-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JyXeuy1SX9+DlJKLENLHR7HTu2tFlCFa2gJzcIMVHx78cSYvIOOJdte4KvWFqHtI SJScbAI+hc3YH2t+zWZlJg== 0000950116-96-001357.txt : 19961121 0000950116-96-001357.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950116-96-001357 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19960927 FILED AS OF DATE: 19961119 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARAMARK CORP CENTRAL INDEX KEY: 0000757523 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 232319139 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08827 FILM NUMBER: 96669233 BUSINESS ADDRESS: STREET 1: THE ARA TOWER STREET 2: 1101 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19107 BUSINESS PHONE: 2152383000 MAIL ADDRESS: STREET 1: ARA GROUP INC STREET 2: 1101 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19107 FORMER COMPANY: FORMER CONFORMED NAME: ARA GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ARA HOLDING CO DATE OF NAME CHANGE: 19880515 10-K 1 ================================================================================ 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 27, 1996 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 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock, $.01 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: $626 million Common stock outstanding at October 25, 1996 Class A Common stock 1,981,169 shares Class B Common stock 21,742,472 shares
Documents incorporated by reference: Portions of the registrant's Proxy Statement for the 1996 annual meeting of stockholders are incorporated by reference in Part III of this Report. ================================================================================ 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 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 and Support Services The Company provides food, refreshment, specialized dietary and support services (including maintenance and housekeeping) to businesses, and to educational, governmental and medical institutions. Food, lodging and merchandise services are also provided at leisure facilities such as convention centers, stadiums, parks, arenas, race tracks and other recreational facilities. Food, refreshment, specialized dietary and support services are operated at customer locations generally under contracts of indefinite duration which may be subject to termination by either party. However, food and related services at leisure facilities generally are for fixed contract terms well in excess of one year. The Company's food and support services are performed under various financial arrangements including a management-fee basis and a profit-and-loss basis. At most customer food service locations, the equipment and facilities used in providing these services are owned by the customer. Vending machines and related equipment, however, are generally owned by the Company. At most leisure facilities, the equipment is owned by the Company. There is a high level of competition in the food and support services business from local, regional 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 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. Uniform Services The Company rents, sells, cleans, maintains and delivers personalized work apparel and other textile items for customers throughout the United States on a contract basis. Also provided are walk-off mats, cleaning cloths, disposable towels, and other environmental control items. The Company operates one of the largest direct marketers of personalized work clothing, uniforms and related accessories, primarily in the United States. The Company also operates one of the largest direct marketers of public safety equipment and public employee uniforms in the United States. 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 direct marketing of work clothing, public safety equipment and related items is from numerous retailers and other direct marketers at local, regional and national levels. In this market, while the Company is a significant competitor, the Company's volume of sales is small in relation to the total market. The significant competitive factors in the uniform services business are the quality of services provided to customers and the prices charged for such services. At the beginning of fiscal 1996, the Company sold a division of its uniform services business. See note 2 to the consolidated financial statements. At fiscal yearend 1996, the Company acquired a leading provider of uniform apparel to the hospitality and healthcare markets. See note 2 to the consolidated financial statements. 2 Health and Education Services The Company provides contract 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 contract medical services to correctional institutions and to beneficiaries of the Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"). The Company also provides educational and child care services primarily at Company-operated facilities, and to a lesser extent on customer sites and in before and after school programs. 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. Educational and child care services are provided to and are primarily paid for on a weekly or semester basis directly by individual families under short-term agreements. The Company leases a significant number of its facilities under long-term arrangements. The Company believes it is a significant provider of emergency care management services, medical services to correctional institutions and CHAMPUS beneficiaries, and educational and child care services in the United States. Competition in all phases of this business segment is from both national and local providers of 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 and for larger accounts under multi-year agreements, which ordinarily permit the return of unsold magazines and books with full credit being given to the retailer and with the Company in turn receiving full credit from its suppliers. Competition in the distribution of books and periodicals exists primarily from magazine and book subscriptions, direct distribution by publishers to retailers and from other wholesale distributors. While the Company's volume of business in the distribution of books and periodicals is small in relation to the total market, the Company believes the volume of its wholesale periodical and book distribution makes it a significant wholesale distributor. 3 Employees The Company employs approximately 150,000 persons, both full and part time, including approximately 40,000 employees outside the United States. Approximately 16,000 employees in the United States are represented by various labor unions. 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 and Support Services segment, and laundry equipment used by the Uniform Services segment. The vehicles include automobiles and delivery trucks used in the Food and Support Services segment and in the Distributive Services and Uniform Services segments. The service equipment and fixtures represent 63% of the net book value of all fixed assets as of September 27, 1996. The Company's real estate is comprised of educational and 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, Uniform Services and Food and Support Services segments. Additional information concerning property and equipment (including 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. 4 Item 4A. Directors and Executive Officers of the Registrant - -------- -------------------------------------------------- Directors:
Name Principal Occupation - ---- -------------------- Joseph Neubauer.......................... Chairman and Chief Executive Officer ARAMARK Corporation Robert J.Callander....................... Executive-in-Residence, Columbia University Retired Vice Chairman Chemical Banking Corporation Alan K. Campbell......................... Retired Executive Vice President and Vice Chairman, ARAMARK Corporation Ronald R. Davenport...................... Chairman, Sheridan Broadcasting Corporation Philip L. Defliese ...................... Professor Emeritus, Columbia University Retired Chairman, Coopers & Lybrand Lee F. Driscoll, Jr...................... Corporate Director Mitchell S. Fromstein.................... Chairman, President and Chief Executive Officer Manpower Inc. Edward G. Jordan......................... Former Chairman and Chief Executive Officer Consolidated Rail Corporation Thomas H. Kean........................... President, Drew University Former Governor of New Jersey Reynold C. MacDonald..................... Retired Chairman, Acme Metals Incorporated James E.Preston.......................... Chairman, President and Chief Executive Officer Avon Products, Inc.
Officers:
Name (Age as of November 1, 1996) Office Held Officer Since - ---------------------------------- ------------ ------------- Joseph Neubauer (55)..................... President and Director............................... 1979 Julian L. Carr, Jr. (50)................. Executive Vice President............................. 1988 James E. Ksansnak (56)................... Executive Vice President, Chief Financial Officer.............................. 1986 William Leonard (48)..................... Executive Vice President............................. 1992 Brian G. Mulvaney (40)................... Executive Vice President............................. 1993 Martin W. Spector (58)................... Executive Vice President, General Counsel and Secretary........................ 1976 L. Frederick Sutherland (44)............. Executive Vice President............................. 1983 Barbara A. Austell (43).................. Senior Vice President and Treasurer........................................ 1996 Brian J. Gail (49)....................... Senior Vice President................................ 1994 Alan J. Griffith (42).................... Vice President, Controller and Chief Accounting Officer............................. 1994 Dean E. Hill (45)........................ Vice President....................................... 1993 John P. Kallelis (58).................... Vice President....................................... 1982 Michael R. Murphy (39)................... Director of Audit and Controls....................... 1995 Joan C. Mazzotti (46).................... Assistant Secretary and Associate General Counsel............................ 1994 Donald S. Morton (48).................... Assistant Secretary and Associate General Counsel............................ 1985 Richard M. Thon (41)..................... Assistant Treasurer.................................. 1994
5 Except as set forth below, the principal occupation of each executive officer throughout the past five years has been the performance of the functions of the corporate offices shown above. Mr. Leonard was president of ARAMARK Uniform Services from 1984 until March 1992 when he was elected to his current position. Mr. Mulvaney was vice president of ARAMARK Uniform Services from 1988 until 1993 when he was elected vice president of the Company. He was elected Senior Vice President in 1995 and to his current position in August 1996. 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. Ms. Austell was elected senior vice president and treasurer of the Company in August 1996. Prior to joining the Company in July 1996, she was a managing director of J. P. Morgan & Co. 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. Griffith was elected vice president of the Company in February 1995. He 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. 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. Murphy became director of audit and controls in September 1995. He joined the Company as senior audit manager in January 1993. Prior to that time he was a senior audit manager with Arthur Andersen LLP. Ms. Mazzotti was elected assistant secretary in 1994. She has been with the Company since 1977 as assistant and then associate general counsel. 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. 6 PART II ------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - ------- --------------------------------------------------------------------- There are currently approximately 1,450 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 124 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. 7 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.
ARAMARK Corporation and Subsidiaries Fiscal Year Ended on or near September 30 ----------------------------------------------------------------------- 1996 1995 1994 1993 1992 (1) -------- -------- -------- -------- -------- (in millions, except per share amounts and ratios) Income Statement Data: Revenues........................................... $6,122.5 $5,600.6 $5,161.6 $4,890.7 $4,865.3 Earnings before depreciation and amortization, interest, and income taxes........ 478.0 433.9 415.7 399.4 387.4 Earnings before interest and income taxes (2)............................ 295.2 277.0 272.0 268.9 261.6 Interest expense, net.............................. 116.0 109.4 108.5 125.7 137.9 Income before extraordinary item and cumulative effect of change in accounting for income taxes (3)................................ 112.2 100.2 95.0 84.3 70.7 Net income......................................... 109.5 93.5 86.1 77.1 67.4 Earnings per share: (4) Income before extraordinary item and cumulative effect of change in accounting for income taxes (3).............................. $2.37 $2.01 $1.87 $1.64 $1.40 Net income......................................... $2.31 $1.88 $1.69 $1.49 $1.33 Ratio of earnings to fixed charges (5)............. 2.1x 2.1x 2.1x 1.9x 1.7x Balance Sheet Data (at period end): Total assets....................................... $2,830.8 $2,643.3 $2,122.0 $2,040.6 $2,005.0 Long-term borrowings: (6) Senior.......................................... 1,160.7 1,109.4 691.5 533.8 629.5 Subordinated.................................... 161.2 165.4 290.4 474.9 413.5 Common stock subject to potential repurchase (7).................................. 18.6 19.1 20.8 21.7 20.4 Shareholders' equity............................... 296.2 252.3 182.6 124.1 103.8
- ---------------------------- (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 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). (6) See note 4 to the consolidated financial statements. (7) See note 7 to the consolidated financial statements. 8 Item 7. Management's Discussion and Analysis of Results of Operations and - ------- ----------------------------------------------------------------- Financial Condition ------------------- RESULTS OF OPERATIONS Fiscal 1996 Compared to Fiscal 1995 Overview. Revenues for the fiscal year ended September 27, 1996 were $6.1 billion, a 9% increase over fiscal 1995, with increases being recorded by all business segments. Operating income of $295.2 million increased 7% compared to the prior year. Earnings increased substantially in both the Food and Support Services segment, including the positive impact in fiscal 1996 from the return of hockey and baseball, and the Uniform Services segment. Earnings were equal to last year for the Health and Education segment and declined dramatically in the Distributive segment. Total Company operating income includes other income of $2.9 million described in note 2 to the consolidated financial statements. The Company's operating income margin decreased to 4.8% from 4.9%, primarily due to the decreased earnings of the Distributive segment. Excluding the Distributive segment, the fiscal 1996 margin was 5.3% and operating income increased 20% compared to the prior year period. Interest expense increased $6.6 million or 6% over the prior year due to increased debt levels to finance acquisitions, partially offset by the favorable impact of refinancing certain of the Company's subordinated debt and lower interest rates. The effective income tax rate decreased to 37% in fiscal 1996 from 40% in fiscal 1995 due to the favorable impact resulting from the June 1996 settlement of certain prior years' tax returns. Fiscal 1996 and 1995 net income reflect extraordinary items for early extinguishment of debt of $2.8 million and $6.7 million, respectively, as described in note 3 to the consolidated financial statements. Segment Results. Food and Support Services segment revenues were 8% higher than the prior year due to new accounts and increased volume at both U.S. and international food businesses, acquisitions and the return of hockey and baseball (see notes 2 and 11 to the consolidated financial statements). Uniform Services segment revenues increased 17% as a result of yearend 1995 acquisitions and increased volume in the uniform rental business, partially offset by decreased volume from direct marketing of work clothing and the divestiture described in note 2 to the consolidated financial statements. Health and Education segment revenues increased 5% as a result of enrollment growth and pricing at Children's World and new contracts at correctional institutions in the healthcare business. Revenue for the Distributive segment increased 7% due to acquisitions completed during fiscal 1995 and the impact of the change in customer mix in 1996. Operating income for the Food and Support Services segment increased 19% due to increased revenues, including those resulting from the return of hockey and baseball, although the baseball labor contract negotiations have not yet been concluded. Fiscal 1996 operating income for the Uniform Services segment includes the $37 million gain on the sale of a division and charges of $5 million related to changes in estimates regarding asset realization and environmental matters described in note 11 to the consolidated financial statements; excluding the impact of these items, as well as the operating results of the 1996 divestiture, 9 the increase in segment operating income was approximately 16% as compared to fiscal 1995. Health and Education segment operating income was equal to the prior year with revenue related increases being offset by higher operating costs and increased reserves for real estate values (see note 11 to the consolidated financial statements). The Distributive segment incurred an operating loss of $5.6 million in fiscal 1996 versus operating income of $27.4 million in fiscal 1995. Results continue to be severely impacted by higher operating expenses due to costs of servicing new customers and reduced margins resulting from the increased competition and consolidation in the magazine wholesale distribution industry. The Company believes it is well positioned to take advantage of the current competitive conditions in this industry, however, the future impact of these changes is uncertain at this time. The Company currently projects that fiscal 1997 operating income in the Distributive segment will continue to be significantly below historical levels prior to fiscal 1996. The increase in fiscal 1996 General Corporate and Other Expenses is due primarily to reserves established for asset realization, legal and other matters described in note 11 to the consolidated financial statements. Fiscal 1995 Compared to Fiscal 1994 Overview. Revenues for the fiscal year ended September 29, 1995 were $5.6 billion, a 9% increase over fiscal 1994. Operating income of $277 million increased 4% compared to the prior year. Revenues increased over the prior year in all business segments and, with the exception of Health and Education, all business segments posted year-over-year improvements in operating earnings. Fiscal 1995 consolidated results were adversely impacted by the National Hockey League strike and Major League Baseball situation in the United States and Canada. The hockey strike, which ended in January 1995, resulted in a season that was approximately half the normal schedule. The baseball strike, which began in August 1994 and also adversely impacted fiscal 1994 results, ended in April 1995 resulting in a shortened 1995 season. A decline in average attendance from prior year was experienced after the resumption of the season. The baseball situation is still unsettled and may impact fiscal 1996. Had the hockey strike and baseball situation not occurred, management estimates that consolidated operating income and income before extraordinary items would have been approximately 5% and 8% higher in fiscal 1995, and 3% and 5% higher in fiscal 1994, respectively. The Company's operating income margin, excluding "other income" of $5.8 million in 1994, decreased to 4.9% from 5.1%. The decrease in margin is due primarily to the impact of the baseball and hockey situation described above. Interest expense increased approximately $1.0 million or 1%, due primarily to increased debt levels to finance acquisitions and increased interest rates, largely offset by the impact of refinancing certain of the Company's indebtedness. See notes 2 and 3 to the consolidated financial statements. Fiscal 1995 and 1994 net income include an extraordinary item for early extinguishment of debt of $6.7 million and $7.7 million, respectively, as described in note 3 to the consolidated financial statements. Fiscal 1994 net income also included 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. 10 Segment Results. Food and Support Services segment revenues were 8% higher than the prior year due to new accounts and increased volume at both U.S. and international food businesses plus the impact of the current year acquisition, partially offset by the effects of the hockey and baseball situation (see notes 2 and 11 to the consolidated financial statements). Uniform Services segment revenues increased 10% as a result of increased volume at both the uniform rental and direct marketing businesses. Health and Education segment revenues increased 10% as a result of new contracts at correctional institutions and enrollment growth and pricing at Children's World. Revenue for the Distributive segment increased 10% due primarily to the current year acquisitions. See notes 2 and 11 to the consolidated financial statements. Operating income for the Food and Support Services segment increased 6%. Increased earnings were due to revenue growth and improved margins in the U.S. food business plus the current year acquisition. However, earnings were adversely impacted by the hockey and baseball situation described above (see note 11 to the consolidated financial statements). Fiscal 1994 operating income for the Food and Support Services segment also included the $5.8 million gain on the sale of stock of an affiliate. Uniform Services segment operating income increased 7% as a result of revenue growth, reduced by higher merchandise and other operating costs. Operating income for the Health and Education segment decreased 23% from the prior year due primarily to higher operating costs and an increase in insurance reserves in the healthcare services business (see note 11 to the consolidated financial statements), partially offset by revenue related increases at Children's World. Distributive segment operating income increased 3%, with revenue related increases being partially offset by increased operating expenses. FINANCIAL CONDITION AND LIQUIDITY Cash flows generated from operating activities were $239 million. Debt increased by $65 million from the prior year due primarily to the yearend 1996 acquisition, partially offset by the sale of a division (see note 2 to the consolidated financial statements). The Company expects to continue to fund capital expenditures, acquisitions and other liquidity needs from cash provided by operating activities, normal disposals of property and equipment and borrowings available under its credit facilities. As of September 27, 1996, the Company has capital commitments of approximately $34 million related to several long-term concession contracts at stadiums and arenas. During fiscal 1996 the Company amended its U.S. and Canadian credit facilities and established a $125 million credit facility for its childcare business (see note 4 to the consolidated financial statements). Currently, the Company has approximately $430 million of unused committed credit availability under the above credit facilities. Also, during fiscal 1996, the Company issued a $125 million, 6.79% note which was used primarily to refinance the redemption of its $80 million, 8.25% senior note (see note 3 to the consolidated financial statements). During fiscal 1996, the Company redeemed its remaining outstanding Series C Preferred Stock for $6.4 million in cash and the issuance of $8.6 million of its Class B Common Stock. The Company also repurchased $28 million of its Class A Common Stock and $55 million of its Class B Common Stock, with $27 million of subordinated installment notes issued as partial consideration. Additionally, the Company issued $14 million of Class B Common Stock to eligible employees, primarily through the exercise of installment stock purchase opportunities (see note 7 to the consolidated financial statements). 11 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 1996 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 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 Vice President, Controller and Chief Accounting Officer November 19, 1996 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 19, 1996. Signature Title - --------- ----- Joseph Neubauer Chairman and President and Director - -------------------------------- (Principal Executive Officer) Joseph Neubauer James E. Ksansnak Executive Vice President - -------------------------------- (Principal Financial Officer) James E. Ksansnak Alan J. Griffith Vice President, Controller - -------------------------------- and Chief Accounting Officer Alan J. Griffith (Principal Accounting Officer) Robert J. Callander Alan K. Campbell Ronald R. Davenport 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 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 27, 1996 and September 29, 1995 S-4 Consolidated Statements of Income: Fiscal Years 1996, 1995 and 1994 S-6 Consolidated Statements of Cash Flows: Fiscal Years 1996, 1995 and 1994 S-7 Consolidated Statements of Shareholders' Equity: Fiscal Years 1996, 1995 and 1994 S-8 Notes to Consolidated Financial Statements S-11 Consolidated Supporting Schedules Filed: Schedule Number ------ I Condensed Financial Information of Registrant S-25 II Valuation and Qualifying Accounts and Reserves S-29 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 the notes thereto. S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To ARAMARK Corporation: We have audited the accompanying consolidated balance sheets of ARAMARK Corporation (a Delaware corporation) and subsidiaries as of September 27, 1996 and September 29, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended September 27, 1996. 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, prior to fiscal 1995, which statements reflect revenues representing 5.6% of consolidated revenues for fiscal year 1994. 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. for fiscal year 1994, 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 for fiscal 1994, the financial statements referred to above present fairly, in all material respects, the financial position of ARAMARK Corporation and subsidiaries as of September 27, 1996 and September 29, 1995, and the results of their operations and their cash flows for each of the three fiscal years in the period ended September 27, 1996, 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 11, 1996 S-2 REPORT OF CHARTERED ACCOUNTANTS To The Directors of Versa Services Ltd.: We have audited the consolidated balance sheet of Versa Services Ltd. as at September 28, 1994 and the consolidated statements of income and retained earnings and cash flows for the fifty-two week period then ended (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 audit. We conducted our audit 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 financial statements present fairly, in all material respects, the financial position of the company as at September 28, 1994, and the results of its operations and the changes in its financial position for the fifty-two week period then ended in accordance with accounting principles generally accepted in Canada. Mississauga, Canada ERNST & YOUNG November 16, 1994 Chartered Accountants S-3 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 27, 1996 and September 29, 1995 (dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------------------------------------------ 1996 1995 - ------------------------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 25,283 $ 23,082 Receivables (less allowances: 1996, $16,351; 1995, $15,996) 576,447 503,835 Inventories 316,043 312,818 Prepayments and other current assets 67,977 70,675 - ------------------------------------------------------------------------------------------------------------------ Total current assets 985,750 910,410 - ------------------------------------------------------------------------------------------------------------------ Property and Equipment, at Cost: Land, buildings and improvements 445,086 419,522 Service equipment and fixtures 1,137,387 1,047,559 Leased property under capital leases 12,489 10,213 - ------------------------------------------------------------------------------------------------------------------ 1,594,962 1,477,294 Less-Accumulated depreciation 770,327 705,082 - ------------------------------------------------------------------------------------------------------------------ 824,635 772,212 - ------------------------------------------------------------------------------------------------------------------ Goodwill 643,880 657,707 - ------------------------------------------------------------------------------------------------------------------ Other Assets (including $95 million invested in an acquisition made at yearend 1996) 376,505 302,987 - ------------------------------------------------------------------------------------------------------------------ $2,830,770 $2,643,316 ==================================================================================================================
The accompanying notes are an integral part of these financial statements. S-4 ARAMARK CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------ 1996 1995 - ------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term borrowings $ 26,041 $ 8,384 Accounts payable 496,040 448,518 Accrued payroll and related expenses 163,151 157,106 Other accrued expenses and current liabilities 278,609 257,752 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 963,841 871,760 - ---------------------------------------------------------------------------------------------------------------- Long-Term Borrowings: Senior 1,183,047 1,115,371 Subordinated 161,189 165,414 Obligations under capital leases 3,670 2,370 - ---------------------------------------------------------------------------------------------------------------- 1,347,906 1,283,155 Less-current portion 26,041 8,384 - ---------------------------------------------------------------------------------------------------------------- Total long-term borrowings 1,321,865 1,274,771 - ---------------------------------------------------------------------------------------------------------------- Deferred Income Taxes and Other Noncurrent Liabilities 230,249 225,441 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 18,614 19,060 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Series C preferred stock, redemption value $1,000; authorized: 40,000 shares; issued: 1996 - 0 shares; 1995 - 14,965 shares -- 14,965 Class A common stock, par value $.01; authorized: 25,000,000 shares; issued: 1996 - 1,978,326 shares; 1995 - 2,148,069 shares 20 21 Class B common stock, par value $.01; authorized: 150,000,000 shares; issued: 1996 - 22,732,673 shares; 1995 - 23,499,782 shares 227 235 Earnings retained for use in the business 309,437 247,805 Cumulative translation adjustment 5,131 8,318 Impact of potential repurchase feature of common stock (18,614) (19,060) - ----------------------------------------------------------------------------------------------------------------- Total 296,201 252,284 - ---------------------------------------------------------------------------------------------------------------- $2,830,770 $2,643,316 - ----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. S-5 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Fiscal Years Ended September 27, 1996, September 29, 1995 and September 30, 1994 (dollars in thousands, except per share amounts)
- ---------------------------------------------------------------------------------------------------------------- 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------- Revenues $6,122,500 $5,600,645 $5,161,578 - ---------------------------------------------------------------------------------------------------------------- Costs and Expenses: Cost of services provided 5,565,038 5,094,179 4,686,086 Depreciation and amortization 182,785 156,869 143,763 Selling and general corporate expense 82,354 72,602 70,196 Other expense (income), net (2,850) -- (5,792) - ----------------------------------------------------------------------------------------------------------------- 5,827,327 5,323,650 4,894,253 - ---------------------------------------------------------------------------------------------------------------- Operating income 295,173 276,995 267,325 Gain on Issuance of Stock by an Affiliate -- -- 4,658 - ---------------------------------------------------------------------------------------------------------------- Earnings before interest and income taxes 295,173 276,995 271,983 Interest Expense, net 116,014 109,418 108,499 - ---------------------------------------------------------------------------------------------------------------- Income before income taxes 179,159 167,577 163,484 Provision For Income Taxes 66,931 67,388 67,119 Minority Interest -- -- 1,332 - ---------------------------------------------------------------------------------------------------------------- Income Before Extraordinary Item and Cumulative Effect of Change in Accounting for Income Taxes 112,228 100,189 95,033 Extraordinary Item Due to Early Extinguishments of Debt (net of income taxes of $1,839 in 1996, $4,458 in 1995 and $5,118 in 1994) 2,758 6,686 7,677 Cumulative Effect of Change in Accounting for Income Taxes -- -- 1,277 - ---------------------------------------------------------------------------------------------------------------- Net Income $ 109,470 $ 93,503 $ 86,079 ================================================================================================================ Earnings Per Share: Income before extraordinary item and cumulative effect of change in accounting for income taxes $2.37 $2.01 $1.87 Net income $2.31 $1.88 $1.69 ================================================================================================================
The accompanying notes are an integral part of these financial statements. S-6 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Fiscal Years Ended September 27, 1996, September 29,1995 and September 30, 1994 (in thousands)
- ----------------------------------------------------------------------------------------------------------------- 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 109,470 $ 93,503 $ 86,079 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 182,785 156,869 143,763 Income taxes deferred (27,604) 4,920 (2,174) Minority interest -- -- 1,332 Cumulative effect of accounting change -- -- 1,277 Gain on issuance of stock by affiliate -- -- (4,658) Extraordinary item 2,758 6,686 7,677 Changes in noncash working capital: Receivables (62,239) (25,162) (40,557) Inventories (9,734) (13,992) (6,915) Prepayments (209) 13,244 (15,675) Accounts payable 28,973 25,186 36,956 Accrued expenses 27,245 22,737 36,926 Changes in other noncurrent liabilities (461) (6,525) (1,368) Changes in other assets (9,217) 4,020 (6,445) Other (2,494) (2,232) (9,186) - ----------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 239,273 279,254 227,032 - ----------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (190,896) (193,470) (145,935) Disposals of property and equipment 13,099 16,063 11,525 Sale of investments -- 16,203 13,543 Divestiture of certain businesses 51,285 1,719 7,297 Increase in short-term investments -- -- (16,203) Purchase of subsidiary stock -- (20,491) (17,623) Acquisition of certain businesses: Working capital other than cash acquired (8) (12,227) (3,066) Property and equipment (8,076) (36,261) (573) Additions to intangibles and other assets (104,679) (306,067) (6,734) Other (8,362) (2,268) 7,758 - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (247,637) (536,799) (150,011) - ----------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from additional long-term borrowings 155,510 486,844 167,329 Payment of long-term borrowings including premiums (95,510) (209,742) (210,511) Redemption of preferred stock (6,359) (1,984) (17,647) Proceeds from issuance of common stock 13,949 9,718 12,416 Repurchase of common stock (54,849) (26,435) (25,729) Payment of preferred stock dividend (1,067) (1,049) (1,917) Other (1,109) (4,151) (1,337) - ----------------------------------------------------------------------------------------------------------------- Net cash provided by/(used in) financing activities 10,565 253,201 (77,396) - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 2,201 (4,344) (375) Cash and cash equivalents, beginning of year 23,082 27,426 27,801 - ----------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 25,283 $ 23,082 $ 27,426 =================================================================================================================
The accompanying notes are an integral part of these financial statements. S-7 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 1996 (in thousands)
- -------------------------------------------------------------------------------------------------------------------------------- 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 ---------- ----------- --------- ------- -------- ----------- ------------ Balance, September 29, 1995 $14,965 $21 $235 $ -- $247,805 $8,318 $(19,060) Net income 109,470 Dividends on preferred stock (769) Issuance of Class A common stock to employee benefit plans 5,728 Issuance of Class B common stock 25 30,519 Retirement of common and preferred stock (14,965) (1) (33) (36,247) (47,069) Change during the period (3,187) 446 ----------- ----- ------- --------- --------- ------- ---------- Balance, September 27, 1996 $ -- $20 $227 $ -- $309,437 $ 5,131 $(18,614) =========== ===== ======= ========= ======== ======= ========
The accompanying notes are an integral part of these financial statements. S-8 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1995 (in thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- 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 ----------- --------- --------- ------- -------- ---------- ------------ Balance, September 30, 1994 $16,949 $21 $243 $ - $178,587 $7,550 $(20,791) Net income 93,503 Dividends on preferred stock (1,046) Issuance of Class A common stock to employee benefit plans 6,576 Issuance of Class B common stock 31 20,637 Retirement of common and preferred stock (1,984) (39) (27,213) (23,239) Change during the period 768 1,731 ------- ----- ----- --------- --------- ------- --------- Balance, September 29, 1995 $14,965 $ 21 $235 $ - $247,805 $8,318 $(19,060) ======= ===== ===== ========= ========= ======= =========
The accompanying notes are an integral part of these financial statements. S-9 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ 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 --------- ---------- --------- ------- -------- ----------- ------------ 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) ======= === ==== ========= ======== ====== ========
The accompanying notes are an integral part of these financial statements. S-10 ARAMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: FISCAL YEAR The Company's fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest September 30th. The fiscal years ended September 27, 1996, September 29, 1995 and September 30, 1994 are fifty-two week periods. PRINCIPLES OF CONSOLIDATION, ETC. The consolidated financial statements include the accounts of the Company and all its subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain reclassifications were made to the prior year financial statements to conform to the fiscal 1996 presentation. In fiscal 1997, the Company is required to adopt the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The adoption will not have a material impact on the consolidated financial statements. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CURRENCY TRANSLATION Gains and losses resulting from the translation of financial statements of non-U.S. subsidiaries are reflected as a currency translation adjustment in shareholders' equity. Currency transaction gains and losses included in operating results for fiscal 1996, 1995 and 1994 were not significant. CURRENT ASSETS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories are valued at the lower of cost (principally the first-in, first-out method) or market. The LIFO (last-in, first-out) method of determining cost is used to value directly marketed work clothing and public safety clothing and equipment. The stated value of inventories determined using the LIFO method is not significantly different from replacement or current cost. Personalized work apparel and linens in service are recorded at cost and are amortized over their estimated useful lives, approximately two years. In accordance with industry practice, magazines and books are sold to retailers with the right to return unsold items for ultimate credit from the publishers. The components of inventories are as follows: 1996 1995 - -------------------------------------------------------------------------------- Food 24.2% 23.4% Work clothing, safety equipment and linens 59.4% 61.0% Magazines and books 7.5% 8.0% Parts, supplies and novelties 8.9% 7.6% - -------------------------------------------------------------------------------- 100.0% 100.0% - -------------------------------------------------------------------------------- S-11 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. Depreciation expense in fiscal 1996, 1995 and 1994 was $129.1 million, $116.4 million and $107.5 million, respectively. GOODWILL Goodwill, which represents the excess of cost over fair value of the net assets of acquired businesses, is being amortized on a straight-line basis principally over 40 years. The Company develops operating income projections for each of its lines of business and evaluates the recoverability and amortization period of goodwill using these projections. 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 27, 1996 and September 29, 1995 is $150.5 million and $130.2 million, respectively. OTHER ASSETS Other assets consist primarily of investments in less than 50% owned entities, contract rights, customer lists, and long-term receivables. Investments in which the Company owns more than 20% but less than a majority are accounted for using the equity method. Contract rights and customer lists are being amortized on a straight-line basis over the expected period of benefit, 3 to 20 years. As discussed in Note 2, at September 27, 1996, other assets includes approximately $95 million related to the purchase price of an acquisition consummated at yearend. 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 and malpractice insurance arrangements. Self-insurance reserves are determined based on actuarial analyses. The self-insurance reserves for workers' compensation insurance are accrued on a present value basis using a discount rate which approximates a risk-free rate. EARNINGS PER SHARE Earnings per share is reported on a fully diluted Common Stock, Class B equivalent basis (which reflects Common Stock, Class A shares converted to a Class B basis, ten for one) and is based upon the weighted average 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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) SUPPLEMENTAL CASH FLOW INFORMATION 1996 1995 1994 ---- ---- ---- (in millions) Interest Paid $108.1 $107.4 $108.2 Income Taxes Paid $91.4 $53.5 $54.0 Significant noncash investing and financing activities are as follows: o During fiscal 1996, 1995 and 1994, the Company contributed $5.7 million, $6.6 million and $8.9 million, respectively, of Class A Common Stock to its employee benefit plans to fund previously accrued obligations. In addition, during fiscal 1996, 1995 and 1994, the Company contributed $1.7 million, $1.8 million and $1.8 million, respectively, of stock units to its stock unit retirement plan in satisfaction of its accrued obligations. See Note 5. o During fiscal 1996, 1995 and 1994, the Company received $7.2 million, $9.4 million and $4.0 million, respectively, of employee notes under its Deferred Payment program as partial consideration for the issuance of Common Stock Class B. Also, during fiscal 1996, 1995, and 1994, the Company issued subordinated installment notes of $26.8 million, $22.5 million and $13.2 million, respectively, as partial consideration for repurchases of Common Stock. See Note 7. NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: In the first quarter of fiscal 1996, the Company sold a division of its Uniform Services business. The net selling price was approximately $51 million in cash and resulted in a pre-tax gain of $37 million, which was offset by other charges related to asset realization ($20 million) and insurance, legal and other matters ($14 million) and is reflected as "Other expense (income)" in the accompanying consolidated statements of income. The divested operations were not material to the Company's consolidated revenues or operating income. At fiscal 1996 yearend, the Company acquired a provider of uniform apparel to the hospitality and healthcare markets for cash of approximately $95 million. The acquisition will be accounted for under the purchase method of accounting. Due to the timing of the closing of the transaction, the cost of the acquisition has been included in "Other Assets" until appraisals and other valuations have been completed. The Company's pro forma results of operations for fiscal 1996 and 1995 would not have been materially different assuming the acquisition had occurred as of the beginning of the respective periods. During fiscal 1995, the Company acquired a number of businesses: a provider of food and support services to stadiums and arenas late in the first quarter; two magazine and book distribution companies, one in the first quarter and one late in the third quarter; a uniform rental business late in the fourth quarter; and a direct marketer of public safety clothing and equipment late in the fourth quarter; all for aggregate consideration of approximately $360 million in cash. The acquisitions were accounted for under the purchase method of accounting and the fiscal 1995 financial statements reflect the results of operations and cash flows of the acquired companies from the dates of the acquisitions. Had these acquisitions occurred as of the beginning of the fiscal period, pro forma consolidated revenues and earnings before interest, taxes, depreciation and amortization would have been approximately 4% and 6%, and 6% and 7% greater in fiscal 1995 and 1994, respectively. Additionally, net income and earnings per share would have been approximately 9% and 18% lower in fiscal 1995 and 1994, respectively. S-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: (Continued) Pro forma results are unaudited and are based on historical results, adjusted for the impact of certain acquisition related adjustments, such as: increased amortization of intangibles, increased interest expense on acquisition debt, and the related income tax effects. Pro forma results do not reflect any synergies that might be achieved from combined operations and therefore, in management's opinion, are not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the respective periods. In addition, they are not intended to be a projection of future results. In the fourth quarter of fiscal 1994, the Company initiated a tender offer for the 30% minority interest of its Canadian subsidiary. The transaction was completed in fiscal 1995 for total cash consideration of approximately $38 million, of which $20.5 million was paid in fiscal 1995. 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, received 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%. NOTE 3. EXTRAORDINARY ITEM: The following have been reflected as extraordinary items in the consolidated financial statements: During fiscal 1996, the Company redeemed its $80 million 8-1/4% senior notes for a premium. The debt extinguishment was financed through the issuance of a $125 million 6.79% senior note. Additionally, the Company replaced its credit facility with a new $1 billion credit facility (see Note 4), writing off the unamoritized balance of financing costs related to the old credit facility. The resultant extraordinary charge on these transactions was $2.8 million or $0.06 per share. During fiscal 1995, the Company redeemed its $125 million 12% subordinated debentures and its $50 million 10.25% senior note for a premium. The debt extinguishment was financed through the issuance of 8.15% and 8% senior notes (see Note 4). The resultant extraordinary charge was $6.7 million or $0.13 per share. 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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. BORROWINGS: Long-term borrowings at September 27, 1996 and September 29, 1995 are summarized in the following table:
1996 1995 ---- ---- (in thousands) SENIOR: Credit facility borrowings $ 596,400 $ 592,900 Canadian credit facility 45,123 50,674 6.79% note, payable in installments through 2003 125,000 - 8% notes, due April 2002 100,000 100,000 8.15% notes, due May 2005 150,000 150,000 10-5/8% notes, due August 2000 100,000 100,000 8-1/4% notes, redeemed in 1996 - 80,000 Other 66,524 41,797 - ----------------------------------------------------------------------------------------------------- 1,183,047 1,115,371 - ----------------------------------------------------------------------------------------------------- SUBORDINATED: 8-1/2% subordinated notes, due June 2003 100,000 100,000 10% exchangeable debentures and notes, due August 2000 58,849 59,299 Other 2,340 6,115 - ----------------------------------------------------------------------------------------------------- 161,189 165,414 - ----------------------------------------------------------------------------------------------------- OBLIGATIONS UNDER CAPITAL LEASES 3,670 2,370 - ----------------------------------------------------------------------------------------------------- 1,347,906 1,283,155 Less-current portion 26,041 8,384 - ----------------------------------------------------------------------------------------------------- $1,321,865 $1,274,771 =====================================================================================================
The non-amortizing $1.0 billion revolving credit facility ("Credit Agreement") is provided by a group of banks and matures in June 2001. Interest under the Credit Agreement is based on the Prime Rate, LIBOR plus a spread of .15% to .625% (as of September 27, 1996 - .33%) or the Certificate of Deposit Rate plus a spread of .25% to .725% (as of September 27, 1996 - .43%), at the option of the Company. The Company pays a fee of .10% to .375% (as of September 27, 1996 - .17%) on the entire credit facility. The spread and fee margins are based on certain financial ratios as defined. The non-amortizing C$80 million Canadian revolving credit facility provides for either U.S. dollar or Canadian dollar borrowings and matures in June 2001. Interest on this facility is based on the Canadian Bankers Acceptance Rate, U.S. Prime Rate, Canadian Prime Rate or LIBOR plus a spread of up to 5/8%, as defined. As of September 27, 1996, all borrowings under this facility are payable in Canadian dollars, with a weighted average interest rate of 4.6%. The Company pays a fee of .17% on the entire credit facility. The Company's Children's World Learning Centers, Inc. (CWLC) subsidiary also has a $125 million revolving credit facility with a group of banks. The credit facility matures in August 2003, with quarterly commitment reductions of $5 million starting in September 2001, which increase to $6.25 million starting September 2002. Interest under the credit facility is based on the Prime Rate plus a spread of 0% to 1/4% or LIBOR plus a spread of 1/2% to 1%, at the option of CWLC. CWLC pays a fee of .2% to .375% (as of September 27, 1996 - 1/4%) on the unborrowed portion of the credit facility. The spread and fee margins are based on certain financial ratios as defined. As of September 27, 1996 there were no borrowings outstanding under this credit facility. S-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: BORROWINGS: (Continued) The 6.79% note is payable in $25 million annual installments beginning January 1999, with a final maturity of January 2003. The 10-5/8% senior notes require a sinking fund payment of $50 million in August 1999 with a final maturity in August 2000. The 8-1/2% subordinated notes may be redeemed at the Company's option, in whole or in part, beginning June 1998 at a price equal to 104.25% of their principal amount and thereafter at prices declining to par in 2002, together with accrued interest. The 10% subordinated exchangeable debentures and notes may be exchanged at any time in whole or part, at the option of the holder, for 10-5/8% senior notes due August 2000 at an exchange ratio of .93. Accrued interest on borrowings totaling $24.3 million at September 27, 1996 and $22.0 million at September 29, 1995 is included in current liabilities as "Other accrued expenses." The Company utilizes derivative financial instruments, such as interest rate swap and forward exchange agreements to manage changes in market conditions related to debt obligations and foreign currency exposures. At September 27, 1996 and September 29, 1995, the Company has $250 million and $175 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 6.2% and 6.3%, respectively. As of September 27, 1996, interest rate exchange agreements remain in effect for periods ranging from 9 to 34 months. 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. During fiscal 1996, the Company entered into a $24 million foreign currency swap agreement maturing in August 1998, which hedges the currency exposure of its net investment in Spain. The counterparties to the above derivative agreements are major international banks. The Company continually monitors its positions and credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The following summarizes the fair value of the Company's financial instruments as of September 27, 1996 and September 29, 1995. The fair values were computed using market quotes, if available, or based on discounted cash flows using market interest rates as of the end of the respective periods.
1996 1995 ------------------------------ ------------------------- Carrying Fair Carrying Fair Asset/(Liability) in millions Amount Value Amount Value - ----------------------------- ------ ----- ------ ----- Long-term debt $(1,347.9) $(1,364.6) $(1,283.2) $(1,313.3) Interest rate swap agreements - 0.1 - 0.7 Foreign currency swap agreement 0.4 0.1 (2.6) (2.5)
The Credit Agreement contains restrictive covenants which provide, among other things, limitations on liens, dispositions of material assets and repurchases of capital stock. The terms of the Credit Agreement also require that the Company maintain certain specified minimum ratios of cash flow to fixed charges and to total borrowings and certain minimum levels of net worth (as defined). At September 27, 1996, the Company was in compliance with all of these covenants. S-16 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) 1997 $ 26,041 1998 4,061 1999 79,719 2000 142,487 2001 686,941 NOTE 5: EMPLOYEE PENSION AND PROFIT SHARING PLANS: In the United States, the Company maintains qualified contributory and non-contributory retirement plans for eligible employees, with Company contributions to the plans based on earnings performance or salary level. Qualified non-contributory profit sharing plans are maintained by certain businesses, with annual contributions determined by management. The Company has a non-qualified stock unit retirement plan for certain employees. The total expense of the above plans for fiscal 1996, 1995 and 1994 was $15.7 million, $15.3 million and $14.5 million, respectively. During fiscal 1996, 1995 and 1994, the Company contributed 32,475 shares, 41,114 shares and 59,919 shares, respectively, of Common Stock, Class A to these plans to partially fund previously accrued obligations. In addition, during fiscal 1996, 1995 and 1994, the Company contributed to the stock unit retirement plan 104,938 stock units, 120,700 stock units and 143,125 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 $13.6 million, $13.1 million and $11.9 million for fiscal 1996, 1995 and 1994, respectively. Additionally, the Company maintains several contributory and noncontributory defined benefit pension plans, primarily in Canada and the United Kingdom. The projected benefit obligation of these plans as of September 27, 1996, which is fully funded, is $44.7 million. Pension expense related to these plans is not material to the consolidated financial statements. NOTE 6. INCOME TAXES: Effective October 2, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires deferred tax assets or liabilities to be recognized for the estimated future tax effects of temporary differences between the financial reporting and tax bases of the Company's assets and liabilities based on the enacted tax law and statutory tax rates applicable to the periods in which the temporary differences are expected to affect taxable income. 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. In June 1996 the Company settled certain prior years' tax returns. S-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. INCOME TAXES: (Continued) The components of income before income taxes by source of income are as follows: 1996 1995 1994 - ------------------------------------------------------------------------------ (in thousands) United States $172,572 $159,851 $143,052 Non-U.S. 6,587 7,726 20,432 - ----------------------------------------------------------------------------- $179,159 $167,577 $163,484 ============================================================================= Non-U.S. income before income taxes includes the gain on the sale of an affiliate's stock in fiscal 1994 (see Note 2), and increased interest expense subsequent to fiscal 1994 due to increased borrowing levels. The provision for income taxes consists of: 1996 1995 1994 - -------------------------------------------------------------------------------- (in thousands) Current: Federal $73,919 $46,579 $51,935 State and local 17,335 12,064 11,827 Non-U.S. 3,281 3,825 5,531 - -------------------------------------------------------------------------------- 94,535 62,468 69,293 - -------------------------------------------------------------------------------- Deferred: Federal (23,210) 3,189 (1,516) State and local (5,379) 739 (351) Non-U.S. 985 992 (307) - -------------------------------------------------------------------------------- (27,604) 4,920 (2,174) - -------------------------------------------------------------------------------- $66,931 $67,388 $67,119 ================================================================================ 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: 1996 1995 1994 - -------------------------------------------------------------------------------- (% of pre-tax income) United States statutory income tax rate 35.0% 35.0% 35.0% Increase (decrease) in taxes, resulting from: State income taxes, net of Federal tax benefit 4.3 4.7 4.6 Permanent book/tax differences, primarily resulting from purchase accounting 2.1 1.7 3.0 Favorable impact of June 1996 tax settlement (2.8) - - Tax credits and other (1.2) (1.2) (1.6) - -------------------------------------------------------------------------------- Effective income tax rate 37.4% 40.2% 41.0% ================================================================================ As of September 27, 1996 and September 29, 1995, the components of deferred taxes are as follows (in thousands): 1996 1995 -------- -------- Deferred tax liabilities: Property and equipment $ 61,095 $ 65,901 Inventory 5,549 10,451 Investments 12,813 12,406 Other 10,837 14,053 -------- -------- Gross deferred tax liability 90,294 102,811 -------- -------- S-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. INCOME TAXES: (Continued) 1996 1995 --------- -------- Deferred tax assets: Insurance $ 26,455 $23,579 Employee compensation and benefits 34,889 34,693 Accruals and allowances 30,638 27,530 Intangibles 3,415 6,534 Other 8,709 3,223 Valuation allowance (815) (1,240) -------- ------- Net deferred tax asset 103,291 94,319 -------- ------- Net deferred tax liability/(asset) $(12,997) $ 8,492 ======== ======= NOTE 7. CAPITAL STOCK: There are two classes of common stock authorized and outstanding, Common Stock, Class A and Common Stock, Class B. Each Class A and Class B Share is entitled to one vote on all matters submitted to shareholders, voting together as a single class except where otherwise required by law. Each Class A Share is entitled to ten times the dividends and other distributions payable on each Class B Share. Class B Shares may be held only by employees, directors and their family members, and upon termination of employment each Class B Share is automatically converted into 1/10 of a Class A Share. During fiscal 1996, the Company redeemed, at par, all its outstanding Series C Preferred Stock for $6.4 million in cash and the issuance of $8.6 million of Common Stock, Class B. During fiscal 1995 and 1994 the Company repurchased 1,984 and 17,647 preferred shares for $2.0 million and $17.6 million, respectively. As of September 27, 1996, the Company's stock option plans provided for the issuance of up to 44,861,642 options to purchase shares of Common Stock, Class B. The Company granted installment stock purchase opportunities under its stock ownership program in fiscal 1996, 1995 and 1994 which provide for the purchase of shares of Common Stock, Class B. Installment stock purchase opportunities are exercisable in six annual installments with the exercise price of each purchase opportunity equal to the current fair market value at the time the purchase opportunity is granted. The Company has a program to grant non-qualified stock options to additional qualified employees on an annual basis. Under the program, options vest after three years and may be exercised for a period of three years after vesting. The exercise price of each option is equal to the current fair market value at the date of grant. In fiscal 1995 and 1996, the Company granted cumulative installment stock purchase opportunities under its existing stock ownership program which are similar to the installment stock purchase opportunities discussed above, however, any purchase opportunities not exercised during an installment period may be carried forward to subsequent installment periods. The Company has a Deferred Payment Program which enables holders of non-qualified stock options and installment purchase opportunities to defer a portion of the total amount required to exercise the options. Interest currently accrues on deferred payments at 8.25% compounded annually and is payable when the deferred payments are due. At September 27, 1996 and September 29, 1995 the receivables from individuals under the Deferred Payment Program were $19.0 million and $17.5 million, respectively, which are reflected as a reduction of Shareholders' Equity. The Company holds as collateral all shares purchased in which any portion of the purchase price is financed under the Deferred Payment Program until the deferred payment is received from the individual by the Company. Status of the options, including installment stock purchase opportunities, under the various ownership programs follows:
Number of Shares Average Option Price ---------------------------------------- ----------------------------- 1996 1995 1994 1996 1995 1994 ---------- ------------- ------------- ------ ------ ------ Options granted 4,133,100 4,409,920 4,314,635 $14.75 $13.11 $11.19 Options exercised 1,938,142 3,084,830 2,588,030 $8.83 $6.17 $6.33 Options outstanding 10,367,984 10,107,199 10,383,764 $12.17 $10.47 $8.05
S-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. CAPITAL STOCK: (Continued) At September 27, 1996, 539,720 of the outstanding option shares were exercisable at an average option price of $3.72. The Company has reserved 11,117,149 shares of Common Stock, Class B at September 27, 1996 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 $18.6 million at September 27, 1996 and $19.1 million at September 29, 1995. 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 ($49.2 million as of September 27, 1996 and $36.8 million as of September 29, 1995) is included in the consolidated balance sheets as "Other Noncurrent Liabilities" and the current portion of these notes ($13.4 million as of September 27, 1996 and $11.3 million as of September 29, 1995) is included in the consolidated balance sheets as "Accounts Payable." NOTE 8. COMMITMENTS AND CONTINGENCIES: - -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- (in thousands) Facilities under capital leases $12,489 $10,213 Less-accumulated amortization 9,269 8,211 - -------------------------------------------------------------------------------- $ 3,220 $ 2,002 ================================================================================ Rental expense for all operating leases was $128.6 million, $124.2 million and $121.2 million for fiscal 1996, 1995 and 1994, respectively. Following is a schedule of the future minimum rental commitments under all noncancelable leases as of September 27, 1996: Fiscal Year Operating Capital - -------------------------------------------------------------------------------- (in thousands) 1997 $128,812 $1,220 1998 73,228 1,088 1999 66,948 837 2000 60,500 691 2001 54,393 255 Subsequent years 151,346 244 - --------------------------------------------------------------------------- Total minimum rental obligations $535,227 4,335 ===================================================== Less-amount representing interest 665 - --------------------------------------------------------------------------- Present value of capital leases 3,670 Less-current portion 796 - --------------------------------------------------------------------------- Noncurrent obligations under capital leases $2,874 =========================================================================== S-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. COMMITMENTS AND CONTINGENCIES: (Continued) The Company has capital commitments of approximately $34 million at September 27, 1996 in connection with several long-term concession contracts at stadiums and arenas. The Company is party to certain claims and litigation arising in the ordinary course of business. The Company believes it has meritorious defenses to these claims and is of the opinion that adequate reserves have been provided for the ultimate resolution of these matters. NOTE 9. ARAMARK SERVICES, INC. AND SUBSIDIARIES: The following financial information has been summarized from the separate consolidated financial statements of ARAMARK Services, Inc. (a wholly owned subsidiary of ARAMARK Corporation) and the subsidiaries which it currently owns. ARAMARK Services, Inc. is the borrower under the Credit Agreement and certain other senior debt described in Note 4 and incurs the interest expense thereunder. This interest expense is only partially allocated to all of the other subsidiaries of ARAMARK Corporation. 1996 1995 1994 ------------- ------------ ---------- (in thousands) Revenues $3,200,388 $2,975,397 $2,763,098 Cost of services provided 3,024,136 2,808,554 2,594,291 Net income 15,503 14,749 18,677 1996 1995 ------------ ------------- (in thousands) Current assets $ 395,243 $ 366,370 Noncurrent assets 1,630,023 1,545,474 Current liabilities 495,147 435,289 Noncurrent liabilities 1,419,648 1,377,799 S-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. QUARTERLY RESULTS (Unaudited): The following table summarizes quarterly financial data for fiscal 1996 and 1995:
Fiscal Quarter ------------------------------------------------------- 1996 First Second Third Fourth Year - ---------------------------------------------------------------------------------------------------------------- (in thousands, except earnings per share) Revenues $1,549,374 $1,464,626 $1,546,296 $1,562,204 $6,122,500 Cost of services provided 1,413,632 1,343,275 1,407,732 1,400,399 5,565,038 Income before extraordinary item 24,989 15,299 29,805 42,135 112,228 Extraordinary item (1) -- 1,589 1,169 -- 2,758 Net income 24,989 13,710 28,636 42,135 109,470 Earnings per share: Income before extraordinary item $.52 $.32 $.64 $.92 $2.37 Net income $.52 $.28 $.61 $.92 $2.31 Fiscal Quarter ------------------------------------------------------- 1995 First(2) Second Third(3) Fourth Year - ---------------------------------------------------------------------------------------------------------------- (in thousands, except earnings per share) Revenues $1,380,516 $1,364,518 $1,423,824 $1,431,787 $5,600,645 Cost of services provided 1,264,665 1,255,607 1,290,258 1,283,649 5,094,179 Income before extraordinary item 20,753 13,350 28,057 38,029 100,189 Extraordinary item (1) -- -- 6,686 -- 6,686 Net income 20,753 13,350 21,371 38,029 93,503 Earnings per share: Income before extraordinary item $.42 $.26 $.56 $.77 $2.01 Net income $.42 $.26 $.43 $.77 $1.88
(1) See Note 3. (2) Fiscal 1995 first quarter results were adversely impacted by the National Hockey League strike (see Note 11). (3) Fiscal 1995 third quarter results were adversely impacted by the Major League Baseball strike (see Note 11). In the first and second fiscal quarters, within the Food and Support Services segment there is a lower level of activity at the higher margin leisure and recreational food service operations which is partly offset by increased activity in the educational market. In addition, there is a seasonal increase in volume of directly marketed work clothing during the first quarter. Whereas in the third and fourth fiscal quarters, there is a significant increase at leisure and recreational accounts which is partially offset by the effect of summer closings in the educational market. S-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. BUSINESS SEGMENTS: The Company provides or manages services in the following business segments: Food and Support Services - Food, refreshment, specialized dietary and support services, including maintenance and housekeeping, provided to business, educational, governmental and medical institutions and in recreational and other facilities serving the general public. Fiscal 1994 operating income includes a $5.8 million gain on the sale of stock of an affiliate as described in Note 2. The 1995 and 1994 segment operating results were adversely impacted by the Major League Baseball strike in the U.S. and Canada. Additionally, the fiscal 1995 segment operating results were adversely impacted by the National Hockey League strike in the U.S. and Canada and a decrease in average attendance at Major League Baseball games subsequent to the resumption of the season in April 1995. Had the hockey strike and baseball situation not occurred, it is estimated that segment reported results for revenues and operating income would have been approximately 2% and 10% greater in fiscal 1995, and 2% and 6% greater in fiscal 1994, respectively. Also, total Company operating income and income before extraordinary items would have been approximately 5% and 8% higher in fiscal 1995, and 3% and 5% higher in fiscal 1994, 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, safety equipment and accessories. Fiscal 1996 operating income includes the $37 million gain on the sale of a division and charges of $5 million related to changes in estimates regarding asset realization and environmental matters (see Note 2); excluding the impact of these items as well as the impact of the operating results of the 1996 divestiture the increase in segment operating income was approximately 16%. The impact on revenues was not material. The acquisition for $95 million consummated in the fourth quarter of fiscal 1996 discussed in Note 2 is included in the identifiable asset disclosure in fiscal 1996. Health and Education - General management of child care centers, and specialized services to emergency rooms, and other hospital specialties, and medical services to correctional institutions. Fiscal 1996 operating income includes additional charges of approximately $13 million for insurance claims and real estate exposures (see Note 2). Fiscal 1995 segment operating income is lower than 1994 primarily due to an increase in insurance reserves, reflecting a refinement in the claims estimation methodology. Distributive - Wholesale distribution of magazines and other published materials to retail locations patronized by the general public. In fiscal 1996, the Distributive Segment operating results were severely impacted by higher operating costs related to servicing new customers and reduced margins resulting from increased competition and consolidation in the magazine wholesale distribution industry. Revenues by segment are substantially comprised of services to unaffiliated customers and clients. Operating income reflects expenses directly related to individual segments plus an allocation of expenses applicable to more than one segment. General corporate expenses include expenses not specifically identifiable with an individual segment. The increase in fiscal 1996 General Corporate expenses is due primarily to reserves established for asset realization, legal and other matters (see Note 2). Direct selling expenses are approximately 1% of revenues for fiscal 1996, 1995 and 1994. Corporate assets consist principally of goodwill not allocable to any individual segment and other noncurrent assets. S-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. BUSINESS SEGMENTS: (Continued)
Revenues Operating Income --------------------------------------- -------------------------------------- 1996 1995 1994 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- ------- (in millions) Food and Support Services $3,816.0 $3,521.2 $3,274.3 $174.2 $146.4 $138.4 Uniform Services 1,049.2 893.4 810.5 144.2 102.6 96.0 Health and Education 781.0 742.9 673.3 28.1 28.5 37.2 Distributive 476.3 443.1 403.5 (5.6) 27.4 26.5 --------- -------- -------- ----- ----- ----- Total $6,122.5 $5,600.6 $5,161.6 340.9 304.9 298.1 ========= ======== ======== General Corporate and Other Expenses (45.7) (27.9) (30.8) ----- ----- ---- Operating Income 295.2 277.0 267.3 Gain on Issuance of Stock by an Affiliate - - 4.7 Interest Expense, net (116.0) (109.4) (108.5) ------- -------- ------- Income Before Income Taxes, Minority Interest, Extraordinary Item, and Accounting Change $179.2 $167.6 $163.5 ====== ====== ======
Depreciation Capital and Amortization Expenditures --------------------------------- ---------------------------------- 1996 1995 1994 1996 1995 1994 ------ ------ ------ ------ ------ ----- (in millions) Food and Support Services $ 96.5 $ 89.7 $ 85.5 $ 99.5 $128.2 $ 83.2 Uniform Services 52.2 40.7 36.3 54.7 66.7 39.9 Health and Education 19.6 18.2 16.5 39.2 26.6 18.4 Distributive 8.3 3.5 2.3 4.6 3.9 2.0 ------ ------- ------- ------ ------ ------- 176.6 152.1 140.6 198.0 225.4 143.5 Corporate 6.2 4.8 3.2 1.0 4.3 3.0 ------ ------- ------- ------ ------ ------- $182.8 $156.9 $ 143.8 $199.0 $229.7 $ 146.5 ====== ======= ======= ====== ====== ======= Identifiable Assets ----------------------------------------- 1996 1995 1994 --------- ---------- -------- (in millions) Food and Support Services $1,286.4 $1,264.5 $1,085.7 Uniform Services 986.8 891.2 608.7 Health and Education 308.3 272.0 280.2 Distributive 174.1 131.5 74.2 -------- -------- -------- 2,755.6 2,559.2 2,048.8 Corporate 75.2 84.1 73.2 -------- -------- -------- $2,830.8 $2,643.3 $2,122.0 ======== ======== ========
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 8% of total operating income, and identifiable assets for these operations were approximately 10% of the total. S-24 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT ARAMARK CORPORATION BALANCE SHEETS SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995 (in thousands) ASSETS
1996 1995 ---------- --------- Current Assets: Receivables $ 1,946 $ 1,261 Inventories 289 292 Prepayments 1,817 1,560 --------- -------- Total current assets 4,052 3,113 --------- -------- Property & Equipment, net 10,819 11,924 Investment in Subsidiaries 838,439 732,156 Notes Receivable from ARAMARK Services, Inc. 100,000 100,000 Other Assets 2,126 10,245 --------- -------- $ 955,436 $857,438 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 17,013 $ 12,546 Accrued expenses 17,289 13,901 --------- -------- Total current liabilities 34,302 26,447 --------- -------- Long-Term Borrowings 161,189 165,414 Other Noncurrent Liabilities 63,172 54,936 Payable to Subsidiaries 381,958 339,297 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 18,614 19,060 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Series C preferred stock, redemption value $1,000 -- 14,965 Class A common stock, par value $.01 20 21 Class B common stock, par value $.01 227 235 Earnings retained for use in the business 309,437 247,805 Cumulative translation adjustment 5,131 8,318 Impact of potential repurchase feature of common stock (18,614) (19,060) --------- -------- Total 296,201 252,284 --------- -------- $ 955,436 $857,438 ========= ========
The accompanying notes are an integral part of these financial statements. S-25 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) ARAMARK CORPORATION STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994 (in thousands)
1996 1995 1994 ---------- ---------- -------- Equity in Net Income of Subsidiaries $109,470 $ 93,503 $86,079 -------- -------- ------- Management Fee Income 49,677 56,360 67,571 -------- -------- ------- General and Administrative Expenses 39,425 39,322 45,808 -------- -------- ------- Interest (Income) Expense - Intercompany interest income (8,477) (16,532) (38,778) Interest expense 18,729 25,916 47,746 -------- -------- ------- Interest Expense, net 10,252 9,384 8,968 -------- -------- ------- Income before income taxes 109,470 101,157 98,874 Provision for Income Taxes -- 3,062 5,118 -------- -------- ------- Income Before Extraordinary Item 109,470 98,095 93,756 Extraordinary Item Due to Early Extinguishments of Debt (net of income taxes $3,062 in 1995 and $5,118 in 1994) -- 4,592 7,677 -------- -------- ------- Net income $109,470 $ 93,503 $86,079 ======== ======== =======
The accompanying notes are an integral part of these financial statements. S-26 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) ARAMARK CORPORATION STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994 (in thousands)
1996 1995 1994 ---------- ---------- --------- Cash flows from operating activities: Net income $ 109,470 $ 93,503 $ 86,079 Equity in net income of subsidiaries (109,470) (93,503) (86,079) Extraordinary item -- 4,592 7,677 Other, primarily noncash working capital 445 (22,264) (8,408) --------- --------- -------- Net cash provided by (used in) operating activities 445 (17,672) (731) --------- --------- -------- Cash flows from investing activities: Purchases of property and equipment (968) (4,258) (3,023) Other 3,474 119 2,072 --------- --------- -------- Net cash provided by (used in) investing activities 2,506 (4,139) (951) --------- --------- -------- Cash flows from financing activities: Payment of long-term borrowings including premiums (4,225) (131,250) (194,694) Change in notes receivable from ARAMARK Services, Inc. -- 125,000 175,000 Change in intercompany payable to subsidiaries 49,600 47,811 54,253 Redemption of preferred stock (6,359) (1,984) (17,647) Proceeds from issuance of common stock 13,949 9,718 12,416 Repurchase of common stock (54,849) (26,435) (25,729) Payment of preferred stock dividend (1,067) (1,049) (1,917) --------- ---------- -------- Net cash provided by (used in) financing activities (2,951) 21,811 1,682 --------- ---------- -------- Change in cash $ -- $ -- $ -- ========= ========== =========
The accompanying notes are an integral part of these financial statements. S-27 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - 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 noncurrent liabilities consist primarily of deferred compensation and subordinated installment notes arising from repurchases of common stock. Note 2. 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 $1.2 billion on September 27, 1996. S-28 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
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 1996 Reserve for doubtful accounts, advances & current notes receivable $15,996 $209 $6,875 $ - $6,729 $16,351 ======= ==== ====== ========== ====== ======= Fiscal Year 1995 Reserve for doubtful accounts, advances & current notes receivable $12,423 $3,828 $6,357 $ - $6,612 $15,996 ======= ====== ====== ========== ====== ======= Fiscal Year 1994 Reserve for doubtful accounts, advances & current notes receivable $10,242 $1,288 $6,141 $ - $5,248 $12,423 ======= ====== ====== ========= ====== =======
(1) Allowances granted and amounts determined not to be collectible. S-29 INDEX TO EXHIBITS 3.1 Restated Certificate of Incorporation is incorporated by reference to the Company's quarterly report on Form 10-Q for the fiscal quarter ended December 29, 1995. 3.2 Corporate By-laws, as amended, are incorporated by reference to the Company's Registration Statement on 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 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. 10.2 Agreement relating to employment and post-employment competition dated October 1, 1991 with Julian L. Carr, Jr., * 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 Agreement relating to employment and post-employment competition dated December 19, 1983 with Martin W. Spector is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1989. 10.6 Agreement relating to employment and post-employment competition dated June 7, 1993 with L. Frederick Sutherland. 10.7 Agreement relating to employment and post-employment competition dated July 1, 1996 with Barbara A. Austell. 10.8 Credit and Guaranty Agreement dated as of May 29, 1996. 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. *Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. EX-10.6 2 EXHIBIT 10.6 EXHIBIT 10.6 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; health care; child care, 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, 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 Employee 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. 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, association 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 following 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 I 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, 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 jurisdiction 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 therefore 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 Paragraph 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: o Executive Corps Health Care Plan o Executive Corps Long Term Disability Insurance o Survivor Income Protection Plan o 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 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, this 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 lncentive 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 interest of ARA. 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 EMPLOYMENT: 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%). B. Reference to the masculine gender shall include the feminine gender. C. This Agreement shall supersede 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 August 27,1980. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed. /s/ L. Frederick Sutherland -------------------------------- L. Frederick Sutherland ARA Services, Inc. ("ARA") By: /s/ James E. Ksansnak --------------------------------- James E. Ksansnak Date: June 7, 1993 EX-10.7 3 EXHIBIT 10.7 EXHIBIT 10.7 ARAMARK CORPORATION AGREEMENT RELATING TO EMPLOYMENT AND POST-EMPLOYMENT COMPETITION This Agreement is between the undersigned individual, Barbara A. Austell, ("Employee") and ARAMARK CORPORATION ("ARAMARK"). RECITALS -------- A. ARAMARK is the leading provider of managed services to business and industry, private and public institutions, and the general public, in the following business segments: food, leisure and support services; health and education services; magazine and book services; and uniform services. B. ARAMARK has a proprietary interest in its business and financial plans and systems, methods of operation and other secret and confidential information, knowledge and data ("Proprietary Information") which includes, but is not limited to, annual and strategic business plans; financial plans, reports and systems including, profit and loss statements and other information regarding costs, profits, sales and the financial condition of ARAMARK and its business units; management development reviews, including information regarding the capabilities and experience of ARAMARK employees; information regarding ARAMARK*s relationships with its clients, customers, and suppliers and prospective clients, customers and suppliers; and technical data and know-how, including policy and procedure manuals, computer programs, recipes, accounting forms and procedures and human resource policies and procedures, all of which information is not publicly disclosed and is considered by ARAMARK to be confidential trade secrets. C. Employee shall be employed as Senior Vice President, Finance and Treasurer and shall have access to ARAMARK*s Proprietary Information, directly in the course of Employee*s employment, and indirectly through interaction with and presentations by other senior managers at the Executive Leadership Institute, Executive Corps meetings, President*s Council meetings, Chairman*s Council meetings and the like, and ARAMARK will encourage Employee to develop personal relationships with ARAMARK*s clients, prospective clients and suppliers. -1- D. ARAMARK will be vulnerable to unfair post-employment competition by Employee since Employee will have access to and knowledge of ARAMARK*s Proprietary Information and will have a personal relationship with ARAMARK*s clients, prospective clients and suppliers. E. In consideration of employment, the severance and other post-employment benefits provided for herein, Employee is willing to enter into this Agreement with ARAMARK as a condition of employment pursuant to which Employee will limit Employee*s right to compete against ARAMARK following termination of employment on the terms set forth in this Agreement. NOW, THEREFORE, intending to be legally bound, the parties agree as follows: ARTICLE 1. TITLE; REPORTING RELATIONSHIP; BASE SALARY; BONUS (including sign-up bonus); STOCK; AUTOMOBILE; RELOCATION; TERM OF EMPLOYMENT: The terms of the "Offer Details, Barbara A. Austell" previously sent to Employee which is attached as EXHIBIT A are incorporated by reference to the same extent as if those terms were restated in this document in their entirety. However, the Title and Reporting Relationship may change during the term, provided the Title and the person to whom Employee reports are comparable to the initial Title and Reporting Relationship and there is a bona fide reason for such change. ARTICLE 2. NON-DISCLOSURE AGREEMENT: ARAMARK shall, in the course of employment, provide and confide to Employee ARAMARK*s Proprietary Information developed at great expense by ARAMARK and which Employee recognizes to be unique assets of ARAMARK*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, association or other entity, except where required by law, any such Proprietary Information which is not generally known to the public or recognized as standard practice in the industries in which ARAMARK is engaged. -2- ARTICLE 3. NON-COMPETITION AGREEMENT: A. Subject to Article 3.B. below, Employee, for a period of two years following the voluntary or involuntary termination of employment, shall not, without ARAMARK*s written permission, directly or indirectly, become employed by (as an employee, consultant or otherwise), or acquire or maintain any ownership interest in any Business which is similar to or competitive with that conducted by or developed for later implementation by ARAMARK at any time during the term of Employee*s employment, provided, however, if Employee*s employment is involuntarily terminated by ARAMARK for any reason other than good and sufficient cause, the term of the non-competition provision set forth herein, will be modified to the longer of (i) one year, (ii) the number of months Employee receives severance payments or (iii) the number of months Employee is entitled to receive severance payments pursuant to Article 6.A. below. For purposes of this Agreement, "Business" shall be defined as a person, corporation, firm, partnership, joint venture or other entity. B. The provision set forth in Article 3.A. above, shall apply to (i) all fifty states, and (ii) each foreign country, possession or territory in which ARAMARK may be engaged in business as of the effective date of termination or at any time during the twelve month period prior thereto. Further, notwithstanding anything in this Agreement to the contrary, Article 3.A. above shall not limit Employee*s right to engage in any business or activity if such business or activity is unrelated to the type of business or activity conducted by the business segment or segments for which Employee directly or indirectly provided services during the twenty-four month period preceding Employee*s effective date of termination unless Employee otherwise directly or indirectly acquired knowledge of Proprietary Information for such business segment or segments at any time during the twenty-four month period preceding Employee*s -3- effective date of termination. By way of example, but not limitation, if Employee provided services to one of the business units of The ARAMARK Food and Support Services Group or The ARAMARK Leisure Services Group, Employee would be precluded during the applicable time period from being employed by any Business providing food, leisure and support services (irrespective of the particular ARAMARK business unit that employed Employee) but Employee would not be precluded from working for a competitor in the magazine and book distribution business or uniform rental business, unless Employee had acquired knowledge of Proprietary Information for ARAMARK*s Magazine and Book Distribution business or Uniform Rental businesses within twenty-four months prior to termination, as a result of task force assignments, special projects, attendance at the Executive Leadership Institute, Executive Corps meetings, President's Council meetings, Chairman*s Council meetings, and the like. Further, notwithstanding anything in this Agreement to the contrary, ARAMARK agrees that if Employee resigns as a result of a material breach of the obligation that ARAMARK has assumed under this Agreement, (after being given a reasonable opportunity to cure such breach then (i) the non-competition provisions set forth in Article 3.A. above shall not apply and shall be deemed void and (ii) Employee will be entitled to the severance and post-employment benefits set forth in Article 6.A. below to the same extent as if Employee were terminated by ARAMARK without cause). C. Employee acknowledges that enforcement of the provisions set forth in this Article 3 (will apply only if there is a violation of Article 3.A.) will not unduly impair Employee*s ability to obtain other employment following the termination (voluntary or involuntary) of Employee*s employment with ARAMARK. ARTICLE 4. NON-SOLICITATION OF EMPLOYEES: Following Termination of Employment for any reason, Employee shall not for a period of two years, directly or indirectly, at any time, in any manner, induce or attempt to influence any -4- employees of ARAMARK to terminate their employment with ARAMARK. During the term of employment, Employee shall not induce or attempt to influence any employee of ARAMARK to terminate employment with ARAMARK unless Employee, in good faith, determines that it is in the interest of ARAMARK to do so. ARTICLE 5. REMEDIES: Employee acknowledges that in the event of any violation by Employee of the provisions set forth in Articles 1, 2, 3 or 4 above, ARAMARK could sustain serious, irreparable and substantial harm to its business, the extent of which could be difficult to determine and impossible to fully remedy by an action at law for money damages. Accordingly, Employee agrees that, in the event of such violation or threatened violation by Employee, ARAMARK shall be entitled to seek an injunction before trial before 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 ARAMARK. If ARAMARK is required to enforce the provisions set forth in Articles 3 and 3 above by seeking an injunction, Employee agrees that the relevant time periods set forth in Articles 3 and 4 shall commence with the entry of the injunction. Employee further agrees that, in the event any of the provisions of this Agreement are determined by a court of competent jurisdiction to be contrary to any applicable statute, law or rule, or for any reason unenforceable as written, such court may modify any such provisions so as to permit enforcement thereof as modified. ARTICLE 6. POST-EMPLOYMENT BENEFITS: A. If Employee is terminated by ARAMARK for any reason other than good and sufficient cause, Employee shall be entitled to the following post-employment benefits: 1. Severance Pay: Employee shall receive severance payments equivalent to Employee*s monthly base salary as of the effective date of termination for twelve (12) months. Severance payments shall commence with the Employee*s effective date of termination and shall be made in accordance with ARAMARK*s normal payroll cycle. The period during which employee receives severance payments shall be referred to as the "Severance Pay Period". -5- 2. Other Post Employment Benefits: a. Basic Group medical and life insurance coverages shall continue under then prevailing terms during the Severance Pay Period. Employee*s share of the premiums will be deducted from Employee*s severance payments. Basic Group medical coverage provided during such period shall be applied against ARAMARK*s obligation to continue group medical coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Upon termination of basic group medical and life coverages, Employee may convert such coverages to individual policies to the extent allowable under plan provisions. b. Employee*s leased vehicle shall be made available to Employee through the Severance Pay Period at which time Employee has the option to either purchase the vehicle in accordance with the Executive Corps plan then in effect or return it to ARAMARK. c. Employee*s eligibility to receive or participate in all other benefit and compensation plans, including, but not limited to the Management Incentive Bonus, Long Term Disability, Stock Unit Retirement and any stock option or ownership plans, shall terminate as of the effective date of Employee*s termination unless provided otherwise under the terms of a particular plan, provided, however, participation in plans and programs made available solely to Executive Corps members, including, but not limited to the Executive Corps Medical Plan, shall cease as of the effective date of termination or the date Employee*s Executive Corps membership ceases, whichever occurs first. Employee, however, shall have certain rights to continue the Executive Corps Medical Plan under COBRA. B. Termination for "Good and Sufficient Cause" shall be defined as termination for such things as material fraud or illegal activity, repeated willful failure to perform assigned duties, willful violation of a material provision of ARAMARK*s Business Conduct Policy, or intentionally working against the best interest of ARAMARK in a manner which could result in significant economic harm to ARAMARK. -6- C. If Employee is terminated by ARAMARK for reasons other than Good and Sufficient cause, Employee will receive the severance payments and other post-employment benefits during the Severance Pay Period even if Employee commences other employment during such period provided such employment does not violate the terms of Articles 3 or 4. Employee shall not be under any obligation to seek any employment. D. ARAMARK reserves the right to terminate all severance payments and other post-employment benefits if Employee violates the covenants set forth in Articles 2, 3 and 4 above. E. ARAMARK expressly reserves the rights 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 ARAMARK on the date ARAMARK elected to revoke or amend the severance provisions. ARTICLE 7. TERM OF EMPLOYMENT: ARAMARK agrees to employ Employee for an initial term of two years as set forth in EXHIBIT A hereof after which Employee acknowledges that ARAMARK shall have the right to terminate Employee*s employment at any time for any reason whatsoever, provided, however, that any termination by ARAMARK after the initial two year term of employment, for reasons other than good and sufficient cause, shall result in the severance and the post-employment benefits described in Article 6 above, to become due in accordance with the terms of this Agreement subject to the conditions set forth in this Agreement. Employee further acknowledges that the severance payments made and other benefits provided by ARAMARK are in full satisfaction of any obligations ARAMARK may have resulting from ARAMARK*s exercise of its right to terminate Employee*s employment, except for those obligations which are intended to survive termination such as the payments to be made pursuant to retirement plans and conversion of insurance. -7- ARTICLE 8. MISCELLANEOUS: A. As used throughout this Agreement, ARAMARK includes ARAMARK CORPORATION and its subsidiaries and affiliates or any corporation, joint venture, or other entity in which ARAMARK CORPORATION or its subsidiaries or affiliates has an equity interest in excess of ten percent (10%). B. This Agreement shall supersede and substitute for any previous post-employment or severance agreement between Employee and ARAMARK, and is entered into in consideration of the mutual undertakings of the parties and the cancellation of all previous agreements. C. The terms of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania. D. Any dispute hereunder (except for disputes relating to alleged breaches of Articles 3 and 4) shall be exclusively resolved by arbitration in Philadelphia, Pennsylvania in accordance with the rules of the American Arbitration Association, the award of the Arbitrator shall be final and binding on both parties and a judgment for the award may be entered in any court having jurisdiction thereof. E. Employee shall be entitled to coverage under ARAMARK's then existing Director and Officers policies in effect from time to tome to the extent such policies cover other officers of ARAMARK and Employee shall be entitled to be indemnified and held harmless to the maximum extent set forth in the then existing ARAMARK Corporate Governance documents applicable to its officers and employees. -8- IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused this Agreement to be signed. Date: July 1, 1996 ARAMARK CORPORATION By: /s/ Brian G. Mulvaney ---------------------------- Brian G. Mulvaney By: /s/ Barbara A. Austell ---------------------------- Barbara A. Austell -9- EXHIBIT "A" OFFER DETAILS BARBARA A. AUSTELL =============================================================================== Title: Senior Vice President, Finance and Treasurer Corporate Officer Executive Corps Member Reports To: James E. Ksansnak, Executive Vice President, CFO Base Salary: $250,000 Bonus: $ 95,300 Guideline $100,000 Guarantee First Year One-time $300,000 with Option to Defer Sign On Bonus: Stock: 50,000 Shares - Installment Stock Purchase Opportunity 125,000 Shares - Cumulative Stock Purchase Opportunity Car: Per Policy Relocation: Full relocation, third party assistance if necessary Employment Agreement We will provide you with an Employment Agreement for a two year period. EX-10.8 4 CREDIT AND GUARANTY AGREEMENT [CONFORMED COPY] $1,000,000,000 CREDIT AND GUARANTY AGREEMENT dated as of May 29, 1996 among ARAMARK SERVICES, INC., as Borrower ARAMARK CORPORATION as Parent Guarantor THE BANKS LISTED HEREIN and CHEMICAL BANK and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agents TABLE OF CONTENTS* Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Definitions.......................................... 1 SECTION 1.02. Accounting Terms and Determinations.................. 16 SECTION 1.03. Types of Borrowings.................................. 17 ARTICLE II THE LOANS SECTION 2.01. Commitments to Lend.................................. 17 SECTION 2.02. Notice of Committed Borrowings....................... 18 SECTION 2.03. Money Market Borrowings.............................. 19 SECTION 2.04. Swingline Advances................................... 21 SECTION 2.05. Notice to Banks; Funding of Loans.................... 22 SECTION 2.06. Maturity of Loans.................................... 23 SECTION 2.07. Notes................................................ 23 SECTION 2.08. Interest............................................. 24 SECTION 2.09. Facility Fees........................................ 30 SECTION 2.10. Reduction of Commitments............................. 30 SECTION 2.11. Mandatory Termination of Commitments................. 32 SECTION 2.12. Optional Prepayments................................. 32 SECTION 2.13. Payments............................................. 32 SECTION 2.14. Funding Losses....................................... 33 SECTION 2.15. Withholding Tax Exemption............................ 34 ARTICLE III CONDITIONS SECTION 3.01. Effectiveness........................................ 34 SECTION 3.02. Conditions to Borrowing.............................. 36 SECTION 3.03. Representation by Borrower........................... 37 SECTION 3.04. Transitional Provisions.............................. 37 - -------- *The Table of Contents is not a part of this Agreement. i Page ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power........................ 38 SECTION 4.02. Corporate and Governmental Authori- zation; No Contravention........................... 38 SECTION 4.03. Binding Effect....................................... 39 SECTION 4.04. Financial Information................................ 39 SECTION 4.05. Litigation........................................... 39 SECTION 4.06. Compliance with ERISA................................ 40 SECTION 4.07. Environmental Matters................................ 40 SECTION 4.08. Taxes................................................ 40 SECTION 4.09. Compliance with Laws................................. 41 SECTION 4.10. Not an Investment Company............................ 41 SECTION 4.11. Full Disclosure...................................... 41 ARTICLE V COVENANTS SECTION 5.01. Information.......................................... 41 SECTION 5.02. Payment of Obligations............................... 44 SECTION 5.03. Maintenance of Property; Insurance................... 44 SECTION 5.04. Conduct of Business and Maintenance of Existence....................................... 45 SECTION 5.05. Inspection of Property, Books and Records............................................ 45 SECTION 5.06. Maintenance of Stock of Borrower..................... 46 SECTION 5.07. Negative Pledge...................................... 46 SECTION 5.08. Consolidations, Mergers and Sales of Assets............................................. 47 SECTION 5.09. Fixed Charge Coverage................................ 47 SECTION 5.10. Debt Coverage........................................ 47 SECTION 5.11. Minimum Consolidated Net Worth....................... 48 SECTION 5.12. Transactions with Affiliates......................... 48 SECTION 5.13. Use of Proceeds...................................... 48 SECTION 5.14. Restricted Payments.................................. 48 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default.................................... 49 SECTION 6.02. Notice of Default.................................... 52 ii Page ---- ARTICLE VII THE AGENTS SECTION 7.01. Appointment and Authorization........................ 52 SECTION 7.02. Agents and Affiliates................................ 52 SECTION 7.03. Action by Agents..................................... 53 SECTION 7.04. Consultation with Experts............................ 53 SECTION 7.05. Liability of Agents.................................. 53 SECTION 7.06. Indemnification...................................... 53 SECTION 7.07. Credit Decision...................................... 54 SECTION 7.08. Agency Fees.......................................... 54 SECTION 7.09. Successor Agents..................................... 54 ARTICLE VIII CHANGES IN CIRCUMSTANCES AFFECTING FIXED RATE LOANS SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair............................... 54 SECTION 8.02. Illegality........................................... 55 SECTION 8.03. Increased Cost....................................... 56 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................... 58 ARTICLE IX GUARANTEE SECTION 9.01. The Guarantee........................................ 59 SECTION 9.02. Guarantee Unconditional.............................. 59 SECTION 9.03. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances...................................... 60 SECTION 9.04. Waiver............................................... 60 SECTION 9.05. Subrogation and Contribution......................... 61 SECTION 9.06. Stay of Acceleration................................. 61 ARTICLE X JUDICIAL PROCEEDINGS SECTION 10.01. Consent to Jurisdiction............................. 61 SECTION 10.02. Enforcement of Judgments............................ 61 SECTION 10.03. Service of Process.................................. 62 SECTION 10.04. No Limitation on Service or Suit.................... 62 iii Page ---- ARTICLE XI MISCELLANEOUS SECTION 11.01. Notices............................................. 62 SECTION 11.02. No Waiver........................................... 63 SECTION 11.03. Expenses; Documentary Taxes; Indemnification for Litigation.................... 63 SECTION 11.04. Amendments and Waivers.............................. 63 SECTION 11.05. Sharing of Set-Offs................................. 64 SECTION 11.06. New York Law........................................ 65 SECTION 11.07. Successors and Assigns.............................. 65 SECTION 11.08. Collateral.......................................... 66 SECTION 11.09. Counterparts........................................ 66 SECTION 11.10. WAIVER OF JURY TRIAL................................ 67 iv Exhibit A - Note Exhibit B - Opinion of Counsel of the Borrower and the Parent Guarantor Exhibit C - Opinion of Special Counsel for the Agents Exhibit D - Subsidiary Guaranty Agreement Exhibit E - Management Equity Note Exhibit F - Invitation for Money Market Quotes Exhibit G - Money Market Quote v CREDIT AND GUARANTY AGREEMENT AGREEMENT dated as of May 29, 1996 (the "Agreement") among ARAMARK SERVICES, INC., a Delaware corporation (the "Borrower"), ARAMARK CORPORATION, a Delaware corporation (the "Parent Guarantor"), the BANKS party hereto and CHEMICAL BANK and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agents. 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, and its successors in such capacity. "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. "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. "Assessment Rate" has the meaning set forth in Section 2.08(c). "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 Overdue Interest Rate" has the meaning set forth in Section 2.08(b). "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. "Chemical Bank" means Chemical Bank and its successors. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof (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 2.10 or changed as a result of an assignment pursuant to Section 11.07. "Committed Loan" means a loan made or to be made by a Bank pursuant to Section 2.01. "Common Stock" means the Common Stock, par value $.01 per share, of the Parent Guarantor. "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 Applicable 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) 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 Consolidated Subsidiaries for such period. "Consolidated Net Worth" means at any date (the "Date of Determination") without duplication (i) the consolidated shareholders' equity (exclusive of the cumulative foreign currency translation adjustment as determined in accordance with generally accepted accounting principles) of the Parent Guarantor and its Consolidated Subsidiaries as of 3 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 Tangible Assets" means at any date the consolidated assets of the Parent Guarantor and its Consolidated Subsidiaries determined as of such date less their consolidated goodwill, all 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. "Credit" means any Loan or Swingline Advance. "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 5.07, all contingent obligations) of such Person to reimburse any other Person for amounts which have 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, 4 not exceeding the portion of such Debt Guaranteed by such Person). "Default" means any condition or event that constitutes 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. "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 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 Administrative Questionnaire (or identified in its Administrative Questionnaire 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 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 5 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 on a pro forma basis as if such acquisition or sale had occurred on the first day thereof. "Effective Date" means the date this 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. "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. 6 "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 $100,000,000. "Excess Secured Debt" means secured Debt other than Debt secured by Liens permitted pursuant to clauses (a) through (g) of Section 5.07. "Existing Credit Agreement" means the Amended and Restated Credit and Guaranty Agreement dated as of March 12, 1993 among the Borrower (formerly named ARA Services, Inc.), the Parent Guarantor (formerly named The ARA Group, Inc.), the banks party thereto and Chemical Bank and Morgan Guaranty Trust Company of New York, as agents, as in effect immediately prior to the effectiveness of this Agreement. 7 "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 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. "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. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Euro-Dollar 8 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 clause (c) below, end on the last day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (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) 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) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending on the next succeeding Quarterly Date; 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 9 (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (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) any Interest Period which would otherwise end after the Termination Date shall end on the Termination 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 and Derivatives 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 or any affiliates of the Banks. "Interest Rate Indebtedness" means the obligations of the Borrower to the Banks or any of them in respect of the Interest Rate Agreements. "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 10 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 Subsidiaries, or any series of such acquisitions 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 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. "Major Asset Sale" means any Disposition by the Parent Guarantor or any of its 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 Subsidiaries from or in respect of such Disposition exceeds $25,000,000; and provided further that (i) no such Disposition by any Wholly Owned Subsidiary of the Parent Guarantor to any other Wholly Owned Subsidiary of the Parent Guarantor shall constitute a Major Asset Sale and (ii) no Sale and Leaseback Transaction shall constitute a Major Asset Sale. "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 E 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. 11 "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as the same may be amended, supplemented or modified from time to time. "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 $25,000,000. "Money Market Auction" means a solicitation of Money Market Quotes setting forth Money Market Rates pursuant to Section 2.03. "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. "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). 12 "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. "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 limited liability company, 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, any executive vice president, treasurer or general counsel of the Parent Guarantor or the Borrower. "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 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 13 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. "Quarterly Date" means each March 31, June 30, September 30 and December 31. "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. "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 5.13. "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. "Revolving Credit Period" means the period from the Effective Date to but not including the Termination Date. "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Parent Guarantor or any 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 Subsidiaries to such Person with the intention of entering into such a lease. "Series Preferred Stock" means any series of Series Preferred Stock issued by the Parent Guarantor from time to time. 14 "Single Asset" means, in the case of any Disposition by the Parent Guarantor or any of its Subsidiaries, (a) any asset, (b) any group of assets used in connection with the same line of business of the Parent Guarantor or such 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. "Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement dated as of December 14, 1994 among the Parent Guarantor and the investors listed therein, as the same may be amended from time to time. "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 Subsidiary Guaranty Agreement dated as of the date hereof among the Borrower, the Parent Guarantor and certain Subsidiaries, in the form of Exhibit D hereto. "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. "Termination Date" means June 30, 2001, or if such date is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such succeeding Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. "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 May 29, 1996 in an aggregate principal amount not exceeding $10,000,000 and (y) the 15 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 Domestic Material Subsidiary" means, with respect to any Person, a Wholly Owned Subsidiary that (i) is organized under the laws of the United States, any state thereof or any political subdivision thereof or therein and (ii) whose total assets (or in the case of any Subsidiary which itself has Subsidiaries, the consolidated total assets of such Subsidiary and its Consolidated Subsidiaries) are at least 5% of the consolidated total assets of the Parent Guarantor and its Consolidated Subsidiaries, as shown by the financial statements then most recently delivered pursuant to Section 5.01 provided that if the Parent Guarantor determines in good faith that a Subsidiary does not have consolidated assets of at least 5% of the consolidated total assets of the Parent Guarantor and its Consolidated Subsidiaries as at any fiscal year-end, such determination shall be conclusive for purposes of this Agreement and the Subsidiary Guaranty Agreement for a period of 270 days following such fiscal year-end. "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 September 29, 1995 referred to in paragraph (a) of Section 4.04 (except for changes to which independent public accountants for the Parent Guarantor take 16 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 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). 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 Borrowing 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 2.12, prepay Loans and reborrow at any time during the Revolving Credit Period pursuant to this Section. 17 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 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. 18 (c) No more than eight Euro-Dollar Borrowings and eight CD Borrowings shall be outstanding at any one time and no more than four Euro-Dollar Borrowings or 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 F 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. (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 19 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 G 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 G 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 of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (c). In the case of acceptance, 20 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 Revolving 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. 21 (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 270 days after the date of such Swingline Advance; or (ii) the principal amount of which, when added to the aggregate principal amount of all Credits then outstanding, exceeds 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 22 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 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 (or within one Domestic Business Day, in the case of the Borrower) 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 23 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. 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. Such interest rate shall be adjusted automatically on and as of the effective date of any change in the Base Rate. 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 (the "Base Overdue Interest Rate"). (c) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; 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 or the CD Margin and (ii) if any CD Loan shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such CD Loan 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 the 24 Interest Period for such Loan plus the CD Margin for such day and (ii) the Base Overdue Interest Rate for such day. "CD Margin" means a rate per annum determined in accordance with the table set forth below paragraph (g) of this Section 2.08. 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% 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 25 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 327.4(a) (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 each day during the Interest Period applicable thereto, at an interest rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted Euro-Dollar Rate applicable to such Interest Period. Such interest rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage or the Euro-Dollar Margin. 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. "Euro-Dollar Margin" means a rate per annum determined in accordance with the table set forth below paragraph (g) of this Section 2.08. 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. 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 26 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 Euro-Dollar Margin for such day 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 "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" shall be for any day the respective percentages indicated in the table set forth below in the applicable row under the column corresponding to the Status that applies on such day.
=================================================================================================================================== Level Level Level Level Level Level Level Status I II III IV V VI VII - ----------------------------------------------------------------------------------------------------------------------------------- Euro-Dollar 0.15% 0.20% 0.25% 0.33% 0.40% 0.50% 0.625% Margin - ----------------------------------------------------------------------------------------------------------------------------------- CD Margin 0.25% 0.30% 0.35% 0.43% 0.50% 0.60% 0.725% - ----------------------------------------------------------------------------------------------------------------------------------- Facility Fee 0.10% 0.10% 0.12% 0.17% 0.225% 0.25% 0.375% Rate ===================================================================================================================================
For purposes of this Section 2.08(g), the following terms have the following meanings (in addition to terms defined in Section 1.01): 27 "Level I Status" applies at any date if, at such date, either (x) the Borrower's long-term debt is rated A- or higher by S&P or A3 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .55 to 1.0. "Level II Status" applies at any date if, at such date, (i) either (x) the Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .50 to 1.0 and (ii) Level I Status does not apply. "Level III Status" applies at any date if, at such date, (i) either (x) the Borrower's long-term debt is rated BBB or higher by S&P or Baa2 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .45 to 1.0 and (ii) neither Level I Status nor Level II Status applies. "Level IV Status" applies at any date if, at such date, (i) either (x) the Borrower's long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .40 to 1.0 and (ii) none of Level I Status, Level II Status and Level III Status applies. "Level V Status" applies at any date if, at such date, (i) either (x) the Borrower's long-term debt is rated BB+ or higher by S&P or Ba1 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .35 to 1.0 and (ii) none of Level I Status, Level II Status, Level III Status and Level IV Status applies. "Level VI Status" applies at any date if, at such date, (i) either (x) the Borrower's long-term debt is rated BB or higher by S&P or Ba2 or higher by Moody's or (y) the Reference Ratio is equal to or greater than .32 to 1.0 and (ii) none of Level I Status, Level II Status, Level III Status, Level IV Status and Level V Status applies. "Level VII Status" applies at any date if, at such date, no other Status applies. "Moody's" means Moody's Investors Service, Inc. "Reference Ratio" means for any day during any fiscal quarter of the Parent Guarantor (the "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 Parent Guarantor shall, prior to the first day of each fiscal quarter of the Parent Guarantor during which Status (if determined solely on the basis of the Reference Ratio) would differ from the Status (if so determined) during the next preceding fiscal 28 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 calculation of the Reference Ratio. "S&P" means Standard & Poor's Ratings Services. "Status" refers to the determination of which of Level I Status through Level VII Status applies at any date. The credit ratings to be utilized for purposes of the above schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. (h) 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. (i) 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. (j) 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. (k) Interest based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a 29 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 at the Facility Fee Rate (determined daily in accordance with the schedule set forth below paragraph (g) of Section 2.08) accrued (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety) on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans; 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 fiscal quarter of the Parent Guarantor if the Reference Ratio is more than 0.45 to 1 for such fiscal quarter. (b) Accrued facility fees under this Section 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 Termination Date (and, if later, such later date of repayment). (c) 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. 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 Commitments pursuant to this subsection (a) or subsection (b) below, the Administrative Agent shall promptly notify each Bank of 30 such termination or reduction. Each reduction of the Commitments pursuant to this subsection (a) shall be permanent. (b) In addition, the Commitments shall be reduced upon the incurrence by the Parent Guarantor or any of its Subsidiaries of Excess Secured Debt (other than Excess Secured Debt arising out of the refinancing, extension, renewal or refunding of other Excess Secured Debt, except to the extent, and only to the extent, that the outstanding principal amount of such other Excess Secured Debt is increased), in an amount equal to the cash proceeds of such Excess Secured Debt, net of the reasonable expenses of the Parent Guarantor or such Subsidiary in connection with such incurrence. (c) The reduction required by subsection (b) of this Section 2.10 shall be effective on the date of receipt by the Parent Guarantor or any of its Subsidiaries of the amounts described therein; 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 of proceeds which, together with all other amounts described in subsection (b) above not previously applied pursuant to subsection (b) 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 (b) of this Section 2.10 and a certificate of a Principal Officer of the Parent Guarantor, setting forth the information, in form and substance satisfactory to the Administrative Agent, necessary to determine the amount of each such reduction. (d) Each reduction of the Commitments pursuant to subsection (b) of this Section 2.10 shall be applied ratably to the respective Commitments of the Banks. In addition, each reduction of the Commitments pursuant to subsection (b) of this Section 2.10 shall be permanent. (e) On each date on which a reduction required by subsection (b) becomes effective, the Borrower shall repay or prepay such principal amount of the outstanding Credits, 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 (b) of 31 this Section 2.10 at a time such that, and with the result that, this subsection (e) 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 (e) shall be made together with accrued interest to the date of payment or prepayment, and shall be applied ratably to payment of the Credits of the several Banks in the related Borrowing. SECTION 2.11. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) The Borrower may (i) upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Base Rate Borrowing without premium or penalty, (ii) upon three Domestic Business Days' notice to the Administrative Agent, subject to Section 2.14, prepay any CD Borrowing and (iii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent subject to Section 2.14, prepay any Euro-Dollar Borrowing, in each case in whole at any time or from time to time in part in an aggregate amount equal to $5,000,000 or 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) Subject to Section 2.14, Money Market Loans and Swingline Advances shall be prepayable as may be mutually agreed by the Borrower and the Bank making any such Money Market Loan or Swingline Advance. (c) 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 2.13. 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, 32 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 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 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or Swingline Advance (pursuant to Article II, 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 2.12(c), 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 Credit), including (without limitation) any loss incurred in obtaining, 33 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 2.15. 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. ARTICLE III CONDITIONS SECTION 3.01. Effectiveness. This 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 34 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 evidence satisfactory to them of the payment of all principal and interest on any "Loans" (as therein defined) outstanding under, and of all other amounts payable under, the Existing Credit Agreement (excluding amounts payable with respect to the Money Market Loans and Swingline Advances specified in Section 3.04(b)); (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, 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; and (h) receipt by the Agents of all documents they may reasonably request relating to the existence of the 35 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; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than June 28, 1996. 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 Banks that are parties to the Existing Credit Agreement, comprising the "Required Banks" as defined therein, and the Borrower and the Parent Guarantor agree to eliminate the requirement under Section 2.10(a) of the Existing Credit Agreement that notice of optional termination of the commitments thereunder be given three Domestic Business Days in advance, and further agree that the commitments under the Existing Credit Agreement shall terminate in their entirety simultaneously with and subject to the effectiveness of this Agreement and that the Borrower shall be obligated to pay the accrued facility fees thereunder to but excluding the date of such effectiveness. 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 Administrative 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, 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; (c) the fact that, immediately after such Borrowing: (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 36 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) Upon the Effective Date, any outstanding Money Market Loans or Swingline Advances of any bank party to the Existing Credit Agreement that is not a Bank hereunder (a "Non-Continuing Bank") shall become due, and the Borrower shall on the Effective Date repay any such outstanding Money Market Loans or Swingline Advances made by such Non-Continuing Banks. If any repayment of Money Market Loans or Swingline Advances under the Existing Credit Agreement is made pursuant to this subsection (a), the Borrower agrees that it will reimburse each Non-Continuing Bank for any funding losses incurred in connection therewith pursuant to Section 2.13 of the Existing Credit Agreement. (b) Each Money Market Loan or Swingline Advance outstanding under the Existing Credit Agreement and made on or prior to the Effective Date by any bank that is both a party to the Existing Credit Agreement and a Bank hereunder shall (i) mature on the last day of the then current Interest Period applicable thereto under the Existing Credit Agreement, (ii) bear interest at the interest rate applicable thereto under the Existing Credit Agreement, (iii) be deemed made pursuant to this Agreement and (iv) be deemed no longer outstanding under the Existing Credit Agreement. 37 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 the case of such Subsidiaries, to the extent that failure to comply with the foregoing statements could not, in the aggregate, affect the business, financial position, results of operations or prospects of the Parent Guarantor and its Consolidated Subsidiaries in a manner material and adverse to the creditworthiness of the Borrower and the other Obligors, 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 affect the business, financial position, results of operations or prospects of the Parent Guarantor and its Consolidated Subsidiaries in a manner material and adverse to the creditworthiness of the Borrower and the other Obligors, considered as a whole. SECTION 4.02. Corporate and Governmental Authorization; 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 on any asset of the Parent Guarantor or any Subsidiary. 38 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 September 29, 1995 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Arthur Andersen LLP, 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 March 29, 1996 and the related unaudited consolidated 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 March 29, 1996 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, 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 March 29, 1996, 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 39 as a whole, or which in any manner questions the validity or enforceability of any Financing Document. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. 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, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made 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 under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. 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 affect the business, financial condition, results of operations or prospects of the Parent Guarantor and its Consolidated Subsidiaries in a manner material and adverse to the creditworthiness of the Borrower and the other Obligors, 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 September 29, 1989. 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, in the good faith determination of the Parent Guarantor, anticipated that could affect the business, financial position, results of operations or prospects of the Parent Guarantor and its Consolidated Subsidiaries in a manner material and adverse to the creditworthiness of the Borrower and the other Obligors, considered as a whole. 40 SECTION 4.09. Compliance with Laws. The Parent Guarantor, the Borrower and each Subsidiary of either are, in the good faith determination of the Parent Guarantor, 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 affect the business, financial position, results of operations or prospects of the Parent Guarantor and its Consolidated Subsidiaries in a manner material and adverse to the creditworthiness of the Borrower and the other Obligors, 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. Full Disclosure. All information heretofore furnished by the Parent Guarantor or the Borrower to the Agents or any Bank for purposes of this Agreement or any transaction contemplated hereby was, in the good faith opinion of the Parent Guarantor at the time such information was furnished, true and accurate in all material respects on the date as of which such information was furnished, and such information as may have been modified or superseded by any subsequently furnished information is true and accurate in all material respects. 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 41 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 LLP 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 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) 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 5.07 through 5.14, inclusive, on the date of such financial statements, (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 and (iii) stating whether, since the date of the most recent financial statements previously delivered 42 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; (d) within five days after any officer of the Parent Guarantor obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, Treasurer or 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; (e) promptly upon the receipt of a request therefor from the Administrative Agent at the request of any Bank, copies of all financial statements, reports and proxy statements that the Parent Guarantor shall have mailed to its shareholders; (f) 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; (g) excluding any event which has not resulted and will not result in a potential liability of a member of the ERISA Group under Title IV of ERISA in an amount in excess of $10,000,000, 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 $10,000,000 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 43 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; and (h) 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 insurance companies which the Parent Guarantor reasonably believes, at the time the relevant coverage is placed or renewed, are financially sound and responsible, insurance on all their respective properties in at least such amounts and against at least such risks (and 44 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. Notwithstanding 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. SECTION 5.04. Conduct of Business and Maintenance of Existence. Subject to Section 5.08, the Parent Guarantor 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 Section 5.08, nothing in this Section 5.04 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 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 5.08 hereof. 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. 45 SECTION 5.06. Maintenance of Stock of Borrower. 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 5.08. SECTION 5.07. Negative Pledge. The Parent Guarantor 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 existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $10,000,000; (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 5.07, 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 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 $25,000,000 (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; 46 (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 5.07 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 an amount equal to 10% of Consolidated Tangible Assets (excluding any such Lien securing any individual obligation in an amount not in excess of $5,000,000); and (h) subject to Section 2.10(b), any Lien on any asset or assets of the Parent Guarantor or any of its Subsidiaries securing Excess Secured Debt. SECTION 5.08. Consolidations, Mergers and Sales of Assets. (a) Neither the Parent Guarantor nor the Borrower shall consolidate or merge with or into any Person, except that (i) the Parent Guarantor and the Borrower may merge with any Person (other than each other) if the Parent Guarantor or the Borrower is the surviving corporation and if, immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing, and (ii) the Parent Guarantor and the Borrower may merge with each other, if (x) immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing and (y) the surviving corporation, whether it be the Parent Guarantor or the Borrower, shall have signed an instrument of assumption in form and substance satisfactory to the Required Banks immediately prior to such merger. (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 Subsidiaries, taken as a whole. SECTION 5.09. Fixed Charge Coverage. As of the last day of each fiscal quarter 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 2.0 to 1.0. SECTION 5.10. Debt Coverage. As of the last day of each fiscal quarter of the Parent Guarantor, the Leverage Ratio at such day shall not be less than 0.3 to 1.0. 47 SECTION 5.11. Minimum Consolidated Net Worth. Consolidated Net Worth shall (i) at no date before September 27, 1996 be less than $165,000,000 and (ii) at no date on or after September 27, 1996 be less than $200,000,000 plus an amount equal to 50% of Consolidated Net Income for each fiscal year of the Parent Guarantor ending after September 27, 1996 but prior to the date of determination for which Consolidated Net Income is positive (but with no deduction on account of negative Consolidated Net Income for any fiscal year of the Parent Guarantor). SECTION 5.12. 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 Subsidiary as the terms which could have been obtained from a Person which was not an Affiliate. SECTION 5.13. 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, including without limitation Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as each is in effect from time to time. After giving effect to the making of each Loan and application of the proceeds thereof, Margin Stock that was Margin Stock at the time it was acquired by the Parent Guarantor or any Subsidiary will not exceed 10% of the value of the total assets (as determined in good faith by the board of directors of the Parent Guarantor) of the Parent Guarantor and its Consolidated Subsidiaries, taken as a whole. SECTION 5.14. Restricted Payments. The Parent Guarantor will not repurchase shares of its capital stock pursuant to Section 5 of the Stockholders' Agreement (Put of Shares upon Death, Complete Disability or Normal Retirement) unless the aggregate cash amount paid with respect to such repurchase of shares, 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 May 29, 1996, shall not exceed an amount equal to 5% of Consolidated Net Worth, as reflected in the most recent 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. 48 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 5.14, 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 paragraph (a), (b) or (c) above) for 30 days after notice thereof has been given to the Parent Guarantor or the Borrower by the Administrative Agent at the request of any Bank; 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 (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 $25,000,000, 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 49 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 $150,000,000 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 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 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 under the Federal bankruptcy laws as now or hereafter in effect; or (j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 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 $25,000,000 (a 50 "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 condition 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 $25,000,000 or an aggregate payment obligation in excess of $25,000,000; or (k) a judgment or order for the payment of money in excess of $15,000,000 (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 and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (l) any Wholly Owned Domestic Material Subsidiary 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 Domestic Material Subsidiary shall have become a Wholly Owned Domestic Material Subsidiary; provided that the foregoing provision of this paragraph (l) shall not apply to any Wholly Owned Domestic Material Subsidiary if such Wholly Owned Domestic Material Subsidiary is a Subsidiary of an Obligor (other than the Parent Guarantor or the Borrower); 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; 51 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 Administrative 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. 52 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. 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. 53 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, independently 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. 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 $500,000,000. 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- 54 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 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 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 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 55 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 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 56 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 applicability, 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 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 57 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. 58 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 and 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 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, structure 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 59 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, 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, constitute 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. 60 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 acceleration 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. 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. 61 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 Administrative 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. 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 62 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. (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 provision of this Agreement or the Notes may be amended or waived if, and only if, such amendment or waiver is in writing and is 63 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, or (iv) 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. 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. 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 64 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 participation 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 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 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 65 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 participation 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) or (iii) 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 such Bank voting instructions with respect to such proposal within 30 days after such participant's receipt of such proposal and such 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 "Representing Bank") represents to each Agent and each other Bank that the Representing Bank in good faith is not relying upon any Margin Stock 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. 66 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. 67 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. ARAMARK SERVICES, INC. By /s/ Melvin M. Mahoney ----------------------------- Title: Treasurer ARAMARK Tower 1101 Market Street Philadelphia, Pennsylvania 19107 Facsimile number: (215) 238-3284 (215) 238-3282 ARAMARK CORPORATION By /s/ Melvin M. Mahoney ----------------------------- Title: Treasurer ARAMARK Tower 1101 Market Street Philadelphia, Pennsylvania 19107 Facsimile number: (215) 238-3284 (215) 238-3282 68 Commitments $75,000,000 CHEMICAL BANK By /s/ Karen M. Sharf -------------------------- Title: Vice President $75,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Penelope J.B. Cox -------------------------- Title: Vice President $60,000,000 BANK OF AMERICA ILLINOIS By /s/ Sandra S. Ober -------------------------- Title: Vice President $60,000,000 THE BANK OF NEW YORK By /s/ Peter H. Abdill -------------------------- Title: Vice President 69 $60,000,000 NATIONSBANK, N.A. By /s/ Rajesh Sood -------------------------- Title: Vice President $50,000,000 CORESTATES BANK, N.A. By /s/ Donna J. Emhart -------------------------- Title: Assistant Vice President $50,000,000 CREDIT LYONNAIS NEW YORK BRANCH By /s/ Mary E. Collier -------------------------- Title: Vice President $50,000,000 FIRST UNION NATIONAL BANK By /s/ Patrrick A. McGovern -------------------------- Title: Senior Vice President $50,000,000 PNC BANK, NATIONAL ASSOCIATION By /s/ Daniel K. Fitzpatrick -------------------------- Title: Vice President 70 $35,000,000 LTCB TRUST COMPANY By /s/ Noboru Kubota -------------------------- Title: Senior Vice President $35,000,000 THE NIPPON CREDIT BANK, LTD., NEW YORK BRANCH By /s/ Nancy Acevedo -------------------------- Title: Assistant Vice President $35,000,000 THE SAKURA BANK, LIMITED NEW YORK BRANCH By /s/ Masahiro Nakajo -------------------------- Title: Senior Vice President & Manager $30,000,000 COMERICA BANK By /s/ John M. Costa -------------------------- Title: Vice President $30,000,000 MELLON BANK, N.A. By /s/ Martin J. Randal -------------------------- Title: Banking Officer 71 $30,000,000 WACHOVIA BANK OF GEORGIA, N.A. By /s/ Adam J. Ogburn -------------------------- Title: Vice President $25,000,000 BANK OF HAWAII By /s/ Alison Sierens -------------------------- Title: Assistant Vice President $25,000,000 BHF BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By /s/ Perry Forman -------------------------- Title: Vice President By /s/ Linda Pace -------------------------- Title: Assistant Vice President $25,000,000 CIBC INC. By /s/ Christopher P. Kleczkowski -------------------------- Title: Agent for CIBC, Inc. 72 $25,000,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By /s/ Hans-Josef Thiele -------------------------- Title: Vice President By /s/ Belinda J. Wheeler -------------------------- Title: Assistant Vice President $25,000,000 THE FIRST NATIONAL BANK OF BOSTON By /s/ Maura C. Wadlinger -------------------------- Title: Vice President $25,000,000 FLEET NATIONAL BANK By /s/ Richard W. Billings, Jr. -------------------------- Title: Senior Vice President $25,000,000 THE FUJI BANK, LIMITED NEW YORK BRANCH By /s/ Teiji Teramoto -------------------------- Title: Vice President & Manager 73 $25,000,000 KREDIETBANK N.V. By /s/ Armen Karozichian -------------------------- Title: Vice President By /s/ Robert Snauffer -------------------------- Title: Vice President $ 25,000,000 NATIONAL WESTMINSTER BANK Plc NEW YORK BRANCH By /s/ Jordan R. Fragiacomo -------------------------- Title: Vice President NATIONAL WESTMINSTER BANK Plc NASSAU BRANCH By /s/ Jordan R. Fragiacomo -------------------------- Title: Vice President $25,000,000 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ Joanna M. Solowski -------------------------- Title: Vice President By /s/ W. Jeffrey Vollack -------------------------- Title: Vice President, Manager 74 $25,000,000 THE SUMITOMO BANK, LIMITED By /s/ Y. Kawamura -------------------------- Title: Joint General Manager - ----------------- Total Commitments $1,000,000,000 ============== 75 CHEMICAL BANK, as Agent By /s/ Karen M. Sharf -------------------------- Title: Vice President 270 Park Avenue New York, New York 10017 Telex: 129100 Facsimile: (212) 270-7138 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ Penelope J.B. Cox -------------------------- Title: Vice President 60 Wall Street New York, New York 10260 Telex: 177615 Facsimile: (212) 648-5018 76 EX-11 5 EXHIBIT 11 ARAMARK CORPORATION AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1) (In thousands, except per share data)
Fiscal Year Ended --------------------------------------------------------------------------------- September 27, September 29, September 30, October 1, October 2, 1996 1995 1994 1993 1992 ------------- ------------- ------------- ---------- ----------- Earnings: Net income $109,470 $93,503 $86,079 $77,132 $67,381 Preferred stock dividends (769) (1,046) (1,337) (883) - -------- ------- ------- ------- ------- Net income available to common stock $108,701 $92,457 $84,742 $76,249 $67,381 ======== ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding (2) 44,318 46,381 46,616 46,133 44,746 Impact of potential exercise opportunities under the ARAMARK Ownership Program 2,670 2,928 3,512 4,873 5,898 -------- ------- ------- ------- ------- Total common and common equivalent shares 46,988 49,309 50,128 51,006 50,644 ======== ======= ======= ======= ======= Fully diluted earnings per common and common equivalent share $2.31 $1.88 $1.69 $1.49 $1.33 ===== ===== ===== ===== =====
(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. (2) Includes Class B plus Class A Common Shares stated on a Class B Common Share Equivalent Basis. EX-12 6 EXHIBIT 12 ARAMARK CORPORATION AND SUBSIDIARIES EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (A) (In thousands)
Fiscal Year Ended ------------------------------------------------------------------------------------ September 27, September 29, September 30, October 1, October 2, 1996 1995 1994 1993 1992 ------------- ------------- ------------- ---------- ---------- Income before income taxes and minority interest $ 179,159 $ 167,577 $ 163,484 $ 143,265 $ 123,723 Fixed charges, excluding capitalized interest 160,740 152,991 150,432 168,158 180,913 Other, net (371) 1,502 (477) 1,222 1,231 --------- --------- --------- --------- --------- Earnings, as adjusted $ 339,528 $ 322,070 $ 313,439 $ 312,645 $ 305,867 ========= ========= ========= ========= ========= Interest expense $ 117,856 $ 111,605 $ 110,040 $ 128,367 $ 141,180 Capitalized interest 414 79 27 47 47 Portion of operating lease rentals representative of interest factor 42,884 41,386 40,392 39,791 39,733 --------- --------- --------- --------- --------- Fixed charges $ 161,154 $ 153,070 $ 150,459 $ 168,205 $ 180,960 ========= ========= ========= ========= ========= Ratio of earnings to fixed charges 2.1x 2.1x 2.1x 1.9x 1.7x ========= ========= ========= ========= =========
(A) 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). EX-21 7 EXHIBIT 21 EXHIBIT 21 DIRECT AND INDIRECT SUBSIDIARIES OF ARAMARK CORPORATION (Companies are incorporated in Delaware unless otherwise indicated) Advertising & Display Services, Inc. ARA RBI, Inc. ARAMARK Advertising Services, Ltd. (PA) ARAMARK Business Dining Services of Texas, Inc. (TX) ARAMARK Cleanroom Services, Inc. ARAMARK Consumer Discount Company (PA) ARAMARK Correctional Services, Inc. ARAMARK Delaware, Inc. ARAMARK Correctional Facility Services, Inc. ARAMARK Educational Group, Inc. ARAMARK Educational Services, Inc. ARAMARK Educational Services of Texas, Inc. (TX) ARAMARK Educational Services of Vermont Inc. (VT) ARAMARK Enterprises, Inc. (DC) ARAMARK Facilities Management, Inc. ARAMARK Facility Services, Inc. (MD) ARAMARK Global Food and Support Services Group, Inc. ARAMARK/Gall's 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. (TX) ARAMARK Healthcare Support Services of the Virgin Islands, Inc. ARAMARK/HMS Company ARAMARK Industrial Services, Inc. ARAMARK Kitty Hawk, Inc. (ID) ARAMARK Convention Services, Inc. (PA) ARAMARK SES Group, Inc. ARAMARK Sports and Entertainment Group, Inc. ARAMARK Sports and Entertainment Services, Inc. ARAMARK Sports and Entertainment Services of Texas, Inc. (TX) ARAMARK Sports and Entertainment Services of Wisconsin, Inc. (WI) ARAMARK Magazine & Book Services, Inc. ARAMARK Marketing Services Group, Inc. ARAMARK Mile High Enterprises, Inc. (CO) ARAMARK Pittsburgh Limited ARAMARK Pittsburgh Stadium Concessions, Inc. (PA) ARAMARK Refreshment Services, Inc. ARAMARK Senior Notes Company ARAMARK Services of Puerto Rico, Inc. Direct and Indirect Domestic Subsidiaries of ARAMARK Corporation (continued) ARAMARK Services, Inc. ARAMARK Services of Kansas, Inc. (KS) ARAMARK Summer Games 1996, Inc. ARAMARK SWV Corporation (WV) ARAMARK Uniform Services Group, Inc. ARAMARK Uniform Services, Inc. ARAMARK Uniform Services II, Inc. (MO) ARAMARK Uniform Services III, inc. (MO) ARAMARK Uniform Manufacturing Company ARAMARK Virginia Sky-Line Co., Inc. (VA) Children's World Learning Centers, Inc. CHS Primary Care, Inc. Coordinated Health Services, Inc. (PA) Correctional Medical Services, Inc. (MO) Correctional Medical Services of Delaware, Inc. Correctional Medical Services of Illinois, Inc. (IL) Crest Uniform Co., Inc. CWLC Brokerage, Inc. (CO) Davre's, Inc. Delsac VI, Inc. Delsac VII, Inc. Delsac VIII, Inc. Delsac X, Inc. (OH) Dragon Wagon, Inc. Fashion-Tex Services, Inc. (CA) Gall's, Inc. H. M. S. Delaware, Inc. H. M. S. Inc. (MA) Harry M. Stevens Holding Corp. (NY) Harry M. Stevens, Inc. (NY) Harry M. Stevens Maintenance Services, Inc. (MD) Harry M. Stevens of New Jersey (NJ) Harry M. Stevens, Inc. of Penn. (PA) Harry M. Stevens Services, Inc. (TX) Landy Textile Rental Services, Inc. (PA) Linen Supply Service, Inc. (IL) Main, Inc. (FL) Meader Distributing Co., Inc. (MN) Medical Claims Management Group, Inc. Mesa Verde Company (CO) Professional Anesthesia Services, Inc. Ranier News, Inc. (WA) Restin, Inc. (CA) 2 Direct and Indirect Domestic Subsidiaries of ARAMARK Corporation (continued) Smithsub, Inc.(VA) Spectrum Cruise Care, Inc. Spectrum Emergency Care, Inc. (MO) Spectrum Emergency Care of Delaware, Inc. Spectrum Emergency Care of New Mexico, Inc. (MO) Spectrum Healthcare of Delaware, Inc. Spectrum Healthcare Resources, Inc. Spectrum Healthcare Resources of Delaware, Inc. Spectrum Healthcare Services, Inc. Spectrum Pharmacy Services, Inc. Spectrum Primary Care, Inc. Spectrum Primary Care of Delaware, Inc. Stevens California Enterprises (CA) Stevens Venture Corp. Texas Stevens, Inc. (TX) WearGuard Corporation Woodhaven Foods, Inc. (PA) For certain subsidiaries, individuals are the record owners of director's qualifying shares and/or other shares held for regulatory purposes. 3 EX-23 8 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated November 11, 1996 included in this Form 10-K for the fiscal year ended September 27, 1996 into the Company's previously filed Registration Statements on Form S-8, Registration Nos. 33-11818, 33-30879, 33-33329, 33-44002, and 33-57825, and on Form S-3, Registration Nos. 33-47564, 33-52587 and 33-64259. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania November 19, 1996 EX-23 9 EXHIBIT 23.2 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, 33-44002, and 33-57825 and on Form S-3, registration numbers 33-47564, 33-52587, and 33-64259, and in the related Prospectuses, our report dated November 16, 1994, with respect to the consolidated financial statements of Versa Services Ltd. for the fifty-two week period ended September 28, 1994, such report included in the Annual Report on Form 10-K of ARAMARK Corporation for the year ended September 27, 1996 filed with the Securities and Exchange Commission. Mississauga, Canada ERNST & YOUNG November 18, 1996 Chartered Accountants EX-24 10 EXHIBIT 24 EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Joseph Neubauer ------------------------------- Joseph Neubauer EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Robert J. Callander ----------------------- Robert J. Callander EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Alan K. Campbell ---------------------- Alan K. Campbell EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Ronald R. Davenport -------------------------- Ronald R. Davenport EXHIBIT 24 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 27, 1996, 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 11, 1996 /s/ Philip L. Defliese ----------------------------- Philip L. Defliese EXHIBIT 24 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 27, 1996, 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 11, 1996 /s/ Lee F. Driscoll, Jr. ------------------------ Lee F. Driscoll, Jr. EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Mitchell S. Fromstein ------------------------------ Mitchell S. Fromstein EXHIBIT 24 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 27, 1996, 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 11, 1996 /s/ Edward G. Jordan -------------------- Edward G. Jordan EXHIBIT 24 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 27, 1996, 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: November12, 1996 /s/ Thomas H. Kean ------------------ Thomas H. Kean EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ Reynold C. MacDonald ------------------------ Reynold C. MacDonald EXHIBIT 24 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 27, 1996, 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 12, 1996 /s/ James E. Preston --------------------- James E. Preston EX-27 11 FINANCIAL DATA SCHEDULE
5 0000757523 ARAMARK CORPORATION AND SUBSIDIARIES 1,000 YEAR SEP-27-1996 SEP-30-1995 SEP-27-1996 25,283 0 576,447 16,351 316,043 985,750 1,594,962 770,327 2,830,770 963,841 1,321,865 0 0 247 295,954 2,830,770 0 6,122,500 0 5,565,038 182,785 6,875 116,014 179,159 66,931 112,228 0 (2,758) 0 109,470 $2.31 $2.31
-----END PRIVACY-ENHANCED MESSAGE-----