-----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, AiIOCKubsIEEKjRogCXuvPFkXsKBWrIs+UjgLszBQMWsaUr/vR4zpL50k75Vsaph Dxx5IpRHs+qc6sQZ8GSTOg== 0000950116-99-002208.txt : 19991125 0000950116-99-002208.hdr.sgml : 19991125 ACCESSION NUMBER: 0000950116-99-002208 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991001 FILED AS OF DATE: 19991124 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: 0927 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08827 FILM NUMBER: 99764337 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 October 1, 1999 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: $1.1 billion
Common stock outstanding at October 29, 1999: Class A Common Stock 2,667,136 shares Class B Common Stock 65,199,321 shares
Documents incorporated by reference: Portions of the registrant's Proxy Statement for the 2000 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 1 Item 1. Business Description of Business Segments The Company is engaged in providing or managing services, including food and support services, in the United States and internationally, rental of uniform and career apparel, direct marketing of uniform and career apparel and educational resources. 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 derives most of its sales from services provided in the United States. The Company's international services, primarily the management of food and support services, are provided in Belgium, Canada, the Czech Republic, Germany, Hungary, Japan, Korea, Mexico, Spain and the United Kingdom. For financial reporting purposes, the Company is comprised of five operating business segments. 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 - United States The Company provides food, refreshment, specialized dietary and support services (including facility maintenance and housekeeping) to businesses, and to educational, governmental and healthcare institutions. Food, lodging and merchandise services are also provided at sports and entertainment facilities such as convention centers, stadiums, parks, arenas and other recreational facilities. Food, refreshment, specialized dietary and support services are operated at customer locations generally under contracts of indefinite duration, which may be subject to termination by either party. However, food and related services at sports and entertainment facilities generally are for fixed contract terms well in excess of one year. The Company's food and support services are performed under various financial arrangements including management-fee and profit-and-loss based agreements. At most customer food service locations, the equipment and facilities used in providing these services are owned by the customer. Vending machines and related equipment, however, are generally owned by the Company. At most sports and entertainment facilities, the equipment is owned by the Company. There is a high level of competition in the food and support services business from local, regional and national companies as well as from businesses 2 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, 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. Food and Support Services - International The Company provides food, refreshment, specialized dietary and support services (including facility maintenance and housekeeping) to businesses, and to educational, governmental and healthcare institutions. Food services are also provided at sports and entertainment facilities, such as stadiums, arenas, and fairgrounds. Food, refreshment, specialized dietary and support services are operated at customer locations generally under contracts of varying duration. Food and related services at sports and entertainment facilities generally are for fixed contract terms well in excess of one year. The Company's food and support services are performed under various financial arrangements including management-fee and profit-and-loss based agreements. 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 are generally owned by the Company, except in the United Kingdom where that equipment is generally owned by the customer. At most sports and entertainment facilities, the equipment is owned by the Company. There is a high level of competition in the food and support services business from numerous companies within each country, 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 Belgium, Canada, Germany, Spain and the United Kingdom, but that its volume of such business is small in relation to the total market. Uniform and Career Apparel - Rental The Company rents, sells, cleans, maintains and delivers personalized uniform and career 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. Service contracts for the rental and laundering of work apparel and other textile items are for well in excess of one year and typically for an initial term of three to five years. The uniform rental service business is highly competitive in the areas in which the Company operates, with numerous competitors in each major operating 3 area. Although no one uniform rental services company is predominant in this industry, the Company believes that it is a significant competitor. The significant competitive factors in the uniform and career apparel business are the quality of services provided to customers and the prices charged for such services. Uniform and Career Apparel - Direct Marketing The Company is one of the largest direct marketers of personalized uniforms, career apparel and related items and public safety equipment in the United States. The direct marketing business is generally conducted under an invoice arrangement with customers. Competition in the direct marketing of work clothing, career apparel and public safety equipment 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 direct marketing of uniform and career apparel are the quality of services provided to customers and the prices charged for such services. See note 10 to the consolidated financial statements for information relating to the seasonal nature of this business. Educational Resources The Company provides infant, toddler, pre-school, and school-age learning programs. The Company operates community-based child care centers, before and after school programs on the premises of elementary schools, private elementary schools, and employer on-site child care centers. These services are provided to, and are primarily paid for on a weekly or monthly basis directly by individual families under short-term agreements. The Company leases a significant number of its facilities under long-term arrangements. The Company believes it is a significant provider of educational and child care services in the United States. Competition in all phases of this business segment is from both national and local providers of educational services as well as from private and public institutions which provide for their own educational services. Significant competitive factors in the Company's educational services business are the quality of care, reputation, physical appearance of facilities, the types of programs offered to the users of these services and the prices charged for such services. General The Company employs approximately 114,000 persons, both full and part time in the United States, and approximately 38,000 employees internationally. Approximately 27,000 employees in the United States are represented by various labor unions. The Company believes it recognizes benefits from its corporate name recognition. Nonetheless, consistent with its businesses, the Company does not have any material trademarks or patents, and its research and development expenditures are not material in amount. Although the Company pursues strategies 4 to increase the number and scope of the services it provides to existing customers, no single customer of the Company accounts for more than 5% of its sales. While the Company focuses its purchasing on selected suppliers and vendors to realize pricing, quality and service benefits, generally, all materials and services that the Company purchases are available from more than one supplier, and the loss of any supplier would not have a material impact on the Company's results of operations. The Company's businesses are subject to various governmental environmental regulations, and the Company has adopted policies designed to comply with such regulations. Such compliance has not had a material impact on the Company's capital expenditures, earnings or competitive position. 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 segments and laundry equipment used by the Uniform and Career Apparel - Rental segment. The vehicles include automobiles and delivery trucks used in the Food and Support Services and Uniform and Career Apparel - Rental segments, and automobiles, vans and small buses used in the Educational Resources segment. The service equipment and fixtures represent 57% of the net book value of all fixed assets as of October 1, 1999. The Company's real estate is comprised of educational and childcare 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 the Uniform and Career Apparel 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. 5 Item 4A. Directors and Executive Officers of the Registrant
Directors: Name Principal Occupation - ---- -------------------- Joseph Neubauer...................................... Chairman and Chief Executive Officer ARAMARK Corporation James E. Ksansnak.................................... Vice Chairman, ARAMARK Corporation Lawrence T. Babbio, Jr............................... President and Chief Operating Officer Bell Atlantic Corporation Patricia C. Barron................................... Clinical Associate Professor, Leonard N. Stern School of Business New York University Robert J. Callander.................................. Executive-in-Residence, Columbia University Retired Vice Chairman, Chemical Banking Corporation Ronald R. Davenport.................................. Chairman, Sheridan Broadcasting Corporation Lee F. Driscoll, Jr.................................. Corporate Director Mitchell S. Fromstein................................ Chairman Emeritus, 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 James E. Preston..................................... Retired Chairman, Avon Products, Inc. Officers: Officer Name (Age as of November 1, 1999) Office Held Since - ----------------------------------- ------------ ----- Joseph Neubauer (58)................................. Chairman and Director................................ 1979 James E. Ksansnak (59)............................... Vice Chairman and Director........................... 1986 William Leonard (51)................................. President............................................ 1992 Charles E. Kiernan (54).............................. Executive Vice President............................. 1998 Brian G. Mulvaney (43)............................... Executive Vice President............................. 1993 Martin W. Spector (61)............................... Executive Vice President, General Counsel and Secretary........................ 1976 L. Frederick Sutherland (47)......................... Executive Vice President and Chief Financial Officer.............................. 1983 Barbara A. Austell (46).............................. Senior Vice President and Treasurer........................................ 1996 Alan J. Griffith (45)................................ Vice President, Controller and Chief Accounting Officer............................. 1994 Dean E. Hill (48).................................... Vice President....................................... 1993 Michael R. Murphy (42)................................ Director of Audit and Controls....................... 1995 Donald S. Morton (51)................................ Assistant Secretary and Associate General Counsel............................ 1985 Richard M. Thon (44)................................. Assistant Treasurer.................................. 1994
6 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. Ksansnak was elected vice chairman of the Company in May 1997. From February 1991 to May 1997 he was executive vice president of the Company and chief financial officer from May 1986 to May 1997. Mr. Leonard has been president and chief operating officer of the Company since May 1997. He was executive vice president of the Company from May 1992 until May 1997. Mr. Kiernan was elected executive vice president of the Company in October 1998. Between 1994 and 1997 he was president and chief operating officer of Duracell International, Inc. and then was a private consultant. Mr. Mulvaney was elected executive vice president of the Company in August 1996. He was senior vice president of the Company from February 1995 to August 1996 and vice president from February 1993 to February 1995. Mr. Sutherland became chief financial officer of the Company in May 1997. He was elected executive vice president in May 1993. 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. Griffith was elected vice president of the Company in February 1995. In December 1993 he became controller and chief accounting officer. Mr. Murphy became director of audit and controls in September 1995. He joined the Company as senior audit manager in January 1993. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters There are currently approximately 2800 record holders of Class B common stock of the Company, all of whom are or were employees or directors of the Company (or members of their families or trusts created by them). There are currently 190 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. The Company has not paid a cash dividend during the last two fiscal years. From time to time, the Board of Directors may consider paying cash dividends in the future, based upon the Company's circumstances at that time. 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 ----------------------------------------------------------------- 1999 1998 1997(1) 1996 1995 ---- ---- ------- ---- ---- (in millions, except per share amounts and ratios) Income Statement Data: Sales (2).......................................... $6,718.4 $6,615.7 $6,555.6 $6,353.8 $5,828.2 Earnings before depreciation and amortization, interest, and income taxes........ 568.9 528.9 523.6 478.0 433.9 Earnings before interest and income taxes (3)............................ 375.2 333.1 331.8 295.2 277.0 Interest expense, net.............................. 135.8 117.3 116.0 116.0 109.4 Income before extraordinary item (4)............... 150.2 133.7 146.1 112.2 100.2 Net income......................................... 150.2 129.2 146.1 109.5 93.5 Earnings per share: (5) Income before extraordinary item: (4) Basic...................................... $1.59 $1.17 $1.16 $.84 $.71 Diluted.................................... 1.48 1.10 1.10 .79 .67 Net Income: Basic...................................... 1.59 1.14 1.16 .82 .66 Diluted.................................... 1.48 1.06 1.10 .77 .63 Ratio of earnings to fixed charges (6)............. 2.2x 2.3x 2.3x 2.1x 2.1x Balance Sheet Data (at period end): Total assets....................................... $2,870.5 $2,741.3 $2,753.6 $2,844.8 $2,643.3 Long-term borrowings: (7) Senior.......................................... 1,583.0 1,678.3 1,084.9 1,160.8 1,109.4 Subordinated ................................... 26.7 26.7 129.0 161.2 165.4 Common stock subject to potential repurchase (8).................................. 20.0 20.0 23.3 18.6 19.1 Shareholders' equity (deficit) (9)................. 126.6 (78.9) 370.0 296.2 252.3
- ---------------- (1) Fiscal 1997 is a fifty-three week period. See note 1 to the consolidated financial statements. (2) See note 1 to the consolidated financial statements. (3) See note 2 to the consolidated financial statements. (4) See note 3 to the consolidated financial statements. (5) Fiscal 1995 through 1997 earnings per share amounts have been restated to reflect the 3 for 1 stock split effective on September 1, 1998 and the adoption of Statement of Financial Accounting Standards No. 128, "Earnings per Share" which was effective beginning in fiscal 1998. See notes 1 and 7 to the consolidated financial statements. (6) 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). (7) See note 4 to the consolidated financial statements. (8) See note 7 to the consolidated financial statements. (9) 1998 reflects the impact of the Common Stock Class A Tender Offer. 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 During fiscal 1999 the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (see note 11 to the consolidated financial statements). Management's discussion and analysis of results of operations for prior years has been revised to conform with the current year segment presentation. Fiscal 1999 Compared to Fiscal 1998 Overview. Sales for the fiscal year ended October 1, 1999 were $6.7 billion, an increase of 2% over fiscal 1998, with increases in all operating segments being partially offset by the impact of the distribution business transaction in fiscal 1998 (see note 2 to the consolidated financial statements). Excluding the impact of the distribution business transaction, sales increased 7% over the prior year. Operating income of $375.2 million increased $42 million or 13% over the prior year. Total Company operating income in fiscal 1998 includes other expense of $5 million as described in note 2 to the consolidated financial statements. Excluding the impact of other expense and the operating results of the distribution business, which are reflected in the Corporate and Other segment, operating income increased 7% over the prior year due to strong performances in the Food and Support Services - United States, Uniform and Career Apparel - Rental, and Educational Resources segments, partially offset by a decline in operating income in the Uniform and Career Apparel - Direct Marketing segment and an increase in costs in the Corporate and Other segment due in part to the impact in 1998 of a gain from the sale of certain assets. Excluding other expense/income, the Company's operating income margin increased to 5.6% from 5.1%, due primarily to the impact of the distribution business transaction noted above. Interest expense increased $18.4 million or 16% over the prior year due primarily to increased debt levels resulting from the impact of the Tender Offer in June 1998 (see note 7 to the consolidated financial statements). Segment Results. Food and Support Services - United States segment sales were 9% higher than the prior year due to increased volume (approximately 5%) and the acquisitions described in note 2 to the consolidated financial statements (approximately 4%). Sales in the Food and Support Services - International segment increased 4% versus the prior year due to new accounts (approximately 3%) and increased volume (approximately 3%), partially offset by the unfavorable impact of foreign currency translation (approximately 2%). Sales in the Uniform and Career Apparel - Rental segment increased 6% over the prior year period due to increased volume. Uniform and Career Apparel - Direct Marketing sales increased 1% over the prior year period due to increased sales of safety equipment and related accessories (approximately 4%) and the impact of the Dyna Corporation acquisition (approximately 2%; see note 2 to the consolidated financial statements), partially offset by a decline in sales of uniforms and career apparel. Educational Resources segment sales increased 11% versus the prior year due to pricing and new locations. Food and Support Services - United States segment operating income increased 14% due to the sales increases noted above and effective cost controls. Food and Support Services - International segment operating income decreased 1% versus the prior year as the impact of the increased volume noted 9 above plus effective cost controls was offset by operating losses at one subsidiary and the unfavorable impact of foreign currency translation. Excluding the impact of the operating losses noted above and foreign currency translation, operating income in the Food and Support Services - International segment increased 19%. Uniform and Career Apparel - Rental segment operating income increased 6% due to the increased volume noted above and gains on disposition of assets, partially offset by costs related to the startup of certain manufacturing operations and the implementation of a new marketing initiative. Operating income in the Uniform and Career Apparel - Direct Marketing segment decreased 62% versus the prior year period due to the decline in sales of uniforms and career apparel noted above, a reduction in gross margin reflecting product mix changes and increased operating costs. Educational Resources segment operating income increased 11% due to the sales growth noted above. Fiscal 1998 Compared to Fiscal 1997 Overview. Sales for the fiscal year ended October 2, 1998 were $6.6 billion, an increase of 1% over fiscal 1997, with increases in all operating segments being partially offset by the impact of the distribution business transaction in fiscal 1998 and the sale of Spectrum in fiscal 1997 (see note 2 to the consolidated financial statements). Excluding the impact of the Spectrum and distribution business transactions, sales increased 5% over the prior year. Operating income of $333.1 million increased $1.3 million over the prior year. Total Company operating income includes other expense of $5 million in fiscal 1998 and other income of $11.7 million in fiscal 1997 as described in note 2 to the consolidated financial statements. Excluding other expense/income and the operating results of Spectrum and the distribution business, operating income increased 7% over the prior year, due to strong performances in the Food and Support Services segments, the Uniform and Career Apparel - Rental segment and the Educational Resources segment, partially offset by a decline in operating income in the Uniform and Career Apparel - Direct Marketing segment. Excluding other expense/income, the Company's operating income margin increased to 5.1% from 4.9%, due primarily to improved cost controls and leveraging of fixed costs. Interest expense increased $1.3 million or 1% over the prior year due primarily to increased debt levels, including the impact of the Tender Offer in June 1998 (see note 7 to the consolidated financial statements). The fiscal 1998 effective tax rate was 38% which includes the favorable impact resulting from the September 1998 settlement of certain prior years' tax returns. The fiscal 1997 effective tax rate of 32% reflects the favorable impact of a permanent difference in the book and tax basis of Spectrum, net of the unfavorable permanent book/tax differences related to certain intangible asset write-offs. Fiscal 1998 net income also includes an extraordinary item for early extinguishment of debt of $4.5 million as described in note 3 to the consolidated financial statements. Segment Results. Food and Support Services - United States segment sales were 5% higher than the prior year due to new accounts (approximately 3%) and increased volume (approximately 2%). Sales in the Food and Support Services - - International segment increased 3% versus the prior year due to new accounts (approximately 5%) and increased volume (approximately 2%), partially offset by the unfavorable impact of foreign currency translation (approximately 4%). Sales in the Uniform and Career Apparel - Rental and Direct Marketing segments increased 4% and 6%, respectively, due to increased volume. Educational Resources segment sales increased 9% over the prior year period due to enrollment growth, pricing and new locations. 10 Food and Support Services - United States segment operating income increased 13% over the prior year period due to the sales increases noted above and effective cost controls. Operating income in the Food and Support Services - International segment increased 27% versus the prior year due to the sales increases noted above and effective cost controls, partially offset by the unfavorable impact of foreign currency translation (approximately 3%). Uniform and Career Apparel - Rental segment operating income increased 5% over the prior year due to the increased sales noted above. Operating income in the Uniform and Career Apparel - Direct Marketing segment decreased 59% as a result of the write down of certain inventory to net realizable value and increased operating costs which were partially offset by the impact of increased volume. Educational Resources segment operating income increased 16% versus the prior year due to the sales increased noted above. Included in the Corporate and Other segment in fiscal 1998 are operating losses of approximately $14 million related to the distribution business and in fiscal 1997 net operating losses of approximately $11 million related to the distribution business and Spectrum (see notes 2 and 11 to the consolidated financial statements). FINANCIAL CONDITION AND LIQUIDITY Cash provided by operating activities was $293 million. Debt decreased by $95 million as cash provided by operating activities exceeded cash used by net investing activities. 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. Currently, the Company has approximately $525 million of unused committed credit availability under its credit facilities. As of October 1, 1999, the Company had capital commitments of approximately $36 million related to several long-term concession contracts. During fiscal 1999, the Company repurchased $8 million of its Class A Common Stock and $28 million of its Class B Common Stock for $29 million in cash and $7 million in installment notes. Additionally, the Company issued $17 million of Class B Common Stock to eligible employees, primarily through the exercise of installment stock purchase opportunities. In the third quarter of fiscal 1999, the Company sold for cash, without recourse, approximately $44 million of notes receivable related to prior employee stock purchases. The sales price approximated book value and the proceeds were used to repay borrowings under the credit facility (see note 7 to the consolidated financial statements). Subsequent to yearend, the Company repurchased 3,159,223 shares of its Class B Common Stock and 157,470 shares of its Class A Common Stock for approximately $40 million in cash and $27 million in installment notes. YEAR 2000 READINESS DISCLOSURE The Year 2000 issue exists because many computer systems and applications currently use two-digit date fields to designate a year. As a result, on or near the change of the century, date-sensitive systems may recognize the Year 2000 as 1900, or not at all, which may cause systems to fail or process financial and operational information incorrectly. For the past three years, the Company has been managing a project to address its Year 2000 issues. The project has addressed three broad areas: (1) internal information technology systems - including financial and operational application systems, computer hardware and systems software; (2) non-information technology systems - such as communication systems, building systems and devices with embedded computer chips; and (3) third party compliance - which addresses 11 Year 2000 compliance efforts of key vendors and suppliers. The project has consisted of the following phases: 1) Organizational awareness - general awareness of Year 2000 issues and ongoing communication of Year 2000 project status. 2) Inventory of current applications. 3) Risk assessment of inventoried systems, with identification of mission-critical systems. 4) Replacement/remediation of systems. 5) Year 2000 testing. 6) Conversion of systems, including rollout of compliant hardware/software to front line locations. 7) Contingency planning. Program management offices, staffed with a combination of business unit personnel and external consultants, were established to address Year 2000 issues. Additionally, a Corporate Compliance Task Force consisting of internal audit, information technology, legal and risk management personnel, with assistance from external consultants, was formed in 1997 to review and monitor the Year 2000 compliance programs. The Task Force has met regularly to review corporate-wide Year 2000 issues and progress. The Company's Year 2000 compliance effort has been monitored by senior management on a regular basis and the Audit and Corporate Practices Committee of the Board of Directors has received progress reports at least quarterly. Internal information technology systems. As of October 31, 1999, the inventory, risk assessment, replacement/remediation and Year 2000 testing phases for all mission-critical systems have been completed. For a few systems, remaining rollout of compliant hardware and software to a relatively small number of frontline locations is expected to continue through November 1999. Based on current status, the Company believes that Year 2000 events caused by the Company's internal financial and operational systems would not have a material adverse impact on the Company's operations or financial condition. Non-information technology systems. The Company has determined that there were only a few mission-critical systems at a limited number of locations with non-compliant date logic. Replacement of these systems is expected to be completed by November 1999. Given the nature and geographic dispersion of the Company's business units, the Company believes that any events caused by Year 2000 failures of non-information technology systems would be short-term in nature and would not have a material adverse impact on the Company's operations or financial condition. Third party compliance. The Company has identified and communicated with key third party suppliers and customers to determine the Company's potential exposure in the event these third parties fail to remediate their own Year 2000 issues. The Company has conducted on site reviews of key suppliers' project status and issues. The Company continues to monitor suppliers' Year 2000 status and has developed contingency plans to address potential third party Year 2000 failures. The basic materials required to operate the Company's businesses are generally available from a number of suppliers, and in the event of an inability of a key supplier to deliver product, the Company believes alternative sources will be available. However, an extended disruption of service by utilities (electric, water, telephone, etc.), key suppliers or financial institutions, while somewhat mitigated by the geographic dispersion of the Company's businesses, could have material adverse impacts on the Company's operations and financial condition. 12 Contingency Plans The Company has contingency plans for computer failures, power outages, natural disasters, etc. Year 2000 contingency plans for mission-critical systems, in the areas discussed above, are being developed or refined and will be integrated with the existing contingency plans where appropriate by December 1999. Costs The Company currently estimates spending approximately $14 million, excluding internal costs, to complete its Year 2000 compliance program, which spending is substantially completed. Year 2000 costs related to systems or equipment replacement are capitalized in accordance with the Company's accounting policies. Year 2000 remediation costs are expensed as incurred. The Company's ability to achieve Year 2000 compliance, the level of costs associated therewith and the resultant impact on operations and financial condition could be adversely impacted by, among other things, the disruption of service by utilities, financial institutions or other key suppliers, or by unanticipated problems identified in the ongoing compliance program. [Space intentionally left blank] 13 Item 7A. Quantitative and Qualitative Disclosure about Market Risk The Company is exposed to the impact of interest rate changes and manages this exposure through the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps. The Company does not enter into contracts for trading purposes and does not use leveraged instruments. The information below summarizes the Company's market risks associated with debt obligations and other significant financial instruments as of October 1, 1999 and October 2, 1998. 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. The information presented below should be read in conjunction with note 4 to the consolidated financial statements. For debt obligations, the table presents principal cash flows and related interest rates by expected fiscal year of maturity. Variable interest rates disclosed represent the weighted-average rates of the portfolio at October 1, 1999 and October 2, 1998, respectively. For interest rate swaps, the table presents the notional amounts and related weighted-average interest rates by fiscal year of maturity. The variable rates presented are the average forward rates for the term of each contract. Expected Fiscal Year of Maturity (US$ equivalent in millions)
There- Fair As of October 1, 1999 2000 2001 2002 2003 2004 after Total Value - --------------------- ---- ---- ---- ---- ---- ----- ----- ----- Debt: Fixed Rate $104 $25 $75 $25 $300(a) $615 (a) $1,144 $1,101 Average Interest Rate 9.3% 6.7% 7.6% 6.8% 6.8% 7.5% 7.4% Variable Rate $25 $36 $4 $425 $490 $490 Average Interest Rate 5.8% 5.5% 6.6% 6.2% 6.2% Interest Rate Swaps: Receive Variable/Pay Fixed $75 $50 -- Average pay rate 6.1% 6.2% Average receive rate 5.8% 6.2% (a) Each balance includes $300 million of senior notes callable by the Company at any time. There- Fair As of October 2, 1998 1999 2000 2001 2002 2003 after Total Value - --------------------- ---- ---- ---- ---- ---- ----- ----- ----- Debt: Fixed Rate $104 $25 $75 $25 $985 (a) $1,214 $1,277 Average Interest Rate 9.3% 6.8% 7.6% 6.8% 7.3% 7.5% Variable Rate $24 $5 $32 $455 $516 $516 Average Interest Rate 6.0% 6.0% 6.3% 6.2% 6.2% Interest Rate Swaps: Receive Variable/Pay Fixed $69 $75 $75 $(4) Average pay rate 5.7% 6.1% 6.0% Average receive rate 5.1% 4.9% 4.7% (a) Balance includes $600 million of senior notes callable by the Company at any time.
14 The Company uses foreign currency debt as a hedge for its investment in foreign subsidiaries. The tables above for fiscal 1999 and 1998 include $60 million of debt denominated in the functional currency of the Company's various subsidiaries, primarily the Canadian dollar and the German deutschemark. 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 Section titled "Election of Directors" in the registrant's Proxy Statement for its annual meeting of stockholders, 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. Item 15. Cautionary Statement regarding Forward-Looking Statements Certain statements made in this Form 10-K are forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those discussed herein at Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition". 15 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 24, 1999 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 24, 1999. Signature Title Joseph Neubauer Chairman and Director - ------------------------------ (Principal Executive Officer) Joseph Neubauer L. Frederick Sutherland Executive Vice President - ------------------------------ (Principal Financial Officer) L. Frederick Sutherland Alan J. Griffith Vice President, Controller - ------------------------------ and Chief Accounting Officer Alan J. Griffith (Principal Accounting Officer) Lawrence T. Babbio, Jr. Patricia C. Barron Robert J. Callander Ronald R. Davenport Lee F. Driscoll, Jr. Directors Mitchell S. Fromstein Edward G. Jordan Thomas H. Kean James E. Ksansnak James E. Preston Martin W. Spector - ------------------------------ Martin W. Spector Attorney-in-Fact ARAMARK CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Page ---- Report of Independent Public Accountants S-1 Consolidated Balance Sheets: As of October 1, 1999 and October 2, 1998 S-2 Consolidated Statements of Income: Fiscal Years 1999, 1998 and 1997 S-4 Consolidated Statements of Cash Flows: Fiscal Years 1999, 1998 and 1997 S-5 Consolidated Statements of Shareholders' Equity: Fiscal Years 1999, 1998 and 1997 S-6 Notes to Consolidated Financial Statements S-9 Consolidated Supporting Schedules Filed: Schedule Number - -------- I Condensed Financial Information of Registrant S-27 II Valuation and Qualifying Accounts and Reserves S-31 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. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To ARAMARK Corporation: We have audited the accompanying consolidated balance sheets of ARAMARK Corporation (a Delaware corporation) and subsidiaries as of October 1, 1999 and October 2, 1998, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended October 1, 1999. 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 conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ARAMARK Corporation and subsidiaries as of October 1, 1999 and October 2, 1998, and the results of their operations and their cash flows for each of the three fiscal years in the period ended October 1, 1999, 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. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania November 8, 1999 S-1 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 1, 1999 and October 2, 1998 (dollars in thousands, except share amounts)
- ----------------------------------------------------------------------------------------------------------------------------- 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 27,690 $ 20,614 Receivables (less allowances: 1999, $22,496 578,393 526,506 1998, $24,457) Inventories 369,791 361,451 Prepayments and other current assets 68,492 60,734 - ----------------------------------------------------------------------------------------------------------------------------- Total current assets 1,044,366 969,305 - ----------------------------------------------------------------------------------------------------------------------------- Property and Equipment, at Cost: Land, buildings and improvements 610,777 526,888 Service equipment and fixtures 1,272,322 1,212,369 Leased property under capital leases 6,857 8,958 - ----------------------------------------------------------------------------------------------------------------------------- 1,889,956 1,748,215 Less-Accumulated depreciation 956,241 873,822 - ----------------------------------------------------------------------------------------------------------------------------- 933,715 874,393 - ----------------------------------------------------------------------------------------------------------------------------- Goodwill 603,017 603,937 - ----------------------------------------------------------------------------------------------------------------------------- Other Assets 289,445 293,664 - ----------------------------------------------------------------------------------------------------------------------------- $2,870,543 $2,741,299 - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. S-2 ARAMARK CORPORATION AND SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------------- 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term borrowings $ 24,761 $ 24,560 Accounts payable 387,127 373,696 Accrued payroll and related expenses 182,056 174,710 Other accrued expenses and current liabilities 331,809 327,772 - ----------------------------------------------------------------------------------------------------------------------------- Total current liabilities 925,753 900,738 - ----------------------------------------------------------------------------------------------------------------------------- Long-Term Borrowings: Senior 1,606,671 1,701,125 Subordinated 26,689 26,689 Obligations under capital leases 1,060 1,795 - ----------------------------------------------------------------------------------------------------------------------------- 1,634,420 1,729,609 Less-current portion 24,761 24,560 - ----------------------------------------------------------------------------------------------------------------------------- Total long-term borrowings 1,609,659 1,705,049 - ----------------------------------------------------------------------------------------------------------------------------- Deferred Income Taxes and Other Noncurrent Liabilities 188,560 194,388 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 20,000 20,000 Shareholders' Equity/(Deficit) Excluding Common Stock Subject to Repurchase: Class A common stock, par value $.01; authorized: 25,000,000 shares; issued: 1999 - 2,719,453 shares; 1998 -2,516,081 shares 27 25 Class B common stock, par value $.01; authorized: 150,000,000 shares; issued: 1999 - 65,569,596 shares; 1998 - 62,927,645 shares 656 629 Capital surplus 57,356 - Earnings retained for use in the business 93,376 (56,815) Accumulated other comprehensive income (loss) (4,844) (2,715) Impact of potential repurchase feature of common stock (20,000) (20,000) - ----------------------------------------------------------------------------------------------------------------------------- Total 126,571 (78,876) - ----------------------------------------------------------------------------------------------------------------------------- $2,870,543 $2,741,299 - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. S-3 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Fiscal Years Ended October 1, 1999, October 2, 1998 and October 3, 1997 (dollars in thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Sales $6,718,426 $ 6,615,749 $ 6,555,608 - ------------------------------------------------------------------------------------------------------------------------------------ Costs and Expenses: Cost of services provided 6,063,594 5,999,170 5,960,593 Depreciation and amortization 193,703 195,770 191,732 Selling and general corporate expense 85,963 82,680 83,079 Other expense (income), net - 5,000 (11,655) - ------------------------------------------------------------------------------------------------------------------------------------ 6,343,260 6,282,620 6,223,749 - ------------------------------------------------------------------------------------------------------------------------------------ Operating income 375,166 333,129 331,859 Interest Expense, net 135,753 117,357 116,012 - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 239,413 215,772 215,847 Provision For Income Taxes 89,222 82,062 69,739 - ------------------------------------------------------------------------------------------------------------------------------------ Income Before Extraordinary Item 150,191 133,710 146,108 Extraordinary Item Due to Early Extinguishment of Debt (net of income taxes of $2,982) - 4,474 - - ------------------------------------------------------------------------------------------------------------------------------------ Net Income $ 150,191 $ 129,236 $ 146,108 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings Per Share: Income before extraordinary item Basic $1.59 $1.17 $1.16 Diluted $1.48 $1.10 $1.10 Net income Basic $1.59 $1.14 $1.16 Diluted $1.48 $1.06 $1.10 - ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. S-4 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Fiscal Years Ended October 1, 1999, October 2, 1998 and October 3, 1997 (in thousands)
1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $150,191 $129,236 $146,108 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 193,703 195,770 191,732 Income taxes deferred 10,845 11,542 (11,049) Extraordinary item - 4,474 - Changes in noncash working capital: Receivables (47,599) (51,743) (19,934) Inventories (1,951) (9,240) (32,428) Prepayments (1,922) (754) (5,740) Accounts payable (10,095) (49,943) (61,348) Accrued expenses 25,371 60,905 48,364 Changes in other noncurrent liabilities (3,319) (3,914) (1,651) Changes in other assets (8,429) (8,934) (9,727) Other, net (13,635) (695) (14,261) - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 293,160 276,704 230,066 - ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (207,223) (164,286) (197,835) Disposals of property and equipment 23,999 22,204 27,641 Sale of investments 40,722 5,779 9,284 Divestiture of certain businesses 8,380 31,116 119,152 Acquisition of certain businesses: Working capital other than cash acquired (1,742) 9,550 (74) Property and equipment (20,325) (17,309) (4,163) Additions to intangibles and other assets (40,672) (35,199) (5,688) Other (19,318) (41,452) (8,020) - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (216,179) (189,597) (59,703) - ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from additional long-term borrowings 4,855 658,820 127,323 Payment of long-term borrowings including premiums (106,744) (167,942) (242,944) Proceeds from issuance of common stock 60,731 22,303 14,338 Repurchase of common stock (28,563) (591,535) (65,463) Other (184) (15,491) (1,548) - ---------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (69,905) (93,845) (168,294) - ---------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 7,076 (6,738) 2,069 Cash and cash equivalents, beginning of year 20,614 27,352 25,283 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 27,690 $ 20,614 $ 27,352 ================================================================================================================
The accompanying notes are an integral part of these financial statements. S-5 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEAR ENDED OCTOBER 1, 1999 (in thousands)
Impact of Potential Accumulated Class A Class B Repurchase Other Common Common Capital Retained Feature of Comprehensive Stock Stock Surplus Earnings Common Stock Income (Loss) Total ----------- --------- ------- -------- ------------ -------------- -------- Balance, October 2, 1998 $25 $629 $ - $(56,815) $(20,000) $(2,715) $(78,876) Net income 150,191 150,191 Foreign currency translation adjustments (2,129) (2,129) -------- Total comprehensive income 148,062 -------- Issuance of Class A common stock to employee benefit plans 1 14,506 14,507 Conversion of Class B to Class A 2 (18) 16 - Issuance of Class B common stock 61 35,623 35,684 Sale of deferred payment obligations 44,172 44,172 Retirement of common stock (1) (16) (36,961) (36,978) --- ---- ------- ------- -------- ------- -------- Balance, October 1, 1999 $27 $656 $57,356 $93,376 $(20,000) $(4,844) $126,571 === ==== ======= ======= ======== ======= ========
The accompanying notes are an integral part of these financial statements. S-6 ARAMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEAR ENDED OCTOBER 2, 1998 (in thousands)
Impact of Potential Accumulated Class A Class B Repurchase Other Common Common Capital Retained Feature of Comprehensive Stock Stock Surplus Earnings Common Stock Income (Loss) Total -------- -------- ------- -------- ------------ ------------- --------- Balance, October 3, 1997 $20 $205 $ - $391,443 $(23,254) $1,633 $370,047 Net income 129,236 129,236 Foreign currency translation adjustments (1,701) (1,701) Change in unrealized gain on available for sale investments (2,647) (2,647) -------- Total comprehensive income 124,888 -------- Issuance of Class A common stock to employee benefit plans 397 397 Issuance of Class B common stock 25 38,975 39,000 Retirement of common stock (12) (23) (39,372) (577,055) (616,462) Common stock split 17 422 (439) - Change during the period 3,254 3,254 --- ---- ------- -------- -------- ------- -------- Balance, October 2, 1998 $25 $629 $ - $(56,815) $(20,000) $(2,715) $(78,876) === ==== ======= ======== ======== ======= ========
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 OCTOBER 3, 1997 (in thousands)
Impact of Potential Accumulated Class A Class B Repurchase Other Common Common Capital Retained Feature of Comprehensive Stock Stock Surplus Earnings Common Stock Income (Loss) Total -------- -------- ------- -------- ------------ ------------- --------- Balance, September 27, 1996 $20 $227 $ - $309,437 $(18,614) $5,131 $296,201 Net income 146,108 146,108 Foreign currency translation adjustments (6,145) (6,145) Change in unrealized gain on available for sale investments 2,647 2,647 -------- Total comprehensive income 142,610 -------- Issuance of Class A common stock to employee benefit plans 384 384 Issuance of Class B common stock 24 25,025 25,049 Retirement of common stock (46) (25,409) (64,102) (89,557) Change during the period (4,640) (4,640) --- ---- ------- -------- -------- ------- -------- Balance, October 3, 1997 $20 $205 $ - $391,443 $(23,254) $ 1,633 $370,047 === ==== ======= ======== ======== ======= ========
The accompanying notes are an integral part of these financial statements. S-8 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 October 1, 1999, October 2, 1998 and October 3, 1997 are fifty-two, fifty-two and fifty-three week periods, respectively. PRINCIPLES OF CONSOLIDATION, ETC. The consolidated financial statements include the accounts of the Company and all its subsidiaries. All significant intercompany balances and transactions have been eliminated. At fiscal 1999 yearend, the Company reclassified its reporting of the reimbursement of direct costs under management fee contracts to an element of sales rather than a reduction of the related expense item. The change in classification, which was made to conform more closely to industry practice, is not a change in revenue recognition policy and has no effect on pre-tax or net income. Prior year amounts have been reclassified to conform with the fiscal 1999 presentation. In fiscal 2000, the Company is required to adopt Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 will not have a material effect on the consolidated financial statements. In fiscal 2001, the Company is required to adopt Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Company is currently assessing the impact of this statement. 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. COMPREHENSIVE INCOME In the first quarter of fiscal 1999, the Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income". Comprehensive income includes all changes to shareholders' equity during a period, except those resulting from investments by and distributions to shareholders. The components of comprehensive income are shown in the Consolidated Statements of Shareholders' Equity. CURRENCY TRANSLATION Gains and losses resulting from the translation of financial statements of non-U.S. subsidiaries are reflected as a component of comprehensive income in shareholders' equity. Currency transaction gains and losses included in operating results for fiscal 1999, 1998 and 1997 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. S-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) CURRENT ASSETS (Continued) Inventories are valued at the lower of cost (principally the first-in, first-out method) or market. The LIFO (last-in, first-out) method of determining cost is used to value directly marketed career apparel and public safety clothing and equipment. The stated value of inventories determined using the LIFO method is not significantly different from replacement or current cost. Personalized work apparel and linens in service are recorded at cost and are amortized over their estimated useful lives, approximately two years. The components of inventories are as follows: 1999 1998 - ------------------------------------------------------------------------------- Food 25.8% 22.0% Career apparel, safety equipment and linens 69.0% 70.3% Parts, supplies and novelties 5.2% 7.7% - ------------------------------------------------------------------------------- 100.0% 100.0% - ------------------------------------------------------------------------------- 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 1999, 1998 and 1997 was $146.7 million $144.3 million and $136.1 million, respectively. GOODWILL Goodwill, which represents the excess of cost over fair value of the net assets of acquired businesses, is being amortized on a straight-line basis principally over 40 years. The Company develops operating income projections for each of its lines of business and evaluates the recoverability and amortization period of goodwill using these projections. In fiscal 1997, the Company wrote off certain intangible assets as discussed in Note 2. Based upon management's current assessment, the estimated remaining amortization period of goodwill is appropriate and the remaining balance is fully recoverable. Accumulated amortization at October 1, 1999 and October 2, 1998 was $199.3 million and $181.2 million, respectively. OTHER ASSETS Other assets consist primarily of investments in 50% or less owned entities, contract rights, customer lists, computer software costs, and long-term receivables. Investments in which the Company owns more than 20% but less than a majority are accounted for using the equity method. Investments in which the Company owns less than 20% are accounted for under the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" or the cost method, as applicable. Contract rights and customer lists are being amortized on a straight-line basis over the expected period of benefit, 3 to 20 years. S-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) OTHER LIABILITIES Other noncurrent liabilities consist primarily of deferred compensation, insurance accruals, deferred gains arising from sale and leaseback transactions and subordinated installment notes arising from repurchases of common stock. The Company is self-insured for a limited portion of the risk retained under its general liability and workers' compensation arrangements. Self-insurance reserves are determined based on actuarial analyses. The self-insurance reserves for workers' compensation insurance are accrued on a present value basis using a discount rate which approximates a risk-free rate. EARNINGS PER SHARE Earnings per share is reported on a Common Stock, Class B equivalent basis (which reflects Common Stock, Class A shares converted to a Class B basis, ten for one -- see Note 7). Basic earnings per share is based on the weighted average number of common shares outstanding during the respective periods. Diluted earnings per share is based on 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. Earnings applicable to common stock and common shares utilized in the calculation of basic and diluted earnings per share are as follows:
1999 1998 1997 ------ ------ ------ (in thousands, except per share data) Earnings: Earnings available to common stock before extraordinary item $150,191 $133,710 $146,108 -------- -------- -------- Shares: Weighted average number of common shares outstanding used in basic earnings per share calculation 94,197 113,859 125,625 Impact of potential exercise opportunities under the ARAMARK Ownership Plan 7,275 8,096 6,813 -------- -------- -------- Total common shares used in diluted earnings per share calculation 101,472 121,955 132,438 ======= ======= ======= Basic earnings per common share $1.59 $1.17 $1.16 ===== ===== ===== Diluted earnings per common share $1.48 $1.10 $1.10 ===== ===== =====
S-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) SUPPLEMENTAL CASH FLOW INFORMATION 1999 1998 1997 ---- ---- ---- (in millions) Interest Paid $131.4 $109.5 $106.4 Income Taxes Paid $70.5 $54.9 $63.0 Significant noncash investing and financing activities are as follows: o During fiscal 1999, 1998 and 1997, the Company contributed $14.5 million, $0.4 million and $0.4 million, respectively, of Class A Common Stock to its employee benefit plans to fund previously accrued obligations. In addition, during fiscal 1999, 1998 and 1997, the Company contributed $2.0 million, $1.9 million and $2.3 million, respectively, of stock units to its stock unit retirement plan in satisfaction of its accrued obligations. See Note 5. o During fiscal 1998, the Company contributed assets and liabilities with a net book value of $14 million into a newly formed joint venture. See Note 2. o During fiscal 1999, 1998 and 1997, the Company received $16.7 million, $14.9 million and $10.5 million, respectively, of employee notes under its Deferred Payment program as partial consideration for the issuance of Common Stock, Class B. Also, during fiscal 1999, 1998 and 1997, the Company issued installment notes of $6.7 million, $18.4 million and $21.9 million, respectively, as partial consideration for repurchases of Common Stock. See Note 7. NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: During the second quarter of fiscal 1999, the Company acquired Restaura, Inc., a provider of food and support services, and Dyna Corporation, a leading distributor of emergency medical supplies for approximately $46 million and $13 million in cash, respectively. The acquisitions were accounted for under the purchase method of accounting. The Company's pro forma results from operations for fiscal 1999 and 1998 would not have been materially different assuming the acquisitions had occurred at the beginning of the respective periods. In the fourth quarter of fiscal 1998, the Company formed a joint venture between its magazine and book distribution business and another leading magazine and book wholesaler, Anderson News Corporation. The Company contributed substantially all of its magazine and book distribution business assets and liabilities in exchange for a minority interest in the venture. In connection with the transaction, the Company recorded a $5 million pre-tax charge, which is reflected as "Other expense/income" in the accompanying consolidated statements of income. The Company accounts for its interest in the venture on the cost basis. S-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: (Continued) During the fourth quarter of fiscal 1998, the Company acquired Facilities Resource Management Co., a provider of energy and facilities management consulting services, for approximately $20 million in cash and common stock. The acquisition was accounted for under the purchase method of accounting. The Company's pro forma results of operations for fiscal 1998 and 1997 would not have been materially different assuming the acquisition had occurred at the beginning of the respective periods. In the second quarter of fiscal 1997, the Company sold an approximate 83% interest in its Spectrum Healthcare Services, Inc. subsidiary (Spectrum). Total consideration was approximately $158 million and included cash ($125 million), notes and a warrant. The transaction resulted in a pre-tax gain of $72.4 million, net of transaction costs and reserves established for indemnification of certain matters related to insurance, legal and other matters ($20 million), and is included in "Other expense/income" in the accompanying consolidated statements of income. No income taxes were provided on the gain due to permanent differences in the underlying book and tax basis of Spectrum. Also reflected in other expense/income in fiscal 1997 are pre-tax charges of $69.8 million, primarily to write off certain intangible assets in the Food and Support Services segments and the magazine and book distribution business. These charges were partially offset by a gain of $9.1 million on the sale of an investment in Brylane, Inc., acquired in connection with a fiscal 1996 divestiture. The amount of the fiscal 1997 charges applicable to the Food and Support Services - United States segment was approximately $9 million, to reduce certain assets to net realizable value. The amount of the fiscal 1997 charges applicable to the Food and Support Services - International segment was approximately $21 million due primarily to recognize an impairment of goodwill in a European operation. The goodwill impairment was determined based on a discounted cash flow basis. The amount of the fiscal 1997 charges related to the Uniform and Career Apparel - Rental segment was approximately $6 million related primarily to asset realization. The amount of charges applicable to the magazine and book distribution business was $34 million, reflecting an asset writedown which was determined based on estimates of discounted future cash flows and an impairment loss on operations to be divested, which was determined based on indications of value for those operations. S-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. EXTRAORDINARY ITEM: During fiscal 1998, the Company exercised its option to redeem its $100 million 8.5% subordinated notes at a price of 104.25% of the principal amount and also redeemed a $50 million 8% note due April 2002 for a premium. The resultant extraordinary charge on these transactions was $4.5 million, or $0.04 per share. NOTE 4. BORROWINGS: Long-term borrowings at October 1, 1999 and October 2, 1998 are summarized in the following table: 1999 1998 ------ ------ (in thousands) SENIOR: Credit facility borrowings $425,000 $ 429,300 Canadian credit facility 35,579 31,728 6.75% notes, due August 2004 298,776 298,520 6.79% note, payable in installments through 2003 100,000 125,000 7.00% notes, due July 2006 299,933 299,921 7.10% notes, due December 2006 124,862 124,846 7.25% notes and debentures, due August 2007 32,160 32,160 8% notes, due April 2002 50,000 50,000 8.15% notes, due May 2005 150,000 150,000 10-5/8% notes, due August 2000 50,000 100,000 Other 40,361 59,650 - -------------------------------------------------------------------------------- 1,606,671 1,701,125 - -------------------------------------------------------------------------------- SUBORDINATED: 10% exchangeable debentures and notes, due August 2000 26,689 26,689 OBLIGATIONS UNDER CAPITAL LEASES 1,060 1,795 - -------------------------------------------------------------------------------- 1,634,420 1,729,609 Less-current portion 24,761 24,560 - -------------------------------------------------------------------------------- $1,609,659 $1,705,049 ================================================================================ S-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. BORROWINGS: (Continued) The non-amortizing $1.0 billion revolving credit facility ("Credit Agreement") is provided by a group of banks and matures in March 2005. Interest under the Credit Agreement is based on the Prime Rate, LIBOR plus a spread of .18% to .70% (as of October 1, 1999 - .30%) or the Certificate of Deposit Rate plus a spread of .28% to .80% (as of October 1, 1999 - .40%), at the option of the Company. There is a fee of .10% to .30% (as of October 1, 1999 - .15%) on the entire credit facility. The spread and fee margins are based on certain financial ratios as defined. The non-amortizing C$80 million Canadian revolving credit facility provides for either U.S. dollar or Canadian dollar borrowings and matures in June 2001. Interest on this facility is based on the Canadian Bankers Acceptance Rate, U.S. Prime Rate, Canadian Prime Rate or LIBOR plus a spread of up to 5/8%, as defined. As of October 1, 1999, all borrowings under this facility are payable in Canadian dollars, with a weighted average interest rate of 5.4%. There is a fee of .17% on the entire credit facility. The Company's ARAMARK Educational Resources, Inc. (AER) 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 AER. There is a fee of .20% to .375% (as of October 1, 1999 - .20%) on the unborrowed portion of the credit facility. The spread and fee margins are based on certain financial ratios as defined. As of October 1, 1999 there were no borrowings outstanding under this credit facility. The 6.75% and 7.0% notes may be redeemed, in whole or in part, at any time at the Company's option. The redemption price equals the greater of (i) 100% of the principal amount or (ii) an amount based on the discounted present value of scheduled principal and interest payments, as defined. The 6.79% note is payable in $25 million annual installments, with a final maturity of January 2003. The 7.25% notes and debentures may be exchanged, in whole or in part, at the option of the holder, for 7.10% senior notes due December 2006. The Company has the right to redeem these notes and debentures, at par, upon being presented with a notice of conversion or at any time after June 2004. The 10% 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. S-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. BORROWINGS: (Continued) Debt repayments of $104 million, contractually due in fiscal 2000, have been classified as non-current in the accompanying consolidated balance sheet as the Company has the ability and intent to finance the repayments through additional borrowings under the Credit Agreement. Accrued interest on borrowings totaling $29.7 million at October 1, 1999 and $30.4 million at October 2, 1998 is included in current liabilities as "Other accrued expenses." The Company utilizes derivative financial instruments, such as interest rate swap and forward exchange agreements to manage changes in market conditions related to debt obligations and foreign currency exposures. At October 1, 1999 and October 2, 1998, the Company has $125 million and $219 million, respectively, of interest rate swap agreements fixing the rate on a like amount of borrowings under the Credit Agreement at an average effective rate of 6.5% and 6.4%, respectively. As of October 1, 1999, interest rate swap agreements remain in effect for periods ranging from 1 to 16 months. All interest rate swaps are accounted for as hedges under the accrual method with the net payments under the terms of the swap agreements recognized currently in income as a component of interest expense. Gains or losses on the termination of interest rate swaps are deferred and amortized over the remaining life of the terminated swap agreement. Interest rate swaps, for which the designated debt instrument being hedged is extinguished, are accounted for on the fair value method from the extinguishment date, if not concurrently terminated, with gains and losses recognized currently in the consolidated statement of income. The Company has a $24 million foreign currency swap agreement maturing in August 2000. This swap hedges the currency exposure of its net investment in Spain and accordingly, gains and losses on the currency swap are recorded as a component of comprehensive income in shareholders' equity. The counterparties to the above derivative agreements are major international banks. The Company continually monitors its positions and credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The following summarizes the fair value of the Company's financial instruments as of October 1, 1999 and October 2, 1998. 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.
1999 1998 ------------------------------ ---------------------------- Carrying Fair Carrying Fair Asset/(Liability) in millions Amount Value Amount Value ------ ----- ------ ----- Long-term debt $(1,634.4) $(1,590.7) $(1,729.6) $(1,793.0) Interest rate swap agreements - - - (3.9) Foreign currency swap agreement 4.5 4.1 2.4 1.1
The Credit Agreement contains restrictive covenants which provide, among other things, limitations on liens, dispositions of material assets and repurchases of capital stock. The terms of the Credit Agreement also require that the Company maintain certain specified minimum ratios of cash flow to fixed charges and to total borrowings and certain minimum levels of net worth (as defined). At October 1, 1999, the Company was in compliance with all of these covenants. Assets with a net book value of $2.2 million at October 1, 1999, are subject to liens under several of the Company's borrowing arrangements. S-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. BORROWINGS: (Continued) Long-term borrowings maturing in the next five fiscal years, excluding capital lease obligations, are as follows: Amount -------------- (in thousands) 2000 $24,293 2001 60,869 2002 75,290 2003 25,272 2004 304,186 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 1999, 1998 and 1997 was $16.2 million, $15.7 million and $15.5 million, respectively. During fiscal 1999, 1998 and 1997, the Company contributed 106,703 shares, 4,161 shares and 5,985 shares, respectively, of Common Stock, Class A to these plans to partially fund previously accrued obligations. In addition, during fiscal 1999, 1998 and 1997, the Company contributed to the stock unit retirement plan 135,508 stock units, 163,873 stock units and 363,555 stock units, respectively, which are convertible into Common Stock, Class B, in satisfaction of its accrued obligations. Shares contributed to these plans have been adjusted to reflect the stock split described in Note 7. 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 $15.5 million, $14.8 million and $14.4 million for fiscal 1999, 1998 and 1997, respectively. Additionally, the Company maintains several contributory and non-contributory defined benefit pension plans, primarily in Canada and the United Kingdom. The projected benefit obligation of these plans as of October 1, 1999, which is fully funded, was $58.3 million. Pension expense related to these plans is not material to the consolidated financial statements. NOTE 6. INCOME TAXES: The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires deferred tax assets or liabilities to be recognized for the estimated future tax effects of temporary differences between the financial reporting and tax bases of the Company's assets and liabilities based on the enacted tax law and statutory tax rates applicable to the periods in which the temporary differences are expected to affect taxable income. In September 1998 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, including the effects of other expense/income (See Note 2), by source of income are as follows:
1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------- (in thousands) United States $222,259 $188,132 $221,710 Non-U.S. 17,154 27,640 (5,863) - ----------------------------------------------------------------------------------------------------------------- $239,413 $215,772 $215,847 =================================================================================================================
The provision for income taxes, including the effects of other expense/income (See Note 2), consists of:
1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------- (in thousands) Current: Federal $60,402 $ 51,001 $60,370 State and local 13,016 7,643 13,366 Non-U.S. 4,959 11,876 7,052 - ----------------------------------------------------------------------------------------------------------------- 78,377 70,520 80,788 - ----------------------------------------------------------------------------------------------------------------- Deferred: Federal 8,453 9,369 (8,027) State and local 1,624 2,171 (3,494) Non-U.S. 768 2 472 - ----------------------------------------------------------------------------------------------------------------- 10,845 11,542 (11,049) - ----------------------------------------------------------------------------------------------------------------- $89,222 $82,062 $69,739 =================================================================================================================
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:
1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------- (% 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 4.0 3.9 3.0 Foreign tax benefits (4.5) (.5) (.2) Permanent book/tax difference related to the sale of Spectrum - - (11.3) Permanent book/tax differences, primarily resulting from purchase accounting 3.6 3.6 8.2 Favorable impact of tax settlements - (3.2) - Tax credits and other (.8) (.8) (2.4) - ----------------------------------------------------------------------------------------------------------------- Effective income tax rate 37.3% 38.0% 32.3% =================================================================================================================
S-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. INCOME TAXES: (Continued) As of October 1, 1999 and October 2, 1998, the components of deferred taxes are as follows:
1999 1998 ------ ------ (in thousands) Deferred tax liabilities: Property and equipment $77,929 $70,379 Inventory 6,431 5,428 Investments 10,161 13,520 Other 15,731 11,061 ------- ------- Gross deferred tax liability 110,252 100,388 ------- ------- Deferred tax assets: Insurance $ 7,416 $ 8,694 Employee compensation and benefits 43,682 41,318 Accruals and allowances 30,744 29,917 Intangibles 3,182 5,458 Other 1,674 1,943 ------- ------- Gross deferred tax asset 86,698 87,330 ------- ------- Net deferred tax liability $23,554 $13,058 ======= =======
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. On June 15, 1998, the Company completed a cash tender offer (the "Tender Offer") for outstanding shares of its Class A common stock at a price of $500 per share (pre-split). Pursuant to the Tender Offer, the Company repurchased 1,062,485 shares (pre-split) for an aggregate purchase price of $531.2 million plus transaction costs. The purchase price was financed through additional borrowings under the Credit Agreement. On August 11, 1998, the Company's Board of Directors declared, effective September 1, 1998, a three-for-one split of the Class B and Class A Common Stock effected in the form of a stock dividend to shareholders of record on September 1, 1998. The stated par value of $.01 per share of Class B and Class A common stock was not changed. S-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. CAPITAL STOCK: (Continued) As of October 1, 1999, the Company's stock option plans provided for the issuance of up to 134,584,926 options to purchase shares of Common Stock, Class B. The exercise price of each option is equal to the current fair market value at the date of grant. The Company granted installment stock purchase opportunities under its stock ownership program in fiscal 1999, 1998 and 1997, 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. In fiscal 1999, 1998 and 1997, 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 installment purchase opportunities to defer a portion of the total amount required to exercise the options. Interest currently accrues on deferred payments at 7.75% and is payable when the deferred payments are due. At October 1, 1999 and October 2, 1998, the receivables from individuals under the Deferred Payment Program were $5.8 million and $35.7 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. In the third quarter of fiscal 1999, the Company sold for cash, without recourse, approximately $44 million of Deferred Payment Program notes receivable. The sales price approximated book value and the proceeds were used to repay borrowings under the credit facility. Status of the options under the various ownership programs, adjusted to reflect the three-for-one stock split in fiscal 1998, follows:
Number of Shares Average Option Price --------------------------------------------- ---------------------------- 1999 1998 1997 1999 1998 1997 ------------- ------------- ------------- ------ ------ ------ Outstanding at beginning of year 24,701,205 26,832,636 31,103,952 $5.78 $4.74 $4.06 Options granted 4,912,500 9,634,800 10,371,000 $11.57 $7.47 $5.54 Options exercised 6,125,906 7,228,446 7,289,349 $5.28 $4.43 $3.23 Canceled/Forfeited 2,958,191 4,537,785 7,352,967 $6.50 $5.27 $4.31 Outstanding at end of year 20,529,608 24,701,205 26,832,636 $7.19 $5.78 $4.74 Exercisable at end of year 7,960 81,840 193,176 $13.05 $1.52 $2.96
The exercise prices on outstanding options at October 1, 1999 range from $3.73 to $13.05, with a weighted average remaining life of approximately three years. The Company has reserved 22,706,945 shares of Common Stock, Class B at October 1, 1999 for issuance of stock pursuant to its employee ownership and benefit programs. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized related to the plans described above. If compensation cost for these plans had been determined using the fair-value method prescribed by SFAS No. 123, "Accounting for Stock Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below. S-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. CAPITAL STOCK: (Continued) 1999 1998 1997 ---- ---- ---- Net Income As reported $150,191 $129,236 $146,108 Pro forma $146,501 $125,658 $143,570 Earnings per share As reported: Basic $1.59 $1.14 $1.16 Diluted $1.48 $1.06 $1.10 Pro forma: Basic $1.56 $1.10 $1.14 Diluted $1.44 $1.03 $1.08 Because the SFAS No. 123 method of accounting has not been applied to options granted prior to fiscal 1996, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The weighted average fair value of options granted in fiscal 1999, 1998 and 1997 was $1.61, $1.12 and $0.88 per option, respectively. As the Company's stock is not publicly traded, the fair value of each option was estimated on the grant date using the minimum value method (which excludes a volatility assumption), with the following assumptions: 1999 1998 1997 ---------- ---------- ---------- Risk-free interest rate 4.5 - 4.8% 5.3 - 5.9% 5.2 - 6.1% Expected life in years 3.3 3.2 3.2 Dividend yield 0% 0% 0% The Company and its shareholders are parties to an Amended and Restated Stockholders' Agreement. Pursuant to this agreement, holders of common stock who are individuals, upon their death, complete disability or normal retirement, may cause the Company to repurchase up to 30% of their shares for cash at the then appraised value, but only to the extent such repurchase by the Company is permitted under the Credit Agreement. Under this Credit Agreement restriction, repurchases of capital stock cannot exceed an aggregate limit, which amount was $20 million at October 1, 1999 and October 2, 1998. 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 ($25.1 million as of October 1, 1999 and $44.1 million as of October 2, 1998) is included in the consolidated balance sheets as "Other Noncurrent Liabilities" and the current portion of these notes ($18.9 million as of October 1, 1999 and $26.0 million as of October 2, 1998) is included in the consolidated balance sheets as "Accounts Payable." Subsequent to yearend, the Company repurchased 3,159,223 shares of its Class B common stock and 157,470 shares of its Class A common stock for approximately $40 million in cash and $27 million in installment notes. S-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. COMMITMENTS AND CONTINGENCIES: 1999 1998 - ----------------------------------------------------------------------- (in thousands) Facilities under capital leases $6,857 $8,958 Less-accumulated amortization 6,131 7,686 - ----------------------------------------------------------------------- $ 726 $1,272 ======================================================================= Rental expense for all operating leases was $146.5 million, $143.2 million and $129.7 million for fiscal 1999, 1998 and 1997, respectively. Following is a schedule of the future minimum rental commitments under all noncancelable leases as of October 1, 1999: Fiscal Year Operating Capital - --------------------------------------------------------------------------- (in thousands) 2000 $166,082 $523 2001 91,872 348 2002 69,137 128 2003 57,741 59 2004 45,192 44 Subsequent years 96,085 11 - --------------------------------------------------------------------------- Total minimum rental obligations $526,109 1,113 ============================================================= Less-amount representing interest 53 - --------------------------------------------------------------------------- Present value of capital leases 1,060 Less-current portion 468 - --------------------------------------------------------------------------- Noncurrent obligations under capital leases $ 592 =========================================================================== The Company has capital commitments of approximately $36 million at October 1, 1999 in connection with several long-term concession contracts. 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. S-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 1999 1998 1997 ------- ------ ------ (in thousands) Sales $4,282,498 $3,910,124 $3,721,581 Cost of services provided 4,047,430 3,676,193 3,514,317 Net income 26,639 40,842 20,690 1999 1998 ------ ------ (in thousands) Current assets $ 519,356 $ 451,050 Noncurrent assets 2,072,161 2,079,782 Current liabilities 574,013 545,406 Noncurrent liabilities 1,815,161 1,823,868 S-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. QUARTERLY RESULTS (Unaudited): The following table summarizes quarterly financial data for fiscal 1999 and 1998:
Fiscal Quarter ---------------------------------------------------------- 1999 First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------ (in thousands, except earnings per share) Sales $1,648,465 $1,658,845 $1,712,646 $1,698,470 $6,718,426 Cost of services provided 1,498,346 1,521,103 1,544,769 1,499,376 6,063,594 Net Income 30,083 19,427 41,859 58,822 150,191 Diluted earnings per share $.30 $.19 $.41 $.58 $1.48 Fiscal Quarter ---------------------------------------------------------- 1998 First Second Third Fourth(1) Year - ------------------------------------------------------------------------------------------------------------------ (in thousands, except earnings per share) Sales $1,648,393 $1,648,641 $1,695,349 $1,623,366 $6,615,749 Cost of services provided 1,499,440 1,517,761 1,539,784 1,442,185 5,999,170 Income before extraordinary item 30,077 18,658 37,169 47,806 133,710 Extraordinary item (2) - 1,559 2,915 - 4,474 Net income 30,077 17,099 34,254 47,806 129,236 Diluted earnings per share: Income before extraordinary item $.23 $.14 $.30 $.49 $1.10 Net income $.23 $.13 $.27 $.49 $1.06
(1) Fiscal 1998 fourth quarter results reflect charges relating to the contribution of the Company's magazine and book distribution business into a joint venture. See Note 2. (2) See Note 3. In the first and second fiscal quarters, within the Food and Support Services - United States 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-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. BUSINESS SEGMENTS: In fiscal 1999 the Company adopted the provisions of SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information". Operating segment information for fiscal 1998 and 1997 is also presented in accordance with SFAS No. 131. The Company provides or manages services in three strategic markets; Food and Support Services, Uniform and Career Apparel and Educational Resources which are organized and managed by the following reportable business segments: Food and Support Services - United States - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational, governmental and healthcare institutions and in recreational and other facilities serving the general public. Food and Support Services - International - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational, governmental and healthcare institutions and in recreational and other facilities serving the general public. Operations are conducted in Belgium, Canada, the Czech Republic, Germany, Hungary, Japan, Korea, Mexico, Spain and the United Kingdom. Uniform and Career Apparel - Rental - Rental, sale, cleaning, maintenance and delivery of personalized uniform and career apparel and other textile items on a contract basis. Also provided are walk-off mats, cleaning cloths, disposable towels and other environmental control items. Uniform and Career Apparel - Direct Marketing - Direct marketing of personalized uniforms and career apparel, public safety equipment and accessories to businesses, public institutions and individuals. Educational Resources - Provider of infant, toddler, pre-school and school-age learning programs through community-based child care centers, before and after school programs, employer on-site child care centers and private elementary schools. Corporate and Other - The corporate and other segment includes general corporate expenses not specifically allocated to an individual segment and the sales and operating results of the company's magazine and book distribution and Spectrum Healthcare businesses which were divested in fiscal 1998 and 1997, respectively (See Note 2). Included in the Corporate and Other segment in fiscal 1998 are operating losses of approximately $14 million related to the distribution business and in fiscal 1997 net operating losses of approximately $11 million related to the distribution business and Spectrum. Sales 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 corporate expenses applicable to more than one segment. Net property and equipment by geography is as follows: 1999 1998 ------ ------ (in millions) United States $887.6 $829.3 International 46.1 45.1 ------ ------ Total $933.7 $874.4 ====== ====== S-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. BUSINESS SEGMENTS: (Continued)
Sales Depreciation and Amortization ------------------------------------- ---------------------------------- 1999 1998 1997 1999 1998 1997 ----------- ----------- --------- -------- ------- -------- (in millions) Food and Support Services - United States $3,993.5 $3,653.0 $3,472.5 $93.6 $86.8 $83.1 Food and Support Services - International 975.2 938.0 912.8 16.0 16.0 17.1 Uniform and Career Apparel - Rental 911.9 863.5 832.0 43.4 42.4 40.8 Uniform and Career Apparel - Direct Marketing 438.1 434.6 411.5 18.7 17.7 17.6 Educational Resources 399.7 360.8 332.1 20.0 18.8 17.0 Corporate and Other - 365.8 594.7 2.0 14.1 16.1 -------- -------- -------- ------ ------ ------ Total $6,718.4 $6,615.7 $6,555.6 $193.7 $195.8 $191.7 ======== ======== ======== ====== ====== ====== Operating Income ----------------------------------------------------- 1999 1998 1997 ------ ------ ------ (in millions) Food and Support Services - United States $222.3 $195.1 $173.3 Food and Support Services - International 32.0 32.4 25.6 Uniform and Career Apparel - Rental 106.9 100.9 96.4 Uniform and Career Apparel - Direct Marketing 3.9 10.1 24.7 Educational Resources 34.7 31.2 26.9 ------ ------ ------ $399.8 $369.7 $346.9 Corporate and Other (24.6) (31.6) (26.7) Other Income/(Expense) - (5.0) 11.7 ------ ------ ------ Operating Income 375.2 333.1 331.9 Interest Expense, Net (135.8) (117.3) (116.0) ------ ------ ------ Income Before Income Taxes and Extraordinary Item $239.4 $215.8 $215.9 ====== ====== ====== Capital Expenditures Identifiable Assets ----------------------------- -------------------------------- 1999 1998 1997 1999 1998 1997 ------ ------ ------ ------ ------ ------ (in millions) Food and Support Services - United States $94.6 $78.8 $81.7 $1,186.9 $1,069.7 $1,013.1 Food and Support Services - International 20.1 19.0 15.6 246.5 243.5 227.9 Uniform and Career Apparel - Rental 64.4 41.2 59.9 762.2 739.3 720.8 Uniform and Career Apparel - Direct Marketing 8.8 5.8 6.8 311.4 313.1 319.0 Educational Resources 39.6 24.0 36.0 234.7 218.3 207.9 Corporate and Other - 12.8 2.0 128.8 157.4 264.9 ------ ------ ------ -------- -------- -------- $227.5 $181.6 $202.0 $2,870.5 $2,741.3 $2,753.6 ====== ====== ====== ======== ======== ========
S-26 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT ARAMARK CORPORATION BALANCE SHEETS OCTOBER 1, 1999 AND OCTOBER 2, 1998 (in thousands)
ASSETS 1999 1998 ----------- ---------- Current Assets: Cash and cash equivalents $ 200 $ - Receivables 695 933 Inventories 23 23 Prepayments 1,840 1,565 ---------- ---------- Total current assets 2,758 2,521 ---------- ---------- Property & Equipment, net 2,140 2,947 Investment in Subsidiaries 1,379,139 1,214,682 Other Assets 2,048 1,669 ---------- ---------- $1,386,085 $1,221,819 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 33,174 $ 29,963 Accrued expenses 13,027 24,689 ---------- ---------- Total current liabilities 46,201 54,652 ---------- ---------- Long-Term Borrowings 26,689 26,701 Other Noncurrent Liabilities 40,955 59,342 Payable to Subsidiaries 1,125,669 1,140,000 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 20,000 20,000 Shareholders' Equity/(Deficit) Excluding Common Stock Subject to Repurchase: Class A common stock, par value $.01 27 25 Class B common stock, par value $.01 656 629 Capital Surplus 57,356 - Earnings retained for use in the business 93,376 (56,815) Accumulated other comprehensive income (loss) (4,844) (2,715) Impact of potential repurchase feature of common stock (20,000) (20,000) ---------- ---------- Total 126,571 (78,876) ---------- ---------- $1,386,085 $1,221,819 ========== ==========
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 STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED OCTOBER 1, 1999, OCTOBER 2, 1998 AND OCTOBER 3, 1997 (in thousands)
1999 1998 1997 -------- -------- -------- Equity in Net Income of Subsidiaries $150,191 $129,236 $146,108 -------- -------- -------- Management Fee Income 25,371 34,853 35,342 -------- -------- -------- General and Administrative Expenses 20,593 24,885 27,320 -------- -------- -------- Interest (Income) Expense - Intercompany interest income - (5,568) (8,663) Interest expense 4,778 10,678 16,685 -------- -------- -------- Interest Expense, net 4,778 5,110 8,022 -------- -------- -------- Income before income taxes 150,191 134,094 146,108 Provision for Income Taxes - 1,943 - -------- -------- -------- Income Before Extraordinary Item 150,191 132,151 146,108 Extraordinary Item Due to Early Extinguishments of Debt (net of income taxes of $1,943) - 2,915 - -------- -------- -------- Net income $150,191 $129,236 $146,108 ======== ======== ========
The accompanying notes are an integral part of these financial statements. S-28 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) ARAMARK CORPORATION STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED OCTOBER 1, 1999, OCTOBER 2, 1998 AND OCTOBER 3, 1997 (in thousands)
1999 1998 1997 ---------- ---------- ---------- Cash flows from operating activities: Net income $150,191 $ 129,236 $ 146,108 Equity in net income of subsidiaries (150,191) (129,236) (146,108) Extraordinary item - 2,915 - Other, primarily noncash working capital (26,819) 256 (6,204) -------- --------- --------- Net cash provided by (used in) operating activities (26,819) 3,171 (6,204) -------- --------- --------- Cash flows from investing activities: Purchases of property and equipment (31) (732) (469) Other (314) (117) (322) -------- --------- --------- Net cash used in investing activities (345) (849) (791) -------- --------- --------- Cash flows from financing activities: Payment of long-term borrowings including premiums - (106,563) (32,160) Change in notes receivable from ARAMARK Services, Inc. - 100,000 - Change in intercompany payable to subsidiaries (4,804) 573,473 90,280 Proceeds from issuance of common stock 60,731 22,303 14,338 Repurchase of common stock (28,563) (591,535) (65,463) -------- --------- --------- Net cash provided by (used in) financing activities 27,364 (2,322) 6,995 -------- --------- --------- Change in cash $ 200 $ - $ - Cash, beginning of period - - - -------- --------- --------- Cash, end of period $ 200 $ - $ - ======== ========= =========
The accompanying notes are an integral part of these financial statements. S-29 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-3. 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 debt obligations of ARAMARK Services, Inc., its wholly-owned subsidiary, which totaled $1.6 billion on October 1, 1999. See Note 4 to the Company's consolidated financial statements. S-30 ARAMARK CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE FISCAL YEARS ENDED OCTOBER 1, 1999, OCTOBER 2, 1998 AND OCTOBER 3, 1997
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 1999 - ---------------- Reserve for doubtful accounts, advances & current notes receivable $24,457 $165 $13,413 $41 $15,498 $22,496 ======= ==== ======= ==== ======= ======= Fiscal Year 1998 - ---------------- Reserve for doubtful accounts, advances & current notes receivable $23,158 $779 $12,209 $3,739 $7,950 $24,457 ======= ==== ======= ====== ====== ======= Fiscal Year 1997 - ---------------- Reserve for doubtful accounts, advances & current notes receivable $16,973 $141 $16,287 $1,988 $8,255 $23,158 ======= ==== ======= ====== ====== =======
(1) Allowances granted and amounts determined not to be collectible. S-31 INDEX TO EXHIBITS 3.1 Restated Certificate of Incorporation 3.2 Corporate By-Laws, as amended 4.1 Amended and Restated Stockholders' Agreement is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 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 4.3 7.0% Guaranteed Notes due July 15, 2006; Indenture dated July 15, 1991, is incorporated by reference to the Company's Registration Statements on Form S-3, Registration No. 33-525887, 33-64259 and 333-53161 4.4 6 3/4% Guaranteed Notes due August 1, 2004; Indenture dated July 15, 1991, is incorporated by reference to the Company's Registration Statement on Form S-3, Registration No. 333-53161 Long-term debt instruments authorizing debt that does not exceed 10% of the total consolidated assets of the Company are not filed herewith but will be furnished on request of the Commission. 10.1 1999 Employment Agreement with Joseph Neubauer 10.2 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 10.3 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 10.4 Agreement relating to employment and post-employment competition dated June 7, 1993 with L. Frederick Sutherland is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1996 10.5 Agreement relating to employment and post-employment competition dated December 14, 1998 with Charles Kiernan 10.6 Credit and Guaranty Agreement dated January 7, 1998 and amendments thereto dated May 7, 1998 and September 10, 1998 are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended October 2, 1998 12 Ratio of Earnings to Fixed Charges 21 Subsidiaries of Registrant 23 Consent of Arthur Andersen LLP, Independent Public Accountants 24 Powers of Attorney 27 Financial Data Schedule EX-3.1 2 EXHIBIT 3.1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF ARAMARK CORPORATION (Originally Incorporated on September 7, 1984 under the name "ARA Acquiring Company") FIRST: The name of the Corporation is ARAMARK CORPORATION. SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 185,000,000 shares, consisting of (i) 10,000,000 shares of Series Preferred Stock, $1.00 par value per share (the "Series Preferred Stock"), and (ii) 25,000,000 shares of Common Stock, Class A, $.01 par value per share (the "Class A Common Stock"), and (iii) 150,000,000 shares of Common Stock, Class B, $.01 par value per share (the "Class B Common Stock"). The Class A Common Stock and the Class B Common Stock are referred to collectively as the "Common Stock". The Board of Directors shall have the full authority permitted by law to fix full or limited, or no voting power, and such other designations, powers, preferences, and relative, participating, optional, special or other rights (including, as examples and not as a limitation, multiple voting powers and conversion rights), and qualifications, limitations or restrictions of any series of the class of Series Preferred Stock that may be desired. A statement of the designations, powers, preferences, and rights of each class and series of stock, and the qualifications, limitations and restrictions in respect thereof, is as follows: 4A. Common Stock 1. Classes. The Common Stock shall be divided into two classes, the Class A Common Stock and the Class B Common Stock. The powers, preferences and rights of the Class A Common Stock and the Class B Common Stock, and the qualifications, limitations and restrictions thereon, shall be in all respects identical, except as otherwise provided in this Part 4A. 2. Dividends. Subject to any provision in this Article FOURTH with respect to any stock of the Corporation to the contrary, out of the assets of the Corporation which are by law available for the payment of dividends, dividends and other distributions may be, but shall not be required to be, declared and paid upon shares of Common Stock, and the holders of shares of Class A Common Stock and Class B Common Stock shall be entitled to receive the same dividends and other distributions, ratably with the holder of one share of Class A Common Stock entitled to receive ten times what the holder of one share of Class B Common Stock is entitled to receive; provided, however, that in the case of dividends or other distributions payable in Common Stock, only shares of Class B Common Stock shall be distributed with respect to Class B Common Stock and only shares of Class A Common Stock shall be distributed with respect to Class A Common Stock, and any such distribution shall be made ratably, with the holder of one share of Class A Common Stock entitled to receive the same number of shares of Class A Common Stock as the number of shares of Class B Common Stock the holder of one share of Class B Common Stock shall be entitled to receive; and provided further, that the Board of Directors may declare and pay dividends and other distributions with respect to the Class A Common Stock without declaring or paying any dividend or other distribution with respect to the Class B Common Stock. 3. Voting Rights. (a) Subject to the special voting rights of the holders of any other stock of the Corporation, the Common Stock (and any other stock of the Corporation which may be entitled to vote with the holders of Common Stock), voting as a single class except where the Class A Common Stock and the Class B Common Stock (and such other stock) are required by law to vote as separate classes or series on a particular matter, shall possess all of the voting power of the Corporation with respect to the election of directors and for all other purposes. (b) Each share of Common Stock, whether Class A Common Stock or Class B Common Stock, shall be entitled to one vote on all matters submitted to a vote of the Corporation's stockholders. 4. Liquidation. Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after provision for the payment of creditors and after provision shall be made for holders of all shares of stock of the Corporation having a preference upon liquidation, dissolution or winding up, the remaining assets of the Corporation shall be distributed among the holders of Common Stock, ratably, with the holder of one share of Class A Common Stock entitled to receive ten times what the holder of one share of Class B Common Stock is entitled to receive, and, to the extent provided in this Article FOURTH, the holders of any other stock of the Corporation which may be entitled to share in such distribution. 5. Conversion of Class B Common Stock. (a) Optional Conversion. Each share of Class B Common Stock may at any time, but only with the prior approval of the Board of Directors, be converted at the election of the holder thereof into one-tenth of a fully paid and nonassessable share of Class A Common Stock. Subject to the terms of any such approval, the holder of shares of Class B Common Stock may elect to convert any or all of such shares at one time or at various times in such holder's discretion. Such right shall be exercised by delivering a written notice of the election by the holder thereof to convert, in form satisfactory to the agent for the registration of transfer of shares of Class B Common Stock and to the Corporation, accompanied by any certificates representing the shares of Class B Common Stock to be converted. (b) Mandatory Conversion. At any time when the Board of Directors authorizes and directs the conversion of all the Class B Common Stock into Class A Common Stock, then, at the time designated by the Board for the occurrence of such event, each outstanding share of Class B Common Stock shall be converted into one-tenth of a share of Class A Common Stock and no further shares of Class B Common Stock may be issued thereafter. (c) Manner of Conversion. In the event of any such conversion pursuant to paragraph (a) or (b), any certificate or certificates representing shares of Class B Common Stock so converted shall thereupon and thereafter be deemed to represent the number of shares of Class A Common Stock issuable upon such conversion; all rights of such holder arising from ownership of shares of Class B Common Stock shall cease at such time, and such holder shall be treated for all purposes as having become the record holder of such shares of Class A Common Stock at such time and shall have and may exercise all the rights and powers appertaining thereto. No adjustments in respect of any past dividends and other distributions shall be made upon the conversion of any share of Class B Common Stock. The Corporation shall at all times reserve and keep available, solely for the purpose of issue upon conversion of outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as may be issuable upon the conversion of all such outstanding shares of Class B Common Stock. 4B. Series D Stock 1. Designation. There shall be a series of Series Preferred Stock which shall consist of 20,000 shares and shall be designated as Adjustable Rate Callable Nontransferable Series D Preferred Stock (the "Series D Stock"). The number of authorized shares of Series D Stock may be increased by resolution of the Board of Directors. 2. Rank. (a) Rank of Series D Stock. To the extent and in the manner provided in this Part 4B, the Series D Stock shall, with respect to dividend rights and rights on liquidation, rank (i) junior to or on parity with, as the case may be, any other stock of the Corporation, the terms of which shall specifically provide that such stock shall rank senior to, or on parity with, as the case may be, the Series D Stock with respect to dividend rights or rights on liquidation or both, and (iii) senior to any other stock of the Corporation. (b) Certain Definitions. The following terms as used in this Part 4B shall be deemed to have the meanings set forth in this section. (1) The term "Participating Stock" shall mean the Common Stock and any other stock of the Corporation of any class which has the right to participate in the distribution of either earnings or assets of the Corporation without limit as to the amount or percentage. (2) The term "Parity Stock" with respect to Series D Stock shall mean the Series D Stock and all other stock of the Corporation ranking equally therewith as to the payment of dividends or the distribution of assets upon liquidation. The term "Dividend Parity Stock" with respect to Series D Stock shall mean the Series D Stock and all other stock of the Corporation ranking equally therewith as to the payment of dividends. The term "Liquidation Parity Stock" with respect to Series D Stock shall mean the Series D Stock and all other stock of the Corporation ranking equally therewith as to distribution of assets upon liquidation. (3) The term "Junior Stock" with respect to Series D Stock shall mean the Participating Stock and all other stock of the Corporation ranking junior thereto as to the payment of dividends and the distribution of assets upon liquidation. The term "Dividend Junior Stock" with respect to Series D Stock shall mean the Participating Stock and all other stock of the Corporation ranking junior thereto as to the payment of dividends. The term "Liquidation Junior Stock" with respect to Series D Stock shall mean the Participating Stock and all other stock of the Corporation ranking junior thereto as to distribution of assets upon liquidation. (4) The term "Senior Stock" with respect to Series D Stock shall mean all stock of the Corporation ranking senior thereto as to the payment of dividends or distribution of assets upon liquidation. 3. Dividends. (a) Cumulative Dividends. The holders of record of Series D Stock shall be entitled to receive, as and if declared by the Board of Directors, cumulative cash dividends thereon at the per annum rate per share equal to the Established Dividend Rate (as defined in paragraph (c)), and no more, but only out of funds legally available for the payment of such distributions under the General Corporation Law of the State of Delaware. Dividends on the Series D Stock shall not be payable unless and until declared by the Board of Directors. Dividends shall accrue from the date of original issuance. Accumulations of dividends shall not bear interest. (b) Limitations Upon Dividend Arrearage. Unless dividends that have been declared and are payable upon the Series D Stock have been paid, no dividend or other distribution (except in Junior Stock) shall be declared or paid on Dividend Junior Stock and no amount shall be set aside for or applied to the redemption, purchase or other acquisition of (i) any Dividend Junior Stock or Liquidation Junior Stock other than by exchange therefor of Junior Stock or out of the proceeds of a substantially concurrent sale of shares of Junior Stock or (ii) any Parity Stock except in accordance with a purchase or exchange offer made simultaneously by the Corporation to all holders of record of Parity Stock which, considering the annual dividend rates and the other relative rights and preferences of such shares, in the opinion of the Board of Directors (whose determination shall be conclusive), will result in fair and equitable treatment among all such shares. (c) The "Established Dividend Rate" shall initially be $25.00, and shall be reset as provided in this paragraph. On each December 16, beginning December 16, 1998 and continuing so long as any shares of Series D Stock shall be outstanding, the Established Dividend Rate shall be reset at a rate equal to $1,000 multiplied by 50% of the One Year Treasury Rate that shall have been in effect at the close of business on the December 1 next preceding (or if such December 1 shall not have been a business day, the business day next preceding such December 1), rounded up to the nearest $1.00; provided, however, that the Established Dividend Rate shall in no event be greater than $50.00. For purposes of the preceding sentence, the "One Year Treasury Rate" shall mean the rate for direct obligations of the United States having a constant maturity of 1-year, as published in H.15(519) under the heading "Treasury Constant Maturities", or, if not so published by such December 16, such rate as determined in good faith by the Corporation, which determination absent manifest error shall be conclusive. The Corporation shall file with the duly appointed transfer agent for the Series D Stock a certificate stating the new Established Dividend Rate determined as provided in this paragraph and showing the computation thereof, and will cause a notice stating the new Established Dividend Rate and the computation thereof to be mailed to the holders of shares of Series D Stock. 4. Liquidation Rights. (a) Liquidation Value. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Series D Stock shall be entitled to receive from the assets of the Corporation, payment in cash, of $1,000 per share, plus a further amount equal to unpaid cumulative dividends on Series D Stock accrued to the date when such payments shall be made available to the holders thereof, and no more, before any amount shall be paid or set aside for, or any distribution of assets shall be made to the holders of Liquidation Junior Stock. If, upon such liquidation, dissolution or winding up, the amounts available for distribution to the holders of all Liquidation Parity Stock shall be insufficient to permit the payment in full to such holders of the preferential amounts to which they are entitled, then such amounts shall be paid ratably among the shares of Liquidation Parity Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto if paid in full. (b) Actions Not Considered Liquidation. None of the following shall be considered a liquidation, dissolution or winding up of the Corporation within the meaning of this section: (1) a consolidation or merger of the Corporation with or into any other corporation; (2) a merger of any other corporation into the Corporation; (3) a reorganization of the Corporation; (4) the purchase or redemption of all or part of the outstanding shares of any class or classes of the Corporation; (5) a sale or transfer of all or any part of the assets of the Corporation; or (6) a share exchange to which the Corporation is a party. 5. Redemption. (a) Optional Redemption. The Series D Stock may be called for redemption and redeemed at the option of the Corporation by resolution of the Board of Directors, in whole at any time or in part at any time or from time to time upon the notice hereinafter provided for in paragraph (c), by the payment therefor of the redemption price per share of $1,000 plus an amount equal to the accrued and unpaid cumulative dividends thereon to the date fixed by the Board of Directors as the redemption date. In addition, the Corporation may so call for redemption at any time all, but not less than all, of the shares of Series D Stock held by any person. (b) No Mandatory Redemption. There is no mandatory sinking fund for, or other required redemption of, the Series D Stock. (c) Manner of Redemption. (1) If less than all of the outstanding shares of Series D Stock shall be called for redemption (and such redemption is not pursuant to the second sentence of paragraph (a)), the particular shares to be redeemed shall be selected by lot or by such other equitable manner as may be prescribed by resolution of the Board of Directors. (2) Notice of redemption of any shares of Series D Stock shall be given by the Corporation by first-class mail, not less than 10 nor more than 60 days prior to the date fixed by the Board of Directors of the Corporation for redemption (the "redemption date"), to the holders of record of the shares to be redeemed at their respective addresses then appearing on the records of the Corporation. The notice of the redemption shall state: (1) the redemption date; (2) the redemption price; (3) if less than all outstanding shares of Series D Stock of the holder are to be redeemed, the identification of the shares of Series D Stock to be redeemed; (4) that dividends on the shares to be redeemed shall cease to accrue on the redemption date; and (5) the place or places where such shares of Series D Stock to be redeemed are to be surrendered for payment of the redemption price. (3) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption), dividends on the shares of Series D Stock so called for redemption shall cease to accrue, and from and after the redemption date or such earlier date as funds shall be set aside for payment of the redemption price (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption) said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. (4) Shares of Series D Stock redeemed by the Corporation shall be restored to the status of authorized and unissued shares of Series Preferred Stock, undesignated as to series, and, except as otherwise provided by the express terms of any outstanding series, may be reissued by the Corporation as shares of one or more series of Series Preferred Stock. 6. Voting Rights. (a) No Voting Rights Generally. Except as expressly provided to the contrary in this Part 4B or as otherwise required by law, the holders of Series D Stock shall have no right to vote at, or to participate in, any meeting of stockholders of the Corporation, or to receive any notice of such meeting. (b) Rights Upon Dividend Arrearage. (1) In the event dividends that have been declared and are payable upon the Series D Stock shall be in arrears, the number of directors constituting the full board shall be increased by two, and the holders of the Series D Stock voting noncumulatively and separately as a single series together with the holders of any other shares of Series Preferred Stock having the right to elect directors as a series under circumstances when dividends are in arrears, shall be entitled to elect two members of the Board of Directors of the Corporation at the next annual meeting of stockholders of the Corporation or at a special meeting called as hereinafter provided in this section. Such voting rights of the holders of Series D Stock shall continue until all declared and unpaid dividends thereon shall have been paid in full, whereupon such special voting rights of the holders of Series D Stock shall cease (and the respective terms of the two additional directors shall thereupon expire and the number of directors constituting the full board shall be decreased by two) subject to being again revived from time to time upon the recurrence of the conditions described in this section as giving rise thereto. (2) At any time when such right of holders of Series D Stock to elect two additional directors shall have so vested, the Corporation may, and upon the written request of the holders of record of not less than 10% of the Series D Stock then outstanding (or 10% of all Series Preferred Stock having the right to vote for such directors in case holders of shares of other series of Series Preferred Stock shall also have the right to elect directors as a class in circumstances when dividends are in arrears) shall, call a special meeting of holders of such Series D Stock (and other series of Series Preferred Stock, if applicable) for the election of directors. In the case of such a written request, such special meeting shall be held within 60 days after the delivery of such request, and, in either case, at the place and upon the notice provided by law and in the bylaws of the Corporation; except that the Corporation shall not be required to call such a special meeting if such request is received less than 120 days before the date fixed for the next ensuing annual meeting of stockholders of the Corporation; provided, that the holders of Series D Stock receive notice of such meeting and their right to vote thereat. (3) Whenever the number of directors of the Corporation shall have been increased by two as provided in this section, the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the bylaws of the Corporation and without the vote of the holders of Series D Stock. No such action shall impair the right of the holders of Series D Stock to elect and to be represented by two directors as provided in this section. (4) The two directors elected as provided in this section shall serve until the next annual meeting of stockholders of the Corporation and until their respective successors shall be elected and qualified or the earlier expiration of their terms as provided in this section. No such director may be removed without the vote or consent of holders of a majority of the shares of Series D Stock (or holders of a majority of shares of Series Preferred Stock having the right to vote in the election of such director in case holders of shares of other series of Series Preferred Stock shall also have the right to elect such director as a class). If, prior to the expiration of the term of any such director, a vacancy in the office of such director shall occur, such vacancy shall, until the expiration of such term, in each case be filled by appointment made by the remaining director elected as provided in this section. 7. Restrictions on Transfer. The shares of Series D Stock shall not be transferable (other than by will or the laws of descent), except that such shares may be transferred with the consent of the Board of Directors of the Corporation. 8. No Conversion Rights. The holders of shares of Series D Stock shall not have the right to convert such shares into other securities of the Corporation. FIFTH: Subject to the rights of holders of Series Preferred Stock to elect additional directors under certain circumstances, the Corporation shall be governed in accordance with the following provisions: 5A. Number of Directors The Board of Directors of the Corporation shall consist of not less than nine and not more than 19 members and the Chief Executive Officer of the Corporation shall always be one of the members. The exact number of directors within such minimum and maximum shall be fixed by the Board of Directors. 5B. Election Directors need not be elected by written ballot. SIXTH: The By-Laws of the Corporation may be made, altered, amended, changed, added to or repealed by the Board of Directors of the Corporation without the assent or vote of the stockholders. SEVENTH: Each person who was or is made a party or is threatened to be made a party to or is involuntarily involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or a person of whom he is the legal representative is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or representative or in any other capacity while serving as a director, officer or representative shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with an action, suit or proceeding (or part thereof) initiated by such person only if action, suit or proceeding (or part thereof) was authorized by the Board of Directors. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such proceeding in advance of its final disposition upon delivery to the Corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this section or otherwise. If a claim under this Article is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant unpaid may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claim, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. The rights conferred by this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer or representative against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify him against such expense, liability or loss under the Delaware General Corporation Law. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. NINTH: Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed by the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all stockholders or class of stockholders of the Corporation, as the case may be, and also on the Corporation. TENTH: To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as director. IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates and integrates and also further amends the Corporation's Certificate of Incorporation, as heretofore amended and restated, having been duly adopted pursuant to the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, has been duly executed this 9th day of February, 1999. ARAMARK CORPORATION By: /s/ Martin W. Spector --------------------------- Martin W. Spector Executive Vice President EX-3.2 3 EXHIBIT 3.2 EXHIBIT 3.2 BY-LAWS OF ARAMARK CORPORATION ARTICLE I OFFICES ss.1. REGISTERED OFFICE -- The registered office of the corporation shall be established and maintained at the office of The Corporation Trust Company at 1209 Orange Street in the City of Wilmington, in the County of New Castle, in the State of Delaware, and said corporation shall be the registered agent of this corporation, unless otherwise established by the Board of Directors and a certificate certifying the change is filed in the manner provided by statute. ss.2. OTHER OFFICES -- The corporation may also have offices in the City of Philadelphia, Commonwealth of Pennsylvania, and also offices at such other place or places as the Board of Directors may from time to time appoint or as the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS ss.1. PLACE OF MEETINGS -- All meetings of the stockholders shall be held in the offices of the corporation in Philadelphia, Pennsylvania, or at such other place as shall be determined by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. ss.2. ANNUAL MEETING -- An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix. A meeting shall be held within thirteen months subsequent to the date of the last annual meeting of stockholders. Nominations of persons for election to the Board and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice with respect to such meeting, (b) by or at the direction of the Board or (c) by any stockholder of record of the Corporation who was a stockholder of record at the time of the giving of the notice provided for in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of the foregoing paragraph, (1) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (2) such business must be a proper matter for stockholder action under the General Corporation Law of the State of Delaware, (3) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in subclause (c)(iii) of this paragraph, such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation's voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice and (4) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this section. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 45 days prior to the first anniversary (the "Anniversary") of the date on which the Corporation first mailed its proxy materials for the preceding year's annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding years annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class and number of shares of the record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a Corporation that are owned beneficially and of proposal, at least the percentage of the Corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). Only persons nominated in accordance with the procedures set forth in this Section 2 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this section. The chair of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded. Notwithstanding the foregoing provisions of this Section 2, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2. Nothing in this Section 2 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ss.3. SPECIAL MEETINGS -- Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the Chief Executive Officer. Such meetings shall be held at the place, on the date and at the time as they or he shall fix. Business transacted at all special meetings shall be confined to the purpose or purposes stated in the notice. ss.4. NOTICE OF MEETINGS -- Written notice of the place, date, and time of the meeting, and the general nature of business to be considered, shall be given, not less than ten nor more than sixty days before the date on which the meeting is to be held, to each stockholder entitled to vote there at, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the corporation). When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof, unless the Board of Directors shall fix a new record date for the adjourned meeting pursuant to these By-laws. ss.5. QUORUM -- At any meeting of the stockholders, the holders of a majority of the voting rights of all of the shares of capital stock issued and outstanding and entitled to vote thereat, represented in person by proxy, shall constitute a quorum for all purposes, unless or except, and to the extent that, the presence of a larger number may be required by law or these By-laws. Shares of stock represented by a limited proxy (i.e., a proxy that by its terms, withholds authority or does not empower its holder to vote on any or all of the proposals to be considered at a meeting) contribute to the establishment of a quorum at that meeting for all purposes. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the voting rights of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting, provided that they represent at least one third of the voting rights of the shares entitled to vote at such meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting (unless a larger majority is required by the Certificate of Incorporation). ss.6. ORGANIZATION -- Such person as the Board of Directors may have designated or, in the absence of, or upon the failure so to delegate, such a person, the Chief Executive Officer of the corporation or, in his absence, such person as maybe chosen by the holders of a majority of the voting rights of the shares entitled to vote who are present, in person or by proxy, at any meeting, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chairman appoints. ss.7. CONDUCT OF BUSINESS -- The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. ss.8. PROXIES AND VOTING -- At any meeting of the stockholders every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. Each stockholder shall be entitled to vote, in accordance with the provisions of the Certificate of Incorporation relating to shares of stock, the shares of stock registered in his name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors but excepting where otherwise required herein or by law, may be by a stock vote. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the Board of Directors in advance of the meeting or in the absence of, or upon the failure so to appoint such person or persons, then by an inspector or inspectors appointed by the chairman of the meeting. When a quorum is present at any meeting, the vote of the holders of a majority of the votes of the shares having voting power represented in person or by proxy at the meeting and entitled to vote on any question brought before such meeting shall decide such question, unless the question is one upon which, by express provision of law, or these By-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Shares represented by a limited proxy (i.e., a proxy that by its terms, withholds authority or does not empower the holder to vote on a particular proposal) will not be considered as part of the voting power present and entitled to vote with respect to that proposal for determining whether the proposal has a majority (or other required percentage) approval of the voting power present and entitled to vote. Abstentions (whether in person or by proxy) are counted as voting power present and entitled to vote on any proposal to which they relate. ss.9. STOCK LIST -- A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ss.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING -- Any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III BOARD OF DIRECTORS ss.1. NUMBER -- Except as otherwise provided in the Certificate of Incorporation, the number of directors who shall constitute the whole board shall be not less than nine or more than nineteen. ss.2. ELECTION AND TERM -- Except as provided in Section 3 of this Article III or as otherwise provided in the Certificate of Incorporation, directors shall be elected at the annual meeting of the stockholders, and each director shall be elected to serve until the next annual meeting and until his successor shall be elected and shall qualify. ss.3. RESIGNATION AND VACANCIES -- Any director or member of a committee may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein and if no time is specified, at the time of its receipt by the Chief Executive Officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective. Except as otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by vote of the directors then in office though less than a quorum. ss.4. INCREASE OF NUMBER -- The number of directors may be fixed or increased by resolution of the Board of Directors, subject to the provisions of the Certificate of Incorporation. ss.5. COMMITTEES -- The Board of Directors may designate one or more committees, each committee to consist of one or more directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. ss.6. MEETINGS -- The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent of all the directors. Regular meetings of the Board of Directors may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors. Special meetings of the Board of Directors may be called by the Chief Executive Officer or by the Secretary and shall be called by them on the written request of any two directors. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived by mailing notice not less than five days before the meeting or by sending notice by guaranteed overnight carrier not less than forty-eight hours before the meeting or by telephoning, hand delivering, telegraphing, faxing or sending by similar form of telecommunication notice not less than twenty-four hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors (whether regular or special), or any committee, by means of conference telephone calls or by means of similar communications equipment by which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. ss.7. QUORUM -- A majority of the directors in office shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation or these by-laws shall require the vote of a greater number. ss.8. COMPENSATION -- Directors shall be entitled to such compensation and fees (including reimbursement of reasonable expenses) for their services as directors or as members of committees as shall be authorized by resolution of the Board. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. ss.9. ACTION WITHOUT MEETING -- Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee designated by the Board of Directors, may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. ss.10. POWERS -- The Board of Directors shall have full power to manage the business and affairs of the Corporation; and all powers of the corporation, except those specifically reserved or granted to the stockholders by statute, the Certificate of Incorporation or these by-laws, are hereby granted to and vested in the Board of Directors. ARTICLE IV OFFICERS ss.1. OFFICERS -- The officers of the corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors and shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman and a Vice-Chairman of the Board of Directors and such Assistant Secretaries and Assistant Treasurers, as it may deem proper. Except for the Chief Executive Officer, none of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. Two or more offices may be held by the same person. ss.2. OTHER OFFICERS AND AGENTS -- The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold office for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. ss.3. CHAIRMAN -- The Chairman of the Board of Directors, if one is elected, shall preside at all meetings of the Board of Directors, and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. ss.4. CHIEF EXECUTIVE OFFICER -- The Chief Executive Officer must at all times be a stockholder of the corporation and a member of the Board of Directors. He shall be, as Chief Executive Officer of the corporation, responsible for the general supervision of the business and affairs of the corporation and, except as set forth in these by-laws or a resolution of the Board of Directors, of the corporation's other officers, and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. He may sign, execute and acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly and exclusively delegated by the Board of Directors, or by these by-laws, to some other officer or agent of the corporation; and, in general, shall perform all duties incident to the office of Chief Executive Officer, and such other duties as from time to time may be assigned to him by the Board of Directors. ss.5. PRESIDENT -- The President shall have such powers and shall perform such duties as from time to time shall be assigned to him by the Chief Executive Officer or the Board of Directors. ss.6. VICE-PRESIDENTS -- Each Vice-President shall have such powers and shall perform such duties as from time to time shall be assigned to him by the Chief Executive Officer or the Board of Directors. ss.7. TREASURER -- The Treasurer shall provide for the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall collect and deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the Chief Executive Officer, taking proper vouchers for such disbursements. He shall render to the Chief Executive Officer, and the Board of Directors at meetings of the Board of Directors, or whenever the directors may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of Directors shall prescribe. ss.8. SECRETARY -- The Secretary shall be present at and give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these by-laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any Assistant Secretary or by any person thereunto directed by the Chief Executive Officer, or by the Board of Directors. He shall record all the proceedings of the meetings of the corporation and of the Board of Directors in books to be kept for such purpose, and shall perform such other duties as may be assigned to him by the Chief Executive Officer or the Board of Directors. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors or the Chief Executive Officer, and attest the same. ss.9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES -- Assistant Treasurers and Assistant Secretaries, if any, shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the Chief Executive Officer or by the Board of Directors. ARTICLE V GENERAL PROVISIONS ss.1. CERTIFICATES OF STOCK -- The stock of the corporation shall be represented by certificates unless the Board of Directors shall by resolution provide that some or all of any class or series of stock shall be uncertificated shares. ss.2. LOST CERTIFICATES -- Unless otherwise provided by the Certificate of Incorporation, a new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation alleged to have been lost, stolen, destroyed or mutilated, and (in the case of any certificate alleged to be lost, stolen or destroyed) the Board of Directors may, in its discretion, require the owner thereof or his legal representatives, to give the corporation a bond, in such sum as the Board of Directors may direct, not exceeding double the value of the stock, or to indemnify the corporation against any claim that may be made against it with respect to any such certificate, prior to the issuance of any new certificate. ss.3. TRANSFER OF SHARES -- Transfers of stock shall be upon the stock transfer books of the corporation kept at an office of the corporation or by transfer agents designated to transfer shares of the corporation. ss.4. STOCKHOLDER RECORD DATE -- In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any such other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to an adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ss.5. DIVIDENDS -- Subject to the provisions of law and the provisions of the Certificate of Incorporation or any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the Certificate of Incorporation and Section 151 of the Delaware General Corporation Law, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when it deems expedient. Before declaring any dividend there may be set apart out of any funds of the corporation legally available for dividends, such sum or sums as the Board of Directors from time to time in its discretion deem proper for working capital, future capital needs or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board of Directors shall deem appropriate or in the interests of the corporation. ss.6. SEAL -- The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "CORPORATE SEAL DELAWARE". Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ss.7. FACSIMILE SIGNATURES -- In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these by-laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. ss.8. RELIANCE UPON BOOKS, REPORTS AND RECORDS -- Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the corporation, including reports made to the corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care. ss.9. FISCAL YEAR -- The fiscal year of the corporation shall end on the Friday nearest September 30 in each year, and shall be subject to change, by resolution of the Board of Directors. ss.10. CHECKS -- All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined from time to time by resolution of the Board of Directors. ss.11. NOTICE AND WAIVER OF NOTICE -- Except as otherwise provided in this Section 11, whenever any notice is required by these by-laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if deposited in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by law. Whenever any notice is required with respect to a special meeting of the Board of Directors, such notice to a director shall be deemed given when sent, if sent by guaranteed overnight carrier or by hand delivery, telegram, fax or similar form of telecommunication, to the last known address (business or residence) of such director. Whenever any notice is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation or these by-laws, a waiver thereof in writing, or by telegraph, fax or similar form of telecommunication, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These by-laws may be made, altered, amended, changed, added to or repealed by the Board of Directors to the extent provided in the Certificate of Incorporation. ARTICLE VII INDEMNIFICATION OF DIRECTORS AND OFFICERS Each person who was or is made a party or is threatened to be made a party to or is involuntarily involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or a person of whom he is the legal representative is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or representative or in any other capacity while serving as a director, officer or representative, shall be indemnified and held harmless by the corporation to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith; provided, however, that the corporation shall indemnify any such person seeking indemnity in connection with an action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the Board of Directors. Such right shall be a contract right and shall include the right to be paid by the corporation expenses incurred in defending any such proceeding in advance of its final disposition upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this section or otherwise. If a claim under this section is not paid in full by the corporation within ninety days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. The rights conferred by this section shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-laws, agreement, vote of stockholders or disinterested directors or otherwise. The corporation may maintain insurance, at its expense, to protect itself and any director, officer or representative against any such expense, liability or loss, whether or not the corporation would have the power to indemnify him against such expense, liability or loss under the Delaware General Corporation Law. Amended February 9, 1999. EX-10.1 4 EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, made and entered into this ___ day of______, 1999 (the "Effective Date"), by and between ARAMARK Corporation, a Delaware corporation ("ARAMARK"), and Joseph Neubauer ("Mr. Neubauer") (the "Agreement"). W I T N E S S E T H: WHEREAS, Mr. Neubauer, prior to the Effective Date, has served as Chairman and Chief Executive Officer of ARAMARK pursuant to the terms of an employment agreement dated as of the 18th day of February, 1983, as amended and restated on November 15, 1991 (the "Prior Agreement"); and WHEREAS, ARAMARK and Mr. Neubauer desire to enter into this Agreement, which will, except as otherwise set forth herein, supersede the Prior Agreement and set forth the terms and conditions under which Mr. Neubauer will serve in an executive capacity hereafter for ARAMARK and is affiliates; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Employment. ARAMARK hereby employs Mr. Neubauer, and Mr. Neubauer hereby accepts such employment, upon the terms and conditions set forth in this Agreement. 2. Position and Duties. During the Term (as hereinafter defined), Mr. Neubauer (i) agrees to serve as the Chairman and Chief Executive Officer of ARAMARK and to perform such duties in such capacity as may be delineated in the By-Laws of ARAMARK and such other reasonable duties, consistent with his positions as Chairman and Chief Executive Officer, as may be assigned to him from time to time by the Board of Directors of ARAMARK (the "Board"), (ii) shall report only to the Board, and (iii) shall be given such authority as is appropriate to carry out the duties described above. During the Term, ARAMARK shall make its best efforts to ensure Mr. Neubauer's election to, and retention as a member of, the Board. 3. Exclusive Services. During the Term, and except for illness or incapacity, Mr. Neubauer shall devote substantially all of his business time, attention, skill and efforts exclusively to the business and affairs of ARAMARK and its subsidiaries and affiliates, shall not be engaged in any other business activity, and shall perform and discharge the duties that may be assigned to him from time to time by the Board; provided, however, that nothing in this Agreement shall preclude Mr. Neubauer from devoting time during reasonable periods required for: (i) serving, in accordance with ARAMARK's policies and with the prior approval of the Board, as a director or member of a committee of any company or organization, (it being understood that Mr. Neubauer may continue to serve as a director or member of boards and committees on which he serves as of the date of this Agreement); (ii) delivering lectures and fulfilling speaking engagements; (iii) engaging in charitable and community activities; and (iv) investing his personal assets in a Passive Investment (as hereinafter defined) in such form and in such manner as will not violate Section 12 below. For purposes of this Agreement, a "Passive Investment" shall mean an investment in a business or entity which does not require Mr. Neubauer to render any services in the operations or affairs of such business or entity and which does not materially interfere with the performance of Mr. Neubauer's duties and obligations to ARAMARK or any of its subsidiaries or affiliates. 4. Relocation. ARAMARK shall not relocate Mr. Neubauer's principal place of business outside of Philadelphia, Pennsylvania, without the written consent of Mr. Neubauer. 5. Term of Agreement. The term of this Agreement shall be the period commencing on the Effective Date and ending on the second anniversary of a notice of termination of the Agreement given by either party unless earlier terminated pursuant to Section 10 (the "Term"). Upon expiration of the Term pursuant to a two-year notice given pursuant to this Section 5, Mr. Neubauer shall commence the consulting services described in Section 9. 6. Salary and Annual Bonus. (a) Salary. Mr. Neubauer shall be paid base salary (the "Base Salary") at the initial rate of $1,000,000 per annum. The Base Salary shall be payable in accordance with the customary payroll practices for senior executives of ARAMARK. The Board shall review the performance of Mr. Neubauer on a periodic basis and, in its sole discretion, may (but is not required to) increase his salary payable hereunder. Any such increased salary shall thereafter be Mr. Neubauer's Base Salary. (b) Annual Bonus. Mr. Neubauer shall be a participant in the Senior Executives Annual Performance Bonus Arrangement or any successor plan, in accordance with and subject to the terms and conditions of such arrangement or as it may hereafter be amended (the amount payable thereunder, his "Bonus"). 7. Stock Options; Stock Ownership; Other Equity Programs. (a) Mr. Neubauer shall be eligible to participate in ARAMARK's stock option and Installment Stock Purchase Opportunity ("ISPO") plans, or any successor plans, in accordance with and subject to the terms and conditions of such plans or as they may hereafter be amended, so long as they remain in effect. (b) ARAMARK agrees to apply to Mr. Neubauer's ISPOs, stock options and shares of common stock, the terms of the ARAMARK Ownership Program as currently in effect (including the Stockholders' Agreement and applicable plans and policies) with only such changes, amendments and modifications as shall not be, individually or in the aggregate, adverse to Mr. Neubauer, and to waive any such changes, amendments and modifications that are so adverse. (c) Mr. Neubauer is vested in his equity credit account in the former Career Compensation Plan which is now called the Equity Credit Arrangement in accordance with and subject to the terms and conditions of such Arrangement. Granting of equity incentives under the plan was discontinued on December 3, 1982. The Arrangement provides for accrual of interest, and payment of those equity credit awards previously granted under the plan. 8. Retirement and Welfare Benefits. (a) During the Term, unless otherwise specified herein, Mr. Neubauer will be eligible to participate in all retirement and welfare plans, programs and benefits that are from time to time applicable to senior executives of ARAMARK at benefit levels applicable to such senior executives (including, without limitation, each retirement plan, supplemental and excess retirement plan, group life insurance, accident and death insurance, medical and dental insurance, sick leave and disability plan and any other plan or program providing fringe benefits or perquisites). (b) ARAMARK shall pay Supplemental Retirement Benefits under the terms and conditions set forth in Exhibit A. 9. Consulting Period. In the event of a Voluntary Termination with Notice or an Involuntary Termination with Notice (as described in Section 10), Mr. Neubauer shall for a period of two years serve as a consultant to ARAMARK, and shall render as an independent contractor such consulting and transition services, consistent with his former positions as Chairman and Chief Executive Officer, as may be assigned to him from time to time by the Board or the Chairman or Chief Executive Office of the Company. He shall not be required to perform more than 20 hours of service as a consultant per month. As consideration for such services, he shall receive the same Base Salary as he was receiving immediately prior to the end of the Term, and shall continue to be covered by such plans and arrangements described in Section 8 for which independent contractor consultants to ARAMARK are eligible, if any. The aggregate Base Salary payable to Mr. Neubauer under this Section 9 shall be referred to as the "Consulting Compensation." 10. Termination of Employment. (a) Termination for Cause; Resignation Without Good Reason. (i) ARAMARK may terminate Mr. Neubauer's employment hereunder for Cause in accordance with the provisions of Section 10(a)(ii), and the Term shall end on the date of any such termination. Mr. Neubauer may voluntarily terminate his employment hereunder without Good Reason. In such event, the Term will end on the date of any such termination; provided that if such termination occurs at least two years after Mr. Neubauer's notice to ARAMARK of his intent to terminate his employment hereunder without Good Reason, it shall be considered a "Voluntary Termination with Notice." In the event Mr. Neubauer's employment is terminated by ARAMARK for Cause or Mr. Neubauer resigns from his employment without Good Reason, Mr. Neubauer shall receive the following amounts: (A) Any Base Salary accrued but unpaid, and any accrued vacation as of the effective date of termination (the "Accrued Amounts"); (B) A prorated Bonus with respect to ARAMARK's fiscal year in which termination occurs equal to the average annual Bonus paid or accrued on behalf of Mr. Neubauer for the three full fiscal years of ARAMARK that precede the year of Mr. Neubauer's termination of employment (his "Average Bonus") multiplied by the number of days employed over total days in the year in which Mr. Neubauer's employment terminated (a "Pro-Rata Bonus"); (C) Supplemental Retirement Benefits payable pursuant to Exhibit A; (D) All amounts otherwise payable or coverages otherwise afforded pursuant to the terms of any employee benefit plan maintained by ARAMARK (the "Plan Amounts"); and (E) Mr. Neubauer may elect to continue at his sole expense the Executive Health Plan (to the extent Mr. Neubauer and members of his family are eligible for such benefit and, for this purpose, Mr. Neubauer shall be deemed to be employed by ARAMARK) for a period not to exceed three years. Equity Credit Arrangement participation shall be as a terminated employee under the Arrangement. In addition, all of the options and ISPOs held by Mr. Neubauer shall remain subject to the terms and conditions of the applicable plans, except that, in the case of a Voluntary Termination with Notice, all of such stock options and ISPOs shall also become vested and immediately exercisable on the date of termination. (ii) Termination for "Cause" shall mean termination by action of the Board because of: (A) Mr. Neubauer's repeated and willful failure to perform his duties hereunder in any material respect; (B) a felony conviction of Mr. Neubauer; or (C) any willful misconduct by Mr. Neubauer that is materially injurious to the financial condition or business reputation of ARAMARK and its affiliates and subsidiaries taken as a whole, provided, however, that no event or circumstance shall be considered to constitute Cause within the meaning of clause (A) or (C) unless Mr. Neubauer has been given written notice of the events or circumstances constituting Cause and has failed to effect a cure thereof within 30 calendar days after his receipt of such notice. (iii) Resignation for "Good Reason" shall mean (A) the resignation of Mr. Neubauer after (x) ARAMARK, without the express written consent of Mr. Neubauer, materially breaches this Agreement or Mr. Neubauer is not serving on the Board (other than with the express written consent of Mr. Neubauer); (y) Mr. Neubauer notifies ARAMARK in writing of the nature of such material breach or failure to be a member of the Board and (z) ARAMARK does not correct such material breach or failure within 30 calendar days after its receipt of such notice; or (B) resignation by Mr. Neubauer within 12 months after a Change of Control (as defined below in this Section). ARAMARK acknowledges and agrees that a material breach for purposes of this Section 10 shall include, but not be limited to, any material reduction in Mr. Neubauer's duties or authority (whether or not accompanied by a change in title), any diminution in Mr. Neubauer's title, any failure to pay Mr. Neubauer's Base Salary and any relocation of Mr. Neubauer's principal place of business outside of Philadelphia, Pennsylvania. (iv) For this purpose, "Change of Control" shall occur if (i) a "person"as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding ARAMARK and any subsidiary and any employee benefit plan sponsored or maintained by ARAMARK or any subsidiary (including any trustee of such plan acting as trustee), shall become the beneficial owner, directly or indirectly, of securities of ARAMARK representing 35% or more of the combined voting power of ARAMARK's then outstanding voting securities, (ii) at any time individuals who within the prior two years constituted the Board (together with any new directors whose election by the Board or whose nomination for election by ARAMARK's shareholders was approved by a vote of the majority of the Directors then still in office who were either (x) Directors immediately prior to such two year period or (y) whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Directors then in office; (iii) there occurs any sale, exchange or other disposition, in one transaction, or in a series of related transactions, of substantially all of ARAMARK's income producing assets or property; (iv) there is consummated any transaction or series of transactions under which ARAMARK is merged or consolidated with any other company, other than a merger or consolidation which results in the shareholders of ARAMARK immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of ARAMARK or such surviving entity outstanding immediately after such merger or consolidation; or (v) there occurs a change in control of a nature that would be required to be reported in reference to Item 1(a) of Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act; provided, however, that no Change of Control shall occur if Mr. Neubauer is a member of a group (i.e. a "person," as above defined) whose transaction with ARAMARK or its shareholders would result in a Change of Control. (b) Termination Without Cause; Resignation for Good Reason. ARAMARK may terminate Mr. Neubauer's employment hereunder without Cause, in which case the Term will end on the date of any such termination; provided that if such termination occurs at least two years after ARAMARK's notice to him of its intent to terminate his employment hereunder without Cause, it shall be considered an "Involuntary Termination with Notice." Mr. Neubauer may terminate his employment hereunder for Good Reason, and the Term shall end upon such termination of employment. In the event Mr. Neubauer's employment is terminated by ARAMARK without Cause or if Mr. Neubauer should resign for Good Reason, Mr. Neubauer shall receive the following amounts, and ARAMARK shall have no further obligation to Mr. Neubauer under this Agreement, except as specifically set forth in this Agreement: (i) The Accrued Amounts; (ii) In the case of an Involuntary Termination with Notice, the Pro-Rata Bonus; (iii) Except in the case of an Involuntary Termination with Notice, a lump sum payment equal to two times Mr. Neubauer's Base Salary, payable within 10 business days after the effective date of termination of employment; (iv) Except in the case of an Involuntary Termination with Notice, a lump sum payment equal to the Pro-Rata Bonus plus two times Mr. Neubauer's Average Bonus payable within 10 business days after the effective date of termination of employment; (v) Except in the case of an Involuntary Termination with Notice (in which case the consulting period in Section 9 shall be applicable), a lump sum payment equal to the Consulting Compensation, payable within 10 business days after termination of employment; (vi) Supplemental Retirement Benefits shall be payable pursuant to Exhibit A; (vii) Except in the case of an Involuntary Termination with Notice, Survivor Income Protection Plan, other health and welfare plan participation, and other perquisites shall continue for three years from the effective date of termination. (viii) Mr. Neubauer may elect to continue at his sole expense the Executive Health Plan (to the extent Mr. Neubauer and members of his family are eligible for such benefit and, for this purpose, Mr. Neubauer shall be deemed to be employed by ARAMARK) for a period not to exceed three years. Equity Credit Arrangement participation shall be as a terminated employee under the Arrangement; and (ix) The Plan Amounts. In addition, all of the options and ISPOs to purchase shares of Stock of ARAMARK held by Mr. Neubauer shall become vested and immediately exercisable but will in all respects otherwise remain subject to the terms and conditions of the applicable plans. (c) No Duty to Mitigate. Anything contained herein to the contrary notwithstanding, if Mr. Neubauer's employment terminates for any reason, Mr. Neubauer shall in no event be required to seek any other employment or take any other action by way of mitigation or otherwise with respect to the amounts payable to Mr. Neubauer under this Agreement. In addition, any amounts earned by Mr. Neubauer, whether from self-employment, as a common law employee or otherwise, shall not reduce any amounts otherwise payable to him under this Agreement. (d) Death. If Mr. Neubauer's Employment terminates by reason of Mr. Neubauer's death, the Term shall end and Mr. Neubauer's estate shall receive the following amounts: (i) The Accrued Amounts; (ii) The Pro-Rata Bonus; (iii) Supplemental Retirement Benefits shall be payable to the extent set forth in Exhibit A; (iv) Equity Credit Arrangement participation shall be as a terminated employee under the Arrangement; and (v) The Plan Amounts. Stock options and ISPOs shall be treated in accordance with the terms of the applicable plans. (e) Permanent Disability. In the event that Mr. Neubauer is unable to perform his duties hereunder by reason of illness or incapacity for a continuous period of more than six (6) months, or for an aggregate of more than eight (8) months in any twelve (12) month period, ARAMARK shall have the right to terminate Mr. Neubauer's employment by reason of disability ("Permanent Disability"). If ARAMARK terminates Mr. Neubauer's employment pursuant to this Section 10(d), the Term shall end and Mr. Neubauer shall receive the following amounts: (i) The Accrued Amounts; (ii) Base Salary shall continue for a period of three years from the effective date of termination, offset by any payments due to Mr. Neubauer pursuant to the Survivor Income Protection Plan and all other disability income protection plans of ARAMARK; (iii) The Pro-Rata Bonus; (iv) Supplemental Retirement Benefits shall be payable pursuant to Exhibit A; (v) Equity Credit Arrangement participation shall be as a terminated employee under the Arrangement; and (vi) The Plan Amounts. In addition, all of the stock options and ISPOs held by Mr. Neubauer shall become vested and immediately exercisable but will in all respects otherwise remain subject to the terms and conditions of the applicable plans. Mr. Neubauer may elect to continue at his sole expense any or all of the benefits provided by the Executive Health Plan (to the extent Mr. Neubauer and members of his family are eligible for such benefit and, for this purpose, Mr. Neubauer shall be deemed to be employed by ARAMARK) for a period not to exceed three years. 11. Trade Secrets. ARAMARK may, pursuant to Mr. Neubauer's employment hereunder, provide and confide to Mr. Neubauer business methods and systems ("Systems"), techniques and methods of operation developed at great expense by ARAMARK and which Mr. Neubauer recognizes to be unique assets of ARAMARK's business. Mr. Neubauer shall not, ever, during or after the Term, directly or indirectly, in any manner utilize or disclose to any person, firm, corporation, association or other entity, except to directors, consultants, lawyers, auditors, advisors, agents or employees of ARAMARK in the course of his duties or where required by law: (i) any such Systems, techniques and methods of operation, or (ii) any sales prospects, customer lists, products, research or data of any kind, or (iii) any information relating to strategic plans, sales costs, profits or the financial condition of ARAMARK or any of its customers or prospective customers, which are not generally known to the public or recognized as standard practice in the industries in which ARAMARK shall be engaged. 12. Non-Competition Agreement. (a) Subject to the geographic limitation of Section 12(b), Mr. Neubauer, for a period commencing on the date hereof and ending two (2) years following (i) if there is no consulting period pursuant to Section 9, the end of the Term and (ii) if there is such a consulting period, the end of such consulting period pursuant to Section 9, shall not, without ARAMARK's written permission, directly or indirectly, on his 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 ARAMARK at any time during the Term of this Agreement and any subsequent consulting period; provided that the provision of this Section 12 shall not be deemed breached merely because Mr. Neubauer owns not more than 1% of the outstanding stock of a corporation, if, at the time of its acquisition by Mr. Neubauer, such stock is listed on a national securities exchange or quoted on an inter-dealer quotation system and provided further that Mr. Neubauer shall not be required to cease any activity that did not violate this Agreement (or any predecessor agreement) when such activity commenced. (b) Mr. Neubauer acknowledges that ARAMARK is engaged in business in each of the 50 states and several foreign countries and that ARAMARK intends to expand the geographic scope of its activities. Accordingly and in view of the nature of his position and responsibilities, Mr. Neubauer agrees that the provisions of Section 12(a) shall be applicable to all 50 states and, addition, to each foreign country, possession or territory in which ARAMARK (as defined in Section 16) may be engaged in business from time to time during the Term and as of the expiration of the Term and any subsequent consulting period. (c) Mr. Neubauer agrees that for a period of two (2) years following (i) if there is no consulting period pursuant to Section 9, the end of the Term and (ii) if there is such a consulting period, the end of such consulting period, he will not, directly or indirectly, at any time in any manner, induce or attempt to influence any employees of ARAMARK to terminate their employment with ARAMARK. (d) As used in Sections 11 and 12 of this Agreement, the "Company" shall be deemed to include any entity twenty percent (20%) of the equity of which during the period for which he is receiving payments under this Agreement and during any subsequent consulting period, is directly or indirectly owned by ARAMARK. 13. Equitable Remedies. Mr. Neubauer acknowledges that, in the event of any violation by Mr. Neubauer of the provisions of Sections 11 or 12 of this Agreement, ARAMARK 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, Mr. Neubauer agrees that, in the event of such violation or threatened violation by Mr. Neubauer, ARAMARK shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course and 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. Mr. Neubauer further agrees that, in the event any of the provisions of Sections 11 and 12 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 to be unenforceable as written, such court may modify any of such provisions so as to permit enforcement thereof as thus modified. 14. Deferred Compensation. Mr. Neubauer has entered into a series of deferred compensation agreements with ARAMARK. Such agreements shall remain in full force and effect, and shall not be affected by ARAMARK and Mr. Neubauer entering into this Agreement. 15. Additional Provisions. The provisions of Exhibit B are part of this Agreement. 16. Substitution of Benefits. If any of the items of compensation, bonus or perquisites provided for in this Agreement shall hereafter be prohibited by governmental regulations, corporate law, ARAMARK policies or ARAMARK plans, payment or benefit of equivalent value shall be substituted by ARAMARK. 17. Entire Agreement. This Agreement (with the exhibits hereto and agreements referred to in Sections 7 and 14) constitutes the full and complete understanding and agreement of Mr. Neubauer and ARAMARK respecting the subject matter hereof, and supersedes all prior understandings and agreements, oral or written, express or implied. This Agreement may not be modified or amended orally, but only by agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 18. Notices. All notices and other communications hereunder will be in writing and will be given by hand delivery to the other party or by next-day delivery service or registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Mr. Neubauer: 210 West Rittenhouse Square #3106 Philadelphia, PA 19103 If to ARAMARK: ARAMARK Corporation 1101 Market Street Philadelphia, PA 19107 Attn.: Corporate Secretary or to such other address as either party will have furnished to the other in writing. All notices and communications shall be deemed to have been duly given and received: (a) on the date of receipt, if delivered by hand; (b) three (3) business days after being sent by first class certified mail, return receipt requested, postage prepaid; or (c) one (1) business day after sending by next-day delivery service with confirmation of receipt. As used herein, the term "business day" means any day that is not Saturday, Sunday or legal holiday in the State of Pennsylvania. 19. Waiver of Breach. No waiver by either party of any condition or of the breach by the other of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition, or of the breach of any other term or covenant set forth in this Agreement. Moreover, the failure of either party to exercise any right hereunder shall not bar the later exercise thereof. 20. Assignment. This Agreement shall inure to the benefit of and be binding on the parties and their respective successors in interest, and shall not be assignable by either party without the written consent of the other. ARAMARK will require any successor in interest to all or substantially all of ARAMARK (whether direct or indirect, by purchase, merger, or consolidation or otherwise) to expressly assume this Agreement, but ARAMARK shall remain liable if such successor in interest shall default on any of its obligations hereunder. 21. Governing Law. This Agreement is entered into and shall be construed in accordance with the laws of the Commonwealth of Pennsylvania. 22. Continuation of Covenants. The covenants and agreements of Mr. Neubauer set forth in Sections 11 through 13 shall survive termination of employment, shall continue thereafter, and shall not expire unless and except as may be expressly set forth in said Sections. 23. Invalidity or Unenforceability. If any term or provision of this Agreement is held to be invalid or unenforceable, for any reason, such invalidity or unenforceability shall not affect any other term or provision hereof and this Agreement shall continue in full force and effect as if such invalid or unenforceable term or provision (to the extent of the invalidity or unenforceability) had not been contained herein. 24. Arbitration. Except as provided in Section 13, any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in Philadelphia, Pennsylvania, before one arbitrator in accordance with rules then in effect of the American Arbitration Association. ARAMARK shall pay Mr. Neubauer's legal expenses should Mr. Neubauer prevail on any substantial issue. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written. MR. NEUBAUER /s/Joseph Neubauer -------------------------- Joseph Neubauer ARAMARK Corporation By: /s/ Robert J. Callander --------------------------- Exhibit A 1. The annual Supplemental Retirement Benefits ("SRB"), payable in substantially equal monthly installments, shall equal the sum of: 50% of Mr. Neubauer's Base Salary, plus 50% of an amount equal to one times Mr. Neubauer's Average Bonus minus the benefit payable from the Survivor Income Protection Plan. 2. Unless otherwise provided below the SRB shall commence on the first day of the month following the expiration of the Term. 3. In all events the SRB shall terminate upon Mr. Neubauer's death, provided that one-half of the SRB amount that would otherwise be payable to Mr. Neubauer shall continue to be paid to Mr. Neubauer's then surviving spouse, if any, for her lifetime, provided that the surviving spouse benefit described in this item 3 shall only apply to the individual who is Mr. Neubauer's spouse at the time of his termination of employment hereunder. 4. In the event of termination of Mr. Neubauer's employment due to Permanent Disability, payments shall commence upon the earlier of Mr. Neubauer's attainment of age 65 or expiration of Mr. Neubauer's eligibility to receive Company Long Term Disability Plan (or any successor plan) benefit Exhibit B Excise Tax Gross Up ------------------- (a) In the event that any payment or benefit received or to be received by Mr. Neubauer pursuant to the terms of this Agreement (the "Contract Payments") or in connection with Mr. Neubauer's termination of employment or contingent upon a Change in Control of ARAMARK pursuant to any plan or arrangement or other agreement with ARAMARK (or any affiliate) ("Other Payments" and, together with the Contract Payments, the "Payments") would be subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the Code, as determined as provided below, ARAMARK shall pay to Mr. Neubauer, at the time specified in (b) below, an additional amount (the "Gross-Up Payment") such that the net amount retained by Mr. Neubauer, after deduction of the Excise Tax on the Payments and any federal, state and local income or other tax and Excise Tax upon the payment provided for by this Section (a), and any interest, penalties or additions to tax payable by Mr. Neubauer with respect thereto, shall be equal to the value of the Payments at the time such Payments are to be made as if the Excise Tax imposed by Section 4999 did not apply. For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amounts of such Excise Tax, (1) the total amount of the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to the extent that, in the opinion of independent tax counsel selected by ARAMARK's independent auditors and reasonably acceptable to Mr. Neubauer ("Tax Counsel"), a Payment (in whole or in part) does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in part) are not subject to the Excise Tax, (2) the amount of the Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Payments or (B) the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code (after applying clause (1) hereof), and (3) the value of any noncash benefits or any deferred payment or benefit shall be determined by Tax Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Mr. Neubauer shall be deemed to pay federal income tax at the highest marginal rates of federal income taxation applicable to individuals in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest effective rates of taxation applicable to individuals as are in effect in the state and locality of Mr. Neubauer's residence or place of employment in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account any limitations applicable to individuals subject to federal income tax at the highest marginal rates. (b) The Gross-Up Payments provided for in Section (a) hereof shall be made upon the imposition upon Mr. Neubauer or payment by Mr. Neubauer of any Excise Tax. (c) Mr. Neubauer shall notify ARAMARK in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by ARAMARK of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Mr. Neubauer is informed in writing of such claim and shall apprise ARAMARK of the nature of such claim and the date on which such claim is requested to be paid. Mr. Neubauer shall not pay such claim prior to the expiration of the 30 day period following the date on which Mr. Neubauer gives such notice to ARAMARK (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If ARAMARK notifies Mr. Neubauer in writing prior to the expiration of such period that it desires to contest such claim, Mr. Neubauer shall: i give ARAMARK any information reasonably requested by ARAMARK relating to such claim; ii take such action in connection with contesting such claim as ARAMARK shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by ARAMARK and reasonably satisfactory to Mr. Neubauer; iii cooperate with ARAMARK in good faith in order to effectively contest such claim; and iv permit ARAMARK to participate in any proceedings relating to such claim; provided, however, that ARAMARK shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold Mr. Neubauer harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) ARAMARK shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Mr. Neubauer to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Mr. Neubauer agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as ARAMARK shall determine; provided, however, that if ARAMARK directs Mr. Neubauer to pay such claim and sue for a refund, ARAMARK shall advance the amount of such payment to Mr. Neubauer on an interest-free basis, and shall indemnify and hold Mr. Neubauer harmless, on an after-tax basis, from any Excise Tax or other tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Mr. Neubauer is required to extend the statute of limitations to enable ARAMARK to contest such claim, Mr. Neubauer may limit this extension solely to such contested amount. ARAMARK's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Mr. Neubauer shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by ARAMARK without Mr. Neubauer's consent if such position or resolution could reasonably be expected to adversely affect Mr. Neubauer (including any other tax position of Mr. Neubauer unrelated to the matters covered hereby). (e) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by ARAMARK or the Tax Counsel hereunder, it is possible that Gross-Up Payments which will not have been made by ARAMARK should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that ARAMARK exhausts its remedies and Mr. Neubauer thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax, the Tax Counsel shall determine the amount of the Underpayment that has occurred and any such Underpayment shall promptly be paid by ARAMARK to or for the benefit of Mr. Neubauer. (f) If, after the receipt by Mr. Neubauer of the Gross-Up Payment or an amount advanced by ARAMARK in connection with the contest of an Excise Tax claim, Mr. Neubauer receives any refund with respect to such claim, Mr. Neubauer shall promptly pay to ARAMARK the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Mr. Neubauer of an amount advanced by ARAMARK in connection with an Excise Tax claim, a determination is made that Mr. Neubauer shall not be entitled to any refund with respect to such claim and ARAMARK does not notify Mr. Neubauer in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid. EX-10.5 5 EXHIBIT 10.5 EXHIBIT 10.5 ARAMARK CORPORATION AGREEMENT RELATING TO EMPLOYMENT AND POST-EMPLOYMENT COMPETITION This Agreement is between the undersigned individual ("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 in a senior management position 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 Leadership Council 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. 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 continued 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. 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. ARTICLE 2. NON-COMPETITION AGREEMENT: A. Subject to Article 2. 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 5a 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 2. A. above, shall apply to (i) all fifty states, and (11) 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 2, 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 effective date of termination. By way of example, but not limitation, if Employee provided services to one of the business units of ARAMARK Food and Support 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 Leadership Council meetings, Presidents' Council meetings, Chairman's Council meetings, and the like. C. Employee acknowledges that enforcement of the provisions set forth in this Article 2 will not unduly impair Employee's ability to obtain other employment following the termination (voluntary or involuntary) of Employee's employment with ARAMARK. Further, Employee acknowledges that the provisions set forth in this Article 2 shall apply if Employee is involuntarily terminated for good and sufficient cause; as a result of the elimination of employee's position; for performance related issues; or for any other reason or no reason at all. ARTICLE 3. NON-SOLICITATION OF EMPLOYEES. Employee shall not for a period of two years following the voluntary or involuntary termination of employment, directly or indirectly, at any time, in any manner, induce or attempt to influence any employees of ARAMARK to terminate their employment with ARAMARK. ARTICLE 4. REMEDIES: Employee acknowledges that in the event of any violation by Employee of the provisions set forth in Articles 1, 2 or 3 above, ARAMARK will sustain serious, irreparable and substantial harm to its business, the extent of which will 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 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 2 and 3 above by seeking an injunction, Employee agrees that the relevant time periods set forth in Articles 2 and 3 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 5. 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: I. Severance Pay: Employee shall receive severance payments equivalent to Employee's monthly base salary as of the effective date of termination for a period of one (1) year until Executive Leadership Council Agreement payout schedule exceeds one year, then the employee shall receive the number of months set forth on the following schedule: Years of ARAMARK Continuous Service Completed From Last Hire Date ---------------------------------------------- 7 8 9 10 or more ---------------------------------------------- 13 14 16 18 ---------------------------------------------- Employee shall receive severance payments equivalent 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." 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 Leadership Council 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 Leadership Council members, including, but not limited to the Executive Leadership Council Medical Plan, shall cease as of the effective date of termination or the date Employee's Executive Leadership Council membership ceases, whichever occurs first. Employee, however, shall have certain rights to continue the Executive Leadership Council Medical Plan under COBRA. B. Termination for "Good and sufficient cause" shall be defined as termination for such things as fraud or dishonesty, willful failure to perform assigned duties, willful violation of ARAMARK's Business Conduct Policy, or intentionally working against the best interest of ARAMARK. 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 Article 2. D. ARAMARK reserves the right to terminate all severance payments and other post-employment benefits if Employee violates the covenants set forth in Articles 1, 2 and 3 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 6. TERM OF EMPLOYMENT: Employee acknowledges that ARAMARK has the right to terminate Employee's employment at any time for any reason whatsoever, provided, however, that any termination by ARAMARK for reasons other than good and sufficient cause shall result in the severance and the post-employment benefits described in Article 5 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. ARTICLE 7. 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 postemployment 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, The terms of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania. C. Employee and ARAMARK acknowledge that for purposes of Article 5, Employee's last hire date with ARAMARK is October 19, 1998. IN WITNESS WHEREOF, and intending to be legally bound, hereto have caused this Agreement to be signed. Date: December 14, 1998 ARAMARK CORPORATION By:/s/ Brian G. Mulvaney ---------------------------- Brian G. Mulvaney By:/s/ Charles E. Kiernan ---------------------------- Charles E. Kiernan EX-12 6 EXHIBIT 12 EXHIBIT 12 ARAMARK CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (A) (In thousands)
Fiscal Year Ended -------------------------------------------------------------------------------- October 1, October 2, October 3, September 27, September 29, 1999 1998 1997 1996 1995 ---------- ---------- ---------- ------------- ------------- Income before income taxes and minority interest $239,413 $215,772 $215,847 $179,159 $167,577 Fixed charges, excluding capitalized interest 188,184 169,997 163,404 160,740 152,991 Other, net (3,845) (2,063) (67) (371) 1,502 -------- -------- -------- -------- -------- Earnings, as adjusted $423,752 $383,706 $379,184 $339,528 $322,070 ======== ======== ======== ======== ======== Interest expense $139,829 $122,681 $119,284 $117,856 $111,605 Capitalized interest 412 3 223 414 79 Portion of operating lease rentals representative of interest factor 48,355 47,316 44,120 42,884 41,386 --------- -------- -------- -------- -------- Fixed charges $188,596 $170,000 $163,627 $161,154 $153,070 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 2.2x 2.3x 2.3x 2.1x 2.1x ======== ======== ======== ======== ========
(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
Subsidiary Jurisdiction of Incorporation ---------- ----------------------------- United States: Advertising & Display Services, Inc. Delaware ARAMARK Bay Area Group, Inc. Delaware ARAMARK Business Dining Services of Texas, Inc. Texas ARAMARK Cleanroom Services, Inc. Delaware ARAMARK Consumer Discount Company Pennsylvania ARAMARK Correctional Services, Inc. Delaware ARAMARK Delaware, Inc. Delaware ARAMARK Educational Group, Inc. Delaware ARAMARK Educational Resources, Inc. Delaware ARAMARK Educational Services of Texas, Inc. Texas ARAMARK Educational Services of Vermont, Inc. Vermont ARAMARK Educational Services, Inc. Delaware ARAMARK Facilities Management, Inc. Delaware ARAMARK Facility Services, Inc. Maryland ARAMARK Food and Support Services Group, Inc. Delaware ARAMARK Healthcare Support Services of Puerto Rico, Inc. Delaware ARAMARK Healthcare Support Services of Texas, Inc. Texas ARAMARK Healthcare Support Services of the Virgin Islands, Inc. Delaware ARAMARK Healthcare Support Services, Inc. Delaware ARAMARK Industrial Services, Inc. Delaware ARAMARK Kitty Hawk, Inc. Idaho ARAMARK Magazine & Book Services, Inc. Delaware ARAMARK Marketing Services Group, Inc. Delaware ARAMARK Organizational Services, Inc. Delaware ARAMARK Pittsburgh Limited Delaware ARAMARK Pittsburgh Stadium Concessions, Inc. Pennsylvania ARAMARK RBI, Inc. Delaware ARAMARK Refreshment Services, Inc. Delaware ARAMARK Resource Services, Inc. Delaware ARAMARK Senior Notes Company Delaware ARAMARK Services Management of AK, Inc. Alaska ARAMARK Services Management of AL, Inc. Alabama ARAMARK Services Management of AR, Inc. Arkansas ARAMARK Services Management of AZ, Inc. Arizona ARAMARK Services Management of CA, Inc. California ARAMARK Services Management of CO, Inc. Colorado ARAMARK Services Management of CT, Inc. Connecticut ARAMARK Services Management of DC, Inc. District of Columbia ARAMARK Services Management of DE, Inc. Delaware ARAMARK Services Management of FL, Inc. Florida ARAMARK Services Management of GA, Inc. Georgia ARAMARK Services Management of HI, Inc. Hawaii ARAMARK Services Management of IA, Inc. Iowa ARAMARK Services Management of ID, Inc. Idaho ARAMARK Services Management of IL, Inc. Illinois ARAMARK Services Management of IN, Inc Indiana ARAMARK Services Management of KS, Inc. Kansas ARAMARK Services Management of KY, Inc. Kentucky ARAMARK Services Management of LA, Inc. Louisiana ARAMARK Services Management of MA, Inc. Massachusetts ARAMARK Services Management of MD, Inc. Maryland ARAMARK Services Management of ME, Inc. Maine ARAMARK Services Management of MI, Inc. Michigan
ARAMARK Services Management of MN, Inc. Minnesota ARAMARK Services Management of MO, Inc. Missouri ARAMARK Services Management of MS, Inc. Mississippi ARAMARK Services Management of MT, Inc. Montana ARAMARK Services Management of NC, Inc. North Carolina ARAMARK Services Management of ND, Inc. North Dakota ARAMARK Services Management of NE, Inc. Nebraska ARAMARK Services Management of NH, Inc. New Hampshire ARAMARK Services Management of NJ, Inc. New Jersey ARAMARK Services Management of NM, Inc. New Mexico ARAMARK Services Management of NV, Inc. Nevada ARAMARK Services Management of NY, Inc. New York ARAMARK Services Management of OH, Inc. Ohio ARAMARK Services Management of OK, Inc. Oklahoma ARAMARK Services Management of OR, Inc. Oregon ARAMARK Services Management of PA, Inc. Pennsylvania ARAMARK Services Management of RI, Inc. Rhode Island ARAMARK Services Management of SC, Inc. South Carolina ARAMARK Services Management of SD, Inc. South Dakota ARAMARK Services Management of TN, Inc. Tennessee ARAMARK Services Management of TX, Inc. Texas ARAMARK Services Management of UT, Inc. Utah ARAMARK Services Management of VA, Inc. Virginia ARAMARK Services Management of VT, Inc. Vermont ARAMARK Services Management of WA, Inc. Washington ARAMARK Services Management of WI, Inc. Wisconsin ARAMARK Services Management of WV, Inc. West Virginia ARAMARK Services Management of WY, Inc. Wyoming ARAMARK Services of Kansas, Inc. Kansas ARAMARK Services of Puerto Rico, Inc. Delaware ARAMARK Services, Inc. Delaware ARAMARK Sports and Entertainment Group, Inc. Delaware ARAMARK Sports and Entertainment Services of Texas, Inc. Texas ARAMARK Sports and Entertainment Services, Inc. Delaware ARAMARK Summer Games 1996, Inc. Delaware ARAMARK Uniform & Career Apparel, Inc. Delaware ARAMARK Uniform Manufacturing Company Delaware ARAMARK Venue Services, Inc. Delaware ARAMARK/HMS Company Delaware Aurora Educational Resources Company Colorado CWLC Brokerage, Inc. Colorado D.G. Maren II, Inc. Delaware Davre's Inc. Delaware Delsac VI, Inc. Delaware Delsac VII, Inc. Delaware Delsac VIII, Inc. Delaware DYNA Corporation California Fashion-Tex Services, Inc. California Gall's, Inc. Delaware H.M.S. Delaware, Inc. Delaware Harry M. Stevens, Inc. New York Harry M. Stevens, Inc. of New Jersey New Jersey Harry M. Stevens, Inc. of Penn. Pennsylvania Landy Textile Rental Services, Inc. Pennsylvania Linen Supply Service, Inc. Illinois Main, Inc. Florida Merced News Company California Restaura, Inc. Michigan Smithsub, Inc. Virginia
INTERNATIONAL: Administracion De Servicios Hosteleros S.A. Spain ARAMARK (Asia) Pte Limited Singapore ARAMARK Canada Facility Services Ltd. Canada ARAMARK Canada Recycling Services Ltd. Canada ARAMARK Canada, Ltd. Canada ARAMARK Canadian Investments, Inc. Canada ARAMARK Cleaning S.A. Belgium ARAMARK GmbH Germany ARAMARK Holdings GmbH Germany ARAMARK Holdings Ltd. United Kingdom ARAMARK Investments BV Amsterdam ARAMARK Investments Limited United Kingdom ARAMARK Mexico, S.A. de C.V. Mexico ARAMARK Plc United Kingdom ARAMARK Restaurations GmbH Germany ARAMARK S.A. Belgium ARAMARK S.A. de C.V. Mexico ARAMARK S.R.O. Czech Republic ARAMARK Services of Canada, Inc. Canada ARAMARK Servicios de Catering, S.L. Spain ARAMARK Servicios Integrales, S.A. Spain ARAMARK Slovak Republic S.R.O. Slovak Republic ARAMARK Szolgaltato Es Kereskedelmi KFT. Hungary ARAMARK Uniform Manufacturing de Mexico, S.A. de C.V. Mexico ARAMARK Worldwide Investments Limited United Kingdom ARAMONT Company Ltd. Bermuda DynaMed UK Limited United Kingdom Services D'Entretrien Versabec, Inc. Canada Versabec Inc. Canada
EX-23 8 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated November 8, 1999 included in this Form 10-K for the fiscal year ended October 1, 1999 into the Company's previously filed Registration Statements on Form S-8, Registration Nos. 33-11818, 33-30879, 33-33329, 33-44002, 33-57825, and 333-53163, and on Form S-3, Registration Nos. 33-47564, 333-53161, and 333-63427. Philadelphia, Pennsylvania November 24, 1999 EX-24 9 EXHIBIT 24 EXHIBIT 24 JOSEPH NEUBAUER POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /s/ Joseph Neubauer ------------------------------- Joseph Neubauer EXHIBIT 24 LAWRENCE T. BABBIO, JR. POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /s/ Lawrence T. Babbio, Jr. ---------------------------------- Lawrence T. Babbio, Jr. EXHIBIT 24 ROBERT J. CALLANDER POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 9, 1999 /s/ Robert J. Callander ---------------------------------- Robert J. Callander EXHIBIT 24 RONALD R. DAVENPORT POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 9, 1999 /s/ Ronald R. Davenport --------------------------------- Ronald R. Davenport EXHIBIT 24 PATRICIA C. BARRON POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, Martin W. Spector and Donald S. Morton as her Attorney-in-Fact and hereby grants to each of them acting alone without the others, for her and in her name as such director, full power to: (a) sign the Annual Report on Form 10-K for the fiscal year ended October 1, 1999, 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 8, 1999 /s/ Patricia C. Barron ---------------------------------- Patricia C. Barron EXHIBIT 24 LEE F. DRISCOLL, JR. POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /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, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /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, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /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, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /s/ Thomas H. Kean ------------------------------- Thomas H. Kean EXHIBIT 24 JAMES E. PRESTON POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /s/ James E. Preston -------------------------------- James E. Preston EXHBIT 24 JAMES E. KSANSNAK POWER OF ATTORNEY The undersigned director of ARAMARK Corporation, a Delaware corporation (the "Company"), hereby appoints Joseph Neubauer, L. Frederick Sutherland, 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 October 1, 1999, 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 8, 1999 /s/ James E. Ksansnak -------------------------------- James E. Ksansnak EX-27 10 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information from the Consolidated Balance Sheet and Consolidated Statement of Income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K. 1,000 YEAR OCT-01-1999 OCT-03-1998 OCT-01-1999 27,690 0 578,393 22,496 369,791 1,044,366 1,889,956 956,241 2,870,543 925,753 1,609,659 0 0 683 125,888 2,870,543 0 6,718,426 0 6,063,594 193,703 13,413 135,753 239,413 89,222 150,191 0 0 0 150,191 1.59 1.48
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