(a).
"Notice of Money Market Borrowing" has the meaning
set forth in Section 2.03(d).
"Obligors" means the Borrower, the Parent Guarantor
and each Subsidiary from time to time party to the Subsidiary
Guaranty Agreement.
"Original Agreement" means the Credit and Guaranty
Agreement dated as of March 12, 1993 among the parties hereto,
as in effect immediately prior to the effectiveness of this
Amended Agreement.
21
"Original Stock Pledge Agreement" means the Stock
Pledge Agreement dated as of December 19, 1984 among the
Parent Guarantor, the Borrower and the Collateral Agent, as
executed and delivered by the parties thereto and as amended
and restated prior to the Effective Date.
"Original Subsidiary Guaranty Agreement" means the
Subsidiary Guaranty Agreement dated as of December 14, 1984
among the Borrower, the Parent Guarantor and certain
Subsidiaries of the Parent Guarantor, as executed and
delivered by the parties thereto and as amended and restated
prior to the Effective Date.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by
Title I or IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii)
has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly
announced from time to time by Chemical Bank at its main
offices in New York City as its prime rate.
"Principal Officer" means the chief executive
officer, chief operating officer, chief financial officer,
chief accounting officer, senior vice president, treasurer or
general counsel of the Parent Guarantor or the Borrower.
"Priority Debt" means any unsecured Debt of a
Subsidiary (other than the Borrower) and any secured Debt of
the Parent Guarantor or any of its Subsidiaries; except that,
if any long-term senior unsecured Debt of the Borrower ever
achieves Investment Grade Status, "Priority Debt" shall mean
only any secured Debt of the Parent Guarantor or any of its
Subsidiaries.
"Qualification" means, with respect to any report of
independent public accountants covering financial statements
of a Person, (a) an explanatory paragraph with respect to the
continued existence of such Person, as contemplated by
Statement on Auditing Standards No. 59, or (b) a qualification
to such report (such as an "except for" statement therein) (i)
resulting from a limitation on the scope of audit of such
22
financial statements or the underlying data, (ii) resulting
from a change in accounting principles to which such
independent public accountants take exception or (iii) which
could be eliminated by changes in financial statements or
notes thereto covered by such report (such as, by the creation
of or increase in a reserve or a decrease in the carrying
value of assets) and which if so eliminated by the making of
any such change and after giving effect thereto would occasion
a Default, provided that neither of the following shall
constitute a Qualification: (x) an explanatory paragraph
relating to a change in accounting principles to which such
independent public accountants take no exception or (y) an
explanatory paragraph relating to the outcome or disposition
of any uncertainty, including but not limited to threatened
litigation, pending litigation being contested in good faith,
pending or threatened claims or other contingencies, the
impact of which litigation, claims, contingencies or
uncertainties cannot be determined with sufficient certainty
to permit quantification in such financial statements.
"Redeemable Stock" means any capital stock that is
redeemable other than at the sole option of the issuer.
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference Banks.
"Reference Ratio" means, for purposes of determining
a Maximum Money Market Aggregate Amount, an Applicable Pricing
Adjustment Percentage or an applicable facility fee rate for
purposes of Section 2.09(b) for any day during any Current
Quarter, the Leverage Ratio as of the last day of the most
recent fiscal quarter of the Parent Guarantor ended 80 days or
more before the first day of the Current Quarter. The
foregoing determinations (but not determinations of compliance
with Section 5.12) for each day during the Current Quarter
shall be based upon the Reference Ratio as defined above.
"Refunding Borrowing" means a Borrowing which, after
application of the proceeds thereof, results in no net
increase in the outstanding principal amount of Committed
Loans made by any Bank.
"Regulation U" has the meaning set forth in Section
5.16.
"Required Banks" means at any time Banks having
at least 51% of the aggregate amount of the Commitments or, if
the Commitments shall have been terminated, holding Notes
evidencing at least 51% of the aggregate unpaid principal
amount of the Loans.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the capital stock of the Parent
Guarantor (except dividends payable solely in shares of
capital stock) or on any Deferred Stock Units, (ii) any
dividend or other distribution on any shares of the capital
stock of any Restricted Subsidiary held by the Parent
Guarantor (and not by another Subsidiary) (such shares of
23
capital stock held by the Parent Guarantor, together with the
capital stock of the Parent Guarantor and Deferred Stock
Units, being hereinafter referred to as "Restricted Stock")
other than Excluded Dividends, (iii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any
shares of Restricted Stock (except shares acquired upon the
conversion thereof into other shares of capital stock of the
issuer), excluding the issuance of Management Equity Notes in
exchange for such shares, but including repayments of
principal of such Management Equity Notes or (b) any option,
warrant or other right to acquire shares of Restricted Stock
or (iv) any loan or advance by any Subsidiary to the Parent
Guarantor.
"Restricted Subsidiary" means, with respect to any
Person, any Subsidiary of such Person other than Versa
Services, Ltd., a Canadian corporation, and its Subsidiaries.
"Revolving Credit Period" means the period from the
Effective Date to and including October 31, 2001 (or, if such
day is not a Euro-Dollar Business Day, the next preceding
Euro-Dollar Business Day).
"Sale and Leaseback Transaction" means any arrange-
ment with any Person providing for the leasing by the Parent
Guarantor or any Restricted Subsidiary of any property that,
or of any property similar to and used for substantially the
same purposes as any other property that, has been or is to be
sold, assigned, transferred or otherwise disposed of by the
Parent Guarantor or any of its Restricted Subsidiaries to such
Person with the intention of entering into such a lease.
"Secured Interest Rate Indebtedness" means the
obligations of the Borrower to the Banks or any of them in
respect of the Interest Rate Agreements.
"Senior Debt" means Total Borrowed Funds, exclusive
of Subordinated Debt.
"Series Preferred Stock" means any series of Series
Preferred Stock issued by the Parent Guarantor from time to
time.
"Share Transactions" means (i) any repurchase by the
Parent Guarantor of outstanding shares of its Class A Common
Stock, Series Preferred Stock or (pursuant to a substantially
pro rata offer to repurchase) Class B Common Stock or (ii) any
declaration and payment of special dividends (other than in
capital stock of the Parent Guarantor) to the holders of its
Class A Common Stock or Class B Common Stock (or both),
provided that any such repurchase (other than any repurchase
of Series Preferred Stock which was, prior to March 31, 1995,
issued as a dividend or in exchange for Class A Common Stock
or Class B Common Stock) or declaration and payment is made
prior to March 31, 1995.
"Single Asset" means, in the case of any Disposition
by the Parent Guarantor or any of its Restricted Subsidiaries,
(a) any asset, (b) any group of assets used in connection with
24
the same line of business of the Parent Guarantor or such
Restricted Subsidiary prior to such sale, assignment, transfer
or other disposition or (c) any shares of capital stock or any
other ownership interest in any Person.
"Spin-Off Subsidiary" means a Subsidiary of the
Borrower, the capital stock of which is distributed to the
Parent Guarantor in accordance with Section 5.10(d).
"Stock Pledge Agreement" means the Amended and
Restated Stock Pledge Agreement among the Parent Guarantor,
the Borrower and the Collateral Agent, in the form of Exhibit
D hereto.
"Stockholders' Agreement" means the Amended and
Restated Stockholders' Agreement dated as of April 7, 1988
among the Parent Guarantor and the investors listed therein,
as the same may be amended from time to time.
"Subordinated Debt" means any Debt of the Parent
Guarantor (i) which is subordinated to the Notes by substan-
tially the same subordination terms as those set forth in the
Subordinated Indenture dated as of June 1, 1993 between the
Parent Guarantor and The Bank of New York, as trustee, or such
other subordination provisions as shall have been approved in
writing by the Required Banks, and (ii) in the case of
Subordinated Debt issued after the Effective Date, as to which
no principal repayments are required on or prior to October
31, 2001.
"Subordinated Intercompany Notes" means: (i) the
subordinated notes delivered to the Parent Guarantor in
connection with the advance to the Borrower of an amount equal
to the initial principal amount of the Subordinated Debt
described in clause (i) of the definition of "Subordinated
Debt" and (ii) other subordinated notes of the Borrower,
subordinated to the Notes by substantially the same subordina-
tion terms as those applicable to the subordinated note
described in clause (i) above, or such other subordination
provisions as shall have been approved in writing by the
Required Banks, delivered to the Parent Guarantor in connec-
tion with the loan to the Borrower of the principal amount
thereof; provided that the financial terms of such notes are
substantially as favorable to the Borrower as the terms that
could have been obtained at the time of creation thereof from
an unaffiliated lender.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned
by such Person. As used herein, the term "Subsidiary" shall
be deemed to refer to a Subsidiary of the Parent Guarantor
unless otherwise specified.
"Subsidiary Guaranty Agreement" means the Amended
and Restated Subsidiary Guaranty Agreement among the Borrower,
the Parent Guarantor and certain Subsidiaries, in the form of
Exhibit E hereto.
25
"Swingline Advance" means an advance made by a Bank
to the Borrower pursuant to a solicitation of offers therefor
in accordance with Section 2.04.
"Swingline Maturity Date" has the meaning set forth
in Section 2.06.
"Total Borrowed Funds" means at any date the sum of
(i) all Debt of the Parent Guarantor and its Consolidated
Subsidiaries that would be required to be reflected on or
referred to in a consolidated balance sheet of the Parent
Guarantor and its Consolidated Subsidiaries at such date
(including without limitation all Capital Leases of and,
except as set forth below, all Debt Guaranteed by the Parent
Guarantor and its Consolidated Subsidiaries but excluding (x)
Debt Guaranteed by the Parent Guarantor and its Consolidated
Subsidiaries outstanding on March 12, 1993 in an aggregate
principal amount not exceeding $10,000,000 and (y) the
Management Equity Notes) and (ii) Excess Contingent
Liabilities.
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the value
of all benefit liabilities under such Plan, determined on a
plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions), all determined as of the then most
recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member
of the ERISA Group to the PBGC or any other Person under Title
IV of ERISA.
"Wholly Owned Restricted Subsidiary" means, with
respect to any Person, a Wholly Owned Subsidiary of such
Person which is also a Restricted Subsidiary of such Person.
"Wholly Owned Subsidiary" means, with respect to any
Person, any Subsidiary all of the shares of capital stock or
other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly
owned by such Person.
SECTION 1.02. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with the audited consolidated financial statements
of the Parent Guarantor and its Consolidated Subsidiaries for
the fiscal year ended October 1, 1993 referred to in paragraph
(a) of Section 4.04 (except for changes to which independent
public accountants for the Parent Guarantor take no exception)
provided that, if the Borrower notifies the Agents that the
Borrower wishes to amend any covenant in Article V to
eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if
26
the Agents notify the Borrower that the Required Banks wish to
amend Article V for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis
of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted
accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner
satisfactory to the Parent Guarantor, the Borrower and the
Required Banks.
SECTION 1.03. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more
Banks to be made to the Borrower pursuant to Article II on a
single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference
to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Dollar Borrowing" is a Borrowing comprised of EuroDollar
Loans) or by reference to the provisions of Article II under
which participation therein is determined (i.e., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which all
Banks participate in proportion to their Commitments, while a
"Money Market Borrowing" is a Borrowing under Section 2.03 in
which the Bank participants are determined on the basis of
their bids in accordance therewith).
SECTION 1.04. Investment Grade Status. Long-term
senior unsecured Debt of the Borrower will have achieved
"Investment Grade Status", if such Debt (a) is not enhanced by
any security or instrument issued by another Person and (b) is
rated and is known to the Administrative Agent to be rated:
(i) Baa3 or better by Moody's Investors Service,
Inc. ("Moody's"); or
(ii) BBB- or better by Standard & Poor's
Corporation ("S&P").
For purposes of the preceding sentence, (x) the Administrative
Agent shall be deemed to know that such Debt is rated the
ratings specified in clause (i) or (ii) above if and only if a
letter to such effect addressed to the Borrower by Moody's or
S&P is delivered to the Administrative Agent and such letter
is dated no more than 6 months prior to the date of delivery
and (y) such Debt shall be deemed to be rated any rating
specified in a letter addressed and delivered to the Borrower
by Moody's or S&P and a copy of which is delivered to the
Administrative Agent if such letter states that such Debt
would be rated such rating immediately upon the termination of
the Collateral Documents and without the taking of any other
action by any Person or the occurrence of any other event or
condition.
27
ARTICLE II
THE LOANS
SECTION 2.01. Commitments to Lend. During the
Revolving Credit Period each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make
loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of
Committed Loans by such Bank at any one time outstanding shall
not exceed the amount of such Bank's Commitment. Each Borrow-
ing under this Section shall be in an aggregate principal
amount of $5,000,000 or any larger multiple of $5,000,000
(except that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.02(b)) and shall be
made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.11, prepay Loans and reborrow at
any time during the Revolving Credit Period pursuant to this
Section.
SECTION 2.02. Notice of Committed Borrowings. (a)
The Borrower shall give the Administrative Agent at least two
Domestic Business Days' notice (or, in the case of a Base Rate
Borrowing on a date for which the Borrower has requested
quotes pursuant to a Money Market Auction but not accepted
quotes in the full amount for which requested, notice not
later than 11:00 A.M. (New York City time) on the date of such
Borrowing) (a "Notice of Committed Borrowing") of its
intention to make a Domestic Borrowing and at least three
Euro-Dollar Business Days' notice (five Euro-Dollar Business
Days' notice, in the case of a Euro-Dollar Borrowing with
respect to which a 12-month Interest Period is requested) of
its intention to make a Euro-Dollar Borrowing, in each case in
writing (or by telephone confirmed in writing not later than
the close of business on the next succeeding Domestic Business
Day or Euro-Dollar Business Day, as applicable) specifying:
(i) the proposed date of such Borrowing, which
shall be a Domestic Business Day in the case of a
Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are
to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest
Period.
(b) The provisions of subsection (a) above
notwithstanding, if the Borrower shall not have given a Notice
of Committed Borrowing not later than two Domestic Business
Days prior to the last day of the Interest Period applicable
28
to an outstanding Committed Borrowing consisting of Base Rate
Loans, then, unless the Borrower shall have notified the
Administrative Agent not later than two Domestic Business Days
prior to the last day of such Interest Period that it elects
not to borrow on such date, the Administrative Agent shall be
deemed to have received a Notice of Committed Borrowing
specifying (i) that the date of the proposed Borrowing shall
be the last day of the Interest Period applicable to such
outstanding Borrowing, (ii) that the aggregate amount of the
proposed Borrowing shall be the amount of such outstanding
Borrowing (reduced to the extent necessary to reflect any
reduction of the Commitments on or prior to the date of the
proposed Borrowing), and (iii) that the Loans comprising the
proposed Borrowing are to be Base Rate Loans.
(c) No more than eight Euro-Dollar Borrowings and
eight CD Borrowings shall be outstanding at any one time and
no more than two Euro-Dollar Borrowings and two CD Borrowings
at any one time outstanding shall have one-month or 30-day
Interest Periods.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to
Committed Borrowings pursuant to Section 2.01, the Borrower
may, as set forth in this Section, request the Banks during
the Revolving Credit Period to make offers to make Money
Market Loans to the Borrower. The Banks may, but shall have
no obligation to, make such offers and the Borrower may, but
shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03.
(b) Money Market Quote Request. When the Borrower
wishes to request offers to make Money Market Loans under this
Section 2.03, it shall transmit an Invitation for Money Market
Quotes substantially in the form of Exhibit G hereto to each
of the Banks by telex or facsimile transmission so as to be
received no later than 10:00 A.M. (New York City time) on the
Domestic Business Day next preceding the date of Borrowing
proposed therein specifying:
(i) the proposed date of Borrowing, which shall be
a Domestic Business Day,
(ii) the aggregate amount of such Borrowing, which
shall be $5,000,000 or a larger multiple of $1,000,000,
and
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period.
The Borrower may request offers to make Money Market Loans for
up to six different Interest Periods in a single Invitation
for Money Market Quotes. No Invitation for Money Market
Quotes shall be given within three Domestic Business Days of
any other Invitation for Money Market Quotes.
29
(c) Submission and Contents of Money Market Quotes.
(i) Each Bank may submit a Money Market Quote containing an
offer or offers to make Money Market Loans in response to any
Invitation for Money Market Quotes. Each Money Market Quote
must comply with the requirements of this subsection (c) and
must be submitted to the Borrower by telex or facsimile
transmission at its offices specified in or pursuant to
Section 11.01 not later than 10:00 A.M. (New York City time)
on the proposed date of Borrowing. Subject to Articles III
and VI, any Money Market Quote so made shall be irrevocable
except with the written consent of the Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit H hereto and shall in any
case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which principal
amount (w) may be greater than or less than the
Commitment of the quoting Bank, (x) must be $5,000,000 or
a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers
were requested and (z) may be subject to an aggregate
limitation as to the principal amount of Money Market
Loans for which offers being made by such quoting Bank
may be accepted,
(C) the rate of interest per annum (specified to
the nearest 1/10,000th of 1%) (the "Money Market Rate")
offered for each such Money Market Loan, and
(D) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers
by the quoting Bank with respect to each Interest Period
specified in the related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if
it:
(A) is not substantially in conformity with Exhibit
H hereto or does not specify all of the information
required by subsection (c)(ii);
(B) except as provided in subsection (c)(ii)(B)(z),
contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money
Market Quotes; or
(D) arrives after the time set forth in subsection
(c)(i).
(d) Acceptance and Notice by Borrower. Not later
than 11:00 A.M. (New York City time) on the proposed date of
Borrowing, the Borrower shall notify the Administrative Agent
30
of its acceptance or non-acceptance of the offers so notified
to it pursuant to subsection (c). In the case of acceptance,
such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each
Interest Period that are accepted. The Borrower may accept
any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable amount set
forth in the related Invitation for Money Market Quotes,
(ii) the principal amount of each Money Market
Borrowing must be $5,000,000 or a larger multiple of
$1,000,000,
(iii) acceptance of offers may only be made on the
basis of ascending Money Market Rates and without regard
to any Money Market Quote submitted by a Bank that
amends, modifies or is otherwise inconsistent with a
previous Money Market Quote submitted by such Bank in
response to the same Invitation for Money Market Quotes,
unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money
Market Quote,
(iv) the Borrower may not accept any offer that is
described in subsection (c)(iii) or that otherwise fails
to comply with the requirements of this Agreement, and
(v) the absence of timely acceptance by the
Borrower in accordance with this subsection (d) shall
constitute rejection of all related Money Market Quotes.
(e) Allocation Among Banks. If offers are made by
two or more Banks with the same Money Market Rates, for a
greater aggregate principal amount than the amount in respect
of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect
of which such offers are accepted shall be allocated by the
Borrower among such Banks as nearly as possible (in multiples
of $1,000,000) in proportion to the aggregate principal
amounts of such offers. Such determinations of the amounts of
Money Market Loans shall be conclusive in the absence of
manifest error.
SECTION 2.04. Swingline Advances.
(a) The Borrower may at any time during the Revolv-
ing Credit Period request any or all of the Banks to offer to
make Swingline Advances under this Section. No such Bank
shall have any obligation to make such an offer, and the
Borrower shall have no obligation to request or accept any
such offer.
(b) The Borrower may not request or accept any
offer to make a Swingline Advance:
(i) the final maturity date of which is more than
180 days after the date of such Swingline Advance; or
31
(ii) the principal amount of which, when added to
then outstanding Swingline Advances, would exceed an
amount equal to the excess, if any, of (x) the Maximum
Money Market Aggregate Amount at such time over (y) the
aggregate outstanding principal amount of Money Market
Loans at such time; or
(iii) the principal amount of which, when added to
the aggregate principal amount of all Credits then
outstanding, exceeds (or would exceed at any time during
the term of such Swingline Advance) the aggregate
Commitments at such time.
(c) The Borrower shall promptly notify the
Administrative Agent, upon receipt of a request therefor from
the Administrative Agent during normal business hours, of the
aggregate principal amount of Swingline Advances then
outstanding.
SECTION 2.05. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the
Administrative Agent shall promptly notify (by telex, cable,
facsimile transmission, telephone or other means of
telecommunications) each Bank participating therein of the
contents thereof and of such Bank's share of such Borrowing,
and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(b) Not later than 12:00 Noon (New York City time)
on the date of each Borrowing, each Bank participating therein
shall, except as provided in subsection (c) of this Section
2.05, make available its share of such Borrowing, in Federal
or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant
to Section 11.01. Unless the Administrative Agent determines
that any applicable condition specified in Article III has not
been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower on such
date at the Administrative Agent's aforesaid address.
(c) If pursuant to any provision of this Agreement
any Bank makes a new Committed Loan hereunder to the Borrower
on a day on which the Borrower is to repay all or any part of
an outstanding Committed Loan from such Bank, such Bank shall
apply the proceeds of such new Committed Loan to make such
repayment and only an amount equal to the difference (if any)
between the amount being borrowed and the amount being repaid
shall be made available by such Bank to the Administrative
Agent, or remitted by the Borrower to the Administrative
Agent, as the case may be.
(d) Unless the Administrative Agent shall have
received notice from a Bank prior to the date of any Borrowing
that such Bank will not make available to the Administrative
Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available
to the Administrative Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.05
32
and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank
shall not have so made such share available to the
Administrative Agent, such Bank and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand
such corresponding amount together with interest thereon, for
each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a
rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to Section
2.08 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement.
SECTION 2.06. Maturity of Loans. Each Committed
Loan and each Money Market Loan shall mature, and the
principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable thereto. Each Swingline
Advance made by a Bank shall mature, and the principal amount
thereof shall be due and payable, on the maturity date
specified in the applicable offer made pursuant to Section
2.04 (the "Swingline Maturity Date").
SECTION 2.07. Notes. (a) The Credits of each Bank
shall be evidenced by a single Note payable to the order of
such Bank for the account of its Lending Office in an amount
equal to the aggregate unpaid principal amount of such Bank's
Credits.
(b) Each Bank may, by notice to the Borrower and
the Administrative Agent, request that its Credits of a
particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such
Credits. Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to reflect the
fact that it evidences solely Credits of the relevant type.
Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.01, the Administrative Agent shall deliver, by hand
or overnight courier, such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Credit to
be evidenced by its Note and the date and amount of each
payment of principal made by the Borrower with respect thereto
and may, if a Bank so elects in connection with any transfer
or enforcement of its Note, and is hereby irrevocably
authorized by the Borrower to, endorse on the schedules
forming a part thereof appropriate notations to evidence such
information and attach to and make a part of any Note a
continuation of any such schedule as and when required.
Notwithstanding the foregoing provisions of this paragraph
(c), neither the obligations of the Borrower and the Parent
Guarantor hereunder nor the rights of any Bank shall be
affected by the failure of any Bank to appropriately record
such information on any Note.
33
SECTION 2.08. Interest. (a) Subject to paragraph
(b) of this Section 2.08, each Base Rate Loan shall bear
interest on the unpaid principal amount thereof from time to
time outstanding at a rate per annum equal to the Base Rate
plus the Applicable Margin, if any. Such interest rates shall
be adjusted automatically on and as of the effective date of
any change in the Base Rate or the Applicable Margin. Such
interest shall be payable with respect to each Base Rate Loan
on the last day of the related Interest Period.
(b) Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for
each day from the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum
equal to the sum of 1-1/2% plus the Base Rate for such day
plus the Applicable Margin, if any (the "Base Overdue Interest
Rate").
(c) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the
applicable Adjusted CD Rate plus the Applicable Margin less
the Applicable Discount, if any; provided that (i) such
interest rates shall be adjusted automatically on and as of
the effective date of any change in the Domestic Reserve
Percentage, the Assessment Rate, the Applicable Margin or the
Applicable Discount and (ii) if any CD Loan or any portion
thereof shall, as a result of clause (2)(b)(i) of the
definition of Interest Period, have an Interest Period of less
than 30 days, such portion shall bear interest during such
Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, 90 days after the first day
thereof. Any overdue principal of or interest on any CD Loan
shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the higher of (i) the sum of
1-1/2% plus the sum of the Adjusted CD Rate applicable to such
Loan plus the Applicable Margin and (ii) the Base Overdue
Interest Rate for such day.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
{ CDBR }*
ACDR = { ---------- } + AR
{ 1.00 - DRP }
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
34
The "CD Base Rate" applicable to any Interest Period
is the rate of interest determined by the Administrative Agent
to be the average (rounded upward, if necessary, to the next
higher 1/100 of 1%) of the prevailing rates per annum bid at
10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two
or more New York certificate of deposit dealers of recognized
standing for the purchase at face value from each CD Reference
Bank of its certificates of deposit in an amount comparable to
the principal amount of the CD Loan of such CD Reference Bank
to which such Interest Period applies and having a maturity
comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of new non-personal
time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of
$100,000 or more.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Section 327.3(d) (or any successor
provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
United States.
(d) Subject to paragraph (f) of this Section 2.08,
each Euro-Dollar Loan shall bear interest on the unpaid
principal amount thereof for the applicable Interest Period at
an interest rate per annum equal to the sum of the Applicable
Margin plus the applicable Adjusted Euro-Dollar Rate, less the
Applicable Discount, if any. Such interest rate shall be
adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage, the Applicable
Margin or the Applicable Discount. Interest on each
Euro-Dollar Loan shall be payable on the last day of the
related Interest Period and, if such Interest Period is longer
than three months, at intervals of three months after the
first day thereof.
The "Adjusted Euro-Dollar Rate" applicable to any
Interest Period means a rate per annum equal to the quotient
obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (i) the applicable London Interbank
Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
35
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the largest Euro-Dollar Loan to which such
Interest Period is to apply and for a period of time
comparable to such Interest Period.
(e) If requested to do so by the Borrower through
the Administrative Agent at least five Euro-Dollar Business
Days before the beginning of any Interest Period applicable to
a Euro-Dollar Borrowing, each Bank participating therein will
advise the Administrative Agent before noon (New York City
time) on the third Euro-Dollar Business Day preceding the
beginning of such Interest Period as to whether, if the
Borrower selects a duration of 12 months for such Interest
Period, such Bank expects that deposits in dollars with a term
corresponding to such Interest Period will be available to it
on the first day of such Interest Period in the amount
required to fund its Euro-Dollar Loan to which such Interest
Period would apply. Unless Banks having more than 34% of the
aggregate principal amount of the Commitments respond by such
time to the effect that they expect such deposits not to be
available to them, the Borrower shall be entitled to select a
duration of 12 months for such Interest Period.
(f) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for
each day from and including the date payment thereof was due
to but excluding the date of actual payment, at a rate per
annum equal to the sum of 1-1/2% plus the Applicable Margin
plus the quotient obtained (rounded upward, if necessary to
the next higher 1/100 of 1%) by dividing (i) the average
(rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which one-day (or, if
such amount due remains unpaid more than three Euro-Dollar
Business Days, then for such other period of time not longer
than six months as the Administrative Agent may elect)
deposits in dollars in an amount approximately equal to the
largest such overdue payment due to any Bank are offered to
each Euro-Dollar Reference Bank in the London interbank market
for the applicable period determined as provided above by (ii)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01
shall exist, at a rate per annum equal to the Base Overdue
Interest Rate for such day).
(g) The "Applicable Margin" at any date shall be
equal to the sum of the Applicable Pricing Adjustment
Percentage, if positive, plus (i) 5/8 of 1% in the case of CD
Loans and (ii) 1/2 of 1% in the case of Euro-Dollar Loans.
The "Applicable Discount" shall be equal to the absolute value
of the Applicable Pricing Adjustment Percentage, if negative.
36
(h) The "Applicable Pricing Adjustment Percentage"
shall be for each day during any fiscal quarter of the Parent
Guarantor (the "Current Quarter"), the percentage, if any,
indicated in the table set forth below opposite the ratio
category applicable to the Reference Ratio. The Parent
Guarantor shall, prior to the first day of each fiscal quarter
of the Parent Guarantor during which the Applicable Pricing
Adjustment Percentage for any type of Loan differs from that
in effect during the next preceding fiscal quarter of the
Parent Guarantor, deliver to the Administrative Agent a
certificate of the Parent Guarantor signed by its chief
financial officer, its Treasurer or its chief accounting
officer setting forth in reasonable detail the calculations
necessary to determine each of the ratios referred to above as
of the relevant time periods.
Base Rate CD Loans and
Reference Ratio Loans Euro-Dollar Loans
--------------- ------------- -----------------
0.30 to 1, or less + 3/8 of 1% + 3/8 of 1%
More than 0.30 to 1,
but not more than 0.35
to 1 + 1/4 of 1% + 1/4 of 1%
More than 0.35 to 1,
but not more than 0.40
to 1 0 0
More than 0.40 to 1,
but not more than 0.45
to 1 0 - 1/8 of 1%
More than 0.45 to 1,
but not more than 0.50
to 1 0 - 1/4 of 1%
More than 0.50 to 1 0 - 3/8 of 1%
(i) For each day on which Committed Outstandings
exceed $400,000,000, additional interest shall be payable at
the rate of 1/4 of 1% per annum on an amount equal to the
excess of the Committed Outstandings at such day over
$400,000,000. Such interest shall be payable on each
Commitment Reduction Date.
(j) Each Money Market Loan and each Swingline
Advance made by a Bank shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Money Market Rate
quoted by the Bank making such Loan in accordance with Section
2.03 or the fixed interest rate quoted by the Bank making such
Swingline Advance in accordance with Section 2.04, as the case
may be. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or
interest on any Money Market Loan or Swingline Advance shall
bear interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the Prime Rate for
such day.
37
(k) The Administrative Agent shall determine each
rate of interest applicable to the Loans. The Administrative
Agent shall give prompt notice thereof to the Borrower and the
affected Banks by telephone, facsimile transmission, telex or
cable. The Administrative Agent's good faith determination of
each such rate of interest shall be conclusive in the absence
of manifest error.
(l) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Administrative Agent as
contemplated hereby. If any Reference Bank does not furnish a
timely quotation, the Administrative Agent shall determine the
relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks
or, if none of such quotations is available on a timely basis,
the provisions of Section 8.01 shall apply.
(m) Interest based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a
leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All
other interest shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed,
calculated as to each Interest Period or period fixed pursuant
to paragraph (f) of this Section 2.08 from and including the
first day thereof to but excluding the last day thereof.
SECTION 2.09. Facility Fees. (a) The Borrower
shall pay to the Administrative Agent for the account of the
Banks a facility fee accrued from and including the Effective
Date to and including the last day of the Revolving Credit
Period on the daily average aggregate amount of the
Commitments (whether used or unused).
(b) The facility fees referred to in paragraph (a)
of this Section 2.09 shall accrue at the rate of 1/4 of 1% per
annum; provided that no such fee shall accrue with respect to
the portion, if any, of the aggregate Commitments utilized in
the form of Base Rate Loans during any Current Quarter of the
Parent Guarantor if the Reference Ratio is more than 0.45 to 1
for such fiscal quarter.
(c) Such facility fees shall be computed on the
basis of a year of 360 days and paid for the actual number of
days elapsed. Such facility fees shall be paid quarterly in
arrears on each March 31, June 30, September 30 and
December 31 and on the last day of the Revolving Credit
Period. From the effective date of any termination or
reduction of Commitments, such facility fees shall cease to
accrue or be correspondingly reduced. If the Commitments are
terminated in their entirety or reduced, facility fees accrued
on the total Commitments, or accrued on the aggregate amount
of the reduction of the Commitments (in the case of such a
reduction), shall be payable on the effective date of such
termination or reduction.
(d) Upon receipt of any amount representing fees
paid pursuant to this Section 2.09, the Administrative Agent
shall pay such amount to the Banks in proportion to their
respective Commitments.
38
SECTION 2.10. Reduction of Commitments. (a) The
Borrower at its option may at any time and from time to time
upon at least three Domestic Business Days' notice to the
Administrative Agent terminate in their entirety or reduce, in
an aggregate amount of $10,000,000 or any larger multiple of
$5,000,000, the unused Commitments (any such reduction to be
applied ratably to the respective Commitments of all Banks).
For this purpose, the Commitments shall be deemed unused at
any time to the extent (and only to the extent) that the
Borrower could at such time borrow Committed Loans without
causing the Credits to exceed the aggregate Commitments at
such time. Upon any termination or reduction of the Commit-
ments pursuant to this subsection (a) or subsection (c) below,
the Administrative Agent shall promptly notify each Bank of
such termination or reduction.
(b) On each Commitment Reduction Date, the Commit-
ments shall be reduced by the applicable amount (if any) set
forth in Schedule I (adjusted in accordance with subsection
(e) of this Section 2.10).
(c) In addition, the Commitments shall be reduced
in the following amounts:
(i) in the event that the Asset Reduction Amount is
greater than zero, an amount equal to such Asset
Reduction Amount; and
(ii) upon the incurrence by the Parent Guarantor or
any of its Subsidiaries of Excess Priority Debt (other
than Excess Priority Debt arising out of the refinancing,
extension, renewal or refunding of other Excess Priority
Debt, except to the extent, and only to the extent, that
the outstanding principal amount of such other Excess
Priority Debt is increased), an amount equal to the cash
proceeds of such Excess Priority Debt, net of the
reasonable expenses of the Parent Guarantor or such
Subsidiary in connection with such incurrence.
(d) The reductions required by subsection (c) of
this Section 2.10 shall be effective on each date on which the
Asset Reduction Amount first exceeds zero, in the case of
reductions required by subparagraph (i), or on the date of
receipt by the Parent Guarantor or any of its Subsidiaries or
Restricted Subsidiaries, as the case may be, of the amounts
described in subparagraph (ii); provided that, in the event
such amounts shall aggregate less than $10,000,000, such
reduction shall be effective forthwith upon receipt by the
Parent Guarantor or any of its Subsidiaries or Restricted
Subsidiaries, as the case may be, of proceeds which, together
with all other amounts described in subparagraphs (i) and (ii)
of subsection (c) above not previously applied pursuant to
subsection (c) of this Section 2.10, aggregate $10,000,000 or
more. The Borrower shall give the Administrative Agent at
least four Euro-Dollar Business Days' notice of each reduction
in the Commitments pursuant to subsection (c) of this Section
2.10 and a certificate of a Principal Officer of the Parent
Guarantor, setting forth the information, in form and
39
substance satisfactory to the Administrative Agent, necessary
to determine the amount of each such reduction and, in the
case of a reduction in the Commitments required pursuant to
Section 2.10(c)(i), the date thereof.
(e) Each reduction of the Commitments pursuant to
subsection (c) of this Section 2.10 shall be applied ratably
to the respective Commitments of the Banks. The amount of any
mandatory reduction of the Commitments pursuant to subsection
(c) of this Section 2.10 shall be applied to reduce the amount
of subsequent mandatory reductions pursuant to subsection (b)
of this Section 2.10 in inverse chronological order; provided
that, if the Borrower so elects in its notice thereof given
pursuant to subsection (d) of this Section 2.10, such
mandatory reduction shall be applied to reduce the amount of
subsequent mandatory reductions pursuant to such subsection
(b) pro rata by amount. Each optional reduction of the
Commitments pursuant to subsection (a) of this Section 2.10
shall be applied first to reduce the amount of the mandatory
reductions of the Commitments pursuant to subsection (b) of
this Section 2.10 on the four Commitment Reduction Dates next
succeeding the date of such optional reduction, in forward
chronological order, and any remaining amount of such optional
reduction shall be applied to reduce the amount of subsequent
mandatory reductions pursuant to such subsection (b) of the
Commitments pro rata by amount.
(f) On each Commitment Reduction Date or date on
which a reduction required by subsection (c) becomes
effective, the Borrower shall repay or prepay such principal
amount of the outstanding Loans, if any, as may be necessary
so that after such payment or prepayment, (i) the unpaid
principal amount of the Credits does not exceed the aggregate
Commitments after giving effect to such reduction of the
Commitments and (ii) the unpaid principal amount of the
Committed Loans of each Bank does not exceed the amount of the
Commitment of such Bank as then reduced. The particular
Borrowings to be repaid shall be as designated by the Borrower
in the related Notice or Notices of Borrowing; provided that
if there shall have been a mandatory reduction of the
Commitments pursuant to subsection (c) of this Section 2.10 at
a time such that, and with the result that, this subsection
(f) would otherwise require payment of principal of Fixed Rate
Loans or portions thereof prior to the last day of the related
Interest Period, such payment shall be deferred to such last
day unless the Required Banks otherwise elect by notice to the
Borrower through the Administrative Agent (and the facility
fee provided for in Section 2.09(a) shall continue to accrue
on the amount of such deferred payment until such payment is
made). Each repayment or prepayment pursuant to this
subsection (f) shall be made together with accrued interest to
the date of payment or prepayment, and shall be applied
ratably to payment of the Loans of the several Banks in the
related Borrowing.
SECTION 2.11. Optional Prepayments. (a) The
Borrower may, upon at least one Domestic Business Day's notice
to the Administrative Agent, prepay any Base Rate Borrowing
without premium or penalty in whole at any time or from time
to time in part in an aggregate amount equal to $5,000,000 or
40
any larger multiple of $5,000,000, by paying the principal
amount being prepaid together with interest accrued thereon to
the date of prepayment. Each such prepayment shall be applied
ratably to the Loans of the Banks included in the applicable
Borrowing.
(b) Except as provided in Section 8.02, the
Borrower may not prepay all or any portion of the principal
amount of any Fixed Rate Loan prior to the maturity thereof.
(c) Swingline Advances shall be prepayable as may
be mutually agreed by the Borrower and the Bank making any
such Swingline Advance.
(d) Upon receipt of a notice of prepayment pursuant
to this Section, the Administrative Agent shall promptly
notify each affected Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.12. Payments. (a) All payments of
principal of, and interest on, the Loans and of fees and other
amounts payable hereunder shall be made not later than 12:00
Noon (New York City time) on the date when due, in Federal or
other funds immediately available in New York City to the
Administrative Agent at its office at 52 Broadway, New York,
New York. The Administrative Agent will promptly distribute
to each Bank in like funds its ratable share of each such
payment received by the Administrative Agent for the account
of the Banks.
(b) Whenever any payment of principal of, or
interest on, any Domestic Loans or any Swingline Advances or
of facility fees hereunder shall be due on a day which is not
a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, any
Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day,
unless such day falls in another calendar month, in which case
such payment shall be due on the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or
interest on, any Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(c) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which
any payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to
the Administrative Agent on such date and the Administrative
Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to
the amount then due such Bank. If and to the extent that the
41
Borrower shall not have so made such payment, each Bank shall
repay to the Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed
to such Bank until the date such Bank repays such amount to
the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed Rate
Loan (pursuant to Article VI, VIII or otherwise) on any day
other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed
pursuant to Section 2.08(f), or if the Borrower fails to
borrow or prepay any Fixed Rate Loan after notice has been
given to any Bank in accordance with Section 2.05(a) or
2.11(d), the Borrower shall reimburse each Bank on demand for
any resulting loss or expense incurred by such Bank (or by any
existing or prospective participant in the related Loan),
including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment
or failure to borrow or prepay, provided that such Bank shall
have delivered to the Borrower a certificate as to the amount
of such loss or expense, which certificate shall be conclusive
in the absence of manifest error.
SECTION 2.14. Withholding Tax Exemption. At least
five Domestic Business Days prior to the first date on which
interest or facility fees are payable hereunder for the
account of any Bank, each Bank that is not incorporated under
the laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the
Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Bank is entitled to receive payments
under the Financing Documents without deduction or withholding
of any United States federal income taxes. Each Bank which so
delivers a Form 1001 or 4224 further undertakes to deliver to
each of the Borrower and the Administrative Agent two
additional copies of such form (or a successor form) on or
before the date that such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, in each
case certifying that such Bank is entitled to receive payments
under the Financing Documents without deduction or withholding
of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it and
such Bank advises the Borrower and the Administrative Agent
that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
42
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended
Agreement shall become effective on the date that each of the
following conditions shall have been satisfied (or waived in
accordance with Section 11.04):
(a) receipt by the Administrative Agent of
counterparts hereof signed by each of the parties hereto
(or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such
party);
(b) receipt by the Administrative Agent for the
account of each Bank of a duly executed Note dated on or
before the Effective Date complying with the provisions
of Section 2.07;
(c) receipt by the Administrative Agent of
counterparts of all other Financing Documents signed by
each of the parties thereto (or, in the case of any party
as to which an executed counterpart shall not have been
received, receipt by the Administrative Agent in form
satisfactory to it of telegraphic, telex or other written
confirmation from such party of execution of a
counterpart thereof by such party);
(d) receipt by the Agents of a certificate of a
Principal Officer of the Borrower to the effect that, as
of the Effective Date and simultaneously with the initial
Borrowings made pursuant to this Agreement immediately
upon its effectiveness, all amounts payable under the
Original Agreement (excluding amounts payable with
respect to the Money Market Borrowings specified in
Section 3.04(a)) have been paid in full;
(e) receipt by the Agents of a certificate of a
Principal Officer of each of the Parent Guarantor and the
Borrower that, upon the Effective Date, no Default shall
have occurred and be continuing and that each of the
representations and warranties made by the Obligors in or
pursuant to the Financing Documents are true and correct
in all material respects;
(f) receipt by the Agents of an opinion of the
General Counsel or Associate General Counsel of the
Borrower and the Parent Guarantor, substantially in the
form of Exhibit B hereto and covering such additional
matters relating to the transactions contemplated hereby
as the Required Banks may reasonably request;
(g) receipt by the Agents of an opinion of Davis
Polk & Wardwell, special counsel for the Agents,
43
substantially in the form of Exhibit C hereto and
covering such additional matters relating to the
transactions contemplated hereby as the Required Banks
may reasonably request;
(h) receipt by the Agents of all documents they may
reasonably request relating to the existence of the
Borrower and the Parent Guarantor, the corporate
authority for and the validity and enforceability of the
Financing Documents, and any other matters relevant
hereto, all in form and substance satisfactory to the
Agents; and
(i) receipt by the Administrative Agent for the
account of each Bank of a participation fee in an amount
determined by the Administrative Agent on the basis set
forth in the Borrower's letters dated May 27, 1994 to the
Banks;
provided that this Amended Agreement shall not become effec-
tive or be binding on any party hereto unless all of the
foregoing conditions are satisfied not later than July 29,
1994. On the Effective Date the Original Agreement shall be
automatically amended and restated in its entirety to read as
set forth herein. The Administrative Agent shall promptly
notify the Borrower and the Banks of the Effective Date, and
such notice shall be conclusive and binding on all parties
hereto. The Notes delivered to each Bank under the Original
Agreement shall become void on the Effective Date and, upon
receiving its new Note delivered pursuant to clause (b) of
this Section 3.01, each Bank will cancel its original Notes
and return them to the Borrower. No failure of a Bank so to
cancel and return its original Notes shall affect the validity
or enforceability of its new Note.
SECTION 3.02. Conditions to Borrowing. The
obligation of each Bank to make a Loan on the occasion of each
Borrowing is subject to the satisfaction of such of the
following conditions as shall not have been expressly waived
in writing by Banks having 51% or more in aggregate principal
amount of the Loans to be included in such Borrowing:
(a) receipt (or deemed receipt) by the Adminis-
trative Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such
Borrowing, (i) the aggregate outstanding principal amount
of Loans will not exceed an amount equal to (A) the
aggregate amount of the Commitments at such time less (B)
the aggregate outstanding principal amount of Swingline
Advances at such time and (ii) the aggregate outstanding
principal amount of Money Market Loans shall not exceed
an amount equal to (A) the Maximum Money Market Aggregate
Amount at such time less (B) the aggregate outstanding
principal amount of Swingline Advances at such time;
44
(c) the fact that, immediately after such Borrow-
ing: (i) in the case of a Refunding Borrowing, no Event
of Default and no Default under Section 6.01(a) or (b)
shall have occurred and be continuing and (ii) in the
case of any other Borrowing, no Default shall have
occurred and be continuing;
(d) the fact that each of the representations and
warranties made by the Obligors in or pursuant to the
Financing Documents (other than, in the case of a
Refunding Borrowing, the representations and warranties
set forth in Sections 4.04(c), 4.05, 4.06, 4.07 and 4.08
of this Agreement), shall be true and correct in all
material respects on and as of the date of such
Borrowing; and
(e) the fact that such Borrowing will not violate
any provision of law or regulation applicable to any Bank
(including, without limiting the generality of the
foregoing, Regulations U and X of the Board of Governors
of the Federal Reserve System) as then in effect.
SECTION 3.03. Representation by Borrower. Each
Borrowing under this Agreement shall be deemed to be a
representation and warranty by the Borrower on the date of
such Borrowing as to the facts specified in subsections (b),
(c) and (d) of Section 3.02.
SECTION 3.04. Transitional Provisions. (a) Each
Money Market Loan or Swingline Advance outstanding under the
Original Agreement and made on or prior to the Effective Date
shall mature on the last day of the then current Interest
Period applicable thereto under the Original Agreement.
(b) Each of the Banks consents to (i) the amendment
and restatement of the Original Stock Pledge Agreement
substantially in the form of the Stock Pledge Agreement
attached as Exhibit D hereto and (ii) the amendment and
restatement of the Original Subsidiary Guaranty substantially
in the form of the Subsidiary Guaranty Agreement attached as
Exhibit E hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Parent Guarantor and the Borrower jointly and
severally represent and warrant to each Agent and each Bank
that:
SECTION 4.01. Corporate Existence and Power. Each
of the Parent Guarantor, the Borrower and each Subsidiary of
either is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted (except, in
45
the case of such Subsidiaries, to the extent that failure to
comply with the foregoing statements could not, in the
aggregate, have a material adverse effect on the business,
financial position, results of operations or prospects of the
Parent Guarantor and its Consolidated Subsidiaries, considered
as a whole), and each of the Parent Guarantor, the Borrower
and each Subsidiary of either is duly qualified as a foreign
corporation, licensed and in good standing in each
jurisdiction where qualification or licensing is required by
the nature of its business or the character and location of
its property, business or customers and in which the failure
so to qualify or be licensed, as the case may be, in the
aggregate, could have a material adverse effect on the
business, financial position, results of operations or
prospects of the Parent Guarantor and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.02. Corporate and Governmental Authori-
zation; No Contravention. The execution and delivery by each
Obligor of each of the Financing Documents to which it is a
party and the performance by such Obligor of its obligations
thereunder are within the corporate power of such Obligor,
have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable law
or regulation or of the charter or by-laws of such Obligor or
of any agreement or instrument relating to Debt of the Parent
Guarantor or any Subsidiary or any other agreement, judgment,
injunction, order, decree or other instrument binding upon
such Obligor material to the business of the Parent Guarantor
and its Consolidated Subsidiaries, considered as a whole, or
result in the creation or imposition of any Lien (other than
the Liens created by the Collateral Documents) on any asset of
the Parent Guarantor or any Subsidiary.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of each of the
Parent Guarantor and the Borrower and the other Financing
Documents, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of
each Obligor that is a party thereto, in each case enforceable
in accordance with its terms.
SECTION 4.04. Financial Information. (a) The
consolidated balance sheet of the Parent Guarantor and its
Consolidated Subsidiaries as of October 1, 1993 and the
related consolidated statements of income and cash flows for
the fiscal year then ended, reported on by Arthur Andersen &
Co., a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of
the Parent Guarantor and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the
Parent Guarantor and its Consolidated Subsidiaries as of
April 1, 1994 and the related unaudited consolidated
46
statements of income and cash flows for the six months then
ended, set forth in the Parent Guarantor's quarterly report
for the fiscal quarter ended April 1, 1994 as filed with the
Securities and Exchange Commission on Form 10-Q, a copy of
which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles
applied on a basis consistent with the financial statements
referred to in subsection (a) of this Section (except with
respect to any inconsistency resulting from the adoption by
the Parent Guarantor of Financial Accounting Standards Board
Statement No. 109 as of December 31, 1993), the consolidated
financial position of the Parent Guarantor and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
six-month period (subject to normal year-end adjustments).
(c) Since April 1, 1994, there has been no change
in the business, financial position or results of operations
of the Parent Guarantor and its Consolidated Subsidiaries
which materially and adversely affects the credit-worthiness
of the Borrower and the other Obligors, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit
or proceeding pending against, or to the knowledge of a
Principal Officer threatened against, the Parent Guarantor,
the Borrower or any Subsidiary of either before any court or
arbitrator or any governmental body, agency or official in
which there is a reasonable likelihood of an adverse decision
which would affect the business, financial position or results
of operations of the Parent Guarantor and its Consolidated
Subsidiaries in a manner material and adverse to the credit-
worthiness of the Borrower and the other Obligors, considered
as a whole, or which in any manner questions the validity or
enforceability of any Financing Document.
SECTION 4.06. Compliance with ERISA. No member of
the ERISA Group has caused there to be an "accumulated funding
deficiency", as such term is defined in Section 412 of the
Code or Section 302 of ERISA, with respect to any Plan in an
aggregate amount exceeding $100,000, whether or not waived.
Each member of the ERISA Group has paid, when due, all
contributions it has been required to make to any Multi-
employer Plan. Each member of the ERISA Group is in compli-
ance in all material respects with the presently applicable
provisions of ERISA and the Code. No Plan has been termin-
ated, and within the past five years there has not been a
"complete withdrawal" or a "partial withdrawal" from a Multi-
employer Plan, as such terms are defined in Sections 4203 and
4205, respectively, of ERISA, which could have a material
adverse effect on the financial condition of the ERISA Group.
No member of the ERISA Group has incurred any undischarged
liability in excess of $100,000 to the PBGC or a Plan under
Title IV of ERISA. No member of the ERISA Group has (i)
sought a waiver of the minimum funding standard under Section
412 of the Code in respect of any Plan or (ii) failed to make
any contribution or payment to any Plan or made any amendment
to any Plan which has resulted or could result in the
imposition of a Lien or the posting of a bond or other
security under ERISA or the Code.
47
SECTION 4.07. Environmental Matters. The Parent
Guarantor has reasonably concluded that the liabilities and
costs associated with the effect of Environmental Laws on the
business, operations and properties of the Parent Guarantor
and its Subsidiaries, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse
effect on the business, financial condition, results of opera-
tions or prospects of the Parent Guarantor and its Consoli-
dated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income
tax returns of the Borrower and its Subsidiaries have been
examined and closed through the fiscal year ended on October
3, 1986. The Parent Guarantor, the Borrower and each
Subsidiary of either have filed all United States Federal
income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment
received by any of them, except for any such taxes being
diligently contested in good faith and by appropriate
proceedings. Adequate reserves have been provided on the
books of the Parent Guarantor and its Subsidiaries in respect
of all taxes or other governmental charges in accordance with
generally accepted accounting principles, and no tax
liabilities in excess of the amount so provided are
anticipated that could materially and adversely affect the
business, financial position, results of operations or
prospects of the Parent Guarantor and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.09. Compliance with Laws. The Parent
Guarantor, the Borrower and each Subsidiary of either are in
compliance with all applicable laws, rules and regulations
(including, without limitation, Environmental Laws and ERISA
and the rules and regulations thereunder), other than such
laws, rules or regulations (i) the validity or applicability
of which the Parent Guarantor, the Borrower or such Subsidiary
is contesting in good faith or (ii) the failure to comply with
which cannot reasonably be expected to have a material adverse
effect on the business, financial position, results of
operations or prospects of the Parent Guarantor and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.10. Not an Investment Company. None of
the Obligors is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
SECTION 4.11. No Defaults. Neither the Parent
Guarantor nor the Borrower nor any Subsidiary of either is in
violation of, or in default under, any term or provision of
any charter, by-law, mortgage, indenture, agreement,
instrument, statute, rule, regulation, judgment, decree,
order, writ or injunction applicable to it, such that such
violations or defaults in the aggregate might have a material
adverse effect on the business, financial position, results of
operations or prospects of the Parent Guarantor and its
Consolidated Subsidiaries, considered as a whole, or the
ability of any Obligor to perform its obligations under the
Financing Documents to which it is a party.
48
SECTION 4.12. Possession of Franchises, Licenses,
etc. The Parent Guarantor, the Borrower and each Subsidiary
of either own or possess all franchises, patents, trademarks,
service marks, trade names, copyrights, licenses and other
rights that are necessary in any material respect for the
ownership, maintenance and operation of their respective
properties and assets, and neither the Parent Guarantor nor
the Borrower nor any Subsidiary of either is in violation of
any provision thereof in any material respect.
ARTICLE V
COVENANTS
The Parent Guarantor and the Borrower jointly and
severally agree that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Parent Guarantor
will deliver to each of the Banks:
(a) within 90 days after the end of each fiscal
year of the Parent Guarantor, consolidated balance sheets
of the Borrower and its Consolidated Subsidiaries and of
the Parent Guarantor and its Consolidated Subsidiaries as
of the end of such fiscal year, and the related
consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in
reasonable detail and, in the case of such balance sheet
and related consolidated statements of income and cash
flows of the Parent Guarantor and its Consolidated
Subsidiaries, accompanied by an opinion thereon by Arthur
Andersen & Co. or other independent public accountants of
nationally recognized standing, which opinion (x) shall
state that such financial statements present fairly the
consolidated financial position of the companies being
reported upon as of the date of such financial statements
and the consolidated results of their operations and cash
flows for the period covered by such financial statements
in conformity with generally accepted accounting
principles and that the audit of such accountants in
connection with such financial statements has been
conducted in accordance with generally accepted auditing
standards and (y) shall not contain any Qualification;
(b) within 60 days after the end of each of the
first three quarters of each fiscal year of the Parent
Guarantor, consolidated balance sheets of the Borrower
and its Consolidated Subsidiaries and of the Parent
Guarantor and its Consolidated Subsidiaries, and the
related consolidated statements of income for such
quarter and for the portion of the fiscal year ended at
the end of such quarter and cash flows for the portion of
the fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the figures for
the corresponding quarter and the corresponding portion
49
of the previous fiscal year, if any, all prepared in
accordance with Rule 10-01 of Regulation S-X of the
General Rules and Regulations under the Securities Act of
1933, or any successor rule that sets forth the manner in
which interim financial statements shall be prepared, and
certified (subject to normal year-end audit adjustments)
as to fairness of presentation and consistency by the
chief financial officer or the chief accounting officer
of the Borrower and the Parent Guarantor, respectively;
(c) once during each fiscal year of the Parent
Guarantor, in accordance with its normal business
practice, projected consolidated balance sheets of the
Parent Guarantor and its Consolidated Subsidiaries as of
the end of such fiscal year, and the related consolidated
statements of projected cash flows and projected income
(in each case substantially in the form customarily
prepared by the Parent Guarantor) for such fiscal year,
based on the Parent Guarantor's best estimates,
information and assumptions at the time;
(d) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and
(b) of this Section 5.01, a certificate of the chief
financial officer, Treasurer or chief accounting officer
of the Parent Guarantor (i) setting forth in reasonable
detail such calculations as are required to establish
whether the Parent Guarantor was in compliance with the
requirements of Sections 5.06 through 5.14, inclusive, on
the date of such financial statements, and identifying
any Excluded Dividends declared or paid by any Subsidiary
of the Parent Guarantor (ii) stating whether there exists
on the date of such certificate any Default and, if any
Default then exists, setting forth the details thereof
and the action that the Parent Guarantor is taking or
proposes to take with respect thereto, (iii) stating
whether, since the date of the most recent previous
delivery of financial statements pursuant to paragraph
(a) or (b) of this Section 5.01, there has been any
material adverse change in the business, financial
position, results of operations or prospects of the
Parent Guarantor and its Consolidated Subsidiaries or of
the Borrower and its Consolidated Subsidiaries, in each
case considered as a whole, not reflected in the
financial statements delivered simultaneously therewith
and, if so, the nature of such material adverse change
and (iv) stating whether, since the date of the most
recent financial statements previously delivered pursuant
to paragraph (a) or (b) of this Section 5.01, there has
been a change in the generally accepted accounting
principles applied in preparing the financial statements
then being delivered from those applied in preparing the
most recent financial statements and, in the case of the
Parent Guarantor, audited financial statements so
delivered which is material to the financial statements
then being delivered;
(e) forthwith upon the occurrence of any Default, a
certificate of the chief financial officer, Treasurer or
50
chief accounting officer of the Parent Guarantor setting
forth the details thereof and the action that the Parent
Guarantor is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Parent Guarantor generally, copies of
all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto
and any registration statements on Form S-8 or its
equivalent) and annual, quarterly or monthly reports that
the Parent Guarantor or any of its Consolidated
Subsidiaries shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA)
with respect to any Plan which could reasonably lead to a
termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable
event, a copy of the notice of such reportable event
given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under
Title IV of ERISA in an amount greater than $1,000,000 or
notice that any Multiemployer Plan is in reorganization,
is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in
respect of, or appoint a trustee to administer, any Plan,
a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Code, a
copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy
of such notice and other information filed with the PBGC;
(vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any required payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or
the chief accounting officer of the Borrower setting
forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA
Group is required or proposes to take;
(i) as soon as reasonably practicable after a
Principal Officer obtains knowledge of the commencement
of, or of a material threat of the commencement of, an
action, suit or proceeding against the Parent Guarantor
or any of its Subsidiaries before any court or arbitrator
or any governmental body, agency or official in which, in
51
the reasonable opinion of the Parent Guarantor or the
Borrower, there is a reasonable likelihood of an adverse
decision which would affect the business, financial
position or results of operations of the Parent Guarantor
and its Consolidated Subsidiaries in a manner material
and adverse to the credit-worthiness of the Borrower and
the other Obligors, considered as a whole, or which in
any manner questions the validity or enforceability of
any Financing Document, information as to the nature of
such pending or threatened action, suit or proceeding and
will provide such additional information as may be
reasonably requested by any Bank; and
(j) from time to time such additional information
regarding the financial position, results of operations,
business or prospects of the Parent Guarantor or any of
its Subsidiaries as the Administrative Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Parent
Guarantor will, and will cause each of its Subsidiaries to,
pay and discharge, as the same shall become due and payable,
(i) all material claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons
which, in any such case, if unpaid, might by law give rise to
a Lien upon any of its property or assets, and (ii) all
material taxes, assessments and governmental charges or levies
upon it or its property or assets, except where any of the
items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Parent Guarantor or
such Subsidiary, as the case may be, shall have set aside on
its books, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any such
items.
SECTION 5.03. Maintenance of Property; Insurance.
The Parent Guarantor will keep, and will cause each of its
Subsidiaries to keep, all material property useful and
necessary in its business in good working order and condition
in accordance with generally accepted industry standards
applicable to the line of business in which such property is
used; will maintain and will cause each of its Subsidiaries to
maintain (either in the name of the Parent Guarantor or in
such Subsidiary's own name) with financially sound and
responsible insurance companies, insurance on all their
respective properties in at least such amounts and against at
least such risks (and with such risk retentions) as are
usually insured against in the same general area by companies
of established repute engaged in the same or a similar
business; and will furnish to the Banks, upon written request
from the Administrative Agent, information presented in
reasonable detail as to the insurance so carried. Notwith-
standing the foregoing, the Parent Guarantor may, in lieu of
maintaining the insurance required by the preceding sentence,
self-insure, or cause any of its Subsidiaries to self-insure,
with respect to the properties and risks referred to in the
preceding sentence to the extent that such self-insurance is
customary among companies of established repute engaged in the
line of business in which such properties are used or to which
such risks pertain.
52
SECTION 5.04. Conduct of Business and Maintenance
of Existence. (a) Subject to Section 5.09, the Parent Guar-
antor will continue, and will cause each of its Subsidiaries
to continue, to engage in business of the same general type as
now conducted by the Parent Guarantor and its Subsidiaries,
and will preserve, renew and keep in full force and effect,
and will cause each of its Subsidiaries to preserve, renew and
keep in full force and effect, their respective corporate
existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of
business; provided that, subject to Sections 5.09 and 5.10,
nothing in this Section 5.04(a) shall prohibit the termination
of the corporate existence of any Subsidiary (other than the
Borrower) if the Parent Guarantor in good faith determines
that such termination is in the best interest of the Parent
Guarantor and is not adverse to the interests of the Banks;
provided further that nothing in this Section 5.04(a) shall
prohibit the termination of the corporate existence of the
Borrower or the Parent Guarantor, if such termination is the
result of the merger of the Borrower with the Parent Guarantor
pursuant to Section 5.09 hereof.
(b) The Parent Guarantor's principal assets will at
all times be Investments in its Subsidiaries and corporate
assets used to service its Subsidiaries and Investments.
SECTION 5.05. Inspection of Property, Books and
Records. The Parent Guarantor will keep, and will cause each
of its Subsidiaries to keep, proper books of record and
account in which full, true and correct entries in conformity
with generally accepted accounting principles shall be made of
all dealings and transactions in relation to its business and
activities. The Parent Guarantor, upon reasonable request by
any Bank to the Treasurer of the Parent Guarantor, will
permit, and will cause each of its Subsidiaries to permit,
representatives of any Bank to visit and inspect any of their
respective properties, to examine and make abstracts from any
of their respective books and records and to discuss their
respective affairs, finances and accounts with their
respective officers, employees and independent public
accountants, all at such reasonable times and as often as may
reasonably be desired.
SECTION 5.06. Maintenance of Stock of Subsidiaries.
The Parent Guarantor will at all times maintain ownership of
100% of the outstanding shares of each class of capital stock
of the Borrower, unless the Borrower and the Parent Guarantor
shall have merged in accordance with Section 5.09 hereof.
SECTION 5.07. Limitation on Subsidiary Debt. (a)
The Parent Guarantor will not permit any of its Subsidiaries
to incur or at any time be liable with respect to any Debt
owing to the Parent Guarantor except Debt of the Borrower
under Subordinated Intercompany Notes.
(b) Until the long-term unsecured Debt of the
Borrower achieves Investment Grade Status, the Parent
Guarantor will not permit any of its Subsidiaries (other than
the Borrower) to incur or at any time be liable with respect
to any Debt except:
53
(i) Debt consisting of Guarantees under the
Financing Documents;
(ii) Debt listed on Schedule II;
(iii) Debt of any Person outstanding at the date such
Person becomes a Subsidiary of the Parent Guarantor and
not created in contemplation of such event;
(iv) Debt arising out of the refinancing, extension,
renewal or refunding of any Debt permitted by any of the
foregoing clauses of this Section 5.07(b), provided that
the outstanding principal amount of such Debt is not
increased;
(v) Guarantees by a Subsidiary of Debt of the
Borrower;
(vi) Debt owing to a Restricted Subsidiary;
(vii) Debt not otherwise permitted by the foregoing
clauses of this Section 5.07(b) in an aggregate principal
amount at any time outstanding not to exceed, together
with the outstanding principal amount of Debt secured by
Liens pursuant to subsection 5.08(g), an amount equal to
15% of Consolidated Total Assets; and
(viii) subject to Section 2.10(c)(ii), Excess Priority
Debt.
SECTION 5.08. Negative Pledge. The Parent Guar-
antor will not, and will not permit any of its Subsidiaries
to, create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by the Parent Guarantor or any
such Subsidiary, except:
(a) Liens created pursuant to the Financing
Documents and Liens on Schedule II;
(b) any Lien existing on any asset prior to the
acquisition thereof by the Parent Guarantor or such
Subsidiary and not created in contemplation of such
acquisition;
(c) any Lien existing on any asset of any Person at
the time such Person becomes a Subsidiary and not created
in contemplation of such event;
(d) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by any of the foregoing subsections of
this Section 5.08, provided that the outstanding
principal amount of such Debt is not increased and is not
secured by any additional assets;
(e) any Liens arising in the ordinary course of
business of the Parent Guarantor or any of its
Subsidiaries which (i) do not secure Debt or Derivatives
Obligations and (ii) do not in the aggregate materially
54
detract from the value of the assets of the Parent
Guarantor and its Consolidated Subsidiaries, considered
as a whole, or impair the use thereof in the operation of
the business of the Parent Guarantor and its Consolidated
Subsidiaries, considered as a whole; provided that any
Lien on any asset of the Parent Guarantor or any of its
Subsidiaries arising in connection with a judgment in
excess of $10,000,000 (reduced, for purposes of this
proviso, by any amount in respect thereof that is
acknowledged by a reputable insurer as being payable
under any valid and enforceable insurance policy issued
by such insurer), whether or not such judgment is being
contested or execution thereof has been stayed, shall be
deemed not arising in the ordinary course of business of
the Parent Guarantor or such Subsidiary;
(f) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate
amount of cash and cash equivalents subject to such Liens
may at no time exceed $25,000,000;
(g) any Lien not otherwise permitted by the
foregoing provisions of this Section 5.08 securing Debt
(or Derivative Obligations, as measured by the amount of
the pledged collateral in excess of that permitted under
(f)) in an aggregate principal amount not to exceed the
lesser of (i) an amount equal to 5% of Consolidated Total
Assets and (ii) an amount equal to 15% of Consolidated
Total Assets less the outstanding principal amount of
unsecured Debt permitted pursuant to clause (vii) of
Section 5.07(b); and
(h) subject to Section 2.10(c)(ii), any Lien on any
asset or assets of the Parent Guarantor or any of its
Subsidiaries securing Excess Priority Debt.
SECTION 5.09. Consolidations, Mergers and Sales of
Assets. (a) The Parent Guarantor will not, and will not
permit any of its Restricted Subsidiaries to, consolidate or
merge with or into any Person, except that (i) the Borrower
may merge with any Person (other than the Parent Guarantor) if
the Borrower is the surviving corporation and if, immediately
after such merger (and giving effect thereto), no Default
shall have occurred and be continuing, (ii) any other
Restricted Subsidiary of the Parent Guarantor may consolidate
or merge with or into any other Person if the surviving
corporation is a Wholly Owned Subsidiary of the Parent
Guarantor and if, immediately after such consolidation or
merger (and giving effect thereto), no Default shall have
occurred and be continuing and (iii) if any long-term senior
unsecured Debt of the Borrower ever achieves Investment Grade
Status, then the Borrower may merge with the Parent Guarantor,
if (x) immediately after such merger (and giving effect
thereto), no Default shall have occurred and be continuing and
(y) when the Borrower is to be the surviving corporation, the
Borrower has signed an instrument of assumption in form and
substance satisfactory to the Required Banks immediately prior
to such merger.
55
(b) The Parent Guarantor will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise
transfer or dispose of to any Person all or any substantial
part of the assets of the Parent Guarantor and its Subsid-
iaries, taken as a whole.
SECTION 5.10. Restricted Payments. The Parent
Guarantor will not, and will not permit any of its Subsid-
iaries to, declare or make any Restricted Payment except that,
if, after giving effect thereto, no Default shall have
occurred and be continuing,
(a) the Parent Guarantor may declare or make
Restricted Payments, if, after giving effect thereto, the
aggregate of all Restricted Payments, not otherwise
permitted under this Section 5.10, declared or made
subsequent to October 3, 1992 (net of cash received upon
the sale of capital stock (excluding any Series Preferred
Stock issued pursuant to subsection 5.10(b) and any
Redeemable Stock) and Deferred Stock Units subsequent to
October 3, 1992) does not exceed the sum of (i)
$25,000,000 plus (ii) 25% of Consolidated Net Income for
the period from October 3, 1992 through October 1, 1993
plus (iii) 50% of Consolidated Net Income for the period
from October 2, 1993 through the end of the Parent
Guarantor's most recent fiscal quarter (treated for this
purpose as a single accounting period). For purposes of
calculating the net cash received upon the sale of
capital stock or Deferred Stock Units, the contribution
of shares of capital stock or Deferred Stock Units to an
employee benefit plan shall be deemed a sale of such
shares (or, in the case of a contribution of Deferred
Stock Units, shall be deemed a sale of the shares of
Common Stock for which such Deferred Stock Units may be
exchanged) for cash at the then appraised value of such
shares, provided that the amount contributed is in
accordance with the regular practice of the Parent
Guarantor and its Subsidiaries relating to contributions
to employee benefit plans. Nothing in this Section shall
prohibit the payment of any dividend or distribution
within 60 days after the declaration thereof if such
declaration was not prohibited by this Section;
(b) the Parent Guarantor may from time to time
declare or make Restricted Payments not otherwise
permitted under this Section 5.10 solely for the purpose
of the Share Transactions, provided that the aggregate
amount of such Restricted Payments made after March 12,
1993 does not exceed $100,000,000;
(c) any Subsidiary of the Parent Guarantor may make
Restricted Payments in cash to the Parent Guarantor to
enable the Parent Guarantor to make payments otherwise
permitted under this Agreement;
(d) the Borrower may distribute to the Parent
Guarantor all (but not less than all) capital stock of a
Subsidiary of the Borrower; provided that:
56
(A) in the case of a Spin-Off Subsidiary, such
Spin-Off Subsidiary is a party to the Subsidiary
Guaranty Agreement at the time of such distribution;
(B) in the case of a Spin-Off Subsidiary, all
capital stock of such Spin-Off Subsidiary shall have
been duly pledged to the Collateral Agent under the
Stock Pledge Agreement at or prior to the time of
such distribution; and
(C) at or prior to the time of such distri-
bution, the Administrative Agent shall have received
(i) a certificate of a Principal Officer to the
effect that, after giving effect to such
distribution, no Default shall have occurred and be
continuing and (ii) an opinion of counsel
substantially to the effect set forth in paragraphs
2, 4, 5, 6 and 8 of Exhibit B hereto with
appropriate changes to refer to the Spin-Off
Subsidiary; and
(e) any Subsidiary may distribute non-cash assets
in kind to the Parent Guarantor to the extent that such
assets are or will be used in the corporate headquarters
function of the Parent Guarantor, wherever such function
may be performed.
Notwithstanding subsections (a) and (b) of this Section 5.10,
the aggregate cash amount paid in respect of any repurchase
made from a stockholder pursuant to his or her election to
require the Parent Guarantor to repurchase shares in accor-
dance with the terms of Section 5 of the Stockholders'
Agreement (Put of Shares upon Death, Complete Disability or
Normal Retirement), together with the aggregate cash amount
paid in respect of all prior repurchases of shares pursuant to
Section 5 of the Stockholders' Agreement made after March 12,
1993, shall not exceed an amount equal to 4% of Consolidated
Capital Funds, as reflected in the most recent consolidated
balance sheet of the Parent Guarantor and its Consolidated
Subsidiaries referred to in Section 4.04(a) or delivered prior
to such repurchase pursuant to Section 5.01.
SECTION 5.11. Fixed Charge Coverage. As of the
last day of each fiscal quarter ending on or after the last
day of any of the fiscal years set forth below of the Parent
Guarantor, the ratio of Consolidated Cash Flow Available for
Fixed Charges to Consolidated Fixed Charges, in each case for
the four fiscal quarters ending on such day, shall not be less
than the ratio of (i) the number set forth below opposite such
fiscal year to (ii) 1.0:
Fiscal Year
Ending in September
or October Ratio
----------------- -----
1993 1.8
1994 1.9
1995 2.0
1996 2.1
1997 2.2
1998 2.3
1999 2.4
2000 2.5
2001 2.6
57
SECTION 5.12. Debt Coverage. As of the last day of
each fiscal quarter ending on or after the last day of any of
the fiscal years set forth below of the Parent Guarantor, the
Leverage Ratio at such day shall not be less than the ratio of
(i) the number set forth below in the column opposite such
fiscal year to (ii) 1.0:
Fiscal Year Ending
in September or
October Leverage Ratio
-------------- --------------
1993 .28
1994 .28
1995 .30
1996 .32
1997 .36
1998 .42
1999 .48
2000 .55
2001 .65
SECTION 5.13. Minimum Consolidated Net Worth.
Consolidated Net Worth shall at no time on or after the last
day of any fiscal year of the Parent Guarantor set forth below
be less than the amount set forth on the table below opposite
such fiscal year:
Fiscal Year
Ending in September Consolidated
or October Net Worth
---------------- ------------
1993 $ 75,000,000
1994 $115,000,000
1995 $165,000,000
1996 $205,000,000
1997 $270,000,000
1998 $340,000,000
1999 $430,000,000
2000 $525,000,000
2001 $625,000,000
SECTION 5.14. Subordinated Debt. The Parent
Guarantor will not, nor will it permit any of its Subsidiaries
to, directly or indirectly, redeem, retire, purchase, acquire
or otherwise make any payment in respect of the principal of
any Subordinated Debt, unless, after giving effect thereto,
Consolidated Capital Funds is equal to or greater than the sum
of (i) the amount of Consolidated Net Worth required under
Section 5.13 plus (ii) $200,000,000.
SECTION 5.15. Transactions with Affiliates. The
Parent Guarantor will not, and will not permit any of its
Subsidiaries to, directly or indirectly, engage in any
material transaction with an Affiliate unless the terms of
such transaction are determined on an arm's-length basis and
are substantially as favorable to the Parent Guarantor or such
58
Subsidiary as the terms which could have been obtained from a
Person which was not an Affiliate; provided that Restricted
Payments permitted by Section 5.10 shall not be limited by
this Section 5.15.
SECTION 5.16. Use of Proceeds. The proceeds of
Credits hereunder will be used for general corporate purposes.
None of such proceeds will be used in violation of any
applicable law or regulation and, without limiting the
generality of the foregoing, no use of such proceeds for
general corporate purposes will include any use thereof,
directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "margin
stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System as in effect from time
to time ("Regulation U").
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of
the following events ("Events of Default") shall have occurred
and be continuing:
(a) the Borrower shall fail to pay when due any
principal of any Note; or
(b) the Borrower shall fail to pay any interest on
any Note or any fees or any other amount payable
hereunder for a period of three Domestic Business Days
after the same shall become due; or
(c) any Obligor shall fail to observe or perform
any covenant contained in Sections 5.06 to 5.16, inclu-
sive; or
(d) any Obligor shall fail to observe or perform
any of its covenants or agreements contained in the
Financing Documents (other than those covered by para-
graph (a), (b) or (c) above) for 30 days after the Parent
Guarantor or the Borrower shall have become aware of such
failure; or
(e) any representation, warranty, certification or
statement made or deemed made by any Obligor in any
Financing Document or in any certificate, financial
statement or other document delivered pursuant thereto
shall prove to have been incorrect in any material
respect when made or deemed made; or
(f) the Parent Guarantor or any of its Subsidiaries
shall fail to make any payment in respect of any Material
Financial Obligations when due or within any applicable
grace period; or
59
(g) any event or condition shall occur that results
in the acceleration of the maturity of Debt of the Parent
Guarantor or any of its Subsidiaries aggregating in
excess of $10,000,000, or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder
or holders of such Debt or any Person acting on behalf of
such holder or holders to accelerate the maturity thereof
(it being understood that the prepayment by the Borrower
of (x) its Senior Note (the "Senior Note") payable to
Metropolitan Life Insurance Company (the "Holder") or (y)
any successor note (a "Successor Note") issued by the
Borrower to the Holder in connection with the refinancing
of the Debt evidenced by the Senior Note (provided that
the principal amount of any Successor Note is not more
than $125,000,000 and that such Successor Note is
substantially in the form of the Senior Note in all
material respects other than principal amount,
amortization, maturity and interest rate), by reason of
the refusal by the Holder to consent to a proposed
written waiver or amendment of this Agreement insofar as
the provisions hereof are incorporated by reference in
the Senior Note or the Successor Note, as the case may
be, shall not constitute an event or condition subject to
this paragraph (g)); or
(h) the Parent Guarantor or any Subsidiary (other
than any Investment Subsidiary) shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part
of its property, or shall consent to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally or
admit in writing its inability to pay its debts as they
become due, or shall take any corporate action to
authorize any of the foregoing; or
(i) an involuntary case or other proceeding shall
be commenced against the Parent Guarantor or any Sub-
sidiary (other than any Investment Subsidiary) seeking
liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief
shall be entered against the Parent Guarantor or any
Subsidiary (other than any Investment Subsidiary) under
the Federal bankruptcy laws as now or hereafter in
effect; or
60
(j) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of
$500,000 which it shall have become liable to pay under
Title IV of ERISA (other than any such liability which is
being contested in good faith by appropriate proceedings
and is not secured by any Lien); or notice of intent to
terminate a Plan or Plans having aggregate Unfunded
Liabilities in excess of $5,000,000 (a "Material Plan")
shall be filed under Title IV of ERISA by any member of
the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer, any Material Plan; or a condi-
tion shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one
or more members of the ERISA Group to incur a current
annual payment obligation in excess of $20,000,000 or an
aggregate payment obligation in excess of $35,000,000; or
(k) a judgment or order for the payment of money in
excess of $1,000,000 (reduced, for purposes of this
paragraph (k), by any amount in respect thereof that is
acknowledged by a reputable insurer as being payable
under any valid and enforceable insurance policy issued
by such insurer) shall be rendered against the Parent
Guarantor or any of its Subsidiaries (other than any
Investment Subsidiary) and such judgment or order shall
continue unsatisfied and unstayed for a period of 30
days; or
(l) any Wholly Owned Subsidiary of the Parent
Guarantor organized under the laws of the United States,
any State thereof or any political subdivision thereof or
therein shall not have entered into the Subsidiary
Guaranty Agreement within 30 days after the later of the
date hereof or the date on which such Wholly Owned
Subsidiary shall have become a Wholly Owned Subsidiary of
the Parent Guarantor; or
(m) more than 30 percent (40 percent, in the case
of voting securities held by a Plan) in voting power of
the voting securities of the Parent Guarantor shall be
held (i) by any Person or (ii) by any two or more Persons
(other than parties to the Stockholders' Agreement) who
"act as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding, or
disposing of securities" of the Parent Guarantor, as the
case may be, within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934;
61
then, and in every such event, the Administrative Agent shall
(i) if requested by Banks having more than 50 percent in
aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments, and the Commitments shall thereupon
terminate, and (ii) if requested by the Banks holding Notes
evidencing more than 50 percent in aggregate principal amount
of the Loans, by notice to the Borrower declare the Notes
(together with accrued interest thereon) and all other amounts
payable by the Borrower hereunder to be, and such Notes
(together with accrued interest thereon) and amounts shall
thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower, provided that in
the case of any of the Events of Default specified in
paragraph (h) or (i) of this Section 6.01 with respect to the
Parent Guarantor or the Borrower, without any notice to any
Obligor or any other act by any Agent or any Bank, the
Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) and all other amounts payable
by the Borrower hereunder shall become immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administra-
tive Agent shall give notice to the Parent Guarantor and the
Borrower under Section 6.01(d) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes each Agent to take
such action as agent on such Bank's behalf and to exercise
such powers under the Financing Documents as are delegated to
such Agent by the terms thereof, together with all such powers
as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each of
Chemical Bank and Morgan Guaranty Trust Company of New York
shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the
same as though it were not an Agent, and each of Chemical Bank
and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Parent
Guarantor or any Subsidiary or Affiliate of the Parent
Guarantor as if it were not an Agent.
SECTION 7.03. Action by Agents. The obligations of
each Agent under the Financing Documents are only those
expressly set forth therein with respect to it. Without
limiting the generality of the foregoing, neither Agent shall
be required to take any action with respect to any Default,
except as expressly provided in Article VI.
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SECTION 7.04. Consultation with Experts. Either
Agent may consult with legal counsel (who may be counsel for
the Parent Guarantor or the Borrower), independent public
accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel,
accountants or experts.
SECTION 7.05. Liability of Agents. Neither any
Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by such Agent or affiliate or
any such director, officer, agent or employee in connection
herewith (i) with the consent or at the request of the
Required Banks or (ii) in the absence of the gross negligence
or willful misconduct of such Agent, affiliate, director,
officer, agent or employee. Neither any Agent nor any of its
directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into or verify (i)
any statement, warranty or representation made in connection
with any Financing Document or any borrowing hereunder; (ii)
the performance or observance of any of the covenants or
agreements of any Obligor under any Financing Document; (iii)
the satisfaction of any condition specified in Article III
except, in the case of the Administrative Agent, receipt of
items required to be delivered to the Administrative Agent; or
(iv) the validity, effectiveness or genuineness of any
Financing Document or any other instrument or writing
furnished in connection therewith. Neither Agent shall incur
any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank
wire, telex, facsimile or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. The Banks shall,
ratably in accordance with their respective Commitments,
indemnify each Agent (to the extent not reimbursed by any
Obligor) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability
(except such as result from such Agent's gross negligence or
willful misconduct) that such Agent may suffer or incur in
connection with the Financing Documents or any action taken or
omitted by such Agent thereunder.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon either Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement and any other Financing Document to which it is a
party. Each Bank also acknowledges that it will, indepen-
dently and without reliance upon either Agent or any other
Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under the
Financing Documents.
SECTION 7.08. Agency Fees. The Borrower shall pay
fees to the Agents in the amounts and on the dates agreed to
prior to the date hereof by the Borrower and the Agents.
63
SECTION 7.09. Successor Agents. Either Agent may
resign at any time by giving notice thereof to the Banks and
the Obligors. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30
days after the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of
at least $50,000,000. Upon the acceptance of its appointment
as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was Agent.
ARTICLE VIII
CHANGES IN CIRCUMSTANCES
AFFECTING FIXED RATE LOANS
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any
Interest Period for any Fixed Rate Borrowing:
(a) the Administrative Agent is advised by the
Reference Banks that deposits in dollars (in the appli-
cable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks
having at least a majority of the aggregate amount of the
related Commitments advise the Administrative Agent that
the Adjusted CD Rate or the Adjusted Euro-Dollar Rate, as
the case may be, as determined by the Administrative
Agent will not adequately and fairly reflect the cost to
such Banks of maintaining or funding their respective CD
Loans or Euro-Dollar Loans, as the case may be, for such
Interest Period,
the Administrative Agent shall forthwith give notice thereof
to the Borrower (specifying in reasonable detail, in the case
of an event referred to in clause (b) above, the information
relating thereto received by the Administrative Agent from the
Banks) and the Banks, whereupon until the Administrative Agent
notifies the Borrower that the circumstances giving rise to
such suspension no longer exist (which it shall promptly do
when it determines that such circumstances have ceased to
exist or, in the case of clause (b) of this Section 8.01, when
the Administrative Agent is so notified by Banks having at
least a majority of the related Commitments, as specified
above), the obligations of the Banks to make CD Loans or
64
Euro-Dollar Loans, as the case may be, shall be suspended.
Unless the Borrower notifies the Administrative Agent at least
two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, if such Fixed
Rate Borrowing is a Committed Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, on or after the date
hereof, the adoption of any applicable law, rule or regula-
tion, or any change in any applicable law, rule or regulation,
or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable
agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or
fund any of its Euro-Dollar Loans and such Bank shall so
notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the
Borrower, whereupon until such Bank notifies the Borrower and
the Administrative Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank
to make Euro-Dollar Loans shall be suspended. Before giving
any notice to the Administrative Agent pursuant to this
Section 8.02, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the
need for giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to
maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate
Loan in equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans of the other Banks), and such
Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any
obligation to make Committed Loans, or (y) the date of the
related Money Market Quote, in the case of any Money Market
Loan, the adoption of any applicable law, rule or regulation,
or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Bank (or its Lending Office) with any
request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(A) shall subject any Bank (or its Lending Office)
to any tax, duty or other charge with respect to its
Fixed Rate Loans, its Notes or its obligation to make
65
Fixed Rate Loans, or shall change the basis of taxation
of payments to any Bank (or its Lending Office) of the
principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its
Fixed Rate Loans or its obligation to make Fixed Rate
Loans (except for changes in the rate of tax on the
overall net income of such Bank or its Lending Office
imposed by the jurisdiction in which such Bank's
principal executive office or Lending Office is located);
or
(B) shall impose, modify or deem applicable any
reserve, special deposit, insurance assessment or similar
requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (A) with respect to
any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage or Assessment Rate
and (B) with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the
account of, or credit extended by, any Bank's Lending
Office or shall impose on any Bank (or its Lending
Office) or on the United States market for certificates
of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost
to such Bank (or its Lending Office) of making or maintaining
any Fixed Rate Loan, or to reduce the amount of any sum
received or receivable by such Bank (or its Lending Office)
under this Agreement or under its Note with respect thereto,
by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to or for the
account of such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction with
respect to its Fixed Rate Loans.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy of general applicabil-
ity, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Bank (or its Lending Office) with any
request or directive regarding capital adequacy of general
applicability (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the
capital of such Bank (or its Parent) as a consequence of an
undrawn Commitment hereunder to a level below that which such
Bank (or its Parent) could have achieved but for such
adoption, change or compliance (taking into consideration its
policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within
15 days after demand by such Bank (with a copy to the
66
Administrative Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction. The Borrower shall not be
obligated to compensate any Bank pursuant to this subsection
(b) for reduced return accruing prior to the date which is 30
days before such Bank requests compensation; provided that if
any law, rule or regulation, or interpretation or
administration thereof, or any request or directive giving
rise to reduced returns has retroactive effect, such Bank
shall be entitled to claim compensation hereunder for the
period commencing on such date of retroactive effect through
the date of adoption or change or promulgation thereof without
regard to the foregoing limitation. If any Bank has demanded
compensation under this subsection (b), the Borrower shall
have the right, with the assistance of the Administrative
Agent, to seek a mutually satisfactory substitute bank or
banks (which may be one or more of the Banks) to purchase the
Note and assume the Commitment of such Bank.
(c) Each Bank will promptly notify the Borrower and
the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, that will entitle
such Bank to compensation pursuant to this Section 8.03 and
will designate a different Lending Office if such designation
will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any
Bank claiming compensation under this Section 8.03 and setting
forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest
error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any Bank
to make Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under
Section 8.03(a) and the Borrower shall by at least five
Euro-Dollar Business Days' prior notice to such Bank through
the Administrative Agent have elected that the provisions of
this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer
apply:
(a) all Loans which would otherwise be made by such
Bank as CD Loans or Euro-Dollar Loans, as the case may
be, shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks),
and
(b) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid, all payments
of principal that would otherwise be applied to repay
such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
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ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee. The Parent Guarantor
hereby unconditionally and irrevocably guarantees to the
Banks, and to each of them, the due and punctual payment of
all present and future indebtedness evidenced by or arising
out of this Agreement, the Notes and any Interest Rate
Agreements, including, but not limited to, the due and
punctual payment of principal of and interest on the Notes,
the due and punctual payment of all other sums now or
hereafter owed by the Borrower under this Agreement and the
Notes as and when the same shall become due and payable,
whether at maturity, by declaration or otherwise, according to
the terms hereof and thereof and the due and punctual payment
of any Secured Interest Rate Indebtedness. In case of failure
by the Borrower punctually to pay the indebtedness guaranteed
hereby, the Parent Guarantor hereby unconditionally agrees to
cause such payment to be made punctually as and when the same
shall become due and payable, whether at maturity or by
declaration or otherwise, and as if such payment were made by
the Borrower.
SECTION 9.02. Guarantee Unconditional. The
obligations of the Parent Guarantor under this Article IX
shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged
or otherwise affected by:
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of any
other Obligor under any Financing Document or any
Interest Rate Agreement by operation of law or otherwise;
(b) any modification or amendment of or supplement
to any Financing Document or any Interest Rate Agreement;
(c) any modification, amendment, waiver, release,
non-perfection or invalidity of any direct or indirect
security, or of any guarantee or other liability of any
third party, for any obligation of any other Obligor
under any Financing Document or any Interest Rate
Agreement;
(d) any change in the corporate existence, struc-
ture or ownership of any other Obligor, or any
insolvency, bankruptcy, reorganization or other similar
proceeding affecting any other Obligor or its assets or
any resulting release or discharge of any obligation of
any other Obligor contained in any Financing Document or
any Interest Rate Agreement;
(e) the existence of any claim, set-off or other
rights which the Parent Guarantor may have at any time
against any other Obligor, any Agent, any Bank or any
other Person, whether or not arising in connection with
any Financing Document or any Interest Rate Agreement,
68
provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory
counterclaim;
(f) any invalidity or unenforceability relating to
or against any other Obligor for any reason of any
Financing Document or any Interest Rate Agreement, or any
provision of applicable law or regulation purporting to
prohibit the payment by any other Obligor of the
principal of or interest on any Note or any other amount
payable by it under any Financing Document or any
Interest Rate Agreement; or
(g) any other act or omission to act or delay of
any kind by any other Obligor, any Agent, any Bank or any
other Person or any other circumstance whatsoever that
might, but for the provisions of this paragraph, con-
stitute a legal or equitable discharge of the obligations
of the Parent Guarantor under this Article IX.
SECTION 9.03. Discharge Only Upon Payment in Full;
Reinstatement in Certain Circumstances. The Parent
Guarantor's obligations under this Article IX shall remain in
full force and effect until the Commitments are terminated and
the principal of and interest on the Notes and all other
amounts payable by the Borrower under this Agreement shall
have been paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount
payable by the Borrower under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or any Subsidiary
Guarantor or otherwise, the Parent Guarantor's obligations
under this Article IX with respect to such payment shall be
reinstated at such time as though such payment had become due
but had not been made at such time.
SECTION 9.04. Waiver. The Parent Guarantor
irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person
against any other Obligor or any other Person.
SECTION 9.05. Subrogation and Contribution. The
Parent 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 Borrower with respect to such
payment or otherwise to be reimbursed, indemnified or
exonerated by the Borrower 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.
SECTION 9.06. Stay of Acceleration. If accelera-
tion of the time for payment of any amount payable by the
Borrower under this Agreement or the Notes is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms
of this Agreement shall nonetheless be payable by the Parent
Guarantor hereunder forthwith on demand by the Administrative
Agent made at the request of the requisite number of Banks
specified in Section 6.01.
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ARTICLE X
JUDICIAL PROCEEDINGS
SECTION 10.01. Consent to Jurisdiction. Each
Obligor hereby irrevocably submits to the non-exclusive
jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court
sitting in the City of New York over any suit, action or
proceeding arising out of or relating to any Financing
Document. To the fullest extent it may effectively do so
under applicable law, each Obligor irrevocably waives and
agrees not to assert, by way of motion, as a defense or
otherwise, any claim that it is not subject to the
jurisdiction of any such court, any objection that it may now
or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 10.02. Enforcement of Judgments. Each
Obligor agrees, to the fullest extent it may effectively do so
under applicable law, that a judgment in any suit, action or
proceeding of the nature referred to in Section 10.01 brought
in any such court shall be conclusive and binding upon such
Obligor and may be enforced in the courts of the United States
of America or the State of New York (or any other courts to
the jurisdiction of which such Obligor is or may be subject)
by a suit upon such judgment.
SECTION 10.03. Service of Process. Each Obligor
consents to process being served in any suit, action or
proceeding of the nature referred to in Section 10.01 by
mailing a copy thereof by registered or certified air mail,
postage prepaid, return receipt requested, to the address of
such Obligor specified in or designated pursuant to Section
11.01. Each Obligor agrees that such service (i) shall be
deemed in every respect effective service of process upon such
Obligor in any such suit, action or proceeding and (ii) shall,
to the fullest extent permitted by law, be taken and held to
be valid personal service upon and personal delivery to such
Obligor.
SECTION 10.04. No Limitation on Service or Suit.
Nothing in this Article X shall affect the right of the
Administrative Agent or any Bank to serve process in any
manner permitted by law, or limit any right that the Admin-
istrative Agent or any Bank may have to bring proceedings
against any Obligor in the courts of any jurisdiction or to
enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. Unless otherwise specified
herein, all notices, requests and other communications to any
party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be
given to such party (x) in the case of the Parent Guarantor,
the Borrower or either Agent, at its address or telex or
facsimile number set forth on the signature pages hereof, (y)
in the case of any Bank, at its address or telex or facsimile
number set forth in its Administrative Questionnaire, or (z)
in the case of any party hereto, at such other address or
telex or facsimile number as such party may hereafter specify
for the purpose by notice to the Agents and the Parent
Guarantor. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section
11.01 and the appropriate answerback is received, (ii) if
given by facsimile transmission, when transmitted to the
facsimile number specified in this Section and confirmation of
receipt is received, (iii) if given by mail, five days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iv) if given by
any other means, when delivered at the address specified in
this Section 11.01, provided that notices to the
Administrative Agent under Article II or VIII shall not be
effective until received.
SECTION 11.02. No Waiver. No failure or delay by
any Agent or any Bank in exercising any right, power or
privilege under any Financing Document shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights
and remedies provided in the Financing Documents shall be
cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.03. Expenses; Documentary Taxes;
Indemnification for Litigation. (a) The Borrower shall pay
(i) all out-of-pocket expenses of each Agent, including fees
and disbursements of the law firm acting as special counsel
for the Banks and the Agents and such local counsel as may be
retained by the Administrative Agent on behalf of the Banks
and the Agents, in connection with the preparation and
administration of the Financing Documents, any waiver or
amendment of any provision thereof, or any Default or alleged
Default hereunder, and (ii) if any Event of Default occurs,
all out-of-pocket expenses incurred by any Agent or any Bank,
including fees and disbursements of counsel, in connection
with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting
therefrom. The Borrower agrees to indemnify each Bank from
and hold it harmless against any transfer taxes, documentary
taxes, or other similar assessments or charges made by any
governmental authority by reason of the execution and delivery
of the Financing Documents.
71
(b) The Parent Guarantor and the Borrower agree
jointly and severally to indemnify each Bank and hold each
Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including,
without limitation, the reasonable fees and disbursements of
counsel for any Bank in connection with any investigative,
administrative or judicial proceeding, whether or not such
Bank shall be designated a party thereto) which may be
incurred by any Bank (or by any Agent in connection with its
actions as Agent hereunder), relating to or arising out of the
Financing Documents or any actual or proposed use of the
proceeds of the Credits hereunder, provided that no Bank shall
have the right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of
competent jurisdiction.
SECTION 11.04. Amendments and Waivers. Any provi-
sion of this Agreement or the Notes may be amended or waived
if, and only if, such amendment or waiver is in writing and is
signed by the Parent Guarantor, the Borrower and the Required
Banks (and, if the rights or duties of either Agent are
affected thereby, by such Agent), provided that no such
amendment or waiver shall, unless signed by all the Banks, (i)
increase or decrease the amount of any Commitment (except for
a ratable decrease in the Commitments of all Banks) or subject
any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees
payable hereunder, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees
payable hereunder, (iv) postpone the date or reduce the amount
of any reduction of the Commitments pursuant to Section
2.10(b) or (v) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Notes, or the
number of Banks, which shall be required for the Banks or any
of them to take any action under this Section 11.04 or any
other provision of this Agreement or any other Financing
Document; and provided further that an amendment or waiver of
the payment obligations of the Borrower with respect to any
Swingline Advance shall be effective if, and only if, signed
by the Borrower and the Bank making such Swingline Advance.
The release of the Collateral is governed by Section 13 of the
Stock Pledge Agreement.
In the event that (i) a Bank shall have granted a
participation pursuant to Section 11.07(b); (ii) by virtue of
the participation arrangement, such Bank is required to obtain
the consent of its participant to a proposed amendment to this
Agreement or its Note; (iii) such participant's consent is not
forthcoming; (iv) such Bank and the other Banks are otherwise
prepared to agree to such proposed amendment; and (v) such
Bank shall have so certified to the Administrative Agent,
then, in order to effect and in conjunction with such
amendment, the Borrower may terminate the Commitment of such
Bank and, on a date otherwise permitted hereunder, prepay the
outstanding Credits of such Bank in their entirety, provided
that the Borrower shall have procured a substitute Bank (which
may be such Bank) contemporaneously to assume the Commitment
of such Bank and to fund, for the balance of the respective
Interest Periods applicable thereto, the Loans prepaid
pursuant to this paragraph.
72
SECTION 11.05. Sharing of Set-Offs. Each Bank
agrees that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of
the aggregate amount of principal and interest due with
respect to its Credits which is greater than the proportion
received by any other Bank in respect of the aggregate amount
of principal and interest due with respect to the Credits of
such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the
Credits of the other Banks, and such other adjustments shall
be made, as may be required so that all such payments of
principal and interest with respect to the Credits of the
Banks shall be shared by the Banks pro rata. The Borrower and
the Parent Guarantor agree, to the fullest extent they may
effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such par-
ticipation as fully as if such holder of a participation were
a direct creditor of the Borrower or the Parent Guarantor, as
the case may be, in the amount of such participation. Each
Bank further agrees that if it shall, by exercising any right
of set-off or counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of facility fees due with
respect to its Commitments which is greater than the
proportion received by any other Bank in respect of the
aggregate amount of facility fees due with respect to the
Commitments of such other Bank, adjustments shall be made as
may be required so that all such payments of facility fees
with respect to the Commitments of the Banks shall be shared
by the Banks pro rata.
SECTION 11.06. New York Law. This Agreement and
each Note shall be construed in accordance with and governed
by the law of the State of New York.
SECTION 11.07. Successors and Assigns. (a) All of
the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither the
Parent Guarantor nor the Borrower may assign or transfer any
of its rights or obligations under this Agreement or the Stock
Pledge Agreement without the consent of all Banks.
(b) No Bank may assign (other than (x) to Persons
affiliated with such Bank or (y) by granting participations)
such Bank's rights or obligations hereunder without the
Borrower's consent, which shall not be unreasonably withheld,
and no Bank may grant participations (other than to Persons
affiliated with such Bank) with respect to amounts exceeding
80% of such Bank's Commitment; provided that nothing herein
shall be deemed to prohibit (i) the granting of participations
by any Bank in its rights with respect to any particular
Credit or Credits or (ii) the assignment or pledge by any Bank
of its Notes and its rights hereunder with respect thereto to
any Federal Reserve Bank. Any agreement pursuant to which any
Bank may grant a participation shall provide that such Bank
shall retain the sole right and responsibility to enforce the
obligations of the Borrower relating to any Credit or Credits
including, without limitation, the right to approve any
73
amendment, modification or waiver of any provision of this
Agreement; provided that (i) any such participation agreement
with respect to any or all of a Bank's Credit or Credits may
provide that such Bank will not agree to any proposed
modification, amendment or waiver of this Agreement without
the consent of the participant which would reduce the
principal of or rate of interest on such Credit or Credits or
postpone the date fixed for any payment of principal of or
interest on such Credit or Credits and (ii) any such partici-
pation agreement with respect to a portion of a Bank's
Commitment may provide that such Bank will not agree to any
modification, amendment or waiver described in clause (i),
(ii), (iii) or (iv) of the first sentence of Section 11.04
without the consent of the participant; provided further that
any such participation agreement described in the preceding
clause (ii) shall further provide that such Bank may agree to
any proposed modification, amendment or waiver referred to in
such clause (ii) without the consent of such participant if
such participant fails to provide to the Bank voting
instructions with respect to such proposal within 30 days
after such participant's receipt of such proposal and the
Bank's request for such voting instructions. Any Bank that
has granted or grants a participation with respect to a
portion of its Commitment shall notify the Borrower as to the
amount of its Commitment subject to such participation and the
identity of the participant. Each of the Agents and the
Borrower may, for all purposes of this Agreement, treat any
Bank as the holder of any Note drawn to its order until
written notice of an assignment in accordance with this
Section 11.07(b) is received by it.
(c) No assignee of any Bank's rights or obligations
shall be entitled to receive any greater payment under Section
8.03 than such Bank would have been entitled to receive with
respect to the rights assigned, unless such assignment (or
change in Lending Office) is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02
or 8.03 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not
exist.
SECTION 11.08. Collateral. Each Bank (the "Rep-
resenting Bank") represents to each Agent and each other Bank
that the Representing Bank in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral
in the extension or maintenance of the credit provided for in
the Financing Documents.
SECTION 11.09. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, and all of which taken together shall constitute
a single agreement, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
74
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE
OBLIGORS, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the date first above written.
ARA SERVICES, INC.
By /s/ Melvin M. Mahoney
---------------------
Title: Treasurer
The ARA Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
Facsimile number: (215) 238-3284
(215) 238-3282
THE ARA GROUP, INC.
By /s/ Melvin M. Mahoney
---------------------
Title: Treasurer
The ARA Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
Facsimile number: (215) 238-3284
(215) 238-3282
1
EXHIBIT 11
ARAMARK CORPORATION AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
September 30, October 1, October 2, September 27, September 28,
1994 1993 1992 1991 1990
-------------- ---------- ----------- -------------- ------------
Earnings:
<S> <C> <C> <C> <C> <C>
Net income $ 86,079 $ 77,132 $ 67,381 $ 64,223 $ 51,825
Preferred stock dividends (1,337) (883) -- -- (2,965)
--------- --------- -------- -------- --------
Net income available to common stock $ 84,742 $ 76,249 $ 67,381 $ 64,223 $ 48,860
========= ========= ======== ======== ========
Shares:
Weighted average number of common
shares outstanding (2) 46,616 46,133 44,746 45,595 48,725
Additional shares assuming
conversion of preferred stock (3) -- -- -- 1,477 --
Impact of potential exercise opportunities
under the ARAMARK Ownership Program 3,512 4,873 5,898 5,263 5,178
--------- --------- -------- -------- --------
Total common and common
equivalent shares 50,128 51,006 50,644 52,335 53,903
========= ========= ======== ======== ========
Fully diluted earnings per common and
common equivalent share $ 1.69 $ 1.49 $ 1.33 $ 1.23 $ .91
========= ========= ======== ======== ========
</TABLE>
(1) Primary and fully diluted earnings per share are approximately the same.
Weighted average shares outstanding and earnings per share amounts for the
period ending October 1, 1993 and prior have been retroactively adjusted to
reflect the November 1993 four-for-one stock split described in Note 7.
(2) Includes Class B plus Class A Common Shares stated on a Class B Common
Share Equivalent Basis.
(3) Reflects conversion of Preferred Stock stated on a Class B Common Share
Equivalent Basis for fiscal 1991.
1
EXHIBIT 12
ARAMARK CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------------------
September 30, October 1, October 2, September 27, September 28,
1994 1993 1992 1991 1990
------------ ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Income before income taxes
and minority interest $ 163,484 $ 143,265 $ 123,723 $ 117,899 $ 107,220
Fixed charges, excluding
capitalized interest 150,432 168,158 180,913 190,118 195,965
Other, net (477) 1,222 1,231 (1,819) (282)
------------ ---------- ---------- ----------- ------------
Earnings, as adjusted $ 313,439 $ 312,645 $ 305,867 $ 306,198 $ 302,903
============ ========== =========== =========== ============
Interest expense $ 110,040 $ 128,367 $ 141,180 $ 145,727 $ 154,345
Capitalized interest 27 47 47 14 590
Portion of operating lease
rentals representative
of interest factor 40,392 39,791 39,733 44,391 41,620
----------- ---------- ----------- ----------- -------------
Fixed charges $ 150,459 $ 168,205 $ 180,960 $ 190,132 $ 196,555
=========== ========== =========== =========== ============
Ratio of earnings to
fixed charges 2.1x 1.9x 1.7x 1.6x 1.5x
=========== ========== =========== =========== ============
</TABLE>
(1) 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 (including
capitalized interest) plus that portion of operating lease rentals
representative of the interest factor (deemed to be one-third of operating
lease rentals).
1
EXHIBIT 21
SUBSIDIARIES OF ARAMARK CORPORATION
ARA RBI, Inc.
ARAMARK Advertising Services, Ltd.
ARAMARK Business Dining Services of Texas, Inc.
ARAMARK Cleanroom Services, Inc.
ARAMARK Coliseum Limited
ARAMARK Coliseum Management, Inc.
ARAMARK Coliseum Manager Limited
ARAMARK Consumer Discount Company
ARAMARK Correctional Services, Inc.
ARAMARK Educational Group, Inc.
ARAMARK Educational Services, Inc.
ARAMARK Educational Services of Texas, Inc.
ARAMARK Educational Services of Vermont, Inc.
ARAMARK Enterprises, Inc.
ARAMARK Facilities Management, Inc.
ARAMARK Facility Services, Inc.
ARAMARK Food and Support Services Group, Inc.
ARAMARK Health & Education Services, Inc.
ARAMARK Healthcare Support Services, Inc.
ARAMARK Healthcare Support Services of Puerto Rico, Inc.
ARAMARK Healthcare Support Services of Texas, Inc.
ARAMARK Healthcare Support Services of the Virgin Islands,Inc.
ARAMARK/HMS Holding Company
ARAMARK/HMS Company, Inc.
ARAMARK Industrial Services, Inc.
ARAMARK Kitty Hawk, Inc.
ARAMARK Leisure Convention Services, Inc.
ARAMARK Leisure Services Group, Inc.
ARAMARK Leisure Services, Inc.
ARAMARK Leisure Services/International Group, Inc.
ARAMARK Leisure Services of Texas, Inc.
ARAMARK Leisure Services of Wisconsin, Inc.
ARAMARK Magazine & Book Services, Inc.
ARAMARK Marketing Services Group, Inc.
ARAMARK Mile High Enterprises, Inc.
ARAMARK Pittsburgh Limited
ARAMARK Pittsburgh Stadium Concessions, Inc.
ARAMARK Refreshment Services Inc.
ARAMARK Senior Notes Company
ARAMARK Services of Puerto Rico, Inc.
ARAMARK SWV Corporation
2
ARAMARK Terminal Newsstands, Inc.
ARAMARK Terminal Shops, Inc.
ARAMARK Uniform Services, Inc.
ARAMARK Uniform Manufacturing Company
ARAMARK Virginia Sky-Line Co., Inc.
ARASERVE of Kansas, Inc.
Childrens World Learning Centers, Inc.
Coordinated Health Services, Inc.
Corporation for Holding Stock, Inc.
Correctional Medical Services, Inc.
Correctional Medical Services of Delaware, Inc.
CWLC Brokerage, Inc.
Davres, Inc.
Delsac VI, Inc.
Delsac VII, Inc.
Delsac VIII, Inc.
Delsac X, Inc.
Fashion-Tex Services, Inc.
Lake Powell Resorts & Marinas, Inc..
Landy Textile Rental Services, Inc.
Linen Supply Service, Inc.
Medical Claims Management Group, Inc.
Mesa Verde Company
Professional Anesthesia Services, Inc.
Smithsub, Inc.
Spectrum Emergency Care, Inc.
Spectrum Emergency Care of New Mexico, Inc.
Spectrum Healthcare of Delaware, Inc.
Spectrum Healthcare Resources, Inc.
Spectrum Healthcare Resources of Delaware, Inc.
Spectrum Healthcare Services, Inc.
Spectrum Primary Care, Inc.
Spectrum Primary Care of Delaware, Inc.
Szabo Food Service, Inc.
WearGuard Corporation
Woodhaven Foods, Inc.
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated November 7, 1994 included in this Form 10-K for the fiscal year
ended September 30, 1994 into the Company's previously filed Registration
Statements on Form S-8, Registration Nos. 33-11818, 33-30879, 33-33329 and
33-44002, and on Form S-3, Registration Nos. 33-41357, 33-47564 and 33-52587.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 22, 1994
1
EXHIBIT 23.2
CONSENT OF CHARTERED ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
ARAMARK Corporation and, where applicable, ARAMARK Services, Inc., on Form S-8,
registration numbers 33-11818, 33-30879, 33-33329, and 33-44002, and on Form
S-3, registration numbers 33-41357, 33-47564 and 33-52587, and in the related
Prospectuses, our report dated November 16, 1994, with respect to the
consolidated financial statements of Versa Services Ltd. as at September 28,
1994, the fifty-two week period ended September 29, 1993 and the fifty-three
week period ended September 30, 1992 (not presented separately herein or in the
aforementioned Registration Statements or in the related Prospectuses), included
in this annual report on Form 10-K.
Mississauga, Canada
ERNST & YOUNG
Chartered Accountants
November 16, 1994
1
ALAN K. CAMPBELL
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Alan K. Campbell
---------------------
Alan K. Campbell
2
DAVRE J. DAVIDSON
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Davre J. Davidson
---------------------
Davre J. Davidson
3
EDWARD G. JORDAN
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Edward G. Jordan
--------------------
Edward G. Jordan
4
JAMES E. PRESTON
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ James E. Preston
---------------------
James E. Preston
5
JOSEPH NEUBAUER
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Joseph Neubauer
-------------------
Joseph Neubauer
6
LEE F. DRISCOLL, JR.
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Lee F. Driscoll, Jr.
-----------------------
Lee F. Driscoll, Jr.
7
MITCHELL S. FROMSTEIN
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Mitchell S. Fromstein
--------------------------
Mitchell S. Fromstein
8
PHILIP L. DEFLIESE
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Philip L. Defliese
----------------------
Philip L. Defliese
9
REYNOLD C. MACDONALD
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Reynold C. MacDonald
-------------------------
Reynold C. MacDonald
10
ROBERT J. CALLANDER
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Robert J. Callander
-----------------------
Robert J. Callander
11
RONALD R. DAVENPORT
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Ronald R. Davenport
-----------------------
Ronald R. Davenport
12
THOMAS H. KEAN
POWER OF ATTORNEY
The undersigned director of ARAMARK Corporation, a Delaware corporation (the
"Company"), hereby appoints Joseph Neubauer, James E. Ksansnak, Martin W.
Spector and Donald S. Morton, as his Attorney-in-Fact and hereby grants to each
of them acting alone without the others, for him and in his name as such
director, full power to:
(a) sign the Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, and amendments thereto which the Company may
file with the Securities and Exchange Commission pursuant to the
requirements of Section 13 and/or Section 15(d) of the Securities
Exchange Act of 1934; and
(b) perform every other action which any such Attorney-in-fact may deem
necessary or proper in connection with any of such reports or
amendments
(all as approved by the Company's principal executive, financial and accounting
officers whose signatures to such report or amendment thereto shall be
conclusive evidence of such approval).
Dated: November 7, 1994 /s/ Thomas H. Kean
------------------
Thomas H. Kean
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<PERIOD-START> OCT-2-1993
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 27,426
<SECURITIES> 16,203
<RECEIVABLES> 433,550
<ALLOWANCES> 12,423
<INVENTORY> 256,950
<CURRENT-ASSETS> 803,994
<PP&E> 1,276,009
<DEPRECIATION> 594,102
<TOTAL-ASSETS> 2,121,950
<CURRENT-LIABILITIES> 757,201
<BONDS> 981,949
<COMMON> 264
<PREFERRED-MANDATORY> 0
<PREFERRED> 16,949
<OTHER-SE> 165,346
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<CGS> 0
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<INTEREST-EXPENSE> 108,499
<INCOME-PRETAX> 163,484
<INCOME-TAX> 67,119
<INCOME-CONTINUING> 95,033
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<EXTRAORDINARY> (7,677)
<CHANGES> (1,277)
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</TABLE>