S-1 1 e66937sv1.txt FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 2003 REGISTRATION NO. 333- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- VOLUME SERVICES AMERICA HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 5812 13-3870167 (Jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)

201 EAST BROAD STREET SPARTANBURG, SOUTH CAROLINA 29306 (864) 598-8600 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) JANET L. STEINMAYER, ESQ. GENERAL COUNSEL VOLUME SERVICES AMERICA HOLDINGS, INC. 300 FIRST STAMFORD PLACE STAMFORD, CONNECTICUT 06902 (203) 975-5900 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- COPIES TO: RISE B. NORMAN, ESQ. DAVID J. GOLDSCHMIDT, ESQ. SIMPSON THACHER & BARTLETT SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 425 LEXINGTON AVENUE FOUR TIMES SQUARE NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10036 (212) 455-2000 (212) 735-3000

--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------------------- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------------------- If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------------------- If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, please check the following box. [ ] --------------------- CALCULATION OF REGISTRATION FEE

(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (2) The IDSS represent underlying shares of the common stock and $ aggregate principal amount of underlying % subordinated notes of Volume Services America Holdings, Inc. ("VSAH"). Includes IDSS subject to the underwriters' over-allotment option. (3) Includes shares of VSAH's common stock subject to the underwriters' over-allotment option. (4) Includes $ million aggregate principal amount of VSAH's % subordinated notes subject to the underwriters' over-allotment option. (5) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee for the guarantees is payable. --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANT GUARANTORS

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED , 2003 PROSPECTUS INCOME DEPOSITARY SECURITIES (IDSS) VOLUME SERVICES AMERICA HOLDINGS, INC. [VOLUME SERVICES LOGO] --------------------- We are selling IDSS in respect of shares of our common stock and $ million aggregate principal amount of our % subordinated notes. Each IDSS initially represents, through the depositary arrangements: - one share of our common stock; and - $ aggregate principal amount of our % subordinated notes. Holders of IDSS will have the right to surrender the IDSS and receive delivery of the underlying shares of our common stock and subordinated notes at any time after 180 days from the date of this prospectus. Under specified circumstances, we will be required to defer interest payments on our subordinated notes underlying the IDSS. Interest payments will not be deferred for more than 24 months in the aggregate or at any time after , 2008. Deferred interest on our subordinated notes will bear interest at an annual rate of %. Our subordinated notes mature on , 2013, subject to our right to extend their maturity for two additional successive five-year terms under specified circumstances. This is the initial public offering of our IDSS and the underlying shares of our common stock and subordinated notes. We will apply to list our IDSS on the American Stock Exchange under the trading symbol " " and on the Toronto Stock Exchange under the trading symbol " ." In addition, we will apply to list our shares of common stock underlying the IDSS on the Toronto Stock Exchange under the trading symbol " ." INVESTING IN THE SHARES OF OUR COMMON STOCK AND OUR SUBORDINATED NOTES UNDERLYING THE IDSS INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 19. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------

--------------- (1) The offering price in Canada is payable in Canadian dollars and is the approximate equivalent of the U.S. dollar offering price based on the noon buying rate on the date of this prospectus as quoted by the Federal Reserve Bank of New York. (2) We will use approximately $ of those proceeds to redeem % of the shares of our common stock held by the existing investors before this offering. We have granted the underwriters an option to purchase up to additional IDSS to cover over-allotments. We will use all of the proceeds from the sale of any additional IDSS under the underwriters' over-allotment option to redeem additional shares of our capital stock retained by the existing investors after this offering. The underwriters expect to deliver the IDSS to purchasers on or about , 2003. --------------------- CIBC WORLD MARKETS , 2003 TABLE OF CONTENTS

SUMMARY The following is a summary of the principal features of this offering of IDSS and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus. Throughout this prospectus, we refer to Volume Services America Holdings, Inc., a Delaware corporation, as "VSAH," and, together with its consolidated operations, as "we," "our" and "us," unless otherwise indicated. Any reference to "VSA" refers to our wholly-owned subsidiary, Volume Services America, Inc., a Delaware corporation, and its consolidated operations, unless otherwise indicated. We are a holding company and have no direct operations. Our principal asset is the capital stock of VSA which will be pledged to the creditors under the new credit facility, as described more fully below. OUR COMPANY OVERVIEW We are a leading provider of food and beverage concessions, high-end catering and merchandise services for sports facilities, convention centers and other entertainment facilities throughout the United States. Based on the number of facilities served, we are one of the largest providers of food and beverage services to a variety of recreational facilities in the United States and are the: - second largest provider to National Football League, or NFL, facilities (10 teams); - third largest provider to Major League Baseball, or MLB, facilities (7 teams); - largest provider to minor league baseball and spring training facilities (27 teams); and - second largest provider to major convention centers (those with greater than approximately 300,000 square feet of exhibition space) (10 centers). We have a large diversified client base. As of October 1, 2002, we served 127 facilities, with an average length of client relationship of over 15 years. Some of our major accounts by client category include: - Yankee Stadium in New York City; - the Louisiana Superdome, home of the New Orleans Saints; - the Seattle Mariners' Safeco Field; - the National Trade Centre in Toronto, Canada's largest exhibit hall; - the Vancouver Convention & Exhibition Centre; and - the Los Angeles Zoo. Our contracts are typically long-term and exclusive. From 1997 through 2001, on average, contracts representing 9.2% of our EBITDA came up for renewal in each year. We retained contracts representing an average of 84.5% of the EBITDA corresponding to those contracts, which together with the contracts that did not come up for renewal resulted in us retaining contracts representing on average approximately 98.6% of our EBITDA in each year for this period. OUR STRENGTHS Leading Market Position. Based on the number of facilities served, we are one of the largest providers of food and beverage services to a variety of sports facilities and to major convention centers in the United States. Diversified Client Base. As of October 1, 2002, we provided services to 67 sports facilities, 30 convention centers and 30 other entertainment facilities, representing approximately 65.2%, 22.9% and 1 11.9%, respectively, of our net sales and approximately 69.5%, 19.9% and 10.6%, respectively, of our EBITDA for fiscal 2001. Exclusive, Long-Term Service Contracts. We typically provide services at our clients' facilities pursuant to long-term contracts that grant us the exclusive right to provide certain food and beverage products and services and, under some contracts, merchandise products and other services within the facility. High Quality, Full Service Capabilities. We believe that our expertise in high-end catering and concession sales, coupled with our reputation for high-quality food and beverage products and services, provide a competitive advantage when we bid for contracts. Experienced Management Team. We believe that the considerable experience of our senior management and facility general managers in the recreational food service industry, which refers to the portion of the food service industry in which we do business, is of particular value in enabling us to evaluate the risks and benefits associated with potential new contracts, contract structures, product innovations and markets. STRATEGIC DIRECTION AND GROWTH OPPORTUNITIES Our industry position and experience have enabled us to effectively evaluate and select opportunities for growth. Our strategy is to increase net sales with existing clients, obtain new clients and expand into related markets. We intend to accomplish these goals by: Further Penetrating the Mid-Size Account Market. We believe that the most promising area of future growth for us is in the mid-size account market -- sporting and other recreational facilities, arenas, civic centers, convention centers and amphitheatres in medium- to small-cities. We believe that we have the opportunity to expand our presence in this market, and we plan to focus our sales efforts there. Extending Our Suite and Club Seat Catering Services. We believe that we are capable of providing the quality and service levels that our clients expect for their suites and club-level seats at sports and other entertainment facilities. We are actively seeking to be awarded the suite and club-level service contracts for the facilities at which we provide concession services and for prospective clients. Building the Facilities Management Business. We believe that we can offer efficiencies to our clients by providing food and beverage services and facilities management services in the same facility. We intend to build on our experience in facilities management, our expertise in operating and managing food and beverage concession services and our ability to make capital investments in order to more effectively bid on new facility management accounts. Offering a Variety of Branded Products to Our Clients. We are pursuing a strategy of offering a variety of high-quality, well-recognized branded products to our clients, which involves working with prospective branded food and beverage companies in order to make targeted use of branded products to increase customer sales. Adopting Company-Wide Best Practices. To improve our service and performance, we have established four corporate-wide task forces: high-end catering, concessions, facilities management and merchandise. As part of this effort, we plan to develop and implement company-owned brands that emphasize the breadth and high quality of the services that we provide. NEW CREDIT FACILITY Upon completion of this offering, VSA will enter into a new senior secured credit facility with a syndicate of financial institutions, including CIBC World Markets Corp., as lead arranger and sole bookrunner. In this document, we refer to this credit facility as the "new credit facility." We expect that the new credit facility will be comprised of a revolving credit facility in a total principal amount of up to $ million and a term facility consisting of senior secured notes in an aggregate principal amount of 2 $ million. We currently expect that the new credit facility will permit us to pay interest and dividends to IDSS holders. However, the new credit facility will contain significant restrictions on our ability to make interest and dividend payments to IDSS holders and on our subsidiaries' ability to make dividend and interest payments to us. We expect that the revolving credit facility will have a year maturity and the term facility will have a year maturity. See "Description of Certain Indebtedness -- New Credit Facility." TENDER OFFER AND CONSENT SOLICITATION Concurrently with this offering, VSA will commence a tender offer and consent solicitation with respect to all of its outstanding 11 1/4% senior subordinated notes due 2009 for total consideration of $ million. As of October 1, 2002, $100 million of VSA's senior subordinated notes were outstanding. The closing of the tender offer and consent solicitation is a condition to this offering. We cannot assure you that the tender offer and consent solicitation will be consummated on the terms described above. VSA will use a portion of the net proceeds from this offering and borrowings under the new credit facility to pay for its senior subordinated notes accepted for purchase in the tender offer and consent solicitation. OUR RECAPITALIZATION In connection with this offering, we will issue shares of our common stock and shares of our exchangeable participating preferred stock to BCP Volume L.P., BCP Offshore Volume L.P., Recreational Services L.L.C. and VSI Management Direct, L.P., which are the owners of all our outstanding common stock prior to this offering and which we refer to in this prospectus as the "existing investors," in exchange for their shares of our common stock that will not be redeemed with the proceeds from this offering. Upon completion of this offering, the exchangeable participating preferred stock will be exchangeable in the aggregate at any time, at the option of the holder, into shares of our common stock and $ million aggregate principal amount of our subordinated notes. USE OF PROCEEDS We estimate that we will receive net proceeds from this offering of approximately $ million after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. We will use $ million of net proceeds from this offering and borrowings under the new credit facility to redeem % of the shares of our common stock held by the existing investors before this offering. We will use $ million of net proceeds from this offering and borrowings under the new credit facility to make a capital contribution to VSA. VSA will use those funds to repay all outstanding borrowings under its existing credit facility and purchase VSA's senior subordinated notes that are validly tendered and not withdrawn in the tender offer and consent solicitation. If the underwriters exercise their over-allotment option in full, we will use all the proceeds we receive from the sale of additional IDSS under the over-allotment option to redeem the existing investors' remaining interest in us. Certain members of our management will have an aggregate % ownership interest in us after this offering. 3 The following chart reflects our capital structure immediately after this offering: [CHART] [CORPORATE STRUCTURE CHART SHOWING: (1) THE EXISTING INVESTORS OWING SHARES OF 0% EXCHANGEABLE PARTICIPATING PREFERRED STOCK OF VOLUME SERVICES AMERICA HOLDINGS, INC. ("VSAH"), REPRESENTING A 9.5% OWNERSHIP INTEREST IN VSAH; CROSS-REFERENCE TO A FOOTNOTE THAT STATES THAT EACH SHARE OF EXCHANGEABLE PARTICIPATING PREFERRED STOCK IS EXCHANGEABLE, AT ANY TIME AT THE OPTION OF THE HOLDER, INTO ONE SHARE OF OUR COMMON STOCK AND $ PRINCIPAL AMOUNT OF OUR SUBORDINATED NOTES. AS A RESULT, WE EXPECT THAT UPON COMPLETION OF THIS OFFERING, THE EXISTING INVESTORS WILL RETAIN 10% OF THE VOTING POWER OF OUR EQUITY SECURITIES. IF THE UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT OPTION IN FULL, THE EXISTING INVESTORS WILL RETAIN NO INTEREST IN US. CERTAIN MEMBERS OF OUR MANAGEMENT WILL HAVE AN AGGREGATE % OWNERSHIP INTEREST IN US AFTER THIS OFFERING; (2) THE EXISTING INVESTORS OWING SHARES OF COMMON STOCK OF VSAH, REPRESENTING A 0.5% OWNERSHIP INTEREST IN VSAH; CROSS-REFERENCE TO A FOOTNOTE THAT STATES THAT EACH SHARE OF EXCHANGEABLE PARTICIPATING PREFERRED STOCK IS EXCHANGEABLE, AT ANY TIME AT THE OPTION OF THE HOLDER, INTO ONE SHARE OF OUR COMMON STOCK AND $ PRINCIPAL AMOUNT OF OUR SUBORDINATED NOTES. AS A RESULT, WE EXPECT THAT UPON COMPLETION OF THIS OFFERING, THE EXISTING INVESTORS WILL RETAIN 10% OF THE VOTING POWER OF OUR EQUITY SECURITIES. IF THE UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT OPTION IN FULL, THE EXISTING INVESTORS WILL RETAIN NO INTEREST IN US. CERTAIN MEMBERS OF OUR MANAGEMENT WILL HAVE AN AGGREGATE % OWNERSHIP INTEREST IN US AFTER THIS OFFERING; (3) THE PUBLIC OWNING IDSS ( SHARES OF COMMON STOCK AND $ AGGREGATE PRINCIPAL AMOUNT OF SUBORDINATED NOTES), REPRESENTING A 90% OWNERSHIP INTEREST IN VSAH; CROSS-REFERENCE TO A FOOTNOTE THAT STATES THAT THE SUBORDINATED NOTES WILL BE FULLY AND UNCONDITIONALLY GUARANTEED, ON AN UNSECURED SUBORDINATED BASIS, BY EACH OF OUR DIRECT AND INDIRECT U.S. WHOLLY-OWNED SUBSIDIARIES. SEE "DESCRIPTION OF SUBORDINATED NOTES -- GUARANTEES;" (4) VSAH OWNING 100% OF VOLUME SERVICES AMERICA, INC. ("VSA"); CROSS-REFERENCE TO A FOOTNOTE THAT STATES THAT ALL OUTSTANDING SHARES OF VSA'S COMMON STOCK WILL BE PLEDGED TO THE CREDITORS UNDER THE NEW CREDIT FACILITY. SEE "DESCRIPTION OF CERTAIN INDEBTEDNESS -- NEW CREDIT FACILITY -- COLLATERAL;" (5) THE BANK SYNDICATE EXTENDING THE NEW CREDIT FACILITY TO VSA; CROSS-REFERENCE TO A FOOTNOTE THAT STATES THAT IMMEDIATELY FOLLOWING THE OFFERING APPROXIMATELY $ MILLION OF BORROWINGS WILL BE OUTSTANDING UNDER THE NEW CREDIT FACILITY; AND (6) VSA OWNING 100% OF EACH OF VOLUME SERVICES, INC. ("VSI") AND SERVICE AMERICA CORPORATION ("SERVICE AMERICA").] --------------- (1) Each share of exchangeable participating preferred stock is exchangeable, at any time at the option of the holder, into one share of our common stock and $ principal amount of our subordinated notes. As a result, we expect that upon completion of this offering, the existing investors will retain 10% of the voting power of our equity securities. If the underwriters exercise their over-allotment option in full, the existing investors will retain no interest in us. Certain members of our management will have an aggregate % ownership interest in us after this offering. (2) The subordinated notes will be fully and unconditionally guaranteed, on an unsecured subordinated basis, by each of our direct and indirect U.S. wholly-owned subsidiaries. See "Description of Subordinated Notes -- Guarantees." (3) All outstanding shares of VSA's common stock will be pledged to the creditors under the new credit facility. See "Description of Certain Indebtedness -- New Credit Facility -- Collateral." (4) Immediately following the offering approximately $ million of borrowings will be outstanding under the new credit facility. OUR CORPORATE INFORMATION Our principal executive office is located at 201 East Broad Street, Spartanburg, South Carolina 29306, and our telephone number is (864) 598-8600. Our internet address is www.volumeservicesamerica.com. www.volumeservicesamerica.com is a textual reference only, meaning that the information contained on the website is not part of this prospectus and is not incorporated in this prospectus by reference. 4 THE OFFERING SUMMARY OF THE IDSS WHAT ARE IDSS? We are offering IDSS at an initial public offering price of $ per IDSS. Each IDSS initially represents, through the depositary arrangements: - one share of our common stock; and - $ aggregate principal amount of our % subordinated notes. The depositary or its nominee will actually be the registered owner of the shares of our common stock and our subordinated notes underlying the IDSS. As a holder of IDSS, you will have rights with respect to those underlying securities as provided in the deposit agreement under which the IDSS will be issued, including rights to receive interest, dividends and other distributions we make on the underlying securities, to instruct the depositary how to vote the underlying shares of common stock and subordinated notes, to surrender your IDSS and receive delivery of the underlying securities and to deposit the underlying securities and receive delivery of IDSS. WHAT PAYMENTS CAN I EXPECT TO RECEIVE AS A HOLDER OF IDSS? You will be entitled to receive monthly interest payments at an annual rate of % of the aggregate principal amount of subordinated notes underlying your IDSS or approximately $ per IDSS per year, subject to our obligation, under specified circumstances, to defer interest payments on our subordinated notes for no more than 24 months in the aggregate and no later than the earlier of , 2008 or the termination of the new credit facility. You will also receive monthly dividends on the shares of our common stock underlying your IDSS, if and to the extent dividends are declared by our board of directors and permitted by applicable law and the terms of our then existing indebtedness and after payment of a portion of the dividends on our exchangeable participating preferred stock. The subordinated notes indenture contains restrictions on our ability to declare and pay dividends on our common stock. We have adopted a dividend policy which contemplates that initial annual dividends will be approximately $ per share of our common stock. However, our board of directors may, in its discretion, modify or repeal our dividend policy. We cannot assure you that we will pay dividends at this level in the future or at all. Assuming we make our scheduled interest payments and pay dividends in the amount contemplated by our current dividend policy, you will receive in the aggregate approximately $ per year per IDSS in dividends and interest. We expect to make interest and dividend payments on or about the th day of each month. You will receive those payments after the depositary receives them. WILL THE IDSS BE LISTED ON AN EXCHANGE? We will apply to list the IDSS on the American Stock Exchange under the trading symbol " " and on the Toronto Stock Exchange under the trading symbol " ." WILL THE SUBORDINATED NOTES AND SHARES OF OUR COMMON STOCK UNDERLYING THE IDSS BE LISTED ON AN EXCHANGE? The subordinated notes underlying the IDSS will not be listed on any exchange. We will apply to list the shares of our common stock underlying the IDSS on the Toronto Stock Exchange under the trading symbol " ." However, we currently do not expect an active trading market to develop in the shares of our common stock. These securities will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933. 5 IN WHAT FORM WILL IDSS AND THE SECURITIES UNDERLYING THE IDSS BE ISSUED? The IDSS and the securities underlying the IDSS will be issued in book-entry form only. This means that you will not be a registered holder of IDSS or the securities underlying the IDSS, and you will not be entitled to receive a certificate for your IDSS or the securities underlying your IDSS. You must rely on your broker or other financial institution that will maintain your book-entry position to receive the benefits and exercise the rights of a holder of IDSS. HOW CAN I EXCHANGE MY IDSS FOR SHARES OF COMMON STOCK AND SUBORDINATED NOTES OR EXCHANGE SHARES OF COMMON STOCK AND SUBORDINATED NOTES FOR IDSS? Holders of IDSS may, at any time after 180 days from the date of original issuance, through their broker or other financial institution, surrender the IDSS to the depositary and receive delivery of shares of our common stock and subordinated notes underlying the IDSS. Any holder of shares of our common stock and subordinated notes may, at any time, through their broker or other financial institution, deposit shares of common stock and subordinated notes and receive delivery of the applicable number of IDSS. WHAT WILL BE THE U.S. FEDERAL INCOME TAX CONSIDERATIONS IN CONNECTION WITH AN INVESTMENT IN THE IDSS? We intend to treat the purchase of IDSS in this offering as the purchase of shares of our common stock and subordinated notes and, by purchasing IDSS, you will be deemed to have agreed to such treatment. You must allocate the purchase price of the IDSS between those shares of common stock and subordinated notes in proportion to their respective initial fair market values, which will establish your initial tax basis. We expect to report the initial fair market value of each share of common stock as $ and the initial fair market value of each $ aggregate principal amount of our subordinated notes as $ and, by purchasing IDSS, you will be deemed to agree to such allocation. The subordinated notes should be treated as debt for U.S. federal income tax purposes. If the subordinated notes were treated as equity rather than debt for U.S. federal income tax purposes, then the stated interest on the subordinated notes could be treated as a dividend, and interest on the subordinated notes would not be deductible by us for U.S. federal income tax purposes, which could significantly reduce our future cash flow. In addition, payments on the subordinated notes to foreign holders would be subject to U.S. federal withholding taxes at rates of up to 30%. Payments to foreign holders would not be grossed-up on account of any such taxes. The U.S. federal income tax consequences to you of the subsequent deposit with the depositary of subordinated notes with original issue discount upon a subsequent issuance of IDSS pursuant to an offering by us or upon a deposit of subordinated notes following an exercise of exchange rights by holders of exchangeable participating preferred stock are unclear. We intend to take the position that any such deposit of subordinated notes will not result in a taxable exchange of your subordinated notes for U.S. federal income tax purposes, but such deposit of subordinated notes with original issue discount could be treated as a taxable exchange of a portion of the subordinated notes underlying IDSS for a portion of the subordinated notes subsequently deposited with the depositary. Because there is no statutory, judicial or administrative authority directly addressing the tax treatment of the IDSS or instruments similar to the IDSS, we urge you to consult your own tax advisor concerning the tax consequences of an investment in the IDSS. For additional information, see "Material U.S. Federal Income Tax Considerations." WHAT IS THE FUNCTION OF THE DEPOSITARY? The depositary will perform the following administrative functions: - receive payments from us with respect to the shares of our common stock and our subordinated notes and distribute those payments to IDSS holders; - maintain a register of IDSS holders; 6 - facilitate communications between IDSS holders, on the one hand, and us or the subordinated notes trustee, on the other hand; and - effect deliveries of shares of our common stock and our subordinated notes upon surrenders of IDSS and vice versa. The Bank of New York will serve as the depositary. The mailing address of the depositary is 101 Barclay Street, New York, New York 10286. 7 SUMMARY OF THE SUBORDINATED NOTES Issuer........................ Volume Services America Holdings, Inc. Subordinated notes............ $ million aggregate principal amount of % subordinated notes, or $ million aggregate principal amount assuming the exchange of all shares of our exchangeable participating preferred stock for our subordinated notes and shares of our common stock or the exercise of the underwriters' over-allotment option in full. Interest rate................. % per year. Interest payment dates........ Interest will be paid monthly in arrears on the business day of each month, commencing , 2003. Interest deferral............. If and for as long as our ratio of Adjusted EBITDA to interest expense, as defined in the new credit facility, for the twelve-month period ended on the last day of any fiscal quarter is at or below , we must defer interest payments on our subordinated notes, as long as we are not in default under our subordinated notes. Interest payments will not be deferred for more than 24 months in the aggregate or at any time after the earlier of , 2008 or the termination of the new credit facility. Deferred interest on our subordinated notes will bear interest at an annual rate of %. At the end of each interest deferral period, we must pay all deferred interest and any interest on deferred interest in full. In the event that interest payments on the subordinated notes are deferred, you would be required to include accrued interest in your income for U.S. federal income tax purposes even if you do not receive any cash interest payments. Maturity date................. The subordinated notes will mature on , 2013. We may extend the maturity of our subordinated notes for two additional successive five-year terms if, during a specified period ending days before the end of the then current term, the ratio of our Adjusted EBITDA to interest expense is equal to or greater than and so long as we and our subsidiaries are not in bankruptcy or otherwise insolvent, we are not in default under our subordinated notes or any of our other outstanding indebtedness and there are no overdue payments of interest on our subordinated notes or any of our other outstanding indebtedness. Optional redemption........... On and after , 2008, we may redeem for cash all or part of the subordinated notes upon not less than 30 nor more than 60 days' notice by mail to the owners of subordinated notes, for a price equal to % of the principal amount of subordinated notes to be redeemed, plus any accrued but unpaid interest to the redemption date. If the notes are redeemed in part on a pro rata basis, each IDSS will represent less than $ aggregate principal amount of our subordinated notes. Change of control............. Upon the occurrence of a change of control, as defined under "Description of Subordinated Notes -- Change of Control," each owner of subordinated notes will have the right to require us to 8 repurchase that owner's subordinated notes at a price equal to 101% of the principal amount of the subordinated notes being repurchased, plus any accrued but unpaid interest to the date of repurchase. However, a holder of IDSS will not be able to exercise this right unless such holder surrenders the IDSS to the depositary, and receives delivery of the underlying securities. Guarantees of subordinated notes......................... The subordinated notes will be fully and unconditionally guaranteed, on an unsecured subordinated basis, by each of our direct and indirect U.S. wholly-owned subsidiaries existing on the issue date of the subordinated notes and all our future U.S. restricted subsidiaries that incur indebtedness or issue shares of preferred stock or certain capital stock that is redeemable at the option of the holder. The subordinated notes will not be guaranteed by certain of our subsidiaries which are either not wholly-owned or are organized outside of the United States. The guarantees will be subordinated to the guarantees issued by the subsidiary guarantors under the new credit facility. Ranking of subordinated notes and guarantees................ The subordinated notes will be unsecured and subordinated in right of payment to all of VSAH's existing and future senior indebtedness. The subordinated notes will rank pari passu in right of payment with all of VSAH's subordinated indebtedness. VSAH is a holding company and derives all of its operating income and cash flow from its subsidiaries. The guarantees will be unsecured and will be subordinated in right of payment to all existing and future senior indebtedness of the subsidiary guarantors, including all borrowings of VSA and all guarantees of the other subsidiary guarantors under the new credit facility. The guarantees will rank pari passu with all other indebtedness of the subsidiary guarantors, including trade payables. The indenture governing VSAH's subordinated notes will permit VSAH and the subsidiary guarantors to incur additional indebtedness, including senior indebtedness, subject to specified limitations. On a pro forma basis as of October 1, 2002: - VSAH would have had no senior or pari passu indebtedness outstanding; - VSA would have had $ million aggregate principal amount of senior secured indebtedness outstanding under the new credit facility, which would have been guaranteed on a senior secured basis by the other subsidiary guarantors; - VSA and the other subsidiary guarantors would have had $ million aggregate principal amount of pari passu indebtedness outstanding, other than the guarantees of the subordinated notes; and - the non-guarantor subsidiaries would have had total liabilities, excluding liabilities owed to us, of $ million, total assets of these subsidiaries would have accounted for 2.6% of our assets and these subsidiaries would have generated 5.1% of our net sales and 2.1% of our EBITDA. 9 Restrictive covenants......... The indenture governing the subordinated notes will contain covenants with respect to us and our restricted subsidiaries that will restrict: - the incurrence of additional indebtedness and the issuance of preferred stock and certain redeemable capital stock; - the payment of dividends on, and redemption of, capital stock; - a number of other restricted payments, including investments; - specified sales of assets; - specified transactions with affiliates; - the creation of a number of liens; and - consolidations, mergers and transfers of all or substantially all of our assets. The indenture will also prohibit certain restrictions on distributions from our restricted subsidiaries. However, there will be no restriction in the indenture on VSAH incurring indebtedness in connection with the issuance of shares of VSAH's common stock so long as the ratio of the aggregate principal amount of the additional debt securities over the number of the additional shares of VSAH's common stock will not exceed the equivalent ratio underlying the then existing IDSS. In addition, all the limitations and prohibitions described above are subject to a number of other important qualifications and exceptions described under "Description of Subordinated Notes -- Certain Covenants." The depositary will not be obligated to enforce these covenants on your behalf. However, the depositary will terminate the deposit agreement if, among other things, the depositary receives notice from us or the trustee for the subordinated notes of an event of default under the subordinated notes or the holders of at least 25% of the outstanding IDSS request termination on the grounds that a default may have occurred under the subordinated notes. Additionally, you may, at any time, surrender your IDSS, withdraw your subordinated notes and shares of common stock as provided in the deposit agreement and enforce your rights as a noteholder directly. 10 SUMMARY OF THE COMMON STOCK Issuer........................ Volume Services America Holdings, Inc. Shares of common stock underlying IDSS............... shares. Shares of common stock to be outstanding following the offering...................... shares, or shares assuming the exchange of all shares of our exchangeable participating preferred stock for shares of our common stock and subordinated notes or the exercise of the underwriters' over-allotment option in full. Voting rights................. Each outstanding share of our common stock will carry one vote per share and, subject to applicable law, will vote together with shares of our exchangeable participating preferred stock as a single class. Each outstanding share of our exchangeable participating preferred stock will carry a number of votes equal to the number of shares of our common stock for which that share may be exchanged. Listing....................... We will apply to list our common stock underlying the IDSS on the Toronto Stock Exchange under the trading symbol " ." However, we currently do not expect that an active trading market for the shares of our common stock will develop. These securities will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933. RISK FACTORS You should carefully consider the information under the heading "Risk Factors" and all other information in this prospectus before investing in the shares of our common stock and subordinated notes underlying the IDSS. FUTURE FINANCINGS We expect to effect future financings by issuing additional shares of our common stock and subordinated notes, which may be represented by IDSS or issued separately, or by issuing other securities. GENERAL INFORMATION ABOUT THIS PROSPECTUS Unless we specifically state otherwise, the information in this prospectus does not take into account: - the exercise by the underwriters of their over-allotment option with respect to IDSS; and - reserved for issuance under our long-term management incentive plan. Throughout this prospectus, we have assumed the purchase of all of VSA's senior subordinated notes in the tender offer and consent solicitation for aggregate consideration of $ million. In this prospectus, our average length of client relationships is calculated based on continuous historical contract relationships with our existing clients, after weighting each relevant contract by the EBITDA it generated in fiscal 2001. For purposes of calculating our average length of client relationships, we count as continuous relationships those cases in which a sports team at a facility we serve moves to a new facility for which we obtain the relevant service contract. In addition, our contracts' average remaining 11 life is based on the average period of time left to run before their scheduled expirations, after weighting each contract by the EBITDA it generated in fiscal 2001. When we describe EBITDA as being generated by a contract or group of contracts for the relevant period, we have calculated it by allocating all corporate credits, overhead and miscellaneous expenses to the relevant contract or group of contracts proportionately based on the net sales generated by that contract or group of contracts for that same period. In this prospectus, EBITDA is defined as income (loss) before income taxes, interest expense, depreciation and amortization. EBITDA is not a measure in accordance with generally accepted accounting principles in the United States, or GAAP, and should not be considered as an alternative to net income or cash flow data prepared in accordance with GAAP. Our measure of EBITDA may not be comparable to similarly titled measures used by other companies due to differences in methods of calculation. Throughout this prospectus, unless otherwise indicated, all references to dollars are to U.S. dollars, and all references to GAAP are to U.S. generally accepted accounting principles. 12 SUMMARY CONSOLIDATED FINANCIAL INFORMATION The following table sets forth our summary consolidated financial information derived from our audited consolidated financial statements for each of our fiscal years in the five year period ended January 1, 2002. The following table also sets forth our summary historical financial information derived from our unaudited consolidated financial statements for the thirty-nine weeks ended October 1, 2002 and October 2, 2001, which are included in this prospectus. The information in the table below is only a summary and should be read in conjunction with our audited consolidated financial statements for fiscal 1999, 2000 and 2001 and the related notes, our unaudited consolidated financial statements for the thirty-nine weeks ended October 1, 2002 and October 2, 2001 and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," all as included elsewhere in this prospectus. The figures for interim periods shown below are not necessarily indicative of results for the applicable full fiscal year.

--------------- (1) We have adopted a 52-53 week period ending on the Tuesday closest to December 31 as our fiscal year. The 1997, 1998, 1999 and 2001 fiscal years consisted of 52 weeks, and fiscal year 2000 consisted of 53 weeks. (2) In accordance with Statement of Financial Accounting Standards No. 142, or SFAS 142, effective January 2, 2002, we discontinued the amortization of goodwill and trademarks and identified intangible assets which we believe have indefinite lives. Adjusted net income (loss) to give effect to SFAS 142 would have been $(2.4) million for fiscal 1997, $(3.9) million for fiscal 1998, $(3.1) million for fiscal 1999, $(1.8) million for fiscal 2000, $(1.1) million for fiscal 2001 and $1.8 million for the thirty-nine weeks ended October 2, 2001. (3) EBITDA and Adjusted EBITDA are not intended to represent cash flows from operations as determined by generally accepted accounting principles and should not be used as alternatives to income (loss) before taxes or net income as indicators of operating performance or to cash flows as measures of liquidity. Our measures of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies due to differences in methods of calculation. We believe that EBITDA and Adjusted EBITDA best reflect the cash returned on our investment in capital expenditures under our contracts. In addition, we believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about non-cash and certain non-recurring items and because covenants in the indenture governing our subordinated notes contain ratios based on that measure. For example, our ability to incur additional debt and make restricted payments requires an Adjusted EBITDA to fixed charges ratio of 2.0 to 1.0, except that we may incur certain debt and make certain restricted payments without regard to the ratio, including our ability to incur an unlimited amount of indebtedness in connection with the issuance of shares of our common stock so long as the ratio of the aggregate principal amount of the additional debt securities over the number of the additional shares of our common stock will not exceed the equivalent ratio underlying the then existing IDSS. On a pro forma basis, for the four quarters ended October 1, 2002, our Adjusted EBITDA to fixed charges ratio under the indenture would have been to 1.0. We have also disclosed additional information about certain additional cash items that are not related to our core operations that we do not expect to continue in the future. Adjusted EBITDA is determined in the indenture governing our subordinated notes as income (loss) before income taxes, plus interest expense, depreciation and amortization expense, transaction related expenses, contract related losses, other non-cash charges, 14 and the annual management fee paid to affiliates of Blackstone and General Electric Capital, less any non-cash credits. (4) Explanations of the adjustments are listed below: Transaction related expenses include: - for fiscal 1998, $3.1 million of cash severance expenses paid to former employees and other expenses incurred in connection with the elimination of redundant personnel and office functions resulting from the business combination of Volume Services and Service America; - for fiscal 1999, $1.5 million of cash expenses related to the elimination of redundant office functions of the Service America corporate office in connection with the business combination of Volume Services and Service America; and - for fiscal 2000, $1.1 million of cash strategic corporate costs consisting of accounting and legal expenses resulted from merger and acquisition activity unrelated to our on-going operations; - Contract related losses include: - for fiscal 1997, a $2.5 million non-cash charge related to the write-down to net realizable value of a contract that was terminated by mutual agreement; - for fiscal 1998, $1.4 million of non-cash charges related to the write-down to net realizable value of a contract that was terminated; - for fiscal 1999, $1.4 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets; - for fiscal 2000, $1.5 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets, $0.7 million related to the write-off of assets related to a litigation settlement and a non-recurring $0.3 million cash expense in related legal fees; - for fiscal 2001, $4.8 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets; - for the thirty-nine week period ended October 2, 2001, $4.1 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contracts were insufficient to cover the carrying cost of the related long-lived assets and $0.1 million in non-cash compensation expense resulted from the change in estimated value of our company; and - for the thirty-nine week period ended October 1, 2002, $.7 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contracts were insufficient to cover the carrying cost of the related long-lived assets, $0.5 million in non-cash compensation expense resulted from the change in estimated value of our company and $1.4 million in bankruptcy funds returned to Service America; and - Management fees paid to affiliates of Blackstone and General Electric Capital include: - for fiscal 1997, 1998, 1999, 2000, 2001, the thirty-nine week period ended October 1, 2002 and the thirty-nine week period ended October 2, 2001, $0.3 million, $0.3 million, $0.4 million, $0.4 million, $0.4 million, $0.3 million and $0.3 million, respectively, of monitoring fees. 15 (5) The sum of maintenance and growth capital expenditures equals the sum of contract rights acquired, net (purchase of contract rights) and the purchase of property and equipment, net for the relevant periods as displayed in the statement of cash flows, as follows:

--------------- (1) Includes $1.4 million of bankruptcy funds returned to Service America. (2) We will not pay a management fee to Blackstone and General Electric Capital beginning in fiscal 2003, assuming consummation of this offering. (3) Assumes % interest on $ million outstanding borrowings and a letter of credit fee on a portion of the revolving credit facility reserved for the letters of credit. (4) Consist of Canadian audit fees, tax audit fees, director and officer liability insurance, expenses relating to the annual stockholders' meeting, printing expenses, investor relations expenses, additional filing fees, additional trustee fees, depositary fees, registrar and transfer agent fees, directors' fees, additional legal fees, listing fees and miscellaneous fees. (5) Consists of additional federal and state taxes resulting from the capitalization of our company after this offering. 17 Under the dividend policy we will have in place upon consummation of this offering, we would have used the available cash before capital expenditures and dividend payments shown in the above table as follows: Average maintenance capital expenditures (fiscal 1998-fiscal 2002)..................................................... Base dividend on shares of exchangeable participating preferred stock........................................... Participating dividends on shares of exchangeable participating preferred stock and dividends on shares of common stock.............................................. Remaining cash(1).........................................

--------------- (1) Includes $1.4 million of bankruptcy funds returned to Service America. In the above table, we have used our average maintenance capital expenditures from fiscal 1998 to fiscal 2002, because our actual maintenance capital expenditures for fiscal 2002 of $ were unusually high due to the capital we used to renew several long-term contracts with some of our largest clients. We have also assumed that we would have funded growth capital expenditures of $ through borrowings under the revolving line of credit of the new credit facility. In fiscal 2002, we funded these growth capital expenditures through a combination of borrowings under the revolving line of credit of the old credit facility and cash flows from operating activities. Based on the foregoing, aggregate payments to IDSS holders in fiscal 2002 would have been as follows:

18 RISK FACTORS An investment in the shares of our common stock and our subordinated notes underlying the IDSS involves a number of risks. In addition to the other information contained in this prospectus, prospective investors should give careful consideration to the following factors. RISKS RELATING TO OUR BUSINESS AND THE INDUSTRY IF ATTENDANCE OR THE NUMBER OF EVENTS HELD AT OUR CLIENTS' FACILITIES DECREASES, OUR NET SALES AND CASH FLOW MAY SIGNIFICANTLY DECLINE. A decline in the number of events held, the level of attendance at these events or the amount spent by each attendee at client facilities may cause a significant decline in our net sales and cash flow. We rely on our clients to schedule popular events at their facilities and to maximize attendance at these events. The level of attendance and number of events held at client facilities are affected by several factors, most of which are not within our control and are extremely difficult to predict, including the following: - maintenance and physical condition of the facility; - poor performance by the sports teams using the facility; - relocation or loss of a major sports team using a facility; - ticket prices; - changing consumer preferences for leisure time activities; - inclement weather; - scheduling of conventions, meetings and large catered events; - construction of attractive alternative arenas, stadiums, convention centers or other venues or facilities; - labor stoppages; and - weaker economic conditions. Labor stoppages in professional sports can cause a significant decline in our net sales and cash flow, especially in MLB which accounts for a significant portion of our net sales and a majority of our cash flow generated by contracts for sports facilities. For example, the labor stoppage which disrupted the 1995 MLB season caused a material decline in our net sales and cash flow. Had it not been averted, a MLB strike in the 2002 season would likely have had a similar negative effect on our financial performance for the period of the strike. Furthermore, weak economic conditions in North America have caused event sponsors and people attending events held at convention center facilities, including those at which we operate, to cancel, reduce or postpone their use of the facilities and/or have caused attendees at these facilities to reduce spending on discretionary purchases, such as the products which we sell. As a result, these weak economic conditions have adversely affected our net sales and cash flow. THE PRICING AND TERMINATION PROVISIONS OF OUR CONTRACTS MAY CONSTRAIN OUR ABILITY TO RECOVER COSTS AND TO MAKE A PROFIT ON OUR CONTRACTS. The amount of risk that we bear and our profit potential vary depending on the type of contract under which we provide our services. Under profit and loss and profit sharing contracts, which together account for substantially all our net sales and cash flow, we bear all of the expenses of providing our services and we bear all of the risk that net sales will be adequate to support our operations. In addition, some profit and loss and profit sharing contracts contain minimum guaranteed commissions or equivalent payments to the client, regardless of the level of net sales at the facility or whether a profit is generated. If net sales do not exceed costs under a contract, including guaranteed commissions, we will experience losses. Beginning 19 in fiscal 2003, we expect that the EBITDA we generate under our contract with our largest client will decline as a result of higher commission rates which we agreed to in connection with a renewal of the contract. Under many of our contracts, we are obliged to comply with the instructions of our clients in determining which products are sold at individual facilities, and most of our contracts limit our ability to raise prices on the food, beverages and merchandise sold within a particular facility without the client's consent. The refusal by clients to permit the sale of some products at their facilities, or the imposition by clients of maximum prices which are not economically feasible for us, could materially adversely affect our results of operations. In addition, some of our contracts contain provisions allowing our clients to terminate the contract without cause or with little or no notice, exclude specified events or products from the scope of the contract or modify the terms under which we may operate at specified events. If clients exercise these rights, our net sales may decline significantly and our results of operations could be adversely affected. WE HAVE A HISTORY OF LOSSES AND MAY EXPERIENCE LOSSES IN THE FUTURE. We have incurred significant losses in the past and we anticipate that we will continue to incur losses in the foreseeable future. We incurred net losses of: - $3.1 million in fiscal 1997; - $5.2 million in fiscal 1998; - $5.6 million in fiscal 1999; - $4.2 million in fiscal 2000; and - $3.6 million in fiscal 2001. We may not achieve profitability in the future or be able to generate cash flow sufficient to make distributions or meet our interest and principal payment obligations, including interest and dividend payments to IDSS holders, and other capital needs such as working capital for future growth and capital expenditures. WE MAY NOT BE ABLE TO RECOVER OUR CAPITAL INVESTMENTS IN CLIENTS' FACILITIES, WHICH MAY SIGNIFICANTLY REDUCE OUR PROFITS OR CAUSE LOSSES. When we enter into a new contract or renew an existing contract, we are often required to pay substantial contract acquisition fees to the client or to make capital investments in our clients' facilities that can be substantial. If the contract is terminated early either by us or by the client or in the event that a client becomes insolvent or files for bankruptcy, we may not be able to recover our unamortized capital investment under that client's contract and will have to recognize an operating loss or reduction from operating profit equal to the unrecovered portion of our capitalized investment. This amount may be substantial, depending on the remaining term of the contract and the size of the capital investment. For example, for the year ended January 1, 2002, we recorded contract related losses of approximately $1.1 million for the write-down of property and equipment related to two of our clients which filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code and a receivable reserve of $2.3 million related to one of those clients. IF THE SPORTS TEAM TENANT OF A FACILITY WE SERVE RELOCATES OR THE OWNERSHIP OF A FACILITY WE SERVE CHANGES, WE MAY LOSE THE CONTRACT FOR THAT FACILITY. Some of our sports facility contracts do not contain any protection for us in the event that the sports team tenant of the facility moves to a new facility. Changes in the ownership of a facility that we serve, or of a sports team tenant of the facility, may make renewal of a contract less likely and may result in disputes concerning the terms under which we provide our services at the facility. 20 IF WE WERE TO LOSE ANY OF OUR LARGEST CLIENTS, OUR RESULTS OF OPERATIONS COULD BE SIGNIFICANTLY HARMED. Our net sales would significantly decline if we lost any of our largest clients, representing a few key facilities. For fiscal 2001: - our largest client accounted for approximately 10.0% of our net sales; - our three largest clients together accounted for approximately 18.9% of our net sales; - our 10 largest clients together accounted for approximately 39.5% of our net sales; and - our 20 largest clients together accounted for approximately 50.1% of our net sales. Our larger contracts, which typically require higher up-front capital investments, provide us with higher EBITDA margins. A CONTRACTION OF MLB THAT ELIMINATES ANY OF THE TEAMS PLAYING IN ANY OF THE FACILITIES SERVED BY US WOULD LIKELY HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS. In November 2001, MLB announced plans for a "contraction" to eliminate three MLB teams beginning with the 2002 baseball season. No contraction occurred in the 2002 baseball season, and the contract between MLB and its players' union provides for no MLB team elimination by contraction through 2006. We do not have sufficient information to assess the likelihood that any specific team would be subject to contraction if a contraction were to occur. Press accounts at the time contraction of MLB was first announced in 2001 indicated that, among others, the Tampa Bay Devil Rays, the Minnesota Twins and the Montreal Expos were possible targets. We currently have contracts with the Tampa Bay Devil Rays and the Metrodome, home of the Minnesota Twins. If either or both of those teams were to be eliminated by contraction without due compensation to us, it could have a material adverse effect on us. WE MAY NOT HAVE SUFFICIENT FUNDS AVAILABLE TO MAKE CAPITAL INVESTMENTS IN CLIENTS' FACILITIES THAT ARE NECESSARY TO MAINTAIN THESE RELATIONSHIPS. When we renew an existing contract, we are often required to pay substantial contract acquisition fees to the client or to make substantial investments in our client's facility to help finance facility construction or renovation. The amount of these capital investments will vary, in some cases materially, from year to year depending on the number and significance of contracts up for renewal. For example, in 2003, three of our 20 largest contracts will expire. In order to renew these contracts, we expect that we will have to make significant capital expenditures. If we do not have sufficient funds available to make attractive bids for new contracts or renew existing contracts, our business will decline and our ability to make payments on the IDSS will be weakened. OUR HISTORICAL GROWTH RATES MAY NOT BE INDICATIVE OF FUTURE RESULTS, GIVEN OUR NEW CAPITAL STRUCTURE AND DIVIDEND POLICY. Our business has experienced relatively rapid growth over the last several years, much of which has been financed from cash generated by our operations. In the past, we have reinvested a significant portion of our cash earnings in the growth of our business through bidding for new business, which requires substantial up-front cash payments. Following this offering, a substantial portion of our cash earnings will be required to service our debt and maintain our existing client base. In addition, we currently intend to distribute a significant portion of any remaining cash earnings to our stockholders in the form of monthly dividends. Our ability to continue to expand our business will depend upon our future cash flow from operations and, to a large extent, upon our ability to borrow funds under our new credit facility and to obtain other third-party financing, including through the sale of IDSS or other securities. We cannot assure you that such financing will be available to us on favorable terms or at all. Thus, we do not believe that we will be able to achieve the levels of growth we have experienced historically. 21 IF LABOR OR OTHER OPERATING COSTS INCREASE, WE MAY NOT BE ABLE TO MAKE A CORRESPONDING INCREASE IN THE PRICES OF OUR PRODUCTS AND SERVICES AND OUR PROFITABILITY MAY DECLINE SIGNIFICANTLY. Most of our contracts require us to obtain our clients' consent before raising prices. As a result, we may not be able to offset any increases in our wage or other operating costs through price changes. Any factors which increase the wage rates that we have to pay in order to attract suitable employees, including any tightening of the labor supply in any of the markets where we operate, or any other factors that increase our operating costs, such as trends affecting insurance premiums, may materially adversely affect our profitability. In addition, our profitability could be materially adversely affected if we were faced with cost increases for food, beverages, wages and equipment due to general economic conditions, collective bargaining obligations, competitive conditions or any combination of these. WE COULD INCUR SIGNIFICANT LIABILITY FOR WITHDRAWING FROM MULTI-EMPLOYER PENSION PLANS. We operate at numerous facilities under collective bargaining agreements. Under some of these agreements, we are obligated to contribute to multi-employer pension plans. If any of our service contracts at these facilities were terminated or not renewed, and the applicable multi-employer pension plan at that time had unfunded vested benefits, we could be subject to withdrawal liability to the multi-employer plan. We have not determined the extent of our potential liability, if any, for any withdrawal in the future. We may be exposed to material withdrawal liability under these circumstances. In addition, we cannot predict with any certainty which, if any, groups of employees who are not currently represented by labor unions may seek union representation in the future, or the outcome of any re-negotiation of current collective bargaining agreements. WE MAY INCUR SIGNIFICANT LIABILITIES OR REPUTATIONAL HARM IF CLAIMS OF ILLNESS OR INJURY ASSOCIATED WITH OUR SERVICE OF FOOD AND BEVERAGE TO THE PUBLIC ARE BROUGHT AGAINST US. Claims of illness or injury relating to food quality or handling are common in the food service industry and from time to time, we are and may become in the future subject to claims relating to: - consumer product liability; - product tampering; - nutritional and health-related concerns; and - federal, state, provincial and local food controls. We may also be adversely affected by negative publicity resulting from the filing of food quality or handling claims at one or more of the facilities we serve. In addition, the level of product liability insurance coverage we currently maintain may not be adequate to cover these claims. Any losses that we may suffer from future liability claims, including the successful assertion against us of one or a series of large claims in excess of our insurance coverage, could materially adversely affect our results of operations. Furthermore, adverse publicity could negatively impact our ability to renew existing contracts or to obtain new clients. IF ONE OF OUR EMPLOYEES SELLS ALCOHOLIC BEVERAGES TO AN INTOXICATED OR MINOR PATRON, WE MAY BE LIABLE TO THIRD PARTIES FOR THE ACTS OF THE PATRON. We serve alcoholic beverages at many facilities and are subject to the "dram-shop" statutes of the jurisdictions in which we serve alcoholic beverages. "Dram-shop" statutes generally provide that serving alcohol to an intoxicated or minor patron is a violation of law. In most jurisdictions, if one of our employees sells alcoholic beverages to an intoxicated or minor patron, we may be liable to third parties for the acts of the patron. We cannot guarantee that those patrons will not be served or that we will not be subject to liability for their acts. In addition, our liquor liability insurance coverage may not be adequate to cover any potential liability and insurance may not continue to be available on commercially acceptable terms or at all. 22 IF WE FAIL TO COMPLY WITH APPLICABLE GOVERNMENTAL REGULATIONS, WE MAY BECOME SUBJECT TO LIABILITIES OR RESTRICTIONS ON OUR OPERATIONS WHICH COULD SIGNIFICANTLY REDUCE OUR NET SALES AND CASH FLOW AND UNDERMINE THE GROWTH OF OUR BUSINESS. Our operations are subject to various governmental regulations, including those governing: - the service of food and alcoholic beverages; - minimum wage regulations; - employment; - environmental protection; and - human health and safety. In addition, our facilities and products are subject to periodic inspection by federal, state, provincial and local authorities. We are also subject to licensing with respect to the sale of alcoholic beverages in the states and provinces in which we serve such beverages. Failure to receive or retain, or the suspension of, liquor licenses or permits would interrupt or terminate our ability to serve alcoholic beverages at the applicable locations and, depending on the number of locations or specific facilities affected, could have a material adverse effect on our results of operations. Some of our contracts require us to pay liquidated damages during any period in which our liquor license for the relevant facility is suspended, and most contracts are subject to termination in the event that we lose our liquor license for the relevant facility. Additional regulation relating to liquor licenses may limit our activities in the future or significantly increase the cost of compliance. If we fail to comply with applicable laws and regulations, we could be subject to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions. This could have a material adverse effect on our results of operations. We may not be in compliance with all applicable laws and regulations and we may not be able to comply with all future laws and regulations. Furthermore, additional federal or state legislation, or changes in regulatory implementation, may limit our activities in the future or significantly increase the cost of regulatory compliance. WE MAY BE SUBJECT TO SIGNIFICANT ENVIRONMENTAL LIABILITIES. Claims for environmental liabilities arising out of property contamination have been asserted against us from time to time, and in some cases such claims have been associated with businesses, including waste disposal and/or management businesses, related to entities we acquired and have been based on conduct that occurred prior to our acquisition of those entities. Recently, private corporations asserted a claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or "CERCLA," against us for contribution to address past and future remediation costs at a site in Illinois. The site allegedly was used by, among others, a waste disposal business purportedly related to a predecessor for which we allegedly are responsible. In addition, the United States Environmental Protection Agency, asserting authority under CERCLA, recently issued a unilateral administrative order concerning the same Illinois site naming approximately 75 entities as respondents, including the plaintiffs in the CERCLA lawsuit against us and the waste disposal business for which the plaintiffs allege we are responsible. Because these claims are in their early stages, we cannot predict at this time whether we will eventually be held liable at this site or whether such liability will be material. Furthermore, additional environmental liabilities relating to any of our former operations or any entities we have acquired could be identified and give rise to claims against us involving significant losses. 23 IF WE FAIL TO REMAIN COMPETITIVE WITHIN OUR INDUSTRY, WE WILL NOT BE ABLE TO MAINTAIN OUR CLIENTS OR OBTAIN NEW CLIENTS, WHICH WOULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND LIQUIDITY. The recreational food service industry is highly fragmented and competitive, with several national and international food service providers as well as a large number of smaller independent businesses serving discrete local and regional markets and competing in distinct areas. Those smaller companies that lack a full-service capability, because, for example, they cannot cater for luxury suites at stadiums and arenas, often bid for contracts in conjunction with one of the other national or international food service companies that can offer those services. We compete primarily based on the following factors: - the ability to make capital investments; - commission or management fee structures; - service innovation; - quality and breadth of products and services; and - reputation within the industry. Some of our competitors may be prepared to accept less favorable financial returns than we are when bidding for contracts. A number of our competitors also have substantially greater financial and other resources than we do and some of them may have higher retention rates than we do. Furthermore, the fact that we have relatively more debt than some of our competitors could place us at a competitive disadvantage. We also face competition from regional and local service contractors, some of which are better established than we are within a specific geographic region. Existing or potential clients may also elect to "self operate" their food services, eliminating the opportunity for us to compete for the account. OUR NET SALES AND OPERATING INCOME COULD DECLINE SIGNIFICANTLY IF ANY TERRORIST ATTACK OR OTHER CONFLICT OCCURS. If a terrorist attack or other conflict occurs, attendance or the number of events at our clients' facilities may decrease and, as a result, our net sales and operating income may significantly decline and our business may be significantly harmed. The events of September 11, 2001 had a significant negative impact on the attendance at sports facilities and convention centers we serve. We estimate that the impact of September 11, 2001 reduced our consolidated net sales by approximately 2% and our operating income by approximately 8% in fiscal 2001 from the level we would have expected absent those conditions. The national and global responses to terrorist attacks, many of which responses are still being formulated, including a possible war with Iraq and other recent military, diplomatic and financial responses, and any possible reprisals as a consequence of those actions, may materially adversely affect us in ways we cannot predict at this time. In particular, a terrorist attack on a large sports facility which we serve would have a significant negative impact on our business, and a terrorist attack on any large sports facility could have a material adverse effect on our business, even if we do not serve that facility. WE MAY NOT BE ABLE TO OBTAIN INSURANCE, OR OBTAIN INSURANCE ON COMMERCIALLY ACCEPTABLE TERMS, WHICH COULD RESULT IN A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS OR LIQUIDITY. If we fail to obtain insurance on commercially acceptable terms or at all, we may become subject to significant liabilities which could cause a significant decline in our operating income. In addition, depending on the insurance available in the market, we could be in default under a number of our contracts which could cause those contracts to be terminated. Termination of those contracts could cause a significant decline in our net sales and our operating income. The events of September 11, 2001 have caused a significant increase in our insurance costs in connection with the recreational facilities where we provide services. In addition, there is a current trend 24 towards higher rates in the insurance market. These costs may continue to increase significantly in the future. RISKS RELATING TO THE IDSS, OUR SUBORDINATED NOTES AND THE SHARES OF OUR COMMON STOCK WE HAVE SUBSTANTIAL INDEBTEDNESS, WHICH COULD RESTRICT OUR ABILITY TO PAY INTEREST AND PRINCIPAL ON THE SUBORDINATED NOTES AND TO PAY DIVIDENDS WITH RESPECT TO SHARES OF OUR COMMON STOCK UNDERLYING THE IDSS. Our ability to make distributions, pay dividends or make other payments will be subject to applicable law and contractual restrictions contained in the instruments governing any indebtedness of ours and our subsidiaries, including the new credit facility. The degree to which we are leveraged on a consolidated basis could have important consequences to the holders of the IDSS, including: - our ability in the future to obtain additional financing for working capital, capital expenditures or acquisitions may be limited; - we may not be able to refinance our indebtedness on terms acceptable to us or at all; - a significant portion of our cash flow from operations is likely to be dedicated to the payment of the principal of and interest on our indebtedness, thereby reducing funds available for future operations, capital expenditures and/or dividends on our common stock; and - we may be more vulnerable to economic downturns and be limited in our ability to withstand competitive pressures. The indenture governing the subordinated notes underlying the IDSS does not limit our ability to issue additional subordinated notes underlying IDSS or additional subordinated indebtedness evidenced by a different series of notes in connection with the issuance of the appropriate number of shares of our common stock. WE ARE SUBJECT TO RESTRICTIVE DEBT COVENANTS THAT LIMIT OUR BUSINESS FLEXIBILITY BY IMPOSING OPERATING AND FINANCIAL RESTRICTIONS ON OUR OPERATIONS. The agreements governing our indebtedness impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things: - the incurrence of additional indebtedness and the issuance of preferred stock and certain redeemable capital stock; - the payment of dividends on, and purchase or redemption of, capital stock; - a number of other restricted payments, including investments; - specified sales of assets: - specified transactions with affiliates; - the creation of a number of liens; and - consolidations, mergers and transfers of all or substantially all of our assets. The terms of the new credit facility include other and more restrictive covenants and prohibit us from prepaying our other indebtedness, including the subordinated notes, while indebtedness under the new credit facility is outstanding. The new credit facility also requires us to maintain specified financial ratios and satisfy financial condition tests, including, without limitation, the following: a maximum net leverage ratio, a minimum fixed charge coverage ratio and a total debt to book capitalization ratio. Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, ratios or tests could result in a default under the new credit facility and/or the indenture. Certain events of default under 25 the new credit facility would prohibit us from making payments on the subordinated notes, including payment of interest when due. In addition, upon the occurrence of an event of default under the new credit facility, the lenders could elect to declare all amounts outstanding under the new credit facility, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed against the security granted to them to secure that indebtedness. If the lenders accelerate the payment of the indebtedness, our assets may not be sufficient to repay in full this indebtedness and our other indebtedness, including the subordinated notes. WE ARE A HOLDING COMPANY AND RELY ON DIVIDENDS, INTEREST AND OTHER PAYMENTS, ADVANCES AND TRANSFERS OF FUNDS FROM OUR SUBSIDIARIES TO MEET OUR DEBT SERVICE AND OTHER OBLIGATIONS. We are a holding company and conduct all of our operations through our subsidiaries and currently have no significant assets other than the capital stock of VSA, which will be pledged to the creditors under the new credit facility. As a result, we will rely on dividends and other payments or distributions from our subsidiaries to meet our debt service obligations and enable us to pay dividends. The ability of our subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends), agreements of those subsidiaries, the terms of the new credit facility and the covenants of any future outstanding indebtedness we or our subsidiaries incur. YOU MAY NOT RECEIVE THE LEVEL OF DIVIDENDS PROVIDED FOR IN OUR EXISTING DIVIDEND POLICY OR ANY DIVIDENDS AT ALL. Our board of directors may, in its discretion, amend or repeal our existing dividend policy. Future dividends with respect to shares of our capital stock, if any, will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, business opportunities, provisions of applicable law and other factors that our board of directors may deem relevant. Our board of directors may decrease the level of dividends provided for in our existing dividend policy or entirely discontinue the payment of dividends. The new credit facility contains significant restrictions on our ability to make dividend payments. In addition, if the subordinated notes were treated as equity rather than debt for U.S. federal income tax purposes, then the stated interest on the subordinated notes could be treated as a dividend, and interest on the subordinated notes would not be deductible by us for U.S. federal income tax purposes. Our inability to deduct interest on the subordinated notes could materially increase our taxable income and, thus, our U.S. federal and applicable state income tax liability. This would reduce our after-tax income available for interest and dividend payments and could significantly reduce our future cash flow. YOU WILL BE IMMEDIATELY DILUTED BY $ PER SHARE OF COMMON STOCK IF YOU PURCHASE IDSS IN THIS OFFERING. If you purchase IDSS in this offering, you will experience an immediate dilution of $ per share of common stock underlying the IDSS which exceeds the entire price allocated to each share of common stock underlying IDSS in this offering because there will be a net tangible book deficit for each share of common stock outstanding immediately after this offering. Our net tangible book deficit as of October 1, 2002, after giving effect to this offering, was approximately $ million, or $ per share of common stock. As a result of this deficit, the face amount of subordinated notes will exceed the net book value of available assets by $ per $1,000 face amount of subordinated notes. OUR INTEREST EXPENSE MAY INCREASE SIGNIFICANTLY AND COULD CAUSE OUR NET INCOME AND DISTRIBUTABLE CASH TO DECLINE SIGNIFICANTLY. The new credit facility will be subject to periodic renewal or must otherwise be refinanced. We may not be able to renew or refinance the new credit facility, or if renewed or refinanced, the renewal or 26 refinancing may occur on less favorable terms. The new credit facility's revolving facility and 50% of its term facility are made available at a floating rate of interest. In the event of an increase in the base reference interest rates, our interest expense will increase and could have a material adverse effect on our ability to make cash dividend payments to our stockholders. Our ability to continue to expand our business will, to a large extent, be dependent upon our ability to borrow funds under our new credit facility and to obtain other third-party financing, including through the sale of IDSS or other securities. We cannot assure you that such financing will be available to us on favorable terms or at all. We do not believe that we will experience the levels of growth we have achieved in the past. WE MAY NOT GENERATE SUFFICIENT FUNDS FROM OPERATIONS TO PAY OUR INDEBTEDNESS AT MATURITY OR UPON THE EXERCISE BY HOLDERS OF THEIR RIGHTS UPON A CHANGE OF CONTROL. A significant portion of our cash flow from operations will be dedicated to maintaining our client base and servicing our debt requirements. In addition, we currently expect to distribute a significant portion of any remaining cash earnings to our stockholders in the form of monthly dividends. Moreover, prior to the maturity of our subordinated notes, we will not be required to make any payments of principal on our subordinated notes. We may not generate sufficient funds from operations to repay the principal amount of our indebtedness at maturity or in case you exercise your right to require us to purchase your notes upon a change of control. We may therefore need to refinance our debt or raise additional capital. These alternatives may not be available to us when needed or on satisfactory terms due to prevailing market conditions, a decline in our business or restrictions contained in our senior debt obligations. THE REALIZABLE VALUE OF OUR ASSETS UPON LIQUIDATION MAY BE INSUFFICIENT TO SATISFY CLAIMS. At October 1, 2002, our assets included intangible assets in the amount of $174.7 million, representing approximately 61.1% of our total consolidated assets and consisting primarily of contract rights. The value of these intangible assets will continue to depend significantly upon the success of our business as a going concern and the remaining terms of our contracts. Some of our larger contracts contain change of control provisions, which may diminish the realizable value of the contracts. As a result, in the event of a default on our subordinated notes or any bankruptcy or dissolution of our company, the realizable value of these assets may be substantially lower and may be insufficient to satisfy the claims of our creditors. DEFERRAL OF INTEREST PAYMENTS WOULD HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND MAY ADVERSELY AFFECT THE TRADING PRICE OF THE SUBORDINATED NOTES. If interest payments on the subordinated notes are deferred, you will be required to recognize interest income for U.S. federal income tax purposes in respect of interest payments on the subordinated notes represented by the IDSS held by you before you receive any cash payment of this interest. In addition, you will not receive this cash if you sell the IDSS or the subordinated notes before the end of any deferral period or before the record date relating to interest payments that are to be paid. If interest is deferred, the IDSS or the subordinated notes may trade at a price that does not fully reflect the value of accrued but unpaid interest on the subordinated notes. In addition, the existence of the requirement that we defer payments of interest on the subordinated notes under certain circumstances may mean that the market price for the IDSS or the subordinated notes may be more volatile than other securities that do not have these restrictions. BECAUSE OF THE SUBORDINATED NATURE OF THE NOTES, HOLDERS OF OUR SUBORDINATED NOTES MAY NOT BE ENTITLED TO BE PAID IN FULL, IF AT ALL, IN A BANKRUPTCY, LIQUIDATION OR REORGANIZATION OR SIMILAR PROCEEDING. As a result of the subordinated nature of our notes and related guarantees, upon any distribution to our creditors or the creditors of the subsidiary guarantors in bankruptcy, liquidation or reorganization or similar proceeding relating to us or the subsidiary guarantors or our or their property, the holders of our senior indebtedness and senior indebtedness of the subsidiary guarantors will be entitled to be paid in full 27 in cash before any payment may be made with respect to our subordinated notes or the subsidiary guarantees. In addition, neither a holder of our subordinated notes nor the trustee may accelerate the maturity of our subordinated notes or commence any enforcement action relating to our subordinated notes without the prior written consent of the holders of our senior indebtedness for a period of up to 179 days from the date of the occurrence of an event of default with respect to our subordinated notes. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the subsidiary guarantors, holders of our subordinated notes will participate with all other holders of unsecured indebtedness of ours similarly subordinated in the assets remaining after we and the subsidiary guarantors have paid all senior indebtedness. In any of these cases, we and the subsidiary guarantors may not have sufficient funds to pay all of our creditors, and holders of our subordinated notes may receive less, ratably, than the holders of senior indebtedness. On a pro forma basis as of October 1, 2002, our subordinated notes would have ranked junior to $ million of outstanding senior indebtedness on a consolidated basis, all of which would have been secured, and the subsidiary guarantees would have ranked pari passu with approximately $ million of outstanding indebtedness of the subsidiary guarantors, including trade payables. In addition, as of October 1, 2002, on a pro forma basis, VSA would have had the ability to borrow up to an additional amount of $ million under the new credit facility, which would have been senior in right of payment to our subordinated notes. HOLDERS OF OUR SUBORDINATED NOTES WILL BE STRUCTURALLY SUBORDINATED TO THE DEBT OF OUR NON-GUARANTOR SUBSIDIARIES. Our present and future foreign subsidiaries and partially owned domestic subsidiaries will not be guarantors of our subordinated notes. As a result, no payments are required to be made to us from the assets of these subsidiaries. In the event of bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their indebtedness, including their trade creditors, would generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to you. As a result, our subordinated notes are effectively subordinated to the indebtedness of the non-guarantor subsidiaries. For fiscal 2001 and the thirty-nine weeks ended October 1, 2002, our non-guarantor subsidiaries had net sales of $24.4 million and $23.1 million, EBITDA of $0.9 million and $0.9 million, assets of $7.1 million and $7.4 million and liabilities of $9.4 million and $9.6 million, respectively. THE GUARANTEES OF THE SUBORDINATED NOTES BY OUR SUBSIDIARIES MAY NOT BE ENFORCEABLE. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debt of the guarantor, if, among other things, the guarantor, at the time that it assumed the guarantee: - issued the guarantee to delay, hinder or defraud present or future creditors; or - received less than reasonably equivalent value or fair consideration for issuing the guarantee and, at the time it issued the guarantee: - was insolvent or rendered insolvent by reason of issuing the guarantee and the application of the proceeds of the guarantee; - was engaged or about to engage in a business or a transaction for which the guarantor's remaining unencumbered assets constituted unreasonably small capital to carry on its business; - intended to incur, or believed that it would incur, debts beyond its ability to pay the debts as they mature; or 28 - was a defendant in an action for money damages, or had a judgment for money damages docketed against it if, in either case, after final judgment, the judgment is unsatisfied. In addition, any payment by the guarantor under its guarantee could be voided and required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor or the guarantee could be subordinated to other debt of the guarantor. The measures of insolvency for the purposes of fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a person would be considered insolvent if, at the time it incurred the debt: - the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. We cannot be sure as to the standard that a court would use to determine whether or not the subsidiary guarantors were solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance by them of the subsidiary guarantees would not be voided or the subsidiary guarantees would not be subordinated to the subsidiary guarantors' other debt. If such a case were to occur, the guarantee of our subordinated notes by any subsidiary guarantor could be subject to the claim that, since the guarantee was incurred for the benefit of VSAH, and only indirectly for the benefit of the subsidiary guarantor, the obligations of the subsidiary guarantor were incurred for less than fair consideration. A court could therefore void the obligations of the subsidiary guarantor under the guarantee or subordinate these obligations to the subsidiary guarantor's other debt or take action detrimental to holders of the subordinated notes. If the guarantee of any subsidiary guarantor were voided, our subordinated notes would be effectively subordinated to the indebtedness of that subsidiary guarantor. SEASONALITY AND VARIABILITY OF OUR BUSINESSES MAY CAUSE VOLATILITY IN THE MARKET VALUE OF YOUR INVESTMENT AND MAY HINDER OUR ABILITY TO MAKE TIMELY DISTRIBUTIONS ON THE IDSS. Our business is seasonal in nature, and our net sales and operating results vary significantly from quarter to quarter. This variability results from several factors, including: - seasonality of sporting and other events; - unpredictability in the number, timing and type of new contracts; - timing of contract expirations and special events; and - level of attendance at facilities which we serve. Consequently, results of operations for any particular quarter may not be indicative of results of operations for future periods, which makes it difficult to forecast our results for an entire year. This variability may cause volatility in the market price of the IDSS. In addition, the seasonality and variability of our business means that at certain times of the year our cash receipts are significantly higher than at other times. Given that we are required to make equal monthly interest payments and expect to pay equal monthly dividends to IDSS holders throughout the year, there is a risk that we will experience cash shortages, which could hinder our ability to make timely distributions to IDSS holders. If we do not have sufficient cash to pay all dividends contemplated by our dividend policy, we will pay dividends at an annual rate of % on the shares of our exchangeable participating preferred stock in priority to any dividends on shares of our common stock. 29 THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF IDSS ARE NOT ENTIRELY CLEAR. No statutory, judicial or administrative authority directly addresses the treatment of the IDSS or instruments similar to the IDSS for U.S. federal income tax purposes. As a result, the U.S. federal income tax consequences of the purchase, ownership and disposition of IDSS are not entirely clear. We intend to treat an IDSS as a unit consisting of shares of common stock and a subordinated note. However, the Internal Revenue Service or the courts may take the position that the subordinated notes are equity, which could adversely affect the amount, timing and character of income, gain or loss in respect of your investment in IDSS, materially increase our taxable income and, thus, our U.S. federal and applicable state income tax liability, and, in the case of foreign holders, could subject payments to such holders to withholding or estate taxes. Payments to foreign holders would not be grossed-up for any such taxes. Additionally, subsequent issuances of IDSS pursuant to an offering by us or upon the creation of IDSS following an exercise of exchange rights by exchangeable participating preferred stockholders may adversely affect your tax treatment. We intend to take the position that subsequent issuances will not affect you, but you may be required to recognize any gain (but not loss) on a portion of your subordinated notes on such issuance. Additionally, you may be required to include original issue discount in income over the remaining term of your subordinated note as a result of such issuances. For these and additional tax related risks, see "Material U.S. Federal Income Tax Considerations." BEFORE THIS OFFERING, THERE HAS NOT BEEN A PUBLIC MARKET FOR OUR IDSS OR SHARES OF OUR COMMON STOCK. THE PRICE OF THE IDSS MAY FLUCTUATE SUBSTANTIALLY, WHICH COULD NEGATIVELY AFFECT IDSS HOLDERS. Neither the IDSS nor the shares of our common stock has a public market history. In addition, there has not been an active market in the United States for securities similar to the IDSS. We cannot assure you that an active trading market for the IDSS will develop in the future, and we currently do not expect that an active trading market for the shares of our common stock will develop until the subordinated notes mature. If the subordinated notes underlying your IDSS mature or are redeemed or repurchased, you will then hold the underlying shares of our common stock. We do not intend to list our subordinated notes on any securities exchange. The initial public offering price of the IDSS will be determined by negotiations among us, the existing investors and the representatives of the underwriters and may not be indicative of the market price of the IDSS after the offering. Factors such as quarterly variations in our financial results, announcements by us or others, developments affecting us, our clients and our suppliers, general interest rate levels and general market volatility could cause the market price of the IDSS to fluctuate significantly. FUTURE SALES OR THE POSSIBILITY OF FUTURE SALES OF A SUBSTANTIAL AMOUNT OF IDSS, SHARES OF OUR COMMON STOCK OR OUR SUBORDINATED NOTES MAY DEPRESS THE PRICE OF THE IDSS. Future sales or the availability for sale of substantial amounts of IDSS or shares of our common stock or a significant principal amount of our subordinated notes in the public market could adversely affect the prevailing market price of the IDSS and could impair our ability to raise capital through future sales of our securities. The outstanding shares of our exchangeable participating preferred stock and common stock will be owned by the existing investors. These existing investors have registration rights with respect to the shares of common stock they will own after this offering, the shares of common stock into which their shares of exchangeable participating preferred stock may be exchanged and the IDSS that could be created with the securities issued upon exchange or conversion of these securities. We may issue shares of our common stock and subordinated notes, which may be represented by IDSS, or other securities from time to time as consideration for future acquisitions and investments. In the event any such acquisition or investment is significant, the number of shares of our common stock and the aggregate principal amount of subordinated notes, which may be represented by IDSS, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be 30 significant. In addition, we may also grant registration rights covering those IDSS, shares of our common stock, subordinated notes or other securities in connection with any such acquisitions and investments. OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS AND SEVERAL OTHER FACTORS COULD LIMIT ANOTHER PARTY'S ABILITY TO ACQUIRE US AND DEPRIVE OUR INVESTORS OF THE OPPORTUNITY TO OBTAIN A TAKEOVER PREMIUM FOR THEIR SECURITIES. A number of provisions in our amended and restated certificate of incorporation and bylaws will make it difficult for another company to acquire us and for you to receive any related takeover premium for your securities. For example, our amended and restated certificate of incorporation provides that stockholders generally may not act by written consent and only stockholders representing at least 25% in voting power may call a special meeting. In addition, our ability to merge or consolidate with any other person or, directly or indirectly, sell all or substantially all our assets is subject to the approval of a supermajority of our directors. Our certificate of incorporation provides for a classified board of directors and authorizes the issuance of preferred stock without stockholder approval and upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will be subject to, and may be adversely affected by, the rights of holders of our exchangeable participating preferred stock and any other class or series of preferred stock that may be issued in the future. 31 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus may include forward-looking statements which reflect our current views with respect to future events and financial performance. Statements which include the words "expect," "intend," "plan," "believe," "project," "anticipate," "will" and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include the following: - our high degree of leverage and significant debt service obligations; - our history of net losses; - the risk of decreases in the level of attendance at events held at the facilities at which we provide our services and the level of spending on the services that we provide at those events; - the risk of labor stoppages affecting sports teams at whose facilities we provide our services; - the risk of sports facilities at which we provide services losing their sports team tenants; - the risk that we may not be able to retain existing clients or obtain new clients; - the highly competitive nature of the recreational food service industry; - any future changes in management; - the risk of weaker economic conditions within the United States; - the risk of events similar to those of September 11, 2001 or conflicts, including a conflict with Iraq; - general risks associated with the food service industry; - any future changes in government regulation; and - any changes in local government policies and practices regarding facility construction, taxes and financing. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. 32 USE OF PROCEEDS We estimate that we will receive net proceeds from this offering of approximately $ million after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. We will use $ million of net proceeds from this offering and borrowings under the new credit facility to redeem % of the shares of our common stock held by the existing investors before this offering. We will use $ million of net proceeds from this offering and borrowings under the new credit facility to make a capital contribution to VSA. VSA will use those funds to repay outstanding borrowings under the old credit facility and purchase VSA's senior subordinated notes that are validly tendered and not withdrawn in the tender offer and consent solicitation. If the underwriters exercise their over-allotment option in full, we will use all the proceeds we receive from the sale of additional IDSS under this over-allotment option to redeem the existing investors' remaining interest in us. Certain members of management will have an aggregate % ownership interest in us after this offering. The table below sets forth our estimate of the sources and uses of funds required to effect the foregoing. The estimated sources and uses are based on an assumed closing date of . Actual amounts will vary from the amounts shown below.

Borrowings under the old revolving credit facility bear interest at a variable rate, at our option, of either the U.S. Base Rate plus 200 points or LIBOR plus 300 points and become due and payable on December 3, 2004. Borrowings under the tranche B loan under the old credit facility bear interest at a variable rate, at our option, of either the U.S. Base Rate plus 275 points or LIBOR plus 375 points and become due and payable on December 3, 2006. VSA's senior subordinated notes bear interest at 11 1/4% per annum and become due and payable on March 1, 2009. 33 DIVIDEND POLICY Upon completion of this offering, our board of directors will adopt a dividend policy pursuant to which, in the event and to the extent we have any available cash for distribution to the holders of shares of our common stock as of the end of any calendar month, and subject to applicable law and the new credit facility and the terms of our other then outstanding indebtedness, our board of directors will declare cash dividends per share on our common stock equal to $ , subject to adjustment. We will pay those dividends on or about the th day of the subsequent month. If we have any remaining cash after the payment of dividends as contemplated above, our board of directors will, in its sole discretion, decide to use that cash to fund growth capital expenditures or acquisitions, repay indebtedness, pay additional dividends or for general corporate purposes. The indenture governing our subordinated notes restricts our ability to declare and pay dividends on our common stock, as follows: - In the event our Adjusted EBITDA per share for the 12 month period ended at the end of the month immediately prior to the month for which dividends are paid is higher than the fiscal 2002 level, the maximum aggregate amount of dividends per share we may pay in such month may not exceed $ by more than 1/12 of 90% of such difference per share. - In the event our Adjusted EBITDA per share for the 12 month period ended at the end of the month immediately prior to the month for which dividends are paid is lower than the fiscal 2002 level by more than 2%, but by a percentage less than or equal to 20%, the maximum aggregate amount of dividends per share we may pay in such month may not exceed $ minus 1/12 of the amount of such difference per share, excluding the initial 2%. - In the event our Adjusted EBITDA per share for the 12 month period ended at the end of the month immediately prior to the month for which dividends are paid is lower than the fiscal 2002 level by more than 20%, no dividends will be payable in such month. Our board of directors may, in its discretion, amend or repeal our dividend policy. Future dividends with respect to shares of our capital stock, if any, will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Under Delaware law, our board of directors may declare dividends only to the extent of our "surplus" (which is defined as total assets at fair market value minus total liabilities, minus statutory capital), or if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal years. Our board of directors may decrease the level of dividends provided for in our existing dividend policy or discontinue entirely the payment of dividends. Holders of outstanding shares of our exchangeable participating preferred stock will receive monthly cumulative cash dividends per share equal to $ ( % of the $ liquidation preference per share divided by 12) in priority to dividends on shares of our common stock. In addition, holders of shares of our exchangeable participating preferred stock will be entitled to participate in any dividends on the shares of our common stock on an "as if exchanged" basis, and those dividends will rank equal to any dividends on the outstanding shares of our common stock. We will have no outstanding shares of exchangeable participating preferred stock if the underwriters exercise their over-allotment option in full. We have not paid dividends in the past. 34 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of October 1, 2002: - on an actual basis; and - on a pro forma as adjusted basis as if this offering, including the use of proceeds from this offering, our recapitalization and the tender offer and consent solicitation had occurred on that date and VSA had entered into the new credit facility on that date. For purposes of this presentation, we have assumed that all of VSA's senior subordinated notes are purchased in the tender offer and consent solicitation for an aggregate consideration of $ million.

--------------- (1) Assumes the purchase of all VSA's senior subordinated notes in the tender offer and consent solicitation for aggregate consideration of $ million. (2) The actual column represents 194 shares at cost. 35 DILUTION Dilution is the amount by which the portion of the offering price paid by the purchasers of the IDSS to be sold in the offering allocated to our shares of common stock underlying the IDSS exceeds the net tangible book value or deficiency per share of our common stock after the offering. Net tangible book value or deficiency per share of our common stock is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date. Our net tangible book deficiency as of October 1, 2002 was approximately $ million, or $ per share of common stock. After giving effect to our receipt and intended use of approximately $ million of estimated net proceeds (after deducting estimated underwriting discounts and commissions and offering expenses) from our sale of IDSS in this offering, our pro forma as adjusted net tangible book deficiency as of October 1, 2002 would have been approximately $ million, or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share of our common stock to existing stockholders and an immediate dilution of $ per share of our common stock to new investors purchasing IDSS in this offering. As a result of this deficiency, the face amount of subordinated notes will exceed the net book value of available assets by $ per $1,000 face amount of subordinated notes. The following table illustrates this substantial and immediate dilution to new investors:

The following table summarizes on a pro forma basis as of October 1, 2002: - the total number of shares of our common stock underlying the IDSS to be sold in this offering; - the total consideration paid to us, before deducting the estimated underwriting discounts and commissions and offering expenses payable by us in connection with the offering; and - the average price per share of common stock paid by existing stockholders and by new investors purchasing IDSS in this offering:

36 SELECTED HISTORICAL FINANCIAL INFORMATION The following table sets forth our selected consolidated financial information derived from our audited consolidated financial statements for the fiscal years ended December 30, 1997, December 29, 1998, December 28, 1999, January 2, 2001 and January 1, 2002, of which the financial statements for the three fiscal years ended January 1, 2002 are included in this prospectus. The following table also sets forth our selected historical financial information derived from our unaudited consolidated financial statements for the thirty-nine weeks ended October 1, 2002 and October 2, 2001, which are also included in this prospectus. The information in the table below should be read in conjunction with our audited consolidated financial statements and the related notes, our unaudited consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The figures for interim periods shown below are not necessarily indicative of results for the applicable full fiscal year.

--------------- (1) We have adopted a 52-53 week period ending on the Tuesday closest to December 31 as our fiscal year. The 1997, 1998, 1999 and 2001 fiscal years consisted of 52 weeks, and the 2000 fiscal year consisted of 53 weeks. (2) For fiscal 1998, a $1.5 million extraordinary loss on debt extinguishment, net of taxes resulted from refinancing our secured credit facility; for fiscal 1999, $0.9 million extraordinary loss on debt extinguishment resulted from the early retirement of a portion of the secured credit facility, net of taxes. (3) For fiscal 1999, we adopted the provisions of the American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start-up Activities, which requires that costs of start-up activities be expensed as incurred. As a result, we recorded a charge of $0.2 million reflecting the cumulative effect of a change in accounting principle, net of taxes. (4) In accordance with Statement of Financial Accounting Standards No. 142, or SFAS 142, effective January 2, 2002, we discontinued the amortization of goodwill and trademarks and identified intangible assets which we believe have indefinite lives. Adjusted net income (loss) to give effect to SFAS 142 would have been $(2.4) million for fiscal 1997, $(3.9) million for fiscal 1998, $(3.1) million for fiscal 1999, $(1.8) million for fiscal 2000, $(1.1) million for fiscal 2001 and $1.8 million for the thirty-nine weeks ended October 2, 2001. (5) EBITDA and Adjusted EBITDA are not intended to represent cash flows from operations as determined by generally accepted accounting principles and should not be used as alternatives to income (loss) before taxes or net income as indicators of operating performance or to cash flows as measures of liquidity. Our measures of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies due to differences in methods of calculation. We believe that EBITDA and Adjusted EBITDA best reflect the cash returned on our investment in capital expenditures under our contracts. In addition, we believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about non-cash and certain non-recurring items and because covenants in the indenture governing our subordinated notes contain ratios based on that measure. For example, our ability to incur additional debt and make restricted payments requires an Adjusted EBITDA to fixed charges ratio of 2.0 to 1.0, except that we may incur certain debt and make certain restricted payments without regard to the ratio, including our ability to incur an unlimited amount of indebtedness in connection with the issuance of shares of our common stock so long as the ratio of the aggregate principal amount of the additional debt securities over the number of the additional shares of our common stock will not exceed the equivalent ratio underlying the then existing IDSS. 39 On a pro forma basis, for the four quarters ended October 1, 2002, our Adjusted EBITDA to fixed charges ratio under the indenture would have been to . We have also disclosed additional information about certain additional cash items that are not related to our core operations that we do not expect to continue in the future. Adjusted EBITDA is determined in the indenture governing our subordinated notes as income (loss) before income taxes, plus interest expense, depreciation and amortization expense, transaction related expenses, contract related losses, other non-cash charges, and the annual management fee paid to the existing investors, less any non-cash credits. (6) Explanations of the adjustments are listed below: Transaction related expenses include: - for fiscal 1998, $3.1 million of cash severance expenses paid to former employees and other expenses incurred in connection with the elimination of redundant personnel and office functions resulting from the business combination of Volume Services and Service America; - for fiscal 1999, $1.5 million of cash expenses related to the elimination of redundant office functions of the Service America corporate office in connection with the business combination of Volume Services and Service America; and - for fiscal 2000, $1.1 million of cash strategic corporate costs consisting of accounting and legal expenses resulted from merger and acquisition activity unrelated to our on-going operations; - Contract related losses include: - for fiscal 1997, a $2.5 million non-cash charge related to the write-down to net realizable value of a contract that was terminated by mutual agreement; - for fiscal 1998, $1.4 million of non-cash charges related to the write-down to net realizable value of a contract that was terminated; - for fiscal 1999, $1.4 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets; - for fiscal 2000, $1.5 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets, $0.7 million related to the write-off of assets related to litigation settlement and a non-recurring $0.3 million cash expense in related legal fees; - for fiscal 2001, $4.8 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contract were insufficient to cover the carrying cost of the related long-lived assets; - for the thirty-nine week period ended October 1, 2002, $.7 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contracts were insufficient to cover the carrying cost of the related long-lived assets, $0.5 million in non-cash compensation expense resulted from the change in estimated value of our company and $1.4 million in bankruptcy funds returned to Service America; and - for the thirty-nine week period ended October 2, 2001, $4.1 million of non-cash charges related to the write-down of impaired assets for certain contracts where the estimated future cash flows from the contracts were insufficient to cover the carrying cost of the related long-lived assets and $0.1 million in non-cash compensation expense resulted from the change in estimated value of our company; and 40 - Management fees paid to affiliates of Blackstone and General Electric Capital include: - for fiscal 1997, 1998, 1999, 2000, 2001, the thirty-nine week period ended October 1, 2002 and the thirty-nine week period ended October 2, 2001, $0.3 million, $0.3 million, $0.4 million, $0.4 million, $0.4 million, $0.3 million and $0.3 million, respectively, of monitoring fees. (7) The sum of maintenance and growth capital expenditures equals the sum of contract rights acquired, net (purchase of contract rights) and the purchase of property and equipment, net for the relevant periods as displayed in the statement of cash flows, as follows:

Maintenance capital expenditures are capital expenditures made to secure renewals of our existing contracts and maintain these contracts following renewal. Growth capital expenditures are those made to secure new contracts and maintain these contracts during their initial term. Accordingly, growth capital expenditures in any given year consist of up-front capital investments in new contracts and additional committed investments in existing contracts that have never previously been renewed. We believe that the identification and separation of maintenance and growth capital expenditures are important factors in evaluating our financial results. While we strive to maintain our present level of EBITDA by securing renewals of our existing contracts, we cannot assure you that we will maintain our present level of EBITDA since we cannot predict the future financial requirements of our clients. Contracts may be renewed at significantly different commission rates and, thus, levels of EBITDA, depending on the clients' financial requirements at the time of renewal. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." (8) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as income (loss) before income taxes, extraordinary item and cumulative effect of change in accounting principle plus fixed charges. Fixed charges include interest expense on all indebtedness, amortization of deferred financing costs and one-third of rental expense on operating leases representing that portion of rental expense deemed to be attributable to interest. (9) For purposes of this ratio, fixed charges includes interest expense (excluding amortization of deferred financing fees) plus capitalized interest, the earned discount or yield with respect to the sale of receivables and cash dividends on preferred stock. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Management's discussion and analysis is a review of our results of operations and our liquidity and capital resources. The following discussion should be read in conjunction with "Selected Historical Financial Information" and the financial statements, including the related notes, appearing elsewhere in this prospectus. The following data have been prepared in accordance with GAAP. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenues and expenses, including amounts that are susceptible to change. Our critical accounting policies include accounting methods and estimates underlying such financial statement preparation, as well as judgments around uncertainties affecting the application of those policies. In applying critical accounting policies, materially different amounts or results could be reported under different conditions or using different assumptions. We believe that our critical accounting policies, involving significant estimates, uncertainties and susceptibility to change, include the following: - Recoverability of property and equipment, contract rights, cost in excess of net assets acquired (goodwill) and other intangible assets. As of October 1, 2002, net property and equipment of $57.0 million and net contract rights of $103.8 million were recorded. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, we evaluate long-lived assets with definite lives for possible impairment when an event occurs which would require this evaluation. The impairment analysis is made at the contract level and evaluates the net property and equipment as well as the contract rights related to that contract. Events that would trigger an evaluation at the contract level include the loss of a tenant team, notice from the client indicating intent to terminate the contract, the bankruptcy of a client or discontinuation of a sports league, among others. As of October 1, 2002, net goodwill of $46.5 million and other intangible assets (trademarks) of $17.0 million were recorded. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, we evaluate long-lived assets with indefinite lives for possible impairment when an event occurs that would require such evaluation, as well as at a minimum on an annual basis. On a consolidated basis, triggering events for this evaluation include the loss of a significant client, increase in cost structure that cannot be passed on to the customer or a major uninsured loss, among others. Upon the occurrence of a triggering event, management is required to estimate the impact of the event on our future cash flows. The undiscounted future cash flows are compared to the carrying value of the related long-lived assets. If the undiscounted future cash flows are lower than the carrying value, an impairment charge is recorded. The amount of the impairment is equal to the difference between the balance of the long-lived asset and the future discounted cash flows related to the asset (using a rate based on our incremental borrowing rate). As we base our estimates of undiscounted future cash flows on past operating performance, including anticipated labor and other cost increases, and prevailing market conditions, we cannot assure you that our estimates are achievable. Different conditions or assumptions, if significantly negative or unfavorable, could have a material adverse effect on the outcome of our evaluation and our financial condition or future results of operations. - Insurance. We have a high deductible insurance program for general liability, auto liability and workers' compensation risk. We are required to estimate and accrue for the amount of losses that we expect to incur and will ultimately have to pay under the deductible during the policy year. These amounts are recorded in cost of sales and selling, general and administrative expenses on the 42 statement of operations and accrued liabilities and long-term liabilities on the balance sheet. Our estimates consider a number of factors, including historical experience and actuarial assessment of the liabilities for reported claims and claims incurred but not reported. While we use outside parties to assist us in making these estimates, it is difficult to provide assurance that the actual amounts may not be materially different from what we have recorded. In addition we are self-insured for employee medical benefits and related liabilities. Our liabilities are based on historical trends and claims filed and are estimated for claims incurred but not reported. While the liabilities represent management's best estimate, actual results could differ significantly from those estimates. - Deferred income taxes. We recognize deferred tax assets and liabilities based on the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Our primary deferred tax assets relate to net operating losses and credit carryovers. The realization of these deferred tax assets depends upon our ability to generate future income. If our results of operations are adversely affected, not all of our deferred tax assets, if any, may be realized. SEASONALITY AND QUARTERLY RESULTS Our net sales and operating results have varied, and are expected to continue to vary, from quarter to quarter (a quarter is comprised of thirteen or fourteen weeks), as a result of factors which include: - seasonality of sporting and other events; - unpredictability in the number, timing and type of new contracts; - timing of contract expirations and special events; and - level of attendance at the facilities which we serve. Business at the principal types of facilities we serve is seasonal in nature. MLB and minor league baseball related sales are concentrated in the second and third quarters, the majority of NFL related activity occurs in the fourth quarter and convention centers and arenas generally host fewer events during the summer months. Results of operations for any particular quarter may not be indicative of results of operations for future periods. Set forth below are comparative net sales by quarter for our first three quarters of fiscal 2002 and four quarters of fiscal 2001 and 2000, as well as operating income (loss) and net income (loss), on an actual and per share basis (in thousands, except per share data):

RESULTS OF OPERATIONS THIRTY-NINE WEEKS ENDED OCTOBER 1, 2002 COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 2, 2001 Net Sales. Net sales of $449.4 million for the thirty-nine weeks ended October 1, 2002 increased by $31.0 million (approximately 7%) from $418.4 million in the prior year period. Our results for the thirty-nine week period of 2001 were adversely impacted by the events of September 11, 2001 which are estimated to have reduced net sales during the period by approximately 3%. The postponement of NFL and MLB games had the most significant impact on our fiscal 2001 net sales. As of the thirty-nine week period ended October 1, 2002, nine additional NFL games were played at our clients' facilities as compared to the prior year period. Five of the games were played during the first thirteen weeks of the period, including four games which were postponed due to the events of September 11, 2001, and Super Bowl XXXVI, which was hosted by a venue we serve. In the prior year period, two NFL playoff games were played at facilities we serve. In the aggregate, net sales attributable to NFL activity were $8.0 million greater in the thirty-nine weeks ended October 1, 2002 as compared to the prior year period. MLB games, including one playoff game, contributed $4.3 million to the increase primarily as a result of an increase in the number of games played in the 2002 period due to the postponement of games in the prior year period. In addition, newly acquired service contracts generated net sales of $6.6 million and a successful summer music amphitheater season contributed an increase in net sales of $2.5 million during the thirty-nine weeks ended October 1, 2002. Cost of Sales. Cost of sales of $365.5 million for the thirty-nine weeks ended October 1, 2002 increased by $23.0 million from $342.5 million for the prior year period, due primarily to the increase in sales volume. Cost of sales as a percentage of net sales decreased by approximately 0.5% from the prior year period to 81%. This decrease was due mainly to efficiencies associated with greater sales volume. Selling, General and Administrative Expenses. Selling, general and administrative expenses of $42.6 million increased approximately 1% as a percentage of net sales from the prior year period. The increase was primarily the result of higher insurance costs due to dramatic price increases in the insurance market post September 11, 2001, higher corporate overhead expenses related to the addition of management positions and an increase in professional fees. Depreciation and Amortization. For the thirty-nine weeks ended October 1, 2002, depreciation and amortization was $19.0 million compared to $18.2 million in the prior year period. The increase was principally attributable to higher amortization expense related to investments for the renewal and/or acquisition of certain contracts, partially offset by a decline in amortization as a result of the discontinuation of goodwill and trademark amortization ($1.8 million) in accordance with Statement of Financial Accounting Standards No. 142, or SFAS No. 142, Goodwill and Other Intangible Assets. Contract Related Losses. Contract related losses in the thirty-nine weeks ended October 1, 2002 of $0.7 million reflected an impairment charge related to a write-down of contract rights. In the prior year period, contract related losses reflected an impairment charge for equipment, leasehold improvements and location rights in the amount of $1.8 million related to two of our clients which filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code and a receivable reserve of $2.3 million related to one of those clients. 44 Operating Income. Operating income increased approximately $3.6 million from the prior year period due to the factors described above. Interest Expense. Interest expense decreased by $2.4 million from the prior year period due primarily to lower interest rates on our variable rate debt. Other Income Net. Service America received approximately $1.4 million during the thirty-nine week period ended October 1, 2002 from funds previously set aside to satisfy creditors pursuant to a plan of reorganization approved in 1993. Under the plan of reorganization, Service America was required to deposit funds with a disbursing agent for the benefit of its creditors. Any funds which remained unclaimed by its creditors after a period of two years from the date of distribution were forfeited and all interest in those funds reverted back to Service America. Counsel has advised that Service America has no obligation to escheat those funds. Income Taxes. We have evaluated the available evidence about future taxable income and other possible sources of realization of deferred tax assets. Income taxes for the thirty-nine weeks ended October 1, 2002 and October 2, 2001 were calculated using the projected effective tax rate for fiscal 2002 and 2001, respectively, which in fiscal 2002 was impacted by the reversal of approximately $0.8 million of valuation allowances on deferred tax assets and the utilization of approximately $0.9 million of wage and tip credits. OUTLOOK The continuing weak economy has had an adverse impact on the levels of attendance at some sports and many convention center facilities we serve and on the levels of spending at those convention center facilities. Looking forward, we expect economic conditions to continue to be a challenge to growth through at least the first half of 2003. The events of September 11, 2001 have caused a significant increase in our insurance costs in connection with the recreational facilities where we provide services. We expect that future insurance premiums will continue to increase and certain coverages, such as terrorist acts coverage, will no longer be available or will be meaningfully reduced. FISCAL 2001 COMPARED TO FISCAL 2000 Net Sales. In fiscal 2001, net sales increased 3.9% or $20.6 million as compared to fiscal 2000. The increase was primarily due to new accounts (approximately 5%) and an increase in MLB related sales (approximately 2%). We commenced operations at 17 new accounts during fiscal 2001 including one NFL stadium and six minor league baseball facilities generating additional net sales of $34.8 million. Partially offsetting this was the loss of $9.2 million in net sales associated with the closure of several accounts. Our increase in MLB related sales of $14.8 million was primarily driven by results at three accounts where the tenant teams had highly successful seasons resulting in higher attendance and per capita spending. The increases were, in part, offset by a decline in NFL related sales of $6.5 million due primarily to four fewer post season NFL games in fiscal 2001 and the postponement of four NFL games until fiscal 2002 as a result of the September 11, 2001 terrorist attacks. Additionally, at two of the NFL facilities we service, non-NFL related sales declined by approximately $4.9 million as a result of fewer concerts and other ancillary events. Sales at our convention center accounts, which were adversely impacted by the general economic slowdown and the events of September 11, 2001, declined $9.8 million. We estimate that the impact of September 11, 2001 reduced our consolidated net sales approximately 2% in fiscal 2001 from the level we would have expected absent such conditions. Cost of Sales. Cost of sales as a percentage of net sales increased 1% from fiscal 2000. The primary components of the increase were higher commission costs associated with an increase in sales at accounts with higher commission rates and a change in the sales mix to products with higher commission structures at certain accounts. 45 Selling, General and Administrative Expenses. Selling, general and administrative expenses, as a percentage of net sales, declined less than 1.0% as a result of effective cost controls. Depreciation and Amortization. Depreciation and amortization declined $1.8 million from fiscal 2000. The decrease was primarily due to a decline in amortization which was the result of the expiration of the initial contract term of certain service contracts. Transaction Related Expenses. Non-recurring strategic corporate costs of $1.1 million were incurred during fiscal 2000. No such expenses were incurred in 2001. Contract Related Losses. Contract related losses of $4.8 million for fiscal 2001 reflected an impairment charge of $2.3 million for equipment, leasehold improvements and location contracts with respect to certain contracts which we intend to continue performing. Most of the $2.3 million impairment charge related to two of our clients which filed for Chapter 11 bankruptcy. Additionally, we wrote off $2.5 million of other assets primarily representing long-term receivables related to one of those clients. We are currently still operating at the location; however, our ability to continue to operate at this account depends on the final outcome of contract negotiations and the bankruptcy proceedings. We have approximately $600,000 in equipment and leasehold improvements recorded for this location. We are unable to predict the ultimate outcome or whether there will be additional losses related to this contract. Contract related losses of $2.5 million in the prior year period included an impairment charge of approximately $1.5 million relating to certain contracts which we continue to perform and a $0.7 million charge for the write-off of a client receivable and $0.3 million in related legal fees for a terminated service contract. Operating Income. Operating income declined by $1.4 million from fiscal 2000, primarily due to the factors discussed above. We estimate that the impact of September 11, 2001, reduced our operating income approximately 8% in fiscal 2001 from the level we would have expected absent such conditions. Interest Expense. Interest expense declined $3.1 million from fiscal 2000, chiefly associated with lower interest rates on our adjustable rate debt. FISCAL 2000 COMPARED TO FISCAL 1999 Net Sales. Net sales increased 21.1% or $91.0 million from $431.5 million in fiscal 1999 to $522.5 million in fiscal 2000. The increase was due primarily to new service contracts which generated additional net sales of $50.2 million. In addition, ten NFL games, six post-season playoff games and four 1999 regular season games that occurred in January 2000 increased net sales by $12.0 million. Of the remaining $28.8 million increase, $16.4 million was the result of an increase in net sales at our convention center venues, due primarily to an increase in corporate event bookings. Cost of Sales. Cost of sales of $424.2 million in fiscal 2000 increased, as a percentage of net sales, by 1.8% from fiscal 1999. The primary component of the increase was higher commission costs associated with our new service contracts. Selling, General and Administrative Expenses. Selling, general and administrative expenses of $47.9 million in fiscal 2000 decreased, as a percentage of net sales, by 0.7%, from fiscal 1999. The decline was due primarily to fixed expenses, including corporate and field support overhead costs which showed no marked increase as a result of the higher net sales. Depreciation and Amortization. Depreciation and amortization of $26.3 million for fiscal 2000 decreased by $0.5 million from the prior year period. Transaction Related Expenses. Costs of $1.1 million incurred in fiscal 2000 consisted primarily of nonrecurring strategic corporate costs. For fiscal 1999, $1.5 million in expenses were incurred primarily relating to personnel costs, rental costs and professional fees associated with the acquisition of Service America in August 1998 and the subsequent downsizing of Service America's headquarters in Stamford, CT. 46 Contract Related Losses. Contract related losses of $2.5 million in fiscal 2000 included an impairment charge of approximately $1.5 million relating to property and equipment, contract rights and other assets associated with certain contracts which we continue to service. Contract related losses also reflected a $0.7 million charge for the write-off of assets related to a litigation settlement involving a terminated contract and $0.3 million in related legal fees. Operating Income. Operating income increased by $4.1 million, from $16.5 million in fiscal 1999 to $20.6 million in fiscal 2000. The increase was primarily due to the factors discussed above. Interest Expense. Interest expense increased by $3.6 million in fiscal 2000, chiefly associated with approximately one additional month of interest expense on VSA's $100.0 million senior subordinated notes, increased borrowings on VSA's revolving line of credit and higher interest rates on adjustable rate debt during fiscal 2000 as compared to fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES For the thirty-nine weeks ended October 1, 2002, net cash provided by operating activities was $48.0 million compared to net cash provided by operating activities of $26.1 million in the prior year period. The $21.9 million increase from the prior year period was principally attributable to a decrease of $7.1 million in net losses, mainly as a result of the $3.6 million improvement in operating income, a $2.4 million decline in interest expense and the recovery of $1.4 million in funds by Service America, as discussed above. Additionally, our working capital decreased as compared to the prior year period chiefly due to timing of payments to vendors and employees and higher accrued commissions and other contractual obligations related to our MLB and NFL clients. Net cash used in investing activities was $41.1 million in the thirty-nine weeks ended October 1, 2002 compared to $22.5 million in the prior year period. This primarily reflected a higher level of investment in contract rights and property and equipment associated with renewals of existing contracts in the current period. For the thirty-nine weeks ended October 1, 2002, net cash used in financing activities was $11.5 million as compared to $1.3 million in the prior year period. This primarily reflects a higher net repayment of funds borrowed under our revolving credit facility. For fiscal 2001, net cash provided by operating activities was $24.7 million as compared to $22.7 million in fiscal 2000. The $2.0 million increase was primarily due to lower interest costs and a decline in working capital partially offset by a decrease in income from operations. Net cash used in investing activities was $29.3 million in fiscal 2001 compared to $12.9 million in the prior year period. The $16.4 million increase in cash used in investing activities primarily reflected a higher level of investment in contract rights and property and equipment associated with new accounts in fiscal 2001. Net cash provided by financing activities was $5.0 million in fiscal 2001 as compared to $7.3 million used in financing activities in fiscal 2000. The change primarily reflects net borrowings of $6.8 million under the old credit facility used primarily to finance capital investments as compared to the $3.5 million in net repayments in fiscal 2000. Additionally, our bank overdraft declined $0.5 million compared to $2.4 million in fiscal 2000. For fiscal 2000, net cash provided by operating activities was $22.7 million compared to $16.1 million in fiscal 1999. The $6.6 million increase was primarily due to increased operating activities as a result of higher overall sales mainly associated with our new service contracts. For fiscal 2000, net cash used in investing activities was $12.9 million compared to $25.4 million in fiscal 1999. For the 2000 period, the $12.9 million in investing activities primarily reflected investments for the purchases of property and equipment and investments in contract rights in connection with maintaining and/or renewing existing contracts. The higher capital expenditures in the 1999 period reflected $17.5 million in investments for newly acquired service contracts. 47 For fiscal 2000, net cash used in financing activities was $7.3 million compared to $12.8 million in cash provided by financing activities in fiscal 1999. The fiscal 2000 activity primarily reflected the repayment of $3.5 million borrowed under the old credit facility and $1.2 million of senior secured debt. The 1999 figure reflects the issuance by VSA of $100.0 million of senior subordinated notes and the use of proceeds to retire $45.0 million of senior secured debt and $0.5 million of debt owed to General Electric Capital, redeem $49.5 million of stock and pay related fees of $6.2 million. Excluding the financing, $9.5 million was borrowed under the old credit facility to fund working capital and capital expenditures in fiscal 1999. We expect that the new credit facility will be comprised of a revolving credit facility in an aggregate principal amount of up to $ million and senior secured notes in an aggregate principal amount of million. We expect that our revolving credit facility will have a -year maturity period and the senior secured notes will have a -year maturity period. We expect to use borrowings under the revolving credit facility for general corporate purposes, including working capital, capital expenditures, payment of dividends and letters of credit. Upon completion of this offering, we expect to borrow $ million under the new credit facility to pay for a portion of VSA's senior subordinated notes accepted for purchase in the tender offer and consent solicitation, and $ million will be available for borrowing. We expect that the new credit facility will require that we meet certain financial tests, including, without limitation, the following tests: a maximum net leverage ratio, a minimum fixed charge coverage ratio and a total debt to book capitalization ratio. We also expect that our new credit facility will contain customary covenants and restrictions, including, among others, limitations or prohibitions on declaring dividends and other distributions, redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, sale-leaseback transactions, capital expenditures, recapitalizations, mergers, acquisitions and asset sales and transactions with affiliates. We are also often required to obtain performance bonds, bid bonds or letters of credit to secure our contractual obligations. As of October 1, 2002, we had requirements outstanding for performance bonds and letters of credit of $12.9 million and $16.4 million, respectively. Under the new credit facility, we will have an aggregate of $ available for letters of credit, subject to an overall borrowing limit of $ million under that facility. Our capital expenditures can be categorized into two types: maintenance and growth. Maintenance capital expenditures are associated with securing renewals of our existing contracts and maintaining those contracts following renewal. Growth capital expenditures are those made in connection with securing new contracts and maintaining those contracts during their initial term. In both cases, particularly for sports facilities, capital expenditures are often required in the form of contract acquisition fees or up-front or committed future capital investment to help finance facility construction or renovation. This expenditure typically takes the form of investment in leasehold improvements and food service equipment and grants to owners or operators of facilities. We provide our historical maintenance and growth capital expenditures for each of the five fiscal years ended January 1, 2002 in "Summary -- Summary Consolidated Financial Information." The amount of maintenance capital expenditures in the last quarter of fiscal 2001 and in the first nine months of fiscal 2002, a total of $29.2 million, increased significantly due to the renewal of several large long-term contracts. We have historically financed our capital expenditures with a combination of cash from operating activities and borrowings under the revolving line of credit of the old credit facility. We believe that the identification and separation of maintenance and growth capital expenditures are important factors in evaluating our business results. While we strive to maintain our present level of EBITDA by securing renewals of our existing contracts, we cannot assure you that we will maintain our present level of EBITDA since we cannot predict the future financial requirements of our clients. Contracts may be renewed at significantly different commission rates, and thus levels of EBITDA, depending on the clients' financial requirements at the time of renewal. The amount of capital commitment required by us can vary significantly. The ability to make those expenditures is often an essential element of a successful bid. For example, in 2003, three of our 20 largest 48 contracts will expire. In order to renew these contracts, we expect that we will have to make significant capital expenditures. The following table shows, as of January 1, 2002, the aggregate fiscal 2001 EBITDA represented by our contracts that expire during the periods indicated:

Commission and management fee rates vary significantly among contracts based primarily upon the amount of capital that we invest, the type of facility involved, the term of the contract and the services provided by us. In general, within each client category, the level of capital investment and commission are related, such that the greater the capital investment that we make, the lower the commission we pay to the client. Our profit sharing contracts generally provide that we are reimbursed each year for the amortization of our capital investments prior to determining profits under the contract. At the end of the contract term, all capital investments that we have made typically remain the property of the client, but our contracts generally provide that the client must reimburse us for any undepreciated or unamortized capital investments or fees made pursuant to the terms of the contract if the contract is terminated early, other than due to our default. We believe that cash flow from operating activities, together with borrowings available under the new credit facility, will be sufficient to fund our currently anticipated capital investment requirements, interest and principal payment obligations and working capital requirements. We anticipate capital investments of $46.1 million, net of $2.3 million in reimbursement of book value under a contract that was terminated early, in fiscal 2002, of which $41.1 million has been invested as of November 15, 2002. We have already committed approximately $9.8 million for growth capital expenditures in fiscal 2003. We are currently committed to fund aggregate capital investments of approximately $11.7 million and $4.5 million in 2003 and 2004, respectively. We expect that future maintenance capital expenditures will be financed through net cash provided by operating activities. We expect that future growth capital expenditures will be financed through borrowings under our revolving credit facility, issuances of additional IDSS or other securities of ours or net cash provided by operating activities or a combination of these alternatives. CONTRACTUAL COMMITMENTS We have future obligations for debt repayments, future minimum rental and similar commitments under non-cancelable operating leases as well as contingent obligations related to outstanding letters of credit. These obligations as of October 1, 2002, without giving effect to this offering and the related transactions, are summarized below:

--------------- (1) Assumes 2002 contractual obligations fully met as of October 1, 2002. (2) Represents capital commitments in connection with several long-term concession contracts. 49

On a pro forma basis after giving effect to this offering, the expected use of proceeds and the new credit facility, we believe that our net cash provided by operating activities and borrowing capacity under the new credit facility will be sufficient to enable us to fund our liquidity needs for the foreseeable future. Should we be unable to borrow under the new credit facility, we would seek other sources of debt or equity funding. However, we cannot assure you that we will be successful in obtaining alternate sources of funding in sufficient amounts or on acceptable terms. NEW ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 142, Goodwill and Other Intangible Assets, which became effective for us on January 2, 2002. SFAS No. 142 requires, among other things, discontinuing amortization of goodwill and identifiable intangible assets with indefinite lives. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. We have adopted SFAS No. 142 and completed the required transitional impairment test and found there to be no related impairments. In accordance with the standard, we discontinued the amortization of goodwill and trademarks, identified intangible assets which management believes have indefinite lives. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 144 became effective for us on January 2, 2002. The adoption of SFAS No. 144 had no significant impact on our financial position or results of operations. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. First, SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that statement, SFAS No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements. Because of the rescission of SFAS No. 4, the gains and losses from the extinguishment of debt are no longer required to be classified as extraordinary items. SFAS No. 64 amended SFAS No. 4 and is no longer needed because SFAS No. 4 is rescinded. Second, SFAS No. 145 rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers. This statement was originally issued to establish accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. As those transitions are complete, SFAS No. 44 is no longer needed. Third, SFAS No. 145 amends SFAS No. 13, Accounting for Leases, to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sales-leaseback transactions. The amendment of SFAS No. 13 is effective for transactions occurring after May 15, 2002. There has been no impact on us due to the amendment of SFAS No. 13. Lastly, SFAS No. 145 makes various technical corrections to existing pronouncements that are not substantive in nature. We have not yet evaluated the impact on our financial position or results of operations of the rescission of SFAS Nos. 4, 44 and 64 and the other technical corrections prescribed by this statement, all of which become effective for us in fiscal 2003. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employees Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs 50 Incurred in a Restructuring). We have not yet evaluated the impact of this statement on our financial position or results of operations. On November 25, 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Interpretation expands on the accounting guidance of SFAS No. 5, Accounting for Contingencies, SFAS No. 57, Related Party Disclosures, and SFAS No. 107, Disclosures about Fair Value of Financial Instruments. The Interpretation also incorporates, without change, the provisions of FASB Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others, which it supersedes. The Interpretation does identify several situations where the recognition of a liability at inception for a guarantor's obligation is not required. The initial recognition and measurement provisions of Interpretation 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosures are effective for financial statements of interim or annual periods ending after December 15, 2002. We have not determined the impact of this Interpretation on our financial position or results of operations. On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 148's amendment of the transition and annual disclosure requirements of SFAS No. 123 are effective for fiscal years ending after December 15, 2002. SFAS No. 148's amendment of the disclosure requirements of APB Opinion No. 28 is effective for financial reports containing consolidated financial statements for interim periods beginning after December 15, 2002. We have not determined the impact of this Statement on our financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. This Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. This Interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. We have not yet evaluated the impact of this Interpretation on our financial position or results of operations. 51 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of October 1, 2002, we had $110,687,500 in term loans outstanding. Installments of the loan are due in consecutive quarterly installments on the last day of each fiscal quarter with 25% of the following annual amounts being paid on each installment date; $1,150,000 in each year from 2002 through 2005 and $106,950,000 due in 2006. The weighted average variable rates are based on implied forward rates in the yield curve at the reporting date. VSA also has senior subordinated notes outstanding in an aggregate principal amount of $100,000,000. These notes mature on March 1, 2009. As of October 1, 2002, on a pro forma as adjusted basis after giving effect to this offering, including the use of proceeds from this offering, our recapitalization and the tender offer and consent solicitation and the new credit facility, as if those transactions had occurred on that date, we would have had $ million of fixed rate long term debt, consisting of $ million of the subordinated notes underlying the IDSS and $ million of term loans, and $ million in variable rate long term debt, consisting of $ million of term loans and up to $ million of the revolving credit facility. For additional information regarding the variable interest rates under the new credit facility, See "Description of Certain Indebtedness -- New Credit Facility." 52 BUSINESS OVERVIEW We are a leading provider of food and beverage concessions, high-end catering and merchandise services for sports facilities, convention centers and other entertainment facilities throughout the United States. Based on the number of facilities served, we are one of the largest providers of food and beverage services to a variety of recreational facilities in the United States and are the: - second largest provider to NFL facilities (10 teams); - third largest provider to MLB facilities (7 teams); - largest provider to minor league baseball and spring training facilities (27 teams); and - second largest provider to major convention centers (those with greater than approximately 300,000 square feet of exhibition space) (10 centers). We have a large diversified client base. As of October 1, 2002, we served 127 facilities, with an average length of client relationship of over 15 years. Some of our major accounts by client category include: - Yankee Stadium in New York City; - the Louisiana Superdome, home of the New Orleans Saints; - the Seattle Mariners' Safeco Field; - the National Trade Centre in Toronto, Canada's largest exhibit hall; - the Vancouver Convention & Exhibition Centre; and - the Los Angeles Zoo. Our contracts are typically long-term and exclusive. From 1997 through 2001, on average, contracts representing 9.2% of our EBITDA came up for renewal in each year. We retained contracts representing an average of 84.6% of the EBITDA corresponding to these contracts per year, which together with the contracts that did not come up for renewal resulted in us retaining contracts representing on average approximately 98.6% of our EBITDA in each year for this period. We have provided our services to several of the highest profile sporting and other events, including: - 23 World Series events; - three U.S. Presidential Inaugural Balls; - nine Super Bowls, including the 2003 Super Bowl at Qualcomm Stadium; - two NCAA Final Four Men's Basketball Tournaments; and - ten World Cup Soccer games. OUR STRENGTHS We believe that our competitive strengths should enable us to maintain our high retention rate and to secure attractive new contracts. The following is a list of new contracts we have been awarded since the beginning of 1999 for major league (NFL, MLB, NBA and NHL) sports facilities and major convention centers: - Louisiana Superdome, home of the New Orleans Saints; - Denver Broncos' INVESCO Field at Mile High Stadium; - The Coliseum, home of the Tennessee Titans; 53 - Seattle Mariners' Safeco Field; - Minnesota Wild's Xcel Energy Center; - San Francisco Giants' Pacific Bell Park; - Dallas Convention Center; and - new Washington Convention Center (scheduled to open in March 2003). Our strengths include the following: LEADING MARKET POSITION Based on the number of facilities served, we are one of the largest providers of food and beverage services to a variety of sports facilities and to major convention centers in the United States. We believe that our position as one of the market leaders increases the likelihood that we will be able to renew existing contracts and be invited to bid for new contracts to supply food and beverage services to recreational facilities. Furthermore, relative to smaller competitors, we benefit from our ability to make significant capital investments in clients' facilities, which has become an important competitive factor in the bidding process for contracts to serve certain facilities, particularly sports facilities. DIVERSIFIED CLIENT BASE We provide services at 127 facilities located across the United States and into Canada. The breakdown of facilities that we serve by primary client category is as follows: 67 sports facilities, 30 convention centers and 30 other entertainment facilities, representing approximately 65.2%, 22.9% and 11.9%, respectively, of our net sales and approximately 69.5%, 19.9% and 10.6%, respectively, of our EBITDA for fiscal 2001. Within sports facilities, our client base is further diversified and includes contracts to provide services at ten NFL, seven MLB, two NBA, one NHL and 27 minor league baseball and spring training facilities. EXCLUSIVE, LONG-TERM SERVICE CONTRACTS WITH HIGH RETENTION RATE We typically provide services at our clients' facilities pursuant to long-term contracts that grant us the exclusive right to provide certain food and beverage products and services and, under some contracts, merchandise products and other services within the facility. As of October 1, 2002, our contracts had an overall average of approximately 7.0 years left to run before their scheduled expirations, representing 8.5, 3.4 and 3.6 years for sports facilities, convention centers and other entertainment facilities, respectively. We typically renegotiate contracts for extension several months and, in some cases, years prior to their expiration. From 1997 through 2001, on average, contracts representing 9.2% of our EBITDA came up for renewal in each year. We retained contracts representing an average of 84.5% of the EBITDA corresponding to these contracts per year, which together with the contracts that did not come up for renewal resulted in us retaining contracts representing on average approximately 98.6% of our EBITDA in each year for this period. As of October 1, 2002, we had been providing services to our clients' facilities for an average of 15.9 years. Four of our major accounts -- Yankee Stadium in New York City, home of the Yankees, Qualcomm Stadium in San Diego, home of the Chargers and former home of the Padres, Arrowhead Stadium in Kansas City, home of the Chiefs, and Kaufmann Field in Kansas City, home of the Royals -- have been our accounts for more than 30 years. HIGH QUALITY, FULL SERVICE CAPABILITIES We believe that our expertise in high-end catering and concession services, coupled with our reputation for high-quality food and beverage products and services and responsiveness to client needs, provide a competitive advantage when we bid for contracts. Our full service capability is particularly important given the trend in new sports facilities toward providing more premium seating and luxury suites that require high-end catering services. We also believe that our expertise in designing and assisting in the 54 planning of appealing and efficient food service facilities, including food courts, kitchens and permanent and portable concession stands, increases net sales and enhances our ability to obtain and retain clients. For example, we believe that our recognized reputation for service and food, combined with our innovative service offerings, were important factors in obtaining a contract extension at the San Diego Convention Center in 2001. EXPERIENCED MANAGEMENT TEAM Our chief executive officer and our six most senior vice presidents have an average of approximately 15 years of experience in the recreational food service industry. Our facility general managers have an average of approximately 10 years of experience as general managers with our company. We believe that this experience is of particular value in enabling us to evaluate the risks and benefits associated with potential new contracts, contract structures, product innovations and markets. STRATEGIC DIRECTION AND GROWTH OPPORTUNITIES Our goal is to strengthen and broaden our position as a leading provider of food and beverage concessions, catering and merchandise services for sports, convention and other recreational facilities. Our strategies are designed to continue to improve the level of service to our existing clients and their fans and guests, and to attract new clients on the strength of our reputation for quality products and services and for working responsively with our clients. Our industry position and experience have enabled us to effectively evaluate and select opportunities for growth. Our strategy is to increase net sales with existing clients, obtain new clients and expand into related markets. We intend to accomplish these goals by: FURTHER PENETRATING THE MID-SIZE ACCOUNT MARKET We believe that we have greater potential to grow by obtaining new clients in the mid-size account market than in the major-league or large-city professional sports account markets, where we believe growth opportunities are more limited. Generally, the mid-size account market includes sporting and other recreational facilities, arenas, civic centers, convention centers and amphitheatres in medium- to small-cities. Part of this growth opportunity stems from the existence of more potential clients in the mid-size account category as compared to the major-league and large-city professional sports account category. Furthermore, we believe that the client service and types of contractual arrangements we offer will be attractive to the owners and operators of these kinds of facilities. We expect to involve our local general managers, who have first-hand experience with operational issues and local communities, in our sales efforts in this market. EXTENDING OUR SUITE AND CLUB SEAT CATERING SERVICES Our experience is typically that cost savings and service efficiencies often result when one supplier, rather than separate suppliers, provides all the required concession services and suite and club seat catering services for a single facility. Although we provide suite and club-level catering at some of the sports facilities where we provide concessions -- for example, Yankee Stadium, Safeco Field and ALLTEL Stadium -- we do not provide catering services at all of them. We believe that we are capable of providing the quality and service levels that our clients expect for their suites and club-level seats, and we are actively seeking to be awarded the suite and club-level service contracts in the facilities in which we currently have only the concession rights as well as for prospective clients. BUILDING OUR FACILITIES MANAGEMENT BUSINESS We currently have two facility management accounts, and we desire to expand this area of our business. We believe that we can offer efficiencies to our clients by providing food and beverage services and facility management services in the same facility. Toward this end, we have a task force that is building on (1) our experience in facilities management, (2) our expertise in operating and managing food 55 and beverage concession services and (3) our ability to make capital investments in order to more effectively bid on obtaining new facility management accounts. OFFERING A VARIETY OF BRANDED PRODUCTS TO OUR CLIENTS We are pursuing a strategy of offering a variety of high-quality, well-recognized branded products to our clients. Through our experience, we have learned that the careful management of prices, costs and consumer brand promotion and recognition can generate additional customer sales for the benefit of our clients and us. Toward this end, we have entered into and are seeking to enter into additional promotional and preferential pricing arrangements with owners of various branded products which would allow us to offer our clients competitively-priced products which have the brand recognition that should help generate additional customer sales. ADOPTING COMPANY-WIDE BEST PRACTICES We believe that our clients and our own performance would benefit from further standardization of the performance of various tasks in our business. For this purpose, we have established four corporate-wide task forces: - the High-End Catering Task Force, which is "benchmarking" our offerings against comparable dining experiences and developing standardized menus, preparation standards, cost and profit guidelines, smallwares packages and marketing materials. - the Concessions Task Force, which is developing standardized equipment, service routines and part-time labor use guidelines, together with expected quality levels for major food items and large point-of-sale locations. - the Facilities Management Task Force, which is developing our marketing, management and sales plan and best-practices recommendations for this effort. - the Merchandise Task Force, which is working to develop best practices and explore more centralized purchasing. As part of this effort, we plan to develop and implement company-owned brands that emphasize the breadth and high quality of the services that we provide. CLIENTS AND SERVICES OVERVIEW We provide a number of services to our clients. Our principal services include food and beverage concession and catering services at sports and other entertainment facilities, small- to large-scale banquet catering and food court operations at convention centers and in-facility restaurants and catering across the range of facilities that we serve. We also provide merchandise and program sales services at many of the sports facilities that we serve. We are responsible for all personnel, inventory control, purchasing and food preparation requirements in connection with the provision of these services. In addition, we provide full facility management services, which can include a variety of services such as event planning and marketing, maintenance, ticket distribution, program printing, advertising and licensing rights for the facility, and its suites and premium seats. Currently, we provide facility management services at two arenas. We believe that we have built strong relationships with many of our clients. We often work closely with clients in designing or renovating the portion of the facilities where we provide our services. By using our in-house capabilities in conjunction with outside consultants, we have designed state-of-the-art concessions and restaurant facilities in, among other facilities, INVESCO Field at Mile High Stadium, home of the Denver Broncos, and Pacific Bell Park, home of the San Francisco Giants. 56 We also provide for our clients a dedicated central staff for equipment placement and construction design. Our design and construction capabilities are being used in a number of new and existing client facilities where we and the client believe there is an opportunity for additional revenue growth through better design. We assist some of our clients in marketing their facilities, as our net sales are directly affected by the number and quality of events attracted to these facilities. We also seek to build relationships with event sponsors in order to facilitate referrals of recurring events, such as annual trade shows. For fiscal 2001: - our largest client, Yankee Stadium in New York City, accounted for approximately 10% of our net sales; - our three largest clients together accounted for approximately 18.9% of our net sales; - our 10 largest clients together accounted for approximately 39.5% of our net sales; and - our 20 largest clients together accounted for approximately 50.1% of our net sales. SPORTS FACILITIES We currently have contracts to provide services, including food and beverage concessions and, in some cases, the selling of merchandise, at 67 sports facilities, including stadiums and arenas throughout the United States and into Canada. At some of these facilities, we also provide high-end catering services for premium seating, luxury suites and in-stadium restaurants. These facilities host sports teams as well as other forms of entertainment, such as concerts and other large civic events. These facilities may also host conventions, trade shows and meetings. The stadiums and arenas at which we provide our services seat from 7,500 to 102,000 persons and typically host sporting events such as NFL and college football games, MLB or minor league baseball games, NBA and college basketball games, NHL and minor league hockey games, concerts, ice shows and circuses. For fiscal 2001, sports facility contracts accounted for approximately 65.2% of our net sales and 69.5% of our EBITDA. Concession-style sales of food and beverages represent the majority of our business at sports facilities. High-end catering for luxury suites, premium concession services for premium seating and in-stadium restaurants are currently responsible for a significantly smaller portion of net sales at sports facilities, but have been gaining importance due to the general growth of premium seating as a proportion of total stadium and arena seating and to the general increase in demand for a variety of food and beverage offerings. Also, premium seating is important to our clients because of the significant net sales generated for those clients by purchasers of luxury seats and suites. Consequently, the ability to provide high-end catering is an important factor when competing for contracts, and we expect it to become more important in the future. In addition to the provision of food and beverage catering and concession services, we sell team-licensed and other merchandise during events at certain facilities. For example, we provide a wide range of merchandise services, including in-stadium stores and roving vendors, at almost all of the MLB facilities that we serve. Our contracts for sports facilities are typically for terms ranging from five to 20 years. As of October 1, 2002, the existing sports facility contracts had an average remaining life of approximately 8.5 years. In general, stadium and arena contracts require a larger up-front or committed future capital investment than contracts for convention centers and other entertainment facilities and typically have a longer contract term. In addition, some sports facility contracts require greater capital investment than others, and we typically receive a more favorable commission structure at facilities where we have made larger capital investments. 57 The following chart lists all our major league sports facility tenants as of October 31, 2002:

--------------- (1) Represents length of relationship with respect to the New Orleans Arena. The New Orleans Hornets' 2002-2003 season is its first at the arena. (2) Includes length of client relationship with the San Francisco Giants with respect to its former stadium, known first as Candlestick Park (1993-1999) and later as 3COM Park (1999-2000). CONVENTION CENTERS Based on the number of facilities served, we are one of the largest providers of food and beverage services to major convention centers -- those with greater than approximately 300,000 square feet of exhibition space -- in the United States. We have contracts to provide services to 30 convention centers, including 10 major convention centers such as the San Diego Convention Center, the Jacob K. Javits Convention Center in New York City and the National Trade Centre in Toronto. For fiscal 2001, convention center contracts accounted for approximately 22.9% of our net sales and 19.9% of our EBITDA. The services that we provide at convention centers typically include: - catering services; - providing food court operations; - assisting in planning events; and - marketing clients' facilities. Catering services consist primarily of providing large-scale banquet services to functions held in the facilities' ballrooms and banquet halls. We are equipped to tailor our services for small groups to groups of 58 several thousand persons at the facility. To cater meals at certain facilities for larger groups, we may draw, as needed, on the services of chefs, event managers and other employees throughout the region in which the facility is located. At trade shows and consumer exhibitions, we frequently provide smaller-scale catering services to meetings, exhibitions and trade show booths. In operating food courts at convention centers, we typically provide concession sales services from several different locations, which sell a variety of specialty foods and beverages, including nationally-branded, franchised food and beverage products. Our contracts with convention centers are typically for terms ranging from two to five years. As of October 1, 2002, the existing convention center contracts had an average remaining life of 3.4 years. In general, convention center contracts are for a shorter contract term than contracts for sports facilities, but typically require less up-front or committed future capital investment. We typically receive a more favorable commission structure at facilities where we have made larger capital investments. The following chart lists alphabetically our top eight contracts within the convention center category in terms of the fiscal 2001 EBITDA generated by those contracts:

--------------- (1) Source: Tradeshow Week's Major Exhibit Hall Directory 2002. OTHER ENTERTAINMENT AND RECREATIONAL FACILITIES We have contracts to provide a wide range of services to 30 other entertainment facilities located throughout the United States. Such facilities include horse racing tracks, music amphitheaters, motor speedways, skiing facilities and zoos. While the services that we provide can vary widely depending on the type of facility concerned, we primarily provide concession services at zoos and music amphitheaters, high-end concession services at music amphitheaters, and in-facility restaurants, concession services, food court operations and high-end catering services at horse racing tracks. For fiscal 2001, contracts to serve these other entertainment facilities accounted for approximately 11.9% of our net sales and 10.6% of our EBITDA. The duration, level of capital investment required and commission or management fee structure of the contracts for these other entertainment facilities vary from facility to facility. We typically receive a more favorable commission structure at facilities where we have made larger capital investments. As of October 1, 2002, our contracts to serve these other entertainment facilities had an average remaining life of 3.6 years. 59 The following chart lists alphabetically our top six contracts within the other entertainment facilities category in terms of the fiscal 2001 EBITDA generated by those contracts:

CLIENT CONTRACTS We typically enter into one of three types of contracts with our clients: - profit and loss contracts; - profit sharing contracts; and - management fee contracts. Each of our contracts falls into one of these three categories; however, any particular contract may contain elements of any of the other types as well as other features unique to that contract. We draw on our substantial operational and financial experience in attempting to structure contracts to our benefit, including a mix of up-front fees, required capital investment and ongoing commissions to our customers. We try to include contract terms that we believe will achieve our preferred rate of return and cash-flow. For example, some of our contracts contain a guarantee of performance by the client for levels of minimum attendance and/or levels of net sales. Also, many of our contracts have step-scale commission rates, reducing the effect of potential decreases in cash-flow. In addition, most of our contracts require our client to return to us any unamortized capital investment and any up-front fees, if the contract is cancelled before its scheduled termination, other than due to breach by us. PROFIT AND LOSS CONTRACTS Under profit and loss contracts, we receive all of the net sales and bear all of the expenses from the provision of services at a facility. These expenses include commissions paid to the client, which are typically calculated as a fixed or variable percentage of various categories of sales. While we benefit from greater upside potential with profit and loss contracts, as we are entitled to retain all profits from the provision of our services at a facility after paying expenses, including commissions to the client, we are responsible for all associated costs and therefore we are also responsible for any losses incurred. See "Risk Factors -- The pricing and termination provisions of our contracts may constrain our ability to recover costs and to make a profit on our contracts." We consequently bear greater risk with a profit and loss contract than with a profit sharing or management fee contract. In order to achieve our anticipated level of profitability on a profit and loss contract, we must carefully control our operating expenses and obtain price increases commensurate with our cost increases. As of October 1, 2002, we served 100 facilities under profit and loss contracts. For fiscal 2001, profit and loss contracts accounted for 79.4% of our net sales and 89.1% of our EBITDA. 60 Some of our profit and loss contracts contain minimum guaranteed commissions or equivalent payments to the client in connection with our right to provide services within the particular facility, regardless of the level of sales at the facility or whether a profit is being generated at the facility. These guaranteed payments are often structured as a fixed dollar amount, frequently increasing over the life of the contract, or as a fixed per capita amount, generally on an escalating scale based on event attendance or per capita spending levels. PROFIT SHARING CONTRACTS Profit sharing contracts are generally profit and loss contracts with the feature that the commission paid to the client is in whole or in part a specified percentage of the profits generated by our concessions operation at the relevant facility. In calculating profit for those purposes, expenses include commissions payable to the client that are not based on profits. These commissions are typically calculated as a fixed or variable percentage of various categories of sales. In addition, under certain profit sharing contracts, we receive a fixed fee prior to the determination of profits under the contract. As of October 1, 2002, we served 26 facilities under profit sharing contracts. For fiscal 2001, profit sharing contracts accounted for 20.5% of our net sales and 10.1% of our EBITDA. MANAGEMENT FEE CONTRACTS Under our management fee contract, we receive a management fee, calculated as a fixed dollar amount and/or a fixed or variable percentage of various categories of sales. In addition, our management fee contract entitles us to receive incentive fees based upon our performance under the contract, as measured by factors such as net sales or operating costs. We are reimbursed for all of our on-site expenses under these contracts. The benefit of this type of contract is that we do not bear the risks associated with the provision of our services at the facility. However, as a result of this reduced risk, we also have reduced upside potential, as we are entitled to receive only a management fee, and any incentive fees provided for in the contract, and do not share in any profits. As of October 1, 2002, we served one facility under a management fee contract. For fiscal 2001, management fee contracts accounted for 0.1% of our net sales and 0.8% of our EBITDA. ADDITIONAL CONTRACT FEATURES Although the contracts generally fall within one of the three types discussed above, we often include in our contracts a variety of ways to meet our needs and the needs of a particular client. These features include: - step-scale commissions, in which our commission payment to a client will vary according to sales performance; - minimum attendance thresholds, in which a client will refund a portion of the commissions that it receives from us if a minimum attendance level is not reached at the facility; and - merchandise inventory guarantees, under which we return certain unsold inventory to the client without charge to us. These features represent our efforts to tailor our contracts to best suit a particular client opportunity and reflect our experience with comparable facilities, sensitivity analyses of economic assumptions, competitor analyses and general market research. Most of our contracts limit our ability to raise prices on the food, beverages and merchandise we sell within the particular facility without the client's consent. However, some of the contracts contain pricing restrictions that allow us to raise our prices without the client's consent if we are able to demonstrate that prices on similar items at specified benchmark facilities have increased. The length of contracts that we enter into with clients varies. Contracts in connection with sports facilities generally require the highest capital investments but have correspondingly longer terms, typically 61 five to 20 years. Convention center contracts generally require lower capital investments and have usual terms of two to five years. While our contracts are generally terminable only in limited circumstances, some of our contracts give the client the right to terminate the contract with or without cause on little or no notice. However, most of our contracts require our client to return to us any unamortized capital investment and any up-front fees, if the contract is cancelled before its scheduled termination, other than due to breach by us. HISTORY We, including our subsidiaries and their predecessors, have been in operation for over 35 years. We were formed on November 21, 1995 under the laws of the State of Delaware. In August 1998, through our wholly-owned subsidiary, VSA, the parent company of VSI, then one of the leading suppliers of food and beverage services to sports facilities in the United States, we acquired Service America, then one of the leading suppliers of food and beverage services to convention centers in the United States. This acquisition allowed us to enter the convention center market with a significant presence in major convention centers and resulted in us having a substantially more diversified client base and revenue stream business. GROWTH IN THE INDUSTRY Sports facilities. Growth in the sports facilities category of the recreational food service industry in recent years has come primarily from new facility construction, increased per capita spending on new facilities and premium seating. During the 1990s, a substantial number of NFL, MLB, NBA and NHL facilities were built, stemming in part from the addition of 19 new major league franchises during that period. According to Street & Smith's Sports Business Journal of March 11-17, 2002, between 1999 and 2001, 49 sports facilities and 1,819 luxury suites at sports facilities were constructed. This building trend continued in 2002, with an estimated $7.8 billion (in total project cost) of sports facilities under construction, according to Street & Smith's Sports Business Journal of March 4-10, 2002. Newer sports facilities, whether as a result of new construction or refurbishing, tend to experience higher levels of per capita spending on food, beverages and merchandise by attendees of events at those facilities, because newer facilities typically have more points of sale for concessions and more premium seating, full-service restaurants, sports clubs and retail shops as compared to older facilities. Current and near-future facility construction results from planning commenced several years ago. Based on available data, management believes that the growth for stadiums and arenas for major league sports teams and in major cities may be slowing. However, according to Street & Smith's Sports Business Journal of May 28-June 3, 2001, growth is strong for college and minor league sports venues. 62 The following graph shows the historical growth in attendance at NFL, MLB, NBA and NHL events in the United States between 1995 and 2001: U.S. MAJOR PROFESSIONAL SPORT ATTENDANCE(1) (PERFORMANCE GRAPH)

--------------- (1) Source: PriceWaterhouseCoopers' Global Entertainment and Media Outlook 2002-2006 Convention centers. In recent years there has also been a significant expansion of existing and construction of new convention centers, which has created new opportunities for food service providers. According to Tradeweek's Major Exhibit Hall Directory of 1995 and 2002, the total exhibit space in U.S. and Canadian exhibit halls increased approximately 23% from 1991 (54.8 million square feet) through 2001 (67.6 million square feet). Although, according to the same source, the expansion appears to be slowing, a total of 87 new and expanded facilities totaling 12.2 million square feet of exhibit space are planned for completion by 2010. This growth is attributed in part to two primary forces: - the increasing number and size of conventions and trade shows; and - user demand for more specialized or purpose-built facilities and the need for more advanced telecommunication and technological infrastructure. According to Tradeshow Week 200's analysis of April 2002 (which represents the 200 largest U.S. tradeshows), overall professional attendance at tradeshows increased approximately 10% from 1991 (3.9 million) through 2001 (4.3 million). However, recent weak economic conditions and the events of September 11, 2001 have caused a decline in attendance at many convention center facilities we serve, and this decline may continue in the future. Other entertainment facilities. We believe that the market for other entertainment facilities will develop in the next several years in a manner consistent with the development of sports and sports-related facilities. We believe that if we are to obtain growth in this segment, such growth will have to come by obtaining contracts for businesses that are now held by competitors or provided internally by potential clients. 63 SALES AND MARKETING Our chief executive officer determines the direction of our sales and marketing efforts, aided by a senior vice president -- sales administration, who heads their implementation and coordinates the efforts of two vice presidents -- sales. Our primary sales goal is to secure renewals of existing contracts and the addition of new contracts. To this end, we utilize an internal tracking system, trade publications and other industry sources, including our on-site general managers, to identify information about both new and expiring contracts in the recreational food service industry. As a result of many years of experience in the industry, we have developed relationships with a wide variety of participants in the industry, including: the general managers of public and private facilities; league and team owners; event sponsors; and a network of consultants whom facility owners often hire to formulate bid specifications. In addition, members of our management team maintain memberships in various industry trade associations. Substantially all of our clients and potential clients in publicly controlled facilities are members of these trade groups. COMPETITION COMPETITORS The recreational food service industry is highly fragmented and competitive, with several national and international food service providers as well as a large number of smaller independent businesses serving discrete local and regional markets and competing in distinct areas. Those companies that lack a full-service capability because, for example, they cannot cater to luxury suites at stadiums and arenas, often bid for contracts in conjunction with one of the other national or international food service companies that can offer such services. We compete for contracts against a variety of food service providers. However, our major competitors are other national and international food service providers, including ARAMARK Corporation (which includes Fine Host Corporation), Delaware North Corporation, Compass Group plc and Levy Restaurants (which is partially owned by Compass Group plc). We also face competition from regional and local service contractors, some of which are better established within a specific geographic region. Existing or potential clients may also elect to "self operate" their food services, eliminating the opportunity for us to compete for the account. We compete primarily to provide concession, catering and other related services at recreational facilities. Our competitors often operate more narrowly, for example, in high-end catering only, or more broadly, e.g., in food services in other kinds of facilities and in other services altogether. We compete for facility management contracts with Spectacor Management Group (which is a joint venture between ARAMARK Corporation and Hyatt Hotels Inc.) and Global Spectrum, which together manage most privately-managed facilities. In addition, many facilities are managed internally, either by the facility owner or by the owner of the team that plays at the facility. COMPETITION FOR CONTRACTS Contracts are generally gained and renewed through a competitive bidding process. We selectively bid on contracts to provide services at both privately owned and publicly controlled facilities. The privately negotiated transactions are generally competitive in nature, with several other large national competitors submitting proposals. Contracts for publicly controlled facilities are generally awarded pursuant to a request-for-proposal process. Successful bidding on contracts for such publicly controlled facilities often 64 requires a long-term effort focused on building relationships in the community in which the venue is located. We compete primarily on the following factors: - the ability to make capital investments; - reputation within the industry; - commission or management fee structure; - service innovation; and - quality and breadth of products and services. Some of our competitors may be prepared to accept less favorable financial returns than we are when bidding for contracts. A number of our competitors also have substantially greater financial and other resources. SUPPLIERS We have a national distribution contract with SYSCO Corporation to supply our operations. We also have a number of national purchasing programs with major product suppliers that enable us to receive discounted pricing on certain items. The purchase of other items, the most significant of which are alcoholic beverages that must, by law, be purchased in-state, is handled on a local basis. In instances where a contract with a particular client requires us to use a specific branded product for which we do not have a purchasing program or distribution contract, or which results in our bearing additional costs, the client will typically be required to pay any excess cost associated with the use of the brand name product through reduced commission rates for such products. We generally purchase any equipment that we require directly from the manufacturer. We typically obtain several bids when filling our food service equipment requirements. Additionally, we have a number of local, regional and national subcontractors who provide food, beverages or other services at our and our client's behest, and from whom we collect a portion of revenue, depending upon contractual arrangements with the subcontractor and the client. CONTROLS Since a large portion of our business is transacted in cash, principally food and beverage concessions and food court operation sales, we have stringent inventory and cash controls in place. We typically record inventory levels before and after each event to determine if the sales recorded match the decline in inventory. The process is typically completed within hours of conclusion of the event and any discrepancy can generally be traced to either specific points of sale or control processes set up throughout the facility. We also run yield reports on food supplies on a monthly basis to determine if there is any significant difference between inventory and sales. EMPLOYEES As of October 1, 2002, we had approximately 1,600 full-time employees. Of these, approximately 500 provide on-site administrative support and supervision at the facilities we serve, approximately 1,000 provide a variety of services (for example, food preparation, warehousing and merchandise sales) at those facilities, and approximately 100 provide management and staff support at the corporate and regional levels. During fiscal 2001, we had approximately 27,000 employees who were part-time or hired on an event-by-event basis. The number of part-time employees at any point in time varies significantly due to the seasonal nature of the business. As of October 1, 2002, approximately 38.5% of our employees, including full and part-time employees, were covered by collective bargaining agreements with several different unions. We have not experienced any significant interruptions or curtailments of operations due to disputes with our employees, and we 65 consider our labor relations to be good. We have hired, and expect to continue to hire, a large number of qualified, temporary workers at particular events. SEASONALITY OF OPERATIONS Our sales and operating results have varied, and are expected to continue to vary, from quarter to quarter, as a result of factors that include: - seasonality of sporting and other events; - unpredictability in the number, timing and type of new contracts; - timing of contract expirations and special events; and - level of attendance at the facilities which we serve. Business at the principal types of facilities that we serve is seasonal in nature. MLB and minor league baseball-related sales are concentrated in the second and third quarters, the majority of NFL-related activity occurs in the fourth quarter and convention centers and arenas generally host fewer events during the summer months. Consequently, our results of operations for the first quarter are typically substantially lower than in other quarters, and results of operations for the third quarter are typically higher than in other quarters. REGULATORY MATTERS Our operations are subject to various governmental regulations, such as those governing: - the service of food and alcoholic beverages; - minimum wage regulations; - employment; - environmental protection; and - human health and safety. In addition, our facilities and products are subject to periodic inspection by federal, state, provincial and local authorities. The cost of regulatory compliance is subject to additions to or changes in federal, state or provincial legislation, or changes in regulatory implementation. If we fail to comply with applicable laws, we could be subject to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions. The U.S. Food and Drug Administration, or the FDA, regulates and inspects our kitchens in the United States. Every U.S. commercial kitchen must meet the FDA's minimum standards relating to the handling, preparation and delivery of food, including requirements relating to the temperature of food, the cleanliness of the kitchen and the hygiene of its personnel. The Canadian Food Inspection Agency regulates food safety in Canada, applying similar standards to those required by the FDA. We are also subject to various state, provincial, local and federal laws regarding the disposition of property and leftover foodstuffs. The cost of compliance with FDA regulations is subject to additions to or changes in FDA regulations. We serve alcoholic beverages at many facilities, and are subject to the "dram-shop" statutes of the states and provinces in which we serve alcoholic beverages. "Dram-shop" statutes generally provide that serving alcohol to an intoxicated or minor patron is a violation of law. In most states and provinces, if one of our employees sells alcoholic beverages to an intoxicated or minor patron, we may be liable to third parties for the acts of the patron. We sponsor regular training programs in cooperation with state and provincial authorities to minimize the likelihood of serving alcoholic beverages to intoxicated or minor patrons, and we maintain general liability insurance that includes liquor liability coverage. We are also subject to licensing with respect to the sale of alcoholic beverages in the states and provinces in which we serve alcoholic beverages. Failure to receive or retain, or the suspension of, liquor 66 licenses or permits would interrupt or terminate our ability to serve alcoholic beverages at those locations. A few of our contracts require us to pay liquidated damages during any period in which our liquor license for the relevant facility is suspended and most contracts are subject to termination in the event that we lose our liquor license for the relevant facility. ENVIRONMENTAL MATTERS Laws and regulations concerning the discharge of pollutants into the air and water, the handling and disposal of hazardous materials, the investigation and remediation of property contamination and other aspects of environmental protection are in effect wherever we operate. Our current operations do not involve material costs to comply with such laws and regulations; and they have not given rise to, and are not expected to give rise to, material liabilities under these laws and regulations for investigation or remediation of contamination. Claims for environmental liabilities arising out of property contamination have been asserted against us and our predecessors from time to time, and in some cases such claims have been associated with businesses, including waste disposal and/or management businesses, related to entities we acquired and have been based on conduct that occurred prior to our acquisition of those entities. Several such claims were resolved during the 1990s in bankruptcy proceedings involving some of our predecessors. More recently, private corporations asserted a claim under CERCLA against us for contribution to address past and future remediation costs at a site in Illinois. The site allegedly was used by, among others, a waste disposal business related to a predecessor for which we allegedly are responsible. In addition, the United States Environmental Protection Agency, asserting authority under CERCLA, recently issued a unilateral administrative order concerning the same Illinois site naming approximately 75 entities as respondents, including the plaintiffs in the CERCLA lawsuit against us and the waste disposal business for which the plaintiffs allege we are responsible. We believe that we have valid defenses (including discharge in bankruptcy related to certain bankruptcy proceedings filed in the 1990s) to any claimed liability at this site and further believe that our potential liability, if any, is not likely to be significant. However, because these claims are in their early stages, we cannot predict at this time whether we will eventually be held liable at this site or whether such liability will be material. Furthermore, additional environmental liabilities relating to any of our former operations or any entities we have acquired could be identified and give rise to claims against us involving significant losses. PROPERTIES We lease our corporate headquarters of approximately 20,000 square feet in Spartanburg, South Carolina and approximately 3,500 square feet in Stamford, Connecticut. We currently provide our services at 127 client facilities, all of which are owned or leased by our clients. The contracts with our clients generally permit us to use certain areas within the facility to perform our administrative functions and fulfill our warehousing needs, as well as provide food and beverage services. INTELLECTUAL PROPERTY We have the trademarks, trade names and licenses that are necessary for the operation of our business as we currently conduct it. We do not consider our trademarks, trade names or licenses to be material to the operation of our business. LITIGATION We are from time to time involved in various legal proceedings incidental to the conduct of our business. In our opinion, after considering a number of factors, including, but not limited to, the current status of any currently pending proceeding (including any settlement discussions), views of retained counsel, the nature of the litigation, our prior experience and the amounts that we have accrued for known contingencies, the ultimate disposition of any currently pending proceeding will not have a material adverse effect on our financial condition or results of operations. 67 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the names and positions of our current directors and executive officers and their ages as of December 31, 2002.

Set forth below is information concerning our directors and executive officers as of the date of this prospectus. David Blitzer (New York, New York) is a member of our board of directors. Mr. Blitzer is a senior managing director of the Blackstone Group, which he joined in 1991. He has been one of our directors since 1995. John T. Dee (New York, New York) is chairman of our board of directors. Mr. Dee has served as the chairman of our board since August 1998 and as a director of Service America since January 1993. (Service America filed for bankruptcy protection in October 1992 and emerged from bankruptcy in June 1993). He has been chairman of the board of Service America since January 1997. From August 1998 to April 2002, Mr. Dee served as our chief executive officer. He also served as president and chief executive officer of Service America from January 1993 to April 2002 and as a consultant to Service America from November 1992 to January 1993. From 1989 to 1992, Mr. Dee was president of Top Food Services, Inc., a company engaged in the food service business. From 1980 to 1989, he was group president at ARAMARK Corporation with responsibility for ARAMARK Corporation's recreational food service and public restaurant operations. From 1979 to 1980, he held senior positions, including president, at Sportservice Corporation, and was responsible for concessions and merchandise operations at airports, theaters, stadiums, arenas and racetracks. From 1968 to 1979, he held various positions at ARAMARK Corporation, including vice president-sales and president of the Leisure Services Group, a division of ARAMARK Corporation engaged in the recreational food service industry. Kenneth R. Frick (Campobello, South Carolina) is our executive vice president and chief financial officer. Mr. Frick has served as our chief financial officer since August 1998 and as chief financial officer of Volume Services since December 1995. He served as our vice president from August 1998 to December 2000, when he became executive vice president. Mr. Frick has 18 years of experience in the recreational food service industry, 14 of them with Volume Services. Prior to becoming chief financial officer of Volume Services in 1995, Mr. Frick was the controller for Volume Services for two years, and for seven years was assistant controller and Southeast Regional Controller of Volume Services. Mr. Frick is a certified public accountant. Lawrence E. Honig (Spartanburg, South Carolina) has served as our chief executive officer and director since April 2002. From February 2000 until April 2001, Mr. Honig served as managing director at eHatchery LLC. From January 1998 to July 1999, Mr. Honig was chairman, president and chief executive officer of Edison Brothers Stores, Inc., a specialty retailer, also serving as a director from September 1997 68 to March 1999 (Edison Brothers Stores, Inc. filed for bankruptcy protection in March 1999). He has previously served as president and chief executive officer of Federated Systems Group, a division of Federated Department Stores. From 1982 to 1992, Mr. Honig was executive vice president and then vice chairman and a member of the board of The May Department Stores Company. Previously, he was a principal of McKinsey & Company, Inc., an international consulting firm. Howard A. Lipson (Chappaqua, New York) is a member of our board of directors. Mr. Lipson is a senior managing director of The Blackstone Group L.P., referred to in this prospectus as the "Blackstone Group," which he joined in April 1988. He has been one of our directors since December 1995. Prior to joining the Blackstone Group, Mr. Lipson was a member of the Mergers and Acquisitions Group of Salomon Brothers Inc. He currently serves on the board of directors of Allied Waste Industries, Inc., Mega Bloks Inc., Columbia House Holdings Inc., and Universal City Development Partners, Ltd. and is a member of the Advisory Committee of Graham Packaging Holdings Company. Janet L. Steinmayer (Old Greenwich, Connecticut) is our executive vice president, general counsel and secretary. Ms. Steinmayer has been our general counsel and secretary since August 1998. She served as our vice president from August 1998 to December 2000, when she became executive vice president. Ms. Steinmayer has been corporate vice president, general counsel and secretary of Service America since November 1993. From 1992 to 1993, she was senior vice president -- external affairs and general counsel of Trans World Airlines, Inc., or TWA (TWA filed for bankruptcy protection in January 1992). From April 1990 to 1991, she served as vice president -- law, deputy general counsel and corporate secretary at TWA. Ms. Steinmayer was a partner at the Connecticut law firm of Levett, Rockwood & Sanders, P.C. from 1988 to 1990. Peter F. Wallace (New York, New York) is a member of our board of directors. Mr. Wallace joined the Blackstone Group in July 1997 as an analyst and became an associate in January 2001. He has been one of our directors since October 1999. 69 DIRECTOR AND EXECUTIVE COMPENSATION COMPENSATION OF DIRECTORS Initial compensation for our directors who are not also employed by us or our subsidiaries will be $30,000 per director per year and $1,000 per director for attending meetings in person ($500 if by telephone) of the board of directors and $500 per director for attending committee meetings of the board of directors in person ($250 if by telephone). A committee chair will receive an additional $500 for attending a committee meeting in person ($250 if by telephone). Directors will also be reimbursed for out-of-pocket expenses for attending board and committee meetings. COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth information with respect to the compensation of our chief executive officer and the named executive officers for services in all capacities for us in the years indicated: SUMMARY COMPENSATION TABLE

--------------- (1) Bonuses are made pursuant to VSI's bonus plan for general managers and senior management personnel. Eligible personnel qualify for bonus payments in the event that VSI exceeds annual financial performance targets or at the discretion of the board of directors. (2) Perquisites and other personal benefits did not exceed the lesser of $50,000 or 10% of the total salary and bonus of any named executive officer for the years shown. (3) On April 15, 2002, Mr. Dee resigned as chief executive officer. On April 15, 2002, Lawrence E. Honig entered into an employment agreement with us to serve as chief executive officer. His annual base salary is $450,000. (4) Annual bonuses for 2002 have not yet been determined. (5) Amount includes $49,822 in relocation benefits and $2,509 in insurance premiums. (6) Amount includes $117,423 in insurance premiums and $2,750 in VSA's contributions under its 401(k) plan. (7) Amount includes $2,750 in VSA's contributions under its 401(k) plan and $8,047 in insurance premiums. (8) Amount includes $890 in insurance premiums. 70 MANAGEMENT ARRANGEMENTS Employment and Severance Agreements We have entered into the following arrangements with our directors and executive officers: Agreement with Mr. Dee. On May 1, 2002, we entered into an amended employment agreement with Mr. Dee. The agreement provides that Mr. Dee will be employed by us at an annual base salary of $465,000 through August 24, 2003 and then at an annual base salary of $232,500 through August 24, 2005, subject to earlier termination by us for or without cause, or by Mr. Dee for good reason, each as defined in the agreement. Mr. Dee is entitled to a bonus at the discretion of our board of directors and to participate in any executive bonus plan and all employee benefit plans maintained by us. The agreement provides for severance pay in the case of a termination by us without cause or by Mr. Dee for good reason (as such terms are defined in the agreement) in an amount equal to Mr. Dee's annual base salary for the balance of the term of employment and ancillary benefits. During and for two years after Mr. Dee's employment, Mr. Dee has agreed that, without our written consent, he will not: - be engaged, in any capacity, in any business that competes with our business; or - solicit any person who was employed by us during the 12 months preceding such solicitation. Agreement with Mr. Honig. On April 15, 2002, we entered into an employment agreement with Mr. Honig. The agreement provides that Mr. Honig will be employed by us as Chief Executive Officer until April 14, 2004, subject to automatic one-year extensions of the term of his agreement and his employment with us, unless earlier terminated. Mr. Honig's base salary under the agreement is $450,000, subject to increases at the discretion of the board. Mr. Honig is also eligible to earn an annual bonus pursuant to our bonus plan, targeted to be at least 50% of Mr. Honig's base salary. Mr. Honig will be granted, pursuant to a long-term management incentive plan that will be put into place, options to purchase a number of shares of our common stock equal to 3% of the number of shares issued and outstanding on the date of the grant at an exercise price per share equal to the value of our company as determined by the board for purposes of restructuring management's equity in our company, divided by the number of outstanding shares at the time of such restructuring. Of those options, 20% will vest on the first anniversary of the date of the grant and 20% will vest on each anniversary thereafter. The options will fully vest if Mr. Honig's employment is terminated by us without cause, by Mr. Honig for good reason or in the event of a sale of all or substantially all of our stock and/or assets. In addition, if such a sale takes place before April 15, 2004 and the total amounts received by or distributed to our stockholders per share in such sale exceed the exercise price per share for the shares subject to these options, and such excess value, multiplied by the number of shares as to which Mr. Honig has options (the "aggregate excess value"), is less than $1 million, Mr. Honig will be paid the difference between the aggregate excess value and $1 million at the time such sale is consummated. The unvested portion of Mr. Honig's options will immediately expire at his termination of employment for any reason and the vested portion will expire one year following the first anniversary of his termination of employment, unless Mr. Honig has been terminated for cause, in which case the vested portion of his options will expire immediately. Mr. Honig is also entitled to participate in all employee benefits plans maintained by us, except the split dollar life insurance program, and other benefits. In the case of termination by us without cause or by Mr. Honig for good reason, Mr. Honig will receive his annual base salary and continued benefits for the longer of (x) the date of his termination through April 15, 2004 or (y) one year following the date of his termination, plus any accrued but unpaid bonus amounts. During and for two years after Mr. Honig's employment, Mr. Honig has agreed that, without our written consent, he will not: - carry on, be engaged in, or have any financial interest in any business that competes with our business; or - solicit any person who was employed by us during the 12 months preceding such solicitation. 71 Agreement with Mr. Frick. On November 17, 1995, VSI entered into an employment agreement with Mr. Frick. The agreement provides that Mr. Frick will be employed by VSI as Chief Financial Officer until he resigns or is dismissed by VSI for or without cause, as defined in the agreement. Mr. Frick's annual base salary under the contract is $195,000, subject to annual review by VSI's chief executive officer. Mr. Frick is also entitled to receive an annual bonus pursuant to any management incentive compensation plan established by VSI. In the case of termination of employment due to resignation, Mr. Frick will receive his salary up to the 30th day following his resignation and any accrued but unpaid bonus amounts. In the case of termination without cause by VSI, Mr. Frick will receive a one-time payment of two times his annual base salary plus any accrued but unpaid bonus amounts. During and for two years after his employment, Mr. Frick has agreed not to: - solicit employees of VSI to cease such employment without the written consent of VSI; or - have any involvement in any capacity in any contract concessions business similar to that of VSI in those states in the United States in which VSI does business and over which Mr. Frick has had supervisory responsibility. Agreement with Ms. Steinmayer. On September 29, 1998, we entered into an employment agreement with Ms. Steinmayer. The agreement provides that Ms. Steinmayer will be employed by us as Vice President, General Counsel and Secretary at an annual base salary of $190,000, plus $250 per hour for each hour that she works in excess of 24 hours per week, until the agreement is terminated by us for or without cause, or by Ms. Steinmayer with or without good reason, each as defined in the agreement. Ms. Steinmayer is entitled to an annual bonus at the discretion of our board of directors and to participate in any executive bonus plan and all employee benefits plans maintained by us. In the case of a termination by us without cause or by Ms. Steinmayer for good reason, Ms. Steinmayer will receive a one-time payment of an amount equal to two times her annual compensation in the one-year period prior to the date of termination, plus ancillary employee benefits. During and for two years after Ms. Steinmayer's employment, she has agreed that, without our prior written consent, she will not: - have any involvement in any enterprise which provides food services, as defined in the agreement, in any of the states in the United States in which we operate; or - solicit any of our employees to leave their employment. SAVINGS PLAN We sponsor the Volume Services America Retirement and Savings 401(k) Plan, a tax-qualified plan in which our employees who have reached age 21 and have completed one year of service are eligible to participate. The following employees are not eligible to participate in our 401(k) plan: - employees covered by a collective bargaining agreement; - nonresident aliens; and - leased employees. Subject to applicable limits imposed on tax-qualified plans, participants in our 401(k) plan may elect to make pre-tax contributions of up to 16% of their compensation each year. We make matching contributions equal to 25% of a participant's contributions, up to the first 6% of the participant's earnings. Our 401(k) plan also allows us, in the discretion of our board of directors, to make additional matching contributions of up to a total of 50% of a participant's contributions, up to the first 6% of the participant's earnings. Participants become 100% vested with respect to matching contributions after two years of service with us. 72 DEFERRED COMPENSATION PLAN We also sponsor the Volume Services America Deferred Compensation Plan, a non-tax-qualified plan in which employees may participate if such employees are: - members of a select group of highly compensated or management employees; or - selected by the plan's administrative committee as participants. Our Deferred Compensation Plan allows participants to elect to make pre-tax deferrals of a portion of their annual base salary and bonuses, subject to maximum and minimum percentage or dollar amount limitations determined by the plan's administrative committee, the members of which are selected by our board of directors. The Deferred Compensation Plan allows us, in the discretion of the administrative committee, to make matching contributions with respect to participants who elect to defer a portion of their annual base salary. A participant's deferrals and matching contributions, if any, are credited to a bookkeeping account and accrue earnings and losses as if held in certain investments selected by the participant. Our Deferred Compensation Plan is unfunded, and participants are unsecured general creditors of VSA as to their accounts. BONUS PLAN We maintain a bonus plan whereby general managers and senior management personnel qualify for incentive payments in the event that we exceed certain financial performance targets determined on an annual basis. Typically, financial performance targets for us are based on attaining specified levels of EBITDA, the attainment of which correspond to certain award pools. Individual awards are determined at the end of our fiscal year by calculating each participant's weighted earnings. A participant's weighted earnings are equal to his or her salary, excluding bonuses, special payments, paid leaves of absence for illness or disability, and workman's compensation, multiplied by a factor that corresponds to his or her salary grade. The applicable award pool is divided among plan participants pro rata based on their weighted earnings. Individual awards are paid to participants in lump sums as soon as practicable after the end of the fiscal year, subject to withholding of applicable federal, state and local taxes. Our CEO and Board of Directors have the right to adjust or eliminate any incentive payment that would otherwise be paid under the bonus plan based on such factors as they may determine in their sole discretion. Our CEO and Board of Directors may also amend or cancel the bonus plan at any time for any reason. We are currently reviewing our bonus plan and expect to adopt a revised bonus plan for our fiscal year ending December 30, 2003. LONG-TERM MANAGEMENT INCENTIVE PLAN We are in the process of evaluating a long-term management incentive plan. The plan will be for key employees in the future to align their interests with those of the stockholders. This plan may take one of several forms including stock options, stock grants, dividend equivalents, and/or a performance-based cash plan. 73 PRINCIPAL STOCKHOLDERS The following table and accompanying footnotes show information regarding the beneficial ownership of shares of our common stock and exchangeable participating preferred stock before and after the completion of this offering and show the number of and percentage owned by: - each person who is known by us to own beneficially more than 5% of either class of our capital stock; - each member of our board of directors; - each of our named executive officers; and - all members of our board of directors and our executive officers as a group. Except as indicated in the footnotes to this table, each person has sole voting and investment power with respect to all shares attributable to such person.

--------------- (1) Blackstone Management Associates II L.L.C. is one of two managing members of VSI Management I, L.L.C. Blackstone Management Associates II is also the general partner of Blackstone Capital Partners II Merchant Banking Fund L.P. and the investment general partner of 74 Blackstone Offshore Capital Partners II L.P. Blackstone Management Associates II thus exercises shared voting and dispositive power with respect to VSI Management I (see note (5)) and sole voting and dispositive authority with respect to Blackstone Capital Partners II Merchant Banking Fund and Blackstone Offshore Capital Partners II. Blackstone Capital Partners II Merchant Banking Fund is the general partner of BCP Volume L.P. and exercises sole voting and dispositive power with respect to its shares. Blackstone Offshore Capital Partners II is the general partner of BCP Offshore Volume L.P. and exercises sole voting and dispositive power with respect to its shares. VSI Management I is the general partner for VSI Management Direct L.P. and exercises sole voting and dispositive power with respect to its shares. Messrs. Peter G. Peterson and Stephen A. Schwarzman are members of Blackstone Management Associates II, which has or shares investment and voting control over the shares held or controlled by each of the foregoing entities. Each of these individuals disclaims beneficial ownership of such shares. (2) The address of this stockholder is c/o Blackstone, 345 Park Avenue, New York, New York 10154. (3) Recreational Services L.L.C. is a limited liability company, the managing member of which is General Electric Capital. (4) The address of this stockholder is 201 High Ridge Road, Stamford, Connecticut 06927. (5) VSI Management Direct L.P. is a limited partnership, the general partner of which is VSI Management I. The managing members of VSI Management I are Kenneth R. Frick, our Executive Vice President and Chief Financial Officer, and Blackstone Management Associates II, and they exercise shared voting and dispositive power over the shares owned by VSI Management Direct L.P. (6) The address of this stockholder is c/o Volume Services, Inc., 201 East Broad Street, Spartanburg, South Carolina 29306. (7) See "Related Party Transactions -- Management Ownership and Transactions with Management." 75 RELATED PARTY TRANSACTIONS Tax Indemnity Agreement. Service America ceased being a member of the General Electric Company consolidated group, or the GE Consolidated Group, for federal income tax purposes by reason of its acquisition by us in 1998. Accordingly, Service America and General Electric Capital in January 1997 entered into a tax indemnity agreement. Under this agreement: - General Electric Capital agreed to indemnify Service America for, and became entitled to any refund of, all consolidated or combined federal, state and local income taxes payable while Service America was a member of the GE Consolidated Group; and - as authorized by the consolidated return Treasury Regulations, the GE Consolidated Group became entitled to re-attribute to itself the portion of Service America's net operating losses that did not exceed the amount of "disallowed losses," as defined in those regulations, which General Electric Capital realized in connection with the recapitalization of Service America effected in January 1997 by General Electric Capital and some members of Service America's management. Annual Fees. Blackstone and General Electric Capital provide administrative and management functions to us through monitoring agreements. We have paid annual monitoring fees of $250,000 to BMP II, an affiliate of Blackstone Management Associates II, and $167,000 to General Electric Capital. The fees payable to BMP II and General Electric Capital have been accounted for as an expense. We will not be paying these fees beginning in fiscal 2003 assuming consummation of this offering. Leasing Services. General Electric Capital and its affiliates provided us leasing and financing services during 2001 on arms'-length terms. Payments to General Electric Capital and its affiliates during 2001, net of discounts earned, were approximately $95,000. We also lease equipment from General Electric Capital under a capital lease; payments to General Electric Capital under this lease were approximately $225,000 in 2001. Management Ownership and Transactions with Management. John T. Dee, Kenneth R. Frick and Janet L. Steinmayer hold indirect ownership interests in us through their limited partnership interests in VSI Management Direct and VSI Management II. Before this offering, VSI Management Direct owned a 4.2% ownership interest in us, and VSI Management II held a limited partnership interest in each of BCP Volume and BCP Offshore Volume that, before this offering, represented a right to receive 7% of distributions from each partnership. VSI Management II's limited partnership interest in BCP Volume and BCP Offshore Volume represents the right, under specified circumstances, to receive up to 15% of the aggregate distributions from these partnerships. Before this offering: - Mr. Dee owned a 6.8% limited partnership interest in VSI Management Direct and a 7.5% limited partnership interest in VSI Management II; - Mr. Frick owned a 7.4% limited partnership interest in VSI Management Direct, a 9.4% limited partnership interest in VSI Management II and a 98% limited liability company interest in VSI Management I, which owns a 1% general partnership interest in each of VSI Management Direct and VSI Management II; and - Ms. Steinmayer owned a 3.5% limited partnership interest in VSI Management Direct and a 3.9% limited partnership interest in VSI Management II. During 1999, 2000 and 2001, VSA loaned approximately $1,383,400 to VSI Management Direct and VSI Management II. These loans are payable on demand and accrue interest at the applicable federal rate. As of December 31, 2002, approximately $1,175,000 remained outstanding under these loans. VSI Management Direct and VSI Management II used the proceeds from these loans principally to repurchase certain of their outstanding limited partnership interests from some former members of management. VSI Management Direct and VSI Management II have also made loans to certain members of the then-current management team of VSA to enable them to purchase limited partnership interests in those partnerships. John T. Dee and Janet L. Steinmayer are the only current executive officers who received 76 such loans. Mr. Dee borrowed $384,696, and Ms. Steinmayer borrowed $200,363. Interest on these loans accrues annually at the applicable federal rate. As of December 31, 2002, Mr. Dee and Ms. Steinmayer had outstanding loans from the partnerships in the amounts of $384,696 and $200,363, respectively. Interest on these loans has been paid as it accrued. Upon completion of this offering, BCP Volume, BCP Offshore Volume, VSI Management Direct and VSI Management II will distribute to their limited partners the proceeds they receive, directly or indirectly, from this offering. As a result, Messrs. Dee and Frick and Ms. Steinmayer will receive $ , $ , and $ , respectively, of the proceeds from this offering. Mr. Dee and Ms. Steinmayer are then required, by the terms of their loans with VSI Management Direct and VSI Management II, to use these funds to repay a portion of those loans. VSI Management Direct and VSI Management II will in turn use those funds to repay a portion of their borrowings under their loans with VSA. Messrs. Dee and Frick and Ms. Steinmayer will have a %, % and %, respectively, ownership interest in us after this offering. In addition to the transactions with management described above, Lawrence E. Honig borrowed $200,000 from VSA in April 2002 as a bridge loan on the sale of his previous residence. This amount was repaid in full on July 30, 2002. Redemption of a Portion of the Existing Investors' Ownership Interest in Us. We will use a portion of the net proceeds from this offering to redeem a portion of the existing investors' ownership interest in us. See "Use of Proceeds." Registration Rights. The existing investors and we will enter into a registration rights agreement pursuant to which each existing investor will have: - three demand registration rights in the aggregate relating to the shares of our common stock or IDSS held by the existing investor, subject to no more than three demand registration rights per year for the existing investors in the aggregate and subject to the requirement that the securities, including any piggyback securities, covered by each demand registration have an aggregate public offering price of at least $10 million; and - an unlimited number of piggyback registration rights relating to the shares of our common stock or IDSS held by the existing investor, in each case for as long as the existing investor beneficially owns more than 1% of our outstanding shares of common stock or shares of our capital stock exchangeable for or convertible into more than 1% of our outstanding shares of common stock. If an existing investor exercises its demand registration rights, we will file a registration statement or prospectus and undertake an offering in the United States and/or Canada, as requested by the existing investor. The registration rights are transferable by the existing investors. We have agreed to pay all costs and expenses in connection with each such registration, except underwriting discounts and commissions applicable to the securities sold by the existing investors. Additional Agreements. We and the existing investors will enter into an agreement pursuant to which, to the extent not prohibited by law, rule, regulation (including rules of any applicable securities exchange) or in any case except as our counsel deems it inadvisable, if we do not have any director affiliated with the existing investors, then an individual selected by Blackstone Management Associates II or any affiliate it designates will have the right to attend as a non-voting observer all meetings of our board of directors, receive all information provided to our directors and consult with us with respect to any matters as that individual may deem appropriate, so long as that individual is acceptable to our board of directors acting reasonably and has executed a non-disclosure and market stand-off agreement. However, our board of directors may in its discretion exclude the observer from any board meetings. 77 DESCRIPTION OF CERTAIN INDEBTEDNESS NEW CREDIT FACILITY VSA intends to enter into a new credit facility with a syndicate of financial institutions and CIBC World Markets Corp., as lead arranger and sole bookrunner. We expect that the new credit facility will be available in two tranches. The tranche A facility will be comprised of a revolving credit facility in a total principal amount of up to $ million, including a swingline subfacility in the aggregate amount of $ . The tranche B facility will be comprised of senior secured notes in an aggregate principal amount of $ million. We expect that the tranche A facility will mature years after the closing of this offering and the tranche B facility will mature years after the closing of this offering. We expect that the new credit facility will have several features similar to credit facilities of this nature, including but not limited to: Interest Rate and Fees. We expect that borrowings will bear interest, at our option, for the tranche A facility at either (a) U.S. Base Rate plus the applicable margin, as defined below or (b) adjusted LIBOR plus the applicable margin. We expect that a portion of the tranche B term loan will bear interest at a floating rate similar to the tranche A facility and the remainder of the tranche B term loan will bear interest at a rate per annum equal to the sum of the U.S. Treasury rate corresponding to the weighted average life of the term loan which will be fixed as of the closing date plus a spread to be determined. The applicable margin for the tranche A facility will be . We also expect the new credit facility will provide payment to the lenders of a commitment fee on any unused commitments under the tranche A facility equal to % per annum. Mandatory Prepayments. We expect that the new credit facility will require us to prepay outstanding loans under the tranche B facility with, subject to certain conditions and exceptions, % of the cash proceeds received by us from any loss, damage, destruction or condemnation of or any sale, transfer or other disposition of any assets, % of the net cash proceeds form the incurrence of any indebtedness by us and % of the net proceeds of any issuance or sale of equity by us. Voluntary Prepayments. We expect that the new credit facility will provide for voluntary prepayments of the tranche A and tranche B loans, subject to certain conditions and restrictions. Covenants. We expect that the new credit facility will require that we meet certain financial tests, including, without limitation, the following tests: a maximum net leverage ratio, a minimum fixed charge coverage ratio and a total debt to book capitalization ratio. We also expect that our new credit facility will contain customary covenants and restrictions, including, among others, limitations or prohibitions on declaring dividends and other distributions, redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, sale-leaseback transactions, capital expenditures, recapitalizations, mergers, acquisitions and asset sales and transactions with affiliates. Collateral. We expect to give to the administrative agent on behalf of each lender collateral consisting of, without limitation, a pledge of our intercompany debt, 100% of the capital stock of our wholly-owned domestic subsidiaries, 65% of the capital stock of certain of our wholly-owned foreign subsidiaries and a security interest in certain assets of our subsidiaries that are not foreign subsidiaries. Events of Default. We expect that our new credit facility will specify certain customary events of default. VSA 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009 As of October 1, 2002, VSA had $100 million aggregate principal amount of 11 1/4% senior subordinated notes due 2009 outstanding. The closing of the tender offer and consent solicitation is a condition to this offering. See "Summary -- Tender Offer and Consent Solicitation." 78 DESCRIPTION OF IDSS GENERAL We are selling IDSS in this offering. Each IDSS initially represents, through the depositary arrangements: - one share of our common stock; and - $ aggregate principal amount of our % subordinated notes. We will deposit our shares of common stock and our subordinated notes underlying the IDSS with The Bank of New York, as depositary, under a deposit agreement among ourselves, the depositary and all registered holders and beneficial owners of IDSS. The depositary's office at which the IDSS will be administered is located at 101 Barclay Street, New York, New York 10286. The depositary or its nominee will actually be the registered owner of the shares of our common stock and subordinated notes underlying the IDSS. Holders of IDRs will have the rights set forth in the deposit agreement. The deposit agreement also sets out the rights and obligations of the depositary. New York law governs the deposit agreement. The IDSS will be available in book-entry form only. As discussed below under "-- Book-entry settlement and clearance," a nominee of the book-entry clearing system will be the sole registered holder of the IDSS. That means you will not be a registered holder of IDSS or be entitled to receive a certificate evidencing your IDSS. You must rely on the procedures used by your broker or other financial institution that will maintain your book-entry position to receive the benefits and exercise the rights of a holder of IDSS that are described below. You should consult with your broker or financial institution to find out what those procedures are. The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire form of deposit agreement, which is filed as an exhibit to the registration statement of which this prospectus forms a part. PAYMENTS OF INTEREST, DIVIDENDS AND OTHER DISTRIBUTIONS The depositary will distribute to IDSS holders all cash dividends, interest or other distributions received by it in respect of the shares of our common stock or subordinated notes held by it. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. IDSS holders will receive these distributions in proportion to the number of shares of common stock and aggregate principal amount of subordinated notes underlying their IDSS. IDSS holders will receive those payments after the depositary receives them. 79 DEPOSIT, WITHDRAWAL AND CANCELLATION At any time after 180 days following the date of this prospectus, IDSS holders may surrender their IDSS and, upon payment of applicable fees and expenses by us, receive delivery of the securities underlying those IDSS. The depositary will deliver IDSS upon payment of applicable fees and expenses by us, if you or your broker deposits the number of shares of common stock and the aggregate principal amount of subordinates notes that will be represented by any integral number of IDSS. See "-- Book-Entry Settlement and Clearance" below for more information on the method by which delivery and surrender of IDSS and delivery of shares of common stock and our subordinated notes will be effected. The depositary may temporarily delay the surrender of IDSS for the purpose of withdrawal of deposited securities if: - we have closed our transfer books or the depositary has closed its transfer books in connection with voting at a stockholders' meeting or the payment of dividends; - when you or other holders seeking to withdraw underlying securities owe money to pay fees, taxes and similar charges; or - the depositary needs to do so to comply with any U.S. or foreign laws or governmental regulations relating to the IDRs or the underlying securities. This right of withdrawal is not limited by any other provision of the deposit agreement. A holder of IDSS that wishes to exercise the right to cause us to repurchase the subordinated notes underlying that holder's IDSS in connection with a change of control of our company must surrender those IDSS and receive delivery of the underlying securities in order to exercise that right. VOTING RIGHTS After receiving voting materials from us, the depositary will, upon our written request, notify the IDSS holders of any stockholders' meeting or solicitation of consents or proxies. This notice will describe how IDSS holders may instruct the depositary to exercise the voting rights for the underlying securities. For instructions to be valid, the depositary must receive them on or before the date specified. The depositary will vote or have its agents vote the underlying securities as IDSS holders instruct. The depositary will vote only as IDSS holders instruct. The depositary will not itself exercise any voting discretion. Neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote. BOOKS OF DEPOSITARY The depositary will maintain facilities to record and process the issuance, cancellation, combination, split-up and registration of transfer of IDSS. These facilities may be closed from time to time, to the extent not prohibited by law. FEES AND EXPENSES We will pay all charges and expenses of the depositary and any agent of the depositary pursuant to agreements from time to time between us and the depositary. 80 PAYMENT OF TAXES IDSS holders must pay any tax or other governmental charge payable by the depositary on any IDSS, deposited security or distribution. If an IDSS holder owes any tax or other governmental charge in respect of their ownership of IDSS or the underlying securities, the depositary may (1) deduct the amount thereof from any cash distributions or (2) sell deposited securities and deduct the amount owing from the net proceeds of that sale. If any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of IDSS or withdrawal of deposited securities. AMENDMENT AND TERMINATION We may agree with the depositary to amend the deposit agreement without your consent for any reason. However, any amendment which materially and adversely alters the rights of the IDSS holders will not be effective unless the amendment has been approved by the holders of at least a majority of the IDSS which are then outstanding under the deposit agreement. In addition, any amendment that would adversely affect a holder's right to surrender IDSS for the purpose of withdrawal of the underlying securities will require a unanimous vote. We will instruct the depositary to terminate the deposit agreement, and upon receipt of that instruction the depositary will terminate the deposit agreement if all the subordinated notes have been redeemed or repurchased or all principal and interest on the subordinated notes has been paid at maturity. The depositary will terminate the deposit agreement if: - the depositary receives notice from us or the trustee for the subordinated notes of an event of default under the subordinated notes; or - at least 60 days have passed since the depositary notified us that it wishes to resign as depositary and no successor depositary appointed by us has accepted its appointment. The depositary will give notice to the holders of the IDRs at least 30 days prior to the date fixed for termination of the deposit agreement. After termination of the deposit agreement, the depositary and its agents will do the following under the deposit agreement but nothing else: (1) collect distributions on the deposited securities and (2) deliver underlying securities upon surrender of IDSS and upon payment of its fees and any applicable taxes and expenses by us. Ninety days after termination, the depositary may sell any remaining underlying securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the holders that have not surrendered their IDRs. It will not invest the money and has no liability for interest. The depositary's only obligations will be to account for the money and other cash. After termination, our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay. RESIGNATION AND REMOVAL OF DEPOSITARY The depositary may resign at any time by notifying us of its election to do so, and we may remove the depositary upon at least 120 days' prior notice of our election to do so. Any such resignation or removal will take effect only upon the appointment of a successor depositary and its acceptance of the appointment. 81 LIMITATIONS ON OBLIGATIONS AND LIABILITY The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary: - are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or bad faith; - are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing, or if it is impractical to perform, our obligations under the deposit agreement; - are not liable if either of us exercises discretion permitted under the deposit agreement; - have no obligation to become involved in a lawsuit or other proceeding related to the IDSS or the deposit agreement on your behalf or on behalf of any other party; and - may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party. In the deposit agreement, we agree to indemnify the depositary for acting as depositary, except for losses caused by the depositary's own gross negligence or bad faith, and the depositary agrees to indemnify us for losses resulting from its gross negligence or bad faith. The depositary will not be responsible for failing to carry out instructions to vote the underlying securities or for the manner in which the underlying securities are voted or the effect of the vote. The depositary may own and deal in deposited securities and in IDSS. REQUIREMENTS FOR DEPOSITARY ACTIONS Before the depositary will deliver or register a transfer of IDSS, make a distribution on IDSS, or permit withdrawal of underlying securities, the depositary may require: - payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; - satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and - compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents The depositary may refuse to deliver IDSS or register transfers of IDSS generally when the transfer books of the depositary or our transfer books are closed. MISCELLANEOUS Upon our written request, the depositary will forward to the IDSS holders all reports and communications it receives from us and which we are required or otherwise determine to furnish to holders of the underlying securities. BOOK-ENTRY SETTLEMENT AND CLEARANCE Book-entry procedures for IDSS. We intend to apply to The Depository Trust Company, known as DTC, for acceptance of the IDSS into DTC's book-entry settlement system. If the IDSS are eligible for book-entry settlement with DTC and unless otherwise required by law, a single global IDSS certificate evidencing all the IDSS will be issued and registered in the name of Cede & Co. as DTC's nominee. The global IDSS Certificate will be held by the depositary, as custodian for DTC. Beneficial interests in the global IDSS Certificate will be credited to the accounts of direct or indirect DTC participants, including the Canadian Depository for Securities Limited, known as CDS. Investors who purchase IDSS in the Canadian offering will hold the IDSS through the DTC participant account maintained by CDS and will 82 receive only a customer confirmation from the registered dealer which is a CDS participant and from or through which the IDSS are purchased. All interests in the global IDSS certificate will be subject to the operations and procedures of DTC and CDS. We provide the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that settlement system and may be changed at any time. We are not responsible for those operations or procedures. DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York State Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC's participants include securities brokers and dealers, including the underwriters, banks and trust companies, clearing corporations and other organizations. Indirect access to DTC's system is also available to others such as banks, brokers, dealers and trust companies. These indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC. So long as DTC's nominee is the registered owner of the global IDSS certificate, that nominee will be considered the sole owner or holder of the IDSS evidenced by the global IDSS certificate for all purposes under the deposit agreement. Except as provided below, owners of beneficial interests in the global IDSS certificate: - will not be entitled to have IDSS evidenced by the global IDSS certificate registered in their names; - will not receive or be entitled to receive a separate IDSS certificate evidencing IDSS; and - will not be considered the owners or holders of the IDSS under the deposit agreement for any purpose, including with respect to the giving of any direction, instruction or approval to the depositary under the deposit agreement. As a result, each investor who owns a beneficial interest in the global IDSS certificate must rely on the procedures of DTC to exercise any rights of a holder of IDSS under the deposit agreement (and, if the investor is not a participant in DTC, on the procedures of the DTC participant through which the investor owns its interest). The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer a beneficial interest in the global IDSS certificate to such persons may be limited. Payments of distributions with respect to the IDSS evidenced by the global IDSS certificate will be made by the depositary to DTC's nominee as the registered holder of the global IDSS certificate. Neither we nor the depositary will have any responsibility or liability for the payment of amounts to owners of beneficial interests in the global IDSS certificate, for any aspect of the records relating to or payments made on account of those interests by DTC or for maintaining, supervising or reviewing any records of DTC relating to those interests. Payments by participants and indirect participants in DTC to the owners of beneficial interests in the global IDSS certificate will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC. Transfers between participants in DTC will be effected under DTC's procedures and will be settled in same-day funds. Transfers between participants in CDS will be effected in the ordinary way under the rules and operating procedures of CDS. 83 Cross-market transfers between DTC participants, on the one hand, and CDS participants, on the other hand, will be effected within DTC through the DTC participant that is acting as depositary for CDS. To deliver or receive an interest in the global IDSS certificate held in a CDS account, an investor must send transfer instructions to CDS under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, CDS will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the global IDSS in DTC and making or receiving payment under normal procedures for same-day funds settlement applicable to DTC. CDS participants may not deliver instructions directly to the DTC depositary that is acting for CDS. DTC and CDS have agreed to the above procedures to facilitate transfers of interests in the global IDR among participants in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither we nor the depositary will have any responsibility for the performance by DTC or CDS or their direct or indirect participants of their obligations under the rules and procedures governing their operations. Book-entry procedures for our subordinated notes and common stock. The subordinated notes and shares of our common stock will be represented by one or more global notes and global stock certificates, respectively. The global notes will be deposited upon issuance with the trustee, as custodian for DTC, and registered in the name of Cede & Co. as DTC's nominee. The global stock certificates will be deposited upon issuance with the transfer agent of our common stock, as custodian for DTC, and registered in the name of Cede & Co. as DTC's nominee. Beneficial interests in the global notes and global stock certificates, respectively, will be credited to the accounts of direct or indirect DTC participants, which initially will be The Bank of New York, as the depositary for the IDSS. All interests in the global notes and global stock certificates will be subject to the operations and procedures of DTC as described above. Separate IDSS and subordinated notes and stock certificates. Separate IDSS certificates will be issued and delivered to each person that DTC identifies as a beneficial owner of the relevant IDSS only if: - DTC notifies us at any time that it is unwilling or unable to continue as depositary for the IDSS, and a successor depositary is not appointed within 90 days; or - DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days. Separate certificates evidencing the subordinated notes or shares of common stock will be issued and delivered to each person that DTC identifies as a beneficial owner of such securities only if: - DTC notifies us at any time that it is unwilling or unable to continue as depositary for our subordinated notes or our common stock, as the case may be, and a successor depositary is not appointed within 90 days; - DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days; or - in the case of the subordinated notes, certain other events provided in the indenture and our certificate of incorporation should occur. Book-entry delivery and surrender of IDSS. To withdraw securities underlying your IDSS, you must, directly or through your broker or other financial intermediary, instruct DTC to deliver the applicable number of IDSS to the account of the depositary and separately notify the depositary that you are surrendering those IDSS for the purpose of withdrawal, and instruct the depositary where to deliver the securities underlying those IDSS. Corresponding procedures will need to be followed in order to deposit shares of our common stock and subordinated notes for the purposes of issuance of IDSS. 84 DESCRIPTION OF SUBORDINATED NOTES The following is a description of the terms of the indenture under which our subordinated notes will be issued, a copy of the form of which has been filed with the Commission as an exhibit to the registration statement of which this prospectus is a part. GENERAL The subordinated notes are to be issued under an indenture, to be dated as of , 2003 (the "Indenture"), among us, the subsidiary guarantors and , as Trustee (the "Trustee"). The following summary of certain provisions of the Indenture and the subordinated notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part thereof by the Trust Indenture Act of 1939, as amended. Capitalized terms used in this "Description of Subordinated Notes" section and not otherwise defined have the meanings set forth in the section "-- Certain Definitions." The Indenture will provide for the issuance of an unlimited aggregate principal amount of additional subordinated notes having identical terms and conditions to the subordinated notes offered hereby (the "Additional Notes"), subject to compliance with the covenants contained in the Indenture. Any Additional Notes will be part of the same issue as the subordinated notes offered hereby and will vote on all matters with the subordinated notes offered hereby. The Notes will be issued only in fully registered form, without coupons. TERMS OF THE NOTES The Notes will be unsecured subordinated obligations of the Company and will mature on , 2013. The Company may extend the maturity of the Notes for two additional successive five-year terms if, during a period of ending days prior to the end of the then-current term, our ratio of Adjusted EBITDA to interest expense is equal to or greater than and provided that: (i) no Event of Default (including certain events of bankruptcy, insolvency or reorganization of the Company or a significant subsidiary) has occurred and is continuing with respect to the Notes; (ii) no event of default has occurred and is continuing with respect to any other Indebtedness of the Company; and (iii) there is no interest due but unpaid on the Notes or any other Indebtedness of the Company, other than trade payables up to an aggregate amount of $ . Within 30 days prior to the maturity of the Notes, the Company will use its reasonable efforts to list or quote the outstanding shares of its common stock on the securities exchange(s) or automated securities quotation system(s), if any, on which the IDSS will then be listed or quoted, in addition to any other securities exchange on which the common stock is then listed. The Notes will bear interest at a rate per annum of % from , or from the most recent date to which interest has been paid or provided for, payable monthly to Holders of record at the close of business on the day of each month, commencing , 2003. If and for so long as the Company's ratio of Adjusted EBITDA to interest expense for the twelve-month period ended on the last day of any fiscal quarter is at or below , the Company must defer interest payments on the Notes, as long as no Event of Default (including certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary) has occurred and is continuing with respect to the Notes. Interest payments on the Notes will not be deferred for more than 24 months in the aggregate or at any time after the earlier of , 2008 or the termination of the new credit facility. Deferred interest on 85 the Notes will bear interest at a rate per annum of %. At the end of each interest deferral period, the Company must pay all deferred interest on the Notes in full. During any interest deferral period, the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment. OPTIONAL REDEMPTION The Notes will not be redeemable at the option of the Company prior to , 2008. Thereafter, the Notes will be redeemable, at the Company's option, in whole or in part upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at a redemption price of % of the principal amount of the Notes being redeemed, plus accrued and unpaid interest to the redemption date, subject to the rights of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. SELECTION In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or if such Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with the applicable legal requirements). If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption, so long as the Company has deposited with the depositary funds sufficient to pay the principal of, plus accrued and unpaid interest on, the Notes to be redeemed. RANKING The indebtedness evidenced by the Notes will be unsecured subordinated indebtedness of the Company, will be subordinated in right of payment, as set forth in the Indenture, to all existing and future Senior Indebtedness of the Company and will rank pari passu in right of payment with all existing and future Pari Passu Indebtedness of the Company. The Notes will also be effectively subordinated to any Secured Indebtedness of the Company to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described under "-- Defeasance" below is not subordinated to any Senior Indebtedness or subject to the restrictions described herein. The indebtedness evidenced by the Guarantees will be unsecured subordinated indebtedness of the applicable Guarantor, will be subordinated in right of payment, as set forth in the Indenture, to all existing and future Senior Indebtedness of such Guarantor and will rank pari passu in right of payment with all existing and future Pari Passu Indebtedness of such Guarantor. The Guarantees will also be effectively subordinated to any Secured Indebtedness of the applicable Guarantor to the extent of the value of the assets securing such Indebtedness. As of October 1, 2002, on a pro forma basis, (i) the Company would have had no Senior Indebtedness outstanding, (ii) the Company would have had no Pari Passu Indebtedness outstanding other than the Notes, (iii) the Guarantors would have had no Senior Indebtedness outstanding, exclusive of guarantees under the new credit facility, all of which would have been secured indebtedness, (iv) the Guarantors would have had $ million aggregate principal amount of Pari Passu Indebtedness outstanding, other than the Guarantees and (v) the Non-Guarantor Subsidiaries would have had total liabilities, excluding liabilities owed to us, of $ million. Although the Indenture will contain limitations on the amount of additional Indebtedness which the Company, the Guarantors and the Non-Guarantor Subsidiaries may Incur, under certain circumstances the amount of such Indebtedness could be substantial 86 and, in any case, such Indebtedness may be Senior Indebtedness. See "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" below. As a holding company, the Company has no operations and, therefore, is dependent on the cash flow of its subsidiaries and other entities to meet its own obligations, including the payment of interest and principal obligations on the Notes when due. As of October 1, 2002, on a pro forma basis the total liabilities of the Company's subsidiaries were approximately $ million, including trade payables. Although the Indenture will limit the Incurrence of Indebtedness by and the issuance of Preferred Stock of certain of the Company's subsidiaries, such limitation is subject to a number of significant qualifications. "Senior Indebtedness" with respect to the Company or any Guarantor means all indebtedness of the Company or such Guarantor, including interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Subsidiary of the Company whether or not a claim for post-filing interest is allowed in such proceeding) and other amounts (including fees, expenses, reimbursement obligations under letters of credit and indemnities) owing in respect thereof, whether outstanding on the Issue Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Notes or such Guarantor's Guarantee, as applicable; provided, however, that Senior Indebtedness shall not include, as applicable, (i) any obligation of the Company to any Subsidiary of the Company or of such Guarantor to the Company or any other Subsidiary of the Company, (ii) any liability for Federal, state, local or other taxes owed or owing by the Company or such Guarantor, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (iv) any Indebtedness or obligation of the Company or such Guarantor which is Pari Passu Indebtedness, (v) any obligations with respect to any Capital Stock, and (vi) any Indebtedness Incurred in violation of the Indenture. Only Senior Indebtedness or Secured Indebtedness of the Company or a Guarantor will rank senior to the Notes or the relevant Guarantee in accordance with the provisions of the Indenture. The Notes and each Guarantee will in all respects rank pari passu with all other Pari Passu Indebtedness of the Company and the relevant Guarantor, respectively. The Company may not pay principal of, premium (if any) or interest on, the Notes or make any deposit pursuant to the provisions described under "-- Defeasance" below and may not otherwise purchase, redeem or otherwise retire any Notes (except that Holders may receive and retain (a) Permitted Junior Securities and (b) payments made from the trust described under "-- Defeasance" below so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating the subordination provisions described herein) (collectively, "pay the Notes") if (i) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Indebtedness occurs and is continuing or any other amount owing in respect of any Designated Senior Indebtedness is not paid when due, or (ii) any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full. However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or upon the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage 87 Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) by repayment in full of such Designated Senior Indebtedness or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this paragraph and in the succeeding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give one additional Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this provision, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness will be entitled to receive payment in full of the Senior Indebtedness before the Noteholders are entitled to receive any payment, and until the Senior Indebtedness is paid in full, any payment or distribution to which Noteholders would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness as their interests may appear (except that Holders of Notes may receive and retain (i) Permitted Junior Securities, and (ii) payments made from the trust described under "-- Defeasance" so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating the subordination provisions described herein). If a distribution is made to Noteholders that due to the subordination provisions of the Indenture should not have been made to them, such Noteholders are required to hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representative) of the acceleration. If any Designated Senior Indebtedness is outstanding, the Company may not pay the Notes until five Business Days after such holders or the Representative of the Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. By reason of such subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the Noteholders. The Indenture will contain substantially similar subordination provisions relating to each Guarantor's obligations under its Guarantee. FOREBEARANCE PERIODS As long as any Designated Senior Indebtedness is outstanding, for a period (a "Forebearance Period") beginning on the date of the occurrence of an Event of Default and ending on the earliest of (x) 179 days after the commencement of such period, (y) the date on which such Event of Default and any other Event of Default that occurred during the Forebearance Period, shall cease to exist or (z) the date the holders of Designated Senior Indebtedness accelerate the Designated Senior Indebtedness or 88 begin to exercise their rights with respect to collateral therefor, no Holder of the Notes or the Trustee shall, without the prior written consent of the Representative of the Designated Senior Indebtedness, accelerate the maturity of the Notes or commence any action, suit or proceeding to enforce any claims, rights, demands, causes of action, liabilities, or suits, of any kind whatsoever, whether known or unknown, that have been, could have been, or in the future might be asserted by the Holders of the Notes based upon, arising out of, or in any way relating to, the Notes (each, an "Enforcement Action"); provided that upon the termination of a Forebearance Period, no Holder may take any Enforcement Action until the earlier of (x) five Business Days after such Holders of the Notes, or the Trustee acting on their behalf, shall have given prior written notice to the Representative of the Designated Senior Indebtedness of their intention to accelerate and exercise any other remedies, which notice may be given no earlier than 15 Business Days prior to the end of the Forebearance Period, and shall be effective no earlier than the later of (i) five Business Days after the date such notice is given, or (ii) the first Business Day immediately following the end of the Forebearance Period or (y) the date on which the holders of Designated Senior Indebtedness have accelerated the Designated Senior Indebtedness; provided, further, that no Forebearance Period may commence during the pendency of, or within 179 days after termination of, any other Forebearance Period and in no event shall a Forebearance Period extend beyond 179 days from the date of the occurrence of any Event of Default and there must be a 181 consecutive day period in each 360 consecutive day period during which no Forebearance Period is in effect. No single Event of Default may serve as the basis for more than one Forebearance Period, other than an Event of Default that has been cured or waived or otherwise ceased to exist for a period of 90 consecutive days; no Event of Default in existence on the commencement of a Forebearance Period shall serve as the basis for any subsequent Forebearance Period, whether or not within a period of 360 consecutive days, unless such Event of Default shall have been cured or waived or otherwise ceased to exist for a period of 90 consecutive days; and during any 360-day period there shall not be more than one Forebearance Period. The Indenture will contain substantially similar subordination provisions relating to each Guarantor's obligations under its Guarantee. GUARANTEES Each of the Company's direct and indirect Wholly Owned Subsidiaries organized under the laws of any state of the United States of America on the Issue Date and certain future Subsidiaries of the Company (as described below), as primary obligors and not merely as sureties, will jointly and severally irrevocably and unconditionally guarantee on an unsecured subordinated basis the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Guarantors being herein called the "Guaranteed Obligations"). Such Guarantors will agree to pay, in addition to the amount stated above, any and all expenses (including reasonable counsel fees and expenses) Incurred by the Trustee or the Holders in enforcing any rights under the Guarantees. Each Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guarantee, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. After the Issue Date, the Company will cause each Restricted Subsidiary organized under the laws of the United States of America or any state or territory thereof that Incurs Indebtedness or issues shares of Disqualified Stock or Preferred Stock to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will guarantee, payment of the Notes. See "-- Future Guarantors" below. Each Guarantee is a continuing guarantee and shall (i) remain in full force and effect until payment in full of all the Guaranteed Obligations, (ii) be binding upon each such Guarantor and its successors, and (iii) inure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns. 89 CHANGE OF CONTROL Upon the occurrence of any of the following events (each, a "Change of Control"), each Holder will have the right to require the Company to repurchase all or any part of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date): (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Company's assets to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of a direct or indirect interest in more than 50% of the ownership of the Company, or the voting power of the voting stock of the Company, by way of purchase, merger or consolidation or otherwise (other than a creation of a holding company that does not involve a change in the beneficial ownership of the Company as a result of such transaction), (iv) the merger or consolidation of the Company with or into another Person or the merger of another Person into the Company with the effect that immediately after such transaction the stockholders of the Company immediately prior to such transaction hold, directly or indirectly, less than 50% of the total voting power of all securities generally entitled to vote in the election of directors, managers, or trustees of the Person surviving such merger or consolidation, in each case other than creation of a holding company that does not involve a change in the beneficial ownership of the Company as a result of such transaction or (v) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this covenant, then prior to the mailing of the notice to Holders provided for in the immediately following paragraph but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all Bank Indebtedness or offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the Notes as provided for in the immediately following paragraph. Within 30 days following any Change of Control, unless the Company has exercised its right to redeem the Notes as described under "-- Optional Redemption", the Company shall mail a notice (a "Change of Control Offer") to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue thereof. 90 The Change of Control purchase feature is a result of negotiations between us, the existing investors and the underwriters. Our management has no present intention to engage in a transaction involving a Change of Control, although it is possible that we would decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. The occurrence of events which would constitute a Change of Control would constitute a default under the new credit facility. Future Senior Indebtedness of the Company may contain prohibitions on certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. The Bank Indebtedness prohibits any purchase by the Company of the Notes. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under other Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. The definition of Change of Control includes a phrase relating to the sale, lease or transfer of "all or substantially all" the assets of ours and our Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require us to repurchase such Notes as a result of a sale, lease or transfer of less than all of the assets of ours and our Subsidiaries taken as a whole to another Person or group may be uncertain. CERTAIN COVENANTS The Indenture will contain covenants including, among others, the following: Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock. The Indenture will provide that (i) the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock and (ii) the Company will not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that the Company and any Guarantor may Incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock and any Guarantor may issue shares of Preferred Stock if the Fixed Charge Coverage Ratio of the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is Incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00 determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been Incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period. The foregoing limitations will not apply to: (a) the Incurrence by the Company or its Restricted Subsidiaries of Indebtedness under the Credit Agreement and the issuance and creation of letters of credit and bankers' acceptances thereunder (with letters of credit and bankers' acceptances being deemed to have a principal amount equal to the face amount thereof) up to an aggregate principal amount of $ million outstanding at any one time; (b) the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes (not including any Additional Notes) and the Guarantees, as applicable; (c) Indebtedness existing on the Issue Date (other than Indebtedness described in clauses (a) and (b)); 91 (d) Indebtedness (including Capitalized Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries, to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (d) and all Refinancing Indebtedness (as defined below) Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (d), does not exceed the greater of 7.5% of Total Assets at the time of Incurrence or $10.0 million; (e) Indebtedness Incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation letters of credit in respect of workers' compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or with respect to agreements to provide services, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit, such obligations are reimbursed within 30 days following such drawing; (f) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of the Indenture, other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; (g) Indebtedness of the Company to a Restricted Subsidiary of the Company; provided that any such Indebtedness is subordinated in right of payment to the Notes; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Company or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case to be an Incurrence of such Indebtedness; (h) shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary of the Company; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another Restricted Subsidiary of the Company) shall be deemed, in each case, to be an issuance of shares of Preferred Stock; (i) Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary of the Company; provided that (i) any such Indebtedness is made pursuant to an intercompany note and (ii) if a Guarantor Incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor such Indebtedness is subordinated in right of payment to the Guarantee of such Guarantor; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary lending such Indebtedness ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary of the Company) shall be deemed, in each case, to be an Incurrence of such Indebtedness; (j) Hedging Obligations that are incurred in the ordinary course of business (1) for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness that is permitted by the terms of the Indenture to be outstanding, (2) for the purpose of fixing or hedging currency exchange rate risk with respect to any currency exchanges or (3) for the purpose of fixing or hedging commodity price risk with respect to any commodity purchases; (k) obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; 92 (l) Indebtedness or Disqualified Stock of the Company and any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount, which when aggregated with the principal amount or liquidation preference of all other Indebtedness and Disqualified Stock then outstanding and Incurred pursuant to this clause (1), does not exceed $25.0 million at any one time outstanding; provided, however, that Indebtedness of Foreign Subsidiaries, which when aggregated with the principal amount of all other Indebtedness of Foreign Subsidiaries then outstanding and Incurred pursuant to this clause (l), does not exceed $10.0 million (or the equivalent thereof in any other currency) at any one time outstanding (it being understood that any Indebtedness Incurred under this clause (l) shall cease to be deemed Incurred or outstanding for purposes of this clause (l) but shall be deemed to be Incurred for purposes of the first paragraph of this covenant from and after the first date on which the Company could have Incurred such Indebtedness under the first paragraph of this covenant without reliance upon this clause (l)); (m) any guarantee by the Company or a Guarantor of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness Incurred by the Company or such Restricted Subsidiary is permitted under the terms of the Indenture; provided that if such Indebtedness is by its express terms subordinated in right of payment to the Notes or the Guarantee of such Restricted Subsidiary, as applicable, any such guarantee of such Guarantor with respect to such Indebtedness shall be subordinated in right of payment to such Guarantor's Guarantee with respect to the Notes substantially to the same extent as such Indebtedness is subordinated to the Notes or the Guarantee of such Restricted Subsidiary, as applicable; (n) the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness which serves to refund or refinance any Indebtedness Incurred as permitted under the first paragraph of this covenant and clauses (b) and (c) above, or any Indebtedness issued to so refund or refinance such Indebtedness (subject to the following proviso, "Refinancing Indebtedness") prior to its respective maturity; provided, however, that such Refinancing Indebtedness: (i) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is Incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness being refunded or refinanced; (ii) has a Stated Maturity which is no earlier than the Stated Maturity of the Indebtedness being refunded or refinanced; (iii) to the extent such Refinancing Indebtedness refinances Indebtedness pari passu with the Notes or the obligations of the Subsidiaries that are obligors under the intercompany note, as applicable, is pari passu with the Notes or the obligations of such Subsidiaries under the intercompany note, as applicable; (iv) is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus premium and fees Incurred in connection with such refinancing; and (v) shall not include (x) Indebtedness of a Restricted Subsidiary that is not a Guarantor that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary; and provided further that subclauses (i) and (ii) of this clause (n) will not apply to any refunding or refinancing of any Senior Indebtedness; (o) Indebtedness or Disqualified Stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of the Indenture; provided, however, that such Indebtedness or Disqualified Stock is not Incurred in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit 93 support required to consummate such acquisition or merger; provided further, however, that after giving effect to such acquisition and the Incurrence of such Indebtedness either (i) the Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant or (ii) the Fixed Charge Coverage Ratio would be greater than immediately prior to such acquisition; (p) Contribution Indebtedness; and (q) Indebtedness underlying the IDSS or outstanding upon the exchange of any IDSS or shares of the Company's Exchangeable Participating Preferred Stock for the underlying securities or the issuance of Additional Notes or other Pari Passu Indebtedness evidenced by a different series of notes in connection with the issuance of shares of Common Stock of the Company, provided that the ratio of the aggregate principal amount of such Additional Notes or other Pari Passu Indebtedness over the number of such additional shares shall not exceed the equivalent ratio with respect to the IDSS outstanding prior to such issuance, and, in each case the related Guarantees. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of permitted Indebtedness described in clauses (a) through (q) above or is entitled to be Incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify or reclassify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been Incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant. Limitation on Restricted Payments. The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests, including any payment made in connection with any merger or consolidation involving the Company (other than (A) dividends or distributions by the Company payable solely in Equity Interests (other than Disqualified Stock) of the Company or (B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities); (ii) purchase or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary; or (iii) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iii) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (b) immediately after giving effect to such transaction on a pro forma basis, the Company could Incur $1.00 of additional Indebtedness under the provisions of the first paragraph of "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (i), (iv), (v) and (vii) of the next succeeding 94 paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of, without duplication: (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the fiscal quarter that first begins after the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit), plus (ii) 100% of the aggregate net proceeds, including cash and the Fair Market Value (as determined in accordance with the next succeeding sentence) of property other than cash, received by the Company since the Issue Date from the issue or sale of Equity Interests of the Company (excluding Refunding Capital Stock (as defined below), Designated Preferred Stock, Excluded Contributions and Disqualified Stock), including Equity Interests issued upon conversion of Indebtedness or upon exercise of warrants or options (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries), plus (iii) 100% of the aggregate amount of contributions to the capital of the Company received in cash and the Fair Market Value (as determined in accordance with the next succeeding sentence) of property other than cash since the Issue Date (other than Excluded Contributions, Refunding Capital Stock, Designated Preferred Stock and Disqualified Stock), plus (iv) 100% of the aggregate amount received in cash and the Fair Market Value (as determined in accordance with the next succeeding sentence) of property other than cash received from (A) the sale or other disposition (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company and its Restricted Subsidiaries and from repurchases and redemptions of such Restricted Investments from the Company and its Restricted Subsidiaries by any Person (other than the Company or any of its Subsidiaries) and from repayments of loans or advances which constituted Restricted Investments, (B) the sale (other than to the Company or a Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or (C) a distribution or dividend from an Unrestricted Subsidiary, plus (v) in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Company or a Restricted Subsidiary, the Fair Market Value (as determined in good faith by the Board of Directors) of the Investment of the Company in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness associated with the assets so transferred or conveyed, not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments, less (vi) the amount of all Specified Cash Contributions. The Fair Market Value of property other than cash covered by clauses (ii), (iii) and (iv) above shall be determined in good faith by the Company and (A) in the event of property with a Fair Market Value in excess of $2.5 million, shall be set forth in an Officers' Certificate or (B) in the event of property with a Fair Market Value in excess of $10.0 million, shall be set forth in a resolution approved by at least a majority of the Board of Directors. 95 The foregoing provisions will not prohibit: (i) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture; (ii) (a) the repurchase, retirement or other acquisition of any Equity Interests ("Retired Capital Stock") or Subordinated Indebtedness of the Company in exchange for, or out of the proceeds of the substantially concurrent sale of, Equity Interests of the Company or contributions to the equity capital of the Company (other than any Disqualified Stock or any Equity Interests sold to a Subsidiary of the Company or to an employee stock ownership plan or any trust established by the Company or any of its Subsidiaries) (collectively, including any such contributions, "Refunding Capital Stock") and (b) the declaration and payment of accrued dividends on the Retired Capital Stock out of the proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company or to an employee stock ownership plan or any trust established by the Company or any of its Subsidiaries) of Refunding Capital Stock; (iii) (a) the repurchase, retirement or other acquisition for value of Equity Interests of the Company held, directly or indirectly, by any future, present or former employee, director or consultant of the Company or any Subsidiary of the Company or any entity in which any of the foregoing has a beneficial or economic ownership interest pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or agreement or any other agreement pursuant to which stock is held for the benefit of such persons or (b) the payment of any dividend or distribution to VSI Management Direct L.P., VSI Management II L.P., BCP Volume L.P. or BCP Offshore Volume L.P. or any entity in which any of the foregoing has a beneficial or economic ownership interest pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or agreement or any other agreement pursuant to which stock is held for the benefit of such persons to effect the repurchase, retirement or other acquisition for value of their Equity Interests held, directly or indirectly, by any future, present or former employee, director or consultant of the Company or any Subsidiary of the Company or any entity in which any of the foregoing has a beneficial or economic ownership interest; provided, however, that, in each case, the aggregate amounts paid under this clause (iv) do not exceed $4.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over for the two succeeding calendar years); provided further, however, that such amount in any calendar year may be increased by an amount not to exceed (I) the cash proceeds received by the Company or any of its Restricted Subsidiaries from the sale of Equity Interests of the Company (other than Disqualified Stock) to members of management, directors or consultants of the Company and its Restricted Subsidiaries or to VSI Management Direct L.P., BCP Volume L.P. and BCP Offshore Volume L.P. for the direct or indirect account of members of management, directors or consultants of the Company and its Restricted Subsidiaries that occurs after the Issue Date (provided that the amount of such cash proceeds utilized for any such repurchase, retirement, other acquisition or dividend will not increase the amount available for Restricted Payments under clause (c) of the immediately preceding paragraph) plus (II) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date (provided that the Company may elect to apply all or any portion of the aggregate increase contemplated by clauses (I) and (II) above in any single calendar year); (iv) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries issued or incurred in accordance with the covenant entitled "-- Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" (v) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock issued after the Issue Date; provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available 96 immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Company would have had a Fixed Charge Coverage Ratio of at least 2.25 to 1.00 and (B) the aggregate amount of dividends declared and paid pursuant to this clause (v) does not exceed the net cash proceeds received by the Company from the sale of Designated Preferred Stock issued after the Issue Date; (vi) Investments in Unrestricted Subsidiaries having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (vi) that are at that time outstanding, not to exceed $35.0 million (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (vii) the payment of dividends on the shares of the Company's common stock underlying outstanding IDSS or on shares of the Company's common stock outstanding upon exchange of any IDSS for the underlying securities or issued in connection with the issuance of Additional Notes or other Pari Passu Indebtedness evidenced by a different series of notes, the payment of dividends on the shares of the Company's common stock and the payment of the Participating Dividends up to an aggregate amount equal to % per year of the net proceeds received by the Company from the issuance of shares of its common stock and Exchangeable Participating Preferred Stock, provided, however, - In the event the Company's Adjusted EBITDA per share for the 12 month period ended immediately prior to any dividend payment date increases above the fiscal 2002 level, the maximum aggregate amount of dividends per share the Company may pay in such month may not exceed $ by more than 1/12 of 90% of such difference per share. - In the event the Company's Adjusted EBITDA per share for the 12 month period ended immediately prior to any dividend payment date decreases by more than 2%, but by a percentage less than or equal to 20%, of the fiscal 2002 level, the maximum aggregate amount of dividends per share the Company may pay in such month may not exceed $ minus 1/12 of the amount of such decrease per share, excluding the initial 2%. - In the event the Company's Adjusted EBITDA per share for the 12 month period ended immediately prior to any dividend payment date decreases by more 20% of the fiscal 2002 level, no dividends will be payable in such month. (viii) Investments that are made with Excluded Contributions; (ix) other Restricted Payments in an aggregate amount not to exceed $20 million; (x) repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (xi) the payment of the Base Dividends; and (xii) the exchange of the shares of our Exchangeable Participating Preferred stock for the underlying Notes and shares of our common stock; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (iv), (v), (vi), (vii) and (ix), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; provided further, however, that for purposes of determining the aggregate amount expended for Restricted Payments in accordance with clause (c) of the immediately preceding paragraph, only the amounts expended under clauses (i), (iv), (v) and (vii) shall be included. As of the Issue Date, all of the Company's Subsidiaries will be Restricted Subsidiaries. The Company will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the definition of "Unrestricted Subsidiary." For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Company and its Restricted Subsidiaries 97 (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of "Investments." Such designation will only be permitted if a Restricted Payment in such amount would be permitted at such time (whether pursuant to the first paragraph of this covenant or under clause (vi), (viii) or (ix)) and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make loans or advances to the Company or any of its Restricted Subsidiaries; or (c) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries except in each case for such encumbrances or restrictions existing under or by reason of: (1) contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Credit Agreement and the other Senior Credit Documents; (2) the Indenture and the Notes; (3) applicable law or any applicable rule, regulation or order; (4) any agreement or other instrument relating to Indebtedness of a Person acquired by the Company or any Restricted Subsidiary which was in existence at the time of such acquisition (but not created in contemplation thereof or to provide all or any portion of the funds or credit support utilized to consummate such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (5) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (6) Secured Indebtedness otherwise permitted to be Incurred pursuant to the covenants described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and "-- Liens" that limit the right of the debtor to dispose of the assets securing such Indebtedness; (7) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (8) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (9) customary provisions contained in leases, agreements to provide services and other similar agreements entered into in the ordinary course of business that impose restrictions of the type described in clause (c) above; (10) other Indebtedness of Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant to clause (l) of the second paragraph of the covenant described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" or 98 (11) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (10) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. Asset Sales. The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, cause or make an Asset Sale, unless (x) the Company, or its Restricted Subsidiaries, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (as determined in good faith by the Company) of the assets sold or otherwise disposed of and (y) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Company, or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of: (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets; (b) any notes or other obligations or other securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days of the receipt thereof (to the extent of the cash received); and (c) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of 7.5% of Total Assets or $10.0 million (with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value) shall be deemed to be Cash Equivalents for the purposes of this provision. Within 365 days after the Company's or any Restricted Subsidiary's receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its option: (i) to permanently reduce Obligations under the Credit Agreement (and, in the case of revolving Obligations, to correspondingly reduce commitments with respect thereto) or other Senior Indebtedness or Pari Passu Indebtedness (provided that if the Company shall so reduce Obligations under Pari Passu Indebtedness, it will equally and ratably reduce Obligations under the Notes by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, the pro rata principal amount of Notes) or Indebtedness of a Restricted Subsidiary, in each case other than Indebtedness owed to the Company or an Affiliate of the Company; (ii) to an investment in any one or more businesses, capital expenditures or acquisitions of other assets in each case used or useful in a Similar Business; and/or (iii) to make an investment in properties or assets that replace the properties and assets that are the subject of such Asset Sale. Pending the final application of any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net 99 Proceeds in Cash Equivalents or Investment Grade Securities. The Indenture will provide that any Net Proceeds from any Asset Sale that are not applied as provided and within the time period set forth in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $15.0 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in the manner described below. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof. If more Notes are tendered pursuant to an Asset Sale Offer than the Company is required to purchase, selection of such Notes for purchase will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or if such Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements). Notices of an Asset Sale Offer shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the purchase date to each Holder of Notes at such Holder's registered address. If any Note is to be purchased in part only, any notice of purchase that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased. A new Note in principal amount equal to the unpurchased portion of any Note purchased in part will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the purchase date unless the Company defaults in payment of the purchase price, interest shall cease to accrue on Notes or portions thereof purchased. Transactions with Affiliates. The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction or series of transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an "Affiliate Transaction") involving aggregate consideration in excess of $2.5 million, unless: (a) such Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, the Company delivers to the Trustee a resolution adopted by the majority of the Board of Directors of the Company, approving such Affiliate Transaction and set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (a) above. 100 The foregoing provisions will not apply to the following: (i) transactions between or among the Company and/or any of its Restricted Subsidiaries; (ii) Permitted Investments and Restricted Payments permitted by the provisions of the Indenture described above under the covenant "-- Limitation on Restricted Payments;" (iii) the payment of reasonable and customary fees paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary; (iv) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (a) of the preceding paragraph; (v) payments or loans to employees or consultants in the ordinary course of business which are approved by a majority of the Board of Directors of the Company in good faith; (vi) any agreement as in effect as of the Issue Date or any amendment thereto (so long as any such amendment is not disadvantageous to the holders of the Notes in any material respect) or any transaction contemplated thereby; (vii) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (viii) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Notes in any material respect; (viii) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture, which are fair to the Company and its Restricted Subsidiaries in the reasonable determination of the Board of Directors or the senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (ix) the issuance of Capital Stock (other than Disqualified Stock) of the Company or IDSS in respect of the Company's securities (including such underlying securities) or Additional Notes or other Pari Passu Indebtedness evidenced by a different series of notes or shares of the Company's Capital Stock to any Permitted Holder. Liens. The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, Incur or suffer to exist any Lien on any asset or property of the Company or such Restricted Subsidiary, or any income or profits therefrom, or assign or convey any right to receive income therefrom, that secures any obligations of the Company or any of its Subsidiaries (other than Senior Indebtedness) unless the Notes are equally and ratably secured with (or on a senior basis to, in the case of obligations subordinated in right of payment to the Notes) the obligations so secured or until such time as such obligations are no longer secured by a Lien. The preceding sentence will not require the Company or any Restricted Subsidiary to secure the Notes if the Lien consists of a Permitted Lien. The Indenture will provide that no Guarantor will directly or indirectly create, Incur or suffer to exist any Lien on any asset or property of such Guarantor or any income or profits therefrom, or assign or convey any right to receive income therefrom, that secures any obligation of such Guarantor (other than Senior Indebtedness of such Guarantor) unless the Guarantee of such Guarantor is equally and ratably 101 secured with (or on a senior basis to, in the case of obligations subordinated on right of payment to such Guarantor's Guarantee) the obligations so secured or until such time as such obligations are no longer secured by a Lien. The preceding sentence will not require any Guarantor to secure its Guarantee if the Lien consists of a Permitted Lien. Reports and Other Information. The Indenture will provide that notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the Commission, the Company will file with the Commission (and provide the Trustee and Holders with copies thereof, without cost to each Holder, within 15 days after it files them with the Commission), documents and reports that are specified in Sections 13 and 15(d) of the Exchange Act within the time periods specified therein; provided, however, the Company shall not be so obligated to file such documents and other reports with the Commission if the Commission does not permit such filing, in which event the Company will make available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders, in each case within 15 days after the time the Company would be required to file such information with the Commission if it were subject to Section 13 or 15(d) of the Exchange Act. Future Guarantors. The Indenture will provide that the Company will cause each Restricted Subsidiary organized under the laws of the United States of America or any state or territory thereof that Incurs Indebtedness or issues shares of Disqualified Stock or Preferred Stock to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will guarantee payment of the Notes. Each Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by that Subsidiary without rendering the Guarantee, as it relates to such Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS The Indenture will provide that the Company may not consolidate or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (the Company or such Person, as the case may be, being herein called the "Successor Company"); (ii) the Successor Company (if other than the Company) expressly assumes all the obligations of the Company under the Indenture and the Notes pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee; (iii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any of its Restricted Subsidiaries as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction) no Default or Event of Default shall have occurred and be continuing; (iv) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period, either (A) the Successor Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" or (B) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be greater than or equal to such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction; (v) each Guarantor, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person's obligations under the Indenture and the Notes; and (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each 102 stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. The Successor Company will succeed to, and be substituted for, the Company under the Indenture and the Notes. Notwithstanding the foregoing clauses (iii) and (iv), (a) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or to another Restricted Subsidiary and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another state of the United States so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby. The Indenture will further provide that, subject to certain limitations described in the Indenture governing release of a Guarantee upon the sale or disposition of a Guarantor, each Guarantor will not, and the Company will not permit a Guarantor to, consolidate or merge with or into or wind up into (whether or not such Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless (i) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the "Successor Guarantor"); (ii) the Successor Guarantor (if other than such Guarantor) expressly assumes all the obligations of such Guarantor under the Indenture and such Guarantor's Guarantee pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee; (iii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any of its Subsidiaries as a result of such transaction as having been Incurred by the Successor Guarantor or such Subsidiary at the time of such transaction) no Default or Event of Default shall have occurred and be continuing; and (iv) the Guarantor shall have delivered or caused to be delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Subject to certain limitations described in the Indenture, the Successor Guarantor will succeed to, and be substituted for, such Guarantor under the Indenture and such Guarantor's Guarantee. Notwithstanding the foregoing clause (iii), a Guarantor may merge with an Affiliate incorporated solely for the purpose of reincorporating such Guarantor in another state of the United States so long as the amount of Indebtedness of the Guarantor is not increased thereby. DEFAULTS An Event of Default will be defined in the Indenture as (i) a default in any payment of interest on any Note when due, whether or not prohibited by the provisions described under "-- Ranking" above, continued for 30 days, subject to the interest deferral provisions contained in the Indenture, (ii) a default in the payment of principal or premium, if any, of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "-- Ranking" above, (iii) the failure by the Company to comply with its obligations under the covenant described under "-- Merger, Consolidation or Sale of All or Substantially All Assets" above, (iv) the failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under "-- Change of Control" or "-- Certain Covenants" above (in each case, other than a failure to purchase Notes), (v) the failure by the Company to comply for 60 days after notice with its other agreements contained in the Notes or the Indenture, (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness (other than Indebtedness owing to the Company or a Restricted Subsidiary) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $15.0 million or its foreign currency equivalent (the "cross acceleration provision"), (vii) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"), (viii) the rendering of any judgment or decree for the payment of money (other than judgments which are covered 103 by enforceable insurance policies issued by solvent carriers) in excess of $15.0 million or its foreign currency equivalent against the Company or a Significant Subsidiary if (A) an enforcement proceeding thereon is commenced and not discharged or stayed within days thereafter or (B) such judgment or decree remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the "judgment default provision") or (ix) any Guarantee ceases to be in full force and effect, except as contemplated by the terms thereof, or any Guarantor denies or disaffirms its obligations under the Indenture or any Guarantee and the Default continues for 10 days. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clause (iv) or (v) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. Subject to the provisions regarding any Forebearance Period, if an Event of Default (other than a Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Company may declare the principal of, premium, if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal, premium and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of, premium, if any, and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity, and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. The Indenture will provide that if a Default occurs and is continuing and is actually known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver, to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating 104 whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected, no amendment may, among other things, (i) reduce the amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate of or extend the time for payment of interest on any Note, (iii) reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "Optional Redemption" above, (v) make any Note payable in money other than that stated in the Note, (vi) make any change to the subordination provisions of the Indenture that adversely affects the rights of any Holder, (vii) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes, (viii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions or (ix) modify the Guarantees in any manner adverse to the Holders. Without the consent of any Holder, the Company and Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation, partnership or limited liability company of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code), to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder, to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act of 1939 or to make certain changes to the Indenture to provide for the issuance of Additional Notes. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. The consent of the Noteholders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Noteholders a notice briefly describing such amendment. However, the failure to give such notice to all Noteholders, or any defect therein, will not impair or affect the validity of the amendment. DEFEASANCE The Company at any time may terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under the covenants described under "Certain Covenants," the operation of the cross acceleration provision, the bankruptcy provisions with respect to Subsidiaries and the judgment default provision described under "-- Defaults" above and the limitations contained in clause (iv) of the 105 first paragraph under "Merger, Consolidation or Sale of All or Substantially All Assets" above ("covenant defeasance"). If the Company exercises its legal defeasance option or its covenant defeasance option, each Guarantor will be released from all of its obligations with respect to its Guarantee. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (iv), (vi), (vii) with respect only to Significant Subsidiaries or (viii) with respect only to Significant Subsidiaries under "-- Defaults" above or because of the failure of the Company to comply with clause (iv) of the first paragraph under "-- Merger, Consolidation or Sale of All or Substantially All Assets" above. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable U.S. federal income tax law). CONCERNING THE TRUSTEE is to be the Trustee under the Indenture. GOVERNING LAW The Indenture will provide that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York. CERTAIN DEFINITIONS "Acquired Indebtedness" means, with respect to any specified Person: (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person; and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person, in each case, other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by such Person, or such asset was acquired by such person, as applicable. "Adjusted EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication: (i) provision for taxes based on income or profits of such Person for such period deducted in computing Consolidated Net Income, plus (ii) Consolidated Interest Expense of such Person for such period to the extent the same was deducted in computing Consolidated Net Income, plus (iii) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such Consolidated Depreciation and Amortization Expense was deducted in computing Consolidated Net Income, plus 106 (iv) any non-recurring fees, expenses or charges related to any Securities Offering, Permitted Investment, acquisition or Indebtedness permitted to be Incurred by the Indenture (in each case, whether or not successful), deducted in such period in computing Consolidated Net Income, plus (v) the amount of any nonrecurring charges related to client contract terminations or one-time severance costs incurred in connection with acquisitions deducted in such period in computing Consolidated Net Income, plus (vi) any other noncash charges reducing Consolidated Net Income for such period (excluding any such charge which requires an accrual of, or cash reserve for, anticipated cash charges for any future period), plus (vii) the amount of annual management, monitoring, consulting and advisory fees and related expenses paid to Blackstone and GE Capital deducted in such period in computing Consolidated Net Income in an amount not to exceed $1.5 million during any fiscal year, less, without duplication, (viii) noncash items increasing Consolidated Net Income of such Person for such period (excluding any items which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period). Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be paid as a dividend to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of the provisions described under "-- Certain Covenants -- Transactions with Affiliates" and "-- Certain Covenants -- Asset Sales" only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Sale" means: (i) the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of a Sale/Leaseback Transaction) of the Company or any Restricted Subsidiary (each referred to in this definition as a "disposition"); or (ii) the issuance or sale of Equity Interests of any Restricted Subsidiary (other than to the Company or another Restricted Subsidiary)(whether in a single transaction or a series of related transactions), in each case other than: (a) a disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment in the ordinary course of business; 107 (b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to the provisions described above under "-- Merger, Consolidation or Sale of All or Substantially All Assets" or any disposition that constitutes a Change of Control; (c) any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under the covenant described above under "-- Limitation on Restricted Payments;" (d) any disposition of assets with an aggregate Fair Market Value of less than $2.0 million; (e) any disposition of property or assets by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (f) any exchange of like property pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, for use in a Similar Business; (g) sales of assets received by the Company upon the foreclosure on a Lien; (h) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; and (i) sales of inventory in the ordinary course of business consistent with past practices and sales of equipment upon termination of a contract with a client entered into in the ordinary course of business pursuant to the terms of such contract. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement, the other Senior Credit Documents and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Blackstone" means Blackstone Capital Partners II Merchant Banking Fund L.P. and its Affiliates. "Base Dividends" means dividends at the annual rate of % of the liquidation preference of the outstanding shares of the Company's % Exchangeable Participating Preferred Stock. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capitalized Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP. "Capital Stock" means: (i) in the case of a corporation, corporate stock, including, without limitation, corporate stock underlying IDSS and corporate stock outstanding upon the exchange of IDSS for the underlying securities; (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 108 "Cash Equivalents" means: (i) U.S. dollars and foreign currency exchanged into U.S. dollars within 180 days; (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof; (iii) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $500.0 million and whose long-term debt is rated "A" or the equivalent thereof by Moody's or S&P; (iv) repurchase obligations for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; (v) commercial paper issued by a corporation (other than an Affiliate of the Company) rated at least "A-2" or the equivalent thereof by Moody's or S&P and in each case maturing within one year after the date of acquisition; (vi) investment funds investing at least 95% of their assets in securities of the types described in clauses (i) through (v) above; (vii) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody's or S&P; and (viii) Indebtedness or preferred stock issued by Persons with a rating of "A" or higher from S&P or "A-2" or higher from Moody's. "Company" means Volume Services America Holdings, Inc. until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained in the Indenture and required by the Trust Indenture Act, each other obligor on the Notes. "Consolidated Depreciation and Amortization Expense" means with respect to any Person for any period, the total amount of depreciation and amortization expense of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum, without duplication, of: (i) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount, the interest component of Capitalized Lease Obligations (or any financing lease which has substantially the same economic effect as a Capitalized Lease Obligation) and net payments and receipts (if any) pursuant to Hedging Obligations and excluding amortization of deferred financing fees), (ii) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and (iii) the earned discount or yield with respect to the sale of receivables. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis; provided, however, that: (i) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto) shall be excluded; (ii) any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes, shall be excluded; 109 (iii) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period; (iv) any net after-tax income or loss from discontinued operations and any net after-tax gains or losses on disposal of discontinued operations shall be excluded; (v) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors) shall be excluded; (vi) the Net Income for such period of any Person that is not a Subsidiary of such Person, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period; and (vii) the Net Income for such period of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restrictions with respect to the payment of dividends or in similar distributions have been legally waived; provided that the net loss of any such Restricted Subsidiary shall be included. Notwithstanding the foregoing, for the purpose of the covenant described under "-- Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clauses (c)(iv) and (v) thereof. "Continuing Directors" means, as of any date of determination, any member of the Company's Board of Directors who: (i) was a member of the Company's Board of Directors on the date of the Indenture; or (ii) was nominated for election or elected to the Board of Directors with the affirmative vote of at least a majority of the Continuing Directors who were members of the Company's Board of Directors at the time of the nomination or election. "Contribution Indebtedness" means Indebtedness of the Company in an aggregate principal amount not greater than the amount of all Specified Cash Contributions, provided that such Contribution Indebtedness (i) has a Stated Maturity later than the Stated Maturity of the Notes, (ii) is Incurred substantially concurrently with such Specified Cash Contributions, and (iii) is so designated as Contribution Indebtedness pursuant to an Officers' Certificate on the Incurrence date thereof. "Credit Agreement" means the credit agreement dated as of , as amended, restated, supplemented, waived, replaced, restructured, repaid, refunded, refinanced or otherwise modified from time to time, including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness under such agreement (except to the extent that any such amendment, restatement, supplement, waiver, replacement, refunding, refinancing or other modification thereto would be prohibited by the terms of the Indenture, unless otherwise agreed to by the Holders of at least a majority in aggregate principal amount of Notes at the time outstanding), among the Company, the Subsidiaries of the Company named therein, the financial institutions named therein and The Canadian Imperial Bank of Commerce, as Administrative Agent. 110 "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Noncash Consideration" means the Fair Market Value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officers' Certificate, setting forth the basis of such valuation, less the amount of Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration. "Designated Preferred Stock" means Preferred Stock of the Company (other than Disqualified Stock) that is issued for cash (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the covenant described under "-- Limitation on Restricted Payments." "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company. "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is redeemable or exchangeable), or upon the happening of any event; (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise; (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock; or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case prior to the first anniversary of the maturity date of the Notes; provided, however, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such first anniversary shall be deemed to be Disqualified Stock; provided further, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy applicable statutory or regulatory obligations or as a result of such employee's termination, death or disability. Notwithstanding anything contrary herein, the Company's Exchangeable Participating Preferred Stock shall not be Disqualified Stock. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Excluded Contributions" means the net cash proceeds received by the Company after the Issue Date from (i) contributions to its common equity capital and (ii) the sale (other than to a Subsidiary of the Company or to any Company or Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by an Officer of the Company, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the first paragraph of the "-- Limitation on Restricted Payments" covenant. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of Adjusted EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries Incurs or redeems any Indebtedness 111 (other than in the case of revolving credit borrowings, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) or issues or redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such Incurrence or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period. For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, that have been made by the Company or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, discontinued operations, mergers and consolidations (and the reduction of any associated fixed charge obligations and the change in Adjusted EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Investment, acquisition, disposition, discontinued operation, merger or consolidation, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter period. For purposes of this definition, whenever pro forma effect is to be given to any transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate. Any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Company as set forth in an Officers' Certificate, to reflect operating expense reductions reasonably expected to result from any acquisition or merger. "Fixed Charges" means, with respect to any Person for any period, the sum of (i) Consolidated Interest Expense of such Person for such period and (ii) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock or Disqualified Stock of such Person and its Subsidiaries. "Foreign Subsidiary" means a Restricted Subsidiary not organized or existing under the laws of the United States of America or any state or territory thereof. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements 112 by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. For the purposes of the Indenture, the term "consolidated" with respect to any Person shall mean such Person consolidated with its Restricted Subsidiaries, and shall not include any Unrestricted Subsidiary, but the interest of such Person in an Unrestricted Subsidiary will be accounted for as an Investment. "GE Capital" means General Electric Capital Corporation and its Affiliates. "Government Securities" means securities that are: (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations. "Guarantee" means any guarantee of the obligations of the Company under the Indenture and the Notes by any Person in accordance with the provisions of the Indenture. "Guarantor" means any Person that Incurs a Guarantee; provided that upon the release or discharge of such Person from its Guarantee in accordance with the Indenture, such Person ceases to be a Guarantor. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "IDSS" means the Company's Income Depositary Securities, whether currently outstanding or as may be issued from time to time. "Incur" means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be incurred by such person at the time it becomes a Subsidiary. "Indebtedness" means, with respect to any Person: (i) the principal and premium (if any) of any indebtedness of such Person, whether or not contingent: (a) in respect of borrowed money; 113 (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers' acceptances (or, without duplication, reimbursement agreements in respect thereof); (c) representing the deferred and unpaid purchase price of any property, except any such balance that constitutes a trade payable or similar obligation to a trade creditor due within six months from the date on which it is Incurred, in each case Incurred in the ordinary course of business, which purchase price is due more than six months after the date of placing the property in service or taking delivery and title thereto; (d) in respect of Capitalized Lease Obligations; or (e) representing any Hedging Obligations, if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability on a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP; (ii) to the extent not otherwise included, any obligation of such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person (other than by endorsement of negotiable instruments for collection in the ordinary course of business); and (iii) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person); provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Person; provided, further, that any obligation of the Company or any Restricted Subsidiary in respect of (i) minimum guaranteed commissions, or other similar payments, to clients, minimum returns to clients or stop loss limits in favor of clients or (ii) indemnification obligations to clients, in each case pursuant to contracts to provide services to clients entered into in the ordinary course of business shall be deemed not to constitute Indebtedness. "Independent Financial Advisor" means an accounting, appraisal or investment banking firm or consultant to Persons engaged in a similar business of nationally recognized standing that is, in the good faith determination of the Company, qualified to perform the task for which it has been engaged. "Investment Grade Securities" means: (i) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents); (ii) debt securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such rating by such rating organization, or if no rating of S&P or Moody's then exists, the equivalent of such rating by any other nationally recognized securities rating agency, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries; and (iii) investments in any fund that invests exclusively in investments of the type described in clauses (i) and (ii) which fund may also hold immaterial amounts of cash pending investment and/or distribution. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration (including agreements providing for the adjustment of purchase price) of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet of the Company in the same manner as the other 114 investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "-- Limitation on Restricted Payments:" (i) "Investments" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Notes are originally issued or, with respect to any Additional Notes, the date on which such Additional Notes are originally issued. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction); provided that in no event shall an operating lease be deemed to constitute a Lien. "Management Group" means the group consisting of the directors, executive officers and other personnel of the Company on the Issue Date. "Moody's" means Moody's Investors Service, Inc. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received in respect of or upon the sale or other disposition of any Designated Noncash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding the assumption by the acquiring person of Indebtedness relating to the disposed assets or other considerations received in any other noncash form), net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Noncash Consideration (including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions), and any relocation expenses Incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements related thereto), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness required (other than pursuant to clause (i) of the second paragraph of the covenant described under "-- Asset Sales") to be paid as a result of such transaction, and any deduction of appropriate amounts to be provided by the Company as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Company after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction. "Notes" means the % subordinated notes of the Company, including any Additional Notes unless expressly provided otherwise. 115 "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and bankers' acceptances), damages and other liabilities payable under the documentation governing any Indebtedness; provided that Obligations with respect to the Notes shall not include fees or indemnifications in favor of the Trustee and other third parties other than the Holders of the Notes. "Officer" means the Chairman of the Board, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company that meets the requirements set forth in the Indenture. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Pari Passu Indebtedness" means (i) with respect to the Company, the Notes and any other Indebtedness of the Company, other than Senior Indebtedness or Secured Indebtedness of the Company and (ii) with respect to any Guarantor, its Guarantee and any other Indebtedness of such Guarantor, other than Senior Indebtedness or Secured Indebtedness of such Guarantor. "Participating Dividends" means dividends on the shares of the Company's % Junior Exchangeable Participating Preferred Stock in an amount equal to the aggregate amount of all cash dividends or other distributions declared on each share of the Company's common stock multiplied by the number of shares of the Company's common stock for which each share of such Preferred Stock may be exchanged. "Permitted Asset Swap" means any one or more transactions in which the Company or any Restricted Subsidiary exchanges assets for consideration consisting of (i) assets used or useful in a Similar Business and (ii) any cash or Cash Equivalents, provided that such cash or Cash Equivalents will be considered Net Proceeds from an Asset Sale. "Permitted Holders" means Blackstone, GE Capital and the Management Group. "Permitted Investments" means: (i) any Investment in the Company or any Restricted Subsidiary; (ii) any Investment in Cash Equivalents or Investment Grade Securities; (iii) any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is primarily engaged in a Similar Business if as a result of such Investment (a) such Person becomes a Restricted Subsidiary or (b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary; (iv) any Investment in securities or other assets not constituting Cash Equivalents and received in connection with an Asset Sale made pursuant to the provisions of "-- Asset Sales" or any other disposition of assets not constituting an Asset Sale; (v) any Investment existing on the Issue Date; (vi) advances to employees not in excess of $5.0 million outstanding at any one time in the aggregate; (vii) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a 116 foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (viii) Hedging Obligations permitted under clause (j) of the "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" covenant; (ix) additional Investments having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed the greater of 7.5% of Total Assets or $10.0 million at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (x) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case Incurred in the ordinary course of business; (xi) Investments the payment for which consists of Equity Interests of the Company (other than Disqualified Stock); provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (c) of the "-- Limitation on Restricted Payments" covenant; (xii) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of the second paragraph of the covenant described under "-- Transactions with Affiliates" (except transactions described in clauses (ii), (iii) and (vi) of such paragraph); (xiii) Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons; (xiv) Guarantees issued in accordance with "Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" (xv) any Investment by Restricted Subsidiaries in other Restricted Subsidiaries and Investments by Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries; (xvi) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; (xvii) loans and advances to VSI Management Direct LP, VSI Management II L.P., Recreational Services, LLC, current or former management personnel of the Company and/or any entity in which any current or former management personnel of the Company has a beneficial or economic interest pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or agreement or any other agreement pursuant to which stock is held for the benefit of such persons not to exceed $7.5 million in aggregate principal amount at any time outstanding, the proceeds of which will be used to purchase or redeem, directly or indirectly, shares of Capital Stock of the Company or to purchase limited partnership interests in VSI Management Direct LP, VSI Management II L.P. or Recreational Services, LLC; and (xviii) loans to clients made in connection with entering into, renegotiating, renewing or amending contracts to provide services not to exceed $15.0 million in any fiscal year or $30.0 million in aggregate amount at any time outstanding. "Permitted Junior Securities" shall mean debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then-outstanding Senior Indebtedness of the Company at least to the same extent that the Notes are subordinated to the payment of all Senior Indebtedness of the Company on the Issue Date, so long as to the extent that any Senior Indebtedness of the Company outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash on 117 such date, either (a) the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment or (b) such holders receive securities which constitute Senior Indebtedness and which have been determined by the relevant court to constitute satisfaction in full in cash of any Senior Indebtedness not paid in full in cash. "Permitted Liens" means, with respect to any Person: (a) pledges or deposits by such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (b) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (c) Liens for taxes, assessments or other governmental charges not yet due or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings; (d) Liens in favor of issuers of performance and surety bonds or bid bonds or completion guarantees or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (e) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (f) Liens securing Indebtedness permitted to be incurred pursuant to clause (d) of the second paragraph of the covenant described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" (g) Liens to secure Indebtedness permitted pursuant to clause (a) of the second paragraph of the covenant described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" (h) Liens existing on the Issue Date; (i) Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or Incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; (j) Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided further, however, that such Liens are not created or Incurred in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; (k) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or another Restricted Subsidiary permitted to be incurred in accordance with the covenant 118 described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" (l) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations; (m) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances, issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (n) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (o) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business; (p) Liens in favor of the Company; (q) Liens on equipment of the Company granted in the ordinary course of business to the Company's client at which such equipment is located; (r) Liens encumbering deposits made in the ordinary course of business to secure obligations arising from statutory, regulatory, contractual or warranty requirements, including rights of offset and set-off; (s) Liens on the Equity Interests of Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries not otherwise prohibited by the Indenture; (t) Liens to secure Indebtedness permitted by clause (l) of the second paragraph of the covenant described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;" and (u) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g), (h), (i), (j), (k), (l) and (t); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (f), (g), (h), (i), (j), (k), (l) or (t) at the time the original Lien became a Permitted Lien under the Indenture and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up. "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such 119 Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "Secured Indebtedness" means any Indebtedness of the Company or any Subsidiary secured by a Lien. "Securities Offering" means any public or private sale of IDSS or common stock or Preferred Stock of the Company or VSA (other than Disqualified Stock), other than (i) public offerings with respect to IDSS or the Company's Common Stock registered on Form S-8 and (ii) any such public or private sale that constitutes an Excluded Contribution. "S&P" means Standard and Poor's Ratings Group. "Senior Credit Documents" means the collective reference to the Credit Agreement, the notes issued pursuant thereto and the guarantees thereof, and the collateral documents relating thereto. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Similar Business" means a business, the majority of whose revenues are derived from the provision of food, beverage, catering, merchandise, management or other services at stadiums, convention centers, ball parks, concert halls, theaters, seaports, airports, golf courses, arenas, racetracks, parks, malls, zoos, bandstands, or other recreational venues, or the activities of the Company and its Subsidiaries as of the Issue Date or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including, without limitation, investing in sports teams. "Specified Cash Contributions" means the aggregate amount of cash contributions (other than Excluded Contributions) made to the capital of the Company which are designated as "Specified Cash Contributions" pursuant to an Officers' Certificate. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" means, with respect to any Person: (i) any corporation, association or other business entity (other than a partnership, joint venture or limited liability company) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and (ii) any partnership, joint venture or limited liability company of which (x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise and (y) such Person or any Wholly Owned Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. 120 "Trust Officer" means (i) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and (ii) who shall have direct responsibility for the administration of the Indenture. "Unrestricted Subsidiary" means: (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated and its Subsidiaries do not at the time of designation have and do not thereafter Incur any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries; provided further, however, that either (a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "-- Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x)(1) the Company could Incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described under "-- Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" or (2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness or Disqualified Stock, as the case may be, at any date, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock multiplied by the amount of such payment, by (ii) the sum of all such payments. "Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is a Restricted Subsidiary. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. 121 DESCRIPTION OF CAPITAL STOCK The following is a description of the terms of our amended and restated certificate of incorporation and by-laws, copies of the forms of which have been filed with the Commission as exhibits to the registration statement of which this prospectus is part. AUTHORIZED CAPITALIZATION Our authorized capital stock consists of: - shares of common stock, par value $0.01 per share; and - shares of preferred stock, par value $0.01 per share, including shares of % exchangeable participating preferred stock. After this offering, there will be shares of our common stock and shares of our exchangeable participating preferred stock outstanding. COMMON STOCK The following summary is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and by-laws and the applicable provisions of the Delaware General Corporation Law, or DGCL. Dividends. Holders of shares of our common stock will be entitled to receive such dividends and other distributions in cash, stock or property of ours as may be declared by our board of directors from time to time out of our assets or funds legally available for dividends or other distributions. Rights Upon Liquidation. In the event of our voluntary or involuntary liquidation, dissolution or winding up, holders of shares of our common stock will be entitled to share equally in our assets available for distribution to the holders of shares of our common stock. Voting and Preemptive Rights. Shares of our common stock carry one vote per share. Holders of shares of our common stock have no cumulative voting or preemptive rights. No Stockholder Action by Written Consent. Our certificate of incorporation prohibits stockholder action by written consent. Limited Stockholder Ability to Call a Special Meeting. Our certificate of incorporation provides that a special meeting of our stockholders may be called only by (1) our board of directors or the chairman of our board of directors or (2) upon a requisition by holders of at least 25% in voting power of all the outstanding shares of our common stock entitled to vote at that meeting. Limitation of Director Liability. Our certificate of incorporation provides that our directors are not liable to our stockholders for monetary damages for breach of fiduciary duty as directors, except for liability: - for breach of duty of loyalty; - for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law; - under Section 174 of the DGCL (unlawful dividends or stock repurchases); and - for transactions from which the director derived improper personal benefit. Indemnification of Directors and Officers. Our certificate of incorporation provides for indemnification of our directors and officers to the fullest extent authorized by the DGCL. Classified Board of Directors. Our certificate of incorporation provides for a classified board of directors. 122 Quorum Requirements; Removal of Directors. Our certificate of incorporation provides for a minimum quorum of one-third in voting power of the outstanding shares of our capital stock entitled to vote, except that a minimum quorum of a majority in voting power of the outstanding shares of our capital stock entitled to vote is necessary to hold a vote for any director in a contested election, the removal of a director or the filling of a vacancy on our board of directors. Directors may be removed only for cause by the affirmative vote of at least a majority in voting power of the outstanding shares of our capital stock entitled to vote. PREFERRED STOCK General. Our board of directors has the authority to issue shares of preferred stock from time to time on terms that it may determine, to divide shares of preferred stock into one or more series and to fix the designations, voting powers, preferences and relative participating, optional or other special rights of each series, and the qualifications, limitations or restrictions of each series, to the fullest extent permitted by the DGCL. The issuance of shares of preferred stock could have the effect of decreasing the market price of the IDSS and our shares of common stock, impeding or delaying a possible takeover and adversely affecting the voting and other rights of the holders of shares of our common stock. % Exchangeable Participating Preferred Stock. Our board of directors has the authority to issue shares of % exchangeable participating preferred stock, $ liquidation preference per share. Holders of shares of our exchangeable participating preferred stock will have no preemptive or preferential rights to purchase or subscribe to stock, obligations, warrants or any other of our securities. Subject to applicable law, the shares of our exchangeable participating preferred stock will, upon liquidation, winding up and dissolution, be deemed to be automatically exchanged for the number of shares of our common stock and the aggregate principal amount of our subordinated notes that the shares of our exchangeable participating preferred stock would otherwise be exchangeable for, or if that automatic exchange is prohibited by applicable law, then the shares of our exchangeable participating preferred stock will rank senior to our common stock and any other class or series of our capital stock upon our liquidation, winding up or dissolution. Dividends. The holders of shares of exchangeable participating preferred stock will be entitled to receive, when, as and if declared by our board of directors out of funds legally available for payment, cash dividends per share equal to the sum of: - dividends at the annual rate of % of the $ liquidation preference per share of preferred stock; we refer to this dividend as the "base dividend;" and - the aggregate amount of all cash dividends or other distributions declared on each share of our common stock since the immediately preceding monthly dividend payment or distribution date multiplied by the number of shares of our common stock for which each share of our exchangeable participating preferred stock may be exchanged; we refer to this dividend as the "participating dividend." Dividends are payable on the th day of each month to holders of record on the relevant record date. The base dividend will rank senior and prior to any dividends on any other shares of our capital stock, including our common stock, and the participating dividend will rank equal to any dividends on shares of our common stock. The base dividend will be cumulative from each monthly dividend payment date, whether or not we will have funds legally available for the payment of those dividends. Accumulations of base dividends on shares of exchangeable participating preferred stock will bear interest at a rate of % per year. If at any time a dividend or other distribution payable in shares of our common stock or other securities, or options or warrants to purchase shares of our common stock or other securities, or securities convertible into or exchangeable for shares of our common stock or other securities, or any other property is paid on the shares of our common stock, a like dividend or other distribution will also be paid on the shares of our exchangeable participating preferred stock in an amount per share equal to the per share 123 dividend or distribution on our common stock multiplied by the number of shares of our common stock for which each share of our exchangeable participating preferred stock may be exchanged. Voting. At each annual or special meeting of our stockholders and for all other purposes, each holder of record of shares of our exchangeable participating preferred stock will be entitled to a number of votes per share standing in that person's name on our stock transfer records equal to the number of shares of our common stock for which each share of our exchangeable participating preferred stock may be exchanged. Except as otherwise required by law or any stockholders agreement, the holders of shares of our exchangeable participating preferred stock and the holders of shares of our common stock will vote together as a single class on all matters with respect to which a vote of our stockholders is required under applicable law, our certificate of incorporation or by-laws or on which a vote of stockholders is otherwise duly called for, including, but not limited to, the election of directors. Exchange Rights. Holders of shares of our exchangeable participating preferred stock will have the right, at any time after the underwriters' over-allotment option expires or is terminated, to exchange each share of exchangeable participating preferred stock for one share of our common stock, subject to adjustment if there is any split, subdivision, combination or reclassification of the shares of our common stock, and, to the extent there exist sufficient funds legally available therefor, $ aggregate principal amount of our subordinated notes. In the event that we exercise our right to partially or fully redeem our subordinated notes on a pro rata basis, the shares of our exchangeable participating preferred stock will be automatically exchanged for the applicable number of shares of our common stock and $ aggregate principal amount of our subordinated notes, which will be subject to the pro rata redemption. Mergers, Consolidations, Etc. If we enter into any consolidation, merger, combination or other transaction in which our shares of common stock or our subordinated notes are exchanged for or changed into other stock or securities, or any other property, then the shares of our exchangeable participating preferred stock will at the same time be similarly exchanged or changed, in whole or in part as applicable, in an amount per share equal to the aggregate amount of stock, securities, cash or any other property into which or for which (1) each share of our common stock is changed or exchanged multiplied by the number of shares of our common stock for which each share of our exchangeable participating preferred stock may have been otherwise exchanged and (2) the aggregate principal amount of subordinated notes for which each share of our exchangeable participating preferred stock may have been otherwise exchanged is changed or exchanged. Redemption. We will have the right to redeem all or a portion of the shares of our exchangeable participating preferred stock with the proceeds we receive from the exercise of the underwriters' over-allotment option. Each share of our exchangeable participating preferred stock which is redeemed by us will be cancelled and will not be reissued. ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS Our certificate of incorporation and by-laws contain provisions that may have some anti-takeover effects. Delaware Anti-Takeover Statute. We are subject to Section 203 of the DGCL. Subject to specific exceptions, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time the person became an interested stockholder, unless: - the business combination, or the transaction in which the stockholder became an interested stockholder, is approved by our board of directors prior to the time the interested stockholder attained that status; 124 - upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or - at or after the time a person became an interested stockholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. "Business combinations" include mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to various exceptions, in general an "interested stockholder" is a person who, together with his or her affiliates and associates, owns, or within three years did own, 15% or more of the shares of the corporation's outstanding voting stock. These restrictions could prohibit or delay the accomplishment of mergers or other takeover or change in control attempts with respect to us and, therefore, may discourage attempts to acquire us. The provisions of Section 203 of the DGCL will not apply to BCP Volume, BCP Offshore Volume, Recreational Services or their respective current affiliates and associates, even if they would otherwise constitute "interested stockholders" under Section 203 of the DGCL. In addition, various provisions of our certificate of incorporation and by-laws, which are summarized in the following paragraphs, may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders. No Cumulative Voting. The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not expressly address cumulative voting. No Stockholder Action by Written Consent; Calling of Special Meeting of Stockholders. Our certificate of incorporation prohibits stockholder action by written consent. It also provides that special meetings of our stockholders may be called only by (1) our board of directors or the chairman of our board of directors or (2) upon a requisition by holders of at least 25% in voting power of all the outstanding shares of our common stock entitled to vote at that meeting. Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our by-laws provide that stockholders seeking to bring business before or to nominate candidates for election as directors at an annual meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary. To be timely, a stockholder's notice must be delivered or mailed and received at our principal executive offices not less than 90 nor more than 120 days in advance of the anniversary date of the immediately preceding annual meeting of stockholders. Our by-laws also specify requirements as to the form and content of a stockholder's notice. These provisions may impede stockholders' ability to bring matters before an annual meeting of stockholders or make nominations for directors at an annual meeting of stockholders. Stockholder nominations for the election of directors at a special meeting or notice of other stockholder proposals must be received by our corporate secretary by the later of 10 days following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made or 90 days prior to the date that meeting is proposed to be held. Limitations on Liability and Indemnification of Officers and Directors. The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors' fiduciary duties as directors. Our certificate of 125 incorporation includes a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director, except for liability: - for breach of duty of loyalty; - for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law; - under Section 174 of the DGCL (unlawful dividends or stock repurchases); or - for transactions from which the director derived improper personal benefit. Our certificate of incorporation provides that we must indemnify and advance expenses to our directors and officers to the fullest extent authorized by the DGCL. We are also expressly authorized to carry directors' and officers' insurance for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers. The limitation of liability and indemnification provisions in our certificate of incorporation and by-laws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought. Authorized but Unissued Shares. Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without your approval. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise. Supermajority Provisions. The DGCL provides generally that the affirmative vote of a majority in voting power of the outstanding shares entitled to vote is required to amend a corporation's certificate of incorporation, unless the certificate of incorporation requires a greater percentage. Our certificate of incorporation provides that the following provisions in the certificate of incorporation may be amended only by a vote of two-thirds or more in voting power of all the outstanding shares of our capital stock entitled to vote: - the prohibition on stockholder action by written consent; - the ability to call a special meeting of stockholders being vested solely in (1) our board of directors and the chairman of our board of directors and (2) upon a requisition by holders of at least 25% in voting power of all the outstanding shares of our common stock entitled to vote at that meeting; - the provisions relating to the classification of our board of directors; - the provisions relating to the size of our board of directors; - the provisions relating to the quorum requirements for stockholder action and the removal of directors; - the limitation on the liability of our directors to us and our stockholders; - the obligation to indemnify and advance expenses to the directors and officers to the fullest extent authorized by the DGCL; 126 - the provisions granting authority to our board of directors to amend or repeal our by-laws without a stockholder vote, as described in more detail in the next succeeding paragraph; and - the supermajority voting requirements listed above. In addition, our certificate of incorporation grants our board of directors the authority to amend and repeal our by-laws without a stockholder vote in any manner not inconsistent with the laws of the State of Delaware or our certificate of incorporation. Our certificate of incorporation provides that these provisions in our certificate of incorporation may be amended only by a vote of two-thirds or more in voting power of all the outstanding shares of our capital stock entitled to vote. Our certificate of incorporation provides that our by-laws may be amended by stockholders representing no less than two-thirds of the voting power of all the outstanding shares of our capital stock entitled to vote. Our certificate of incorporation provides that the affirmative vote of two-thirds of our directors is necessary to approve any merger, sale of all or substantially all of our assets, any liquidation of our company or our filing of a voluntary petition in bankruptcy. LISTING We will apply to list the shares of our common stock underlying the IDSS on the Toronto Stock Exchange under the trading symbol " ." TRANSFER AGENT AND REGISTRAR is the transfer agent and registrar for our shares of common stock and exchangeable participating preferred stock. 127 SHARES ELIGIBLE FOR FUTURE SALE Future sales or the availability for sale of substantial amounts of IDSS or shares of our common stock or a significant principal amount of our subordinated notes in the public market could adversely affect prevailing market prices and could impair our ability to raise capital through future sales of our securities. Upon completion of this offering, we will have IDSS outstanding, in respect of in the aggregate shares of our common stock and $ million aggregate principal amount of our subordinated notes. All of these IDSS and underlying securities will be freely tradable without restriction or further registration under the Securities Act, unless the IDSS or underlying securities are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933. Upon completion of this offering, we will also have shares of our exchangeable participating preferred stock outstanding exchangeable in the aggregate for shares of our common stock and $ million aggregate principal amount of our subordinated notes, which, together with the additional shares of common stock held by the existing investors, may be represented by IDSS in the aggregate, which will be owned by the existing investors and, with respect to the common stock or IDSS into which they are exchangeable, will be subject to registration rights. Registration rights may not be exercised during the lock-up period. See "Underwriting." We may issue shares of our common stock or subordinated notes, which may be represented by IDSS, or other securities from time to time as consideration for future acquisitions and investments. In the event any such acquisition or investment is significant, the number of shares of our common stock or subordinated notes, which may be represented by IDSS, or other securities that we may issue may in turn be significant. In addition, we may also grant registration rights covering those shares of our common stock or subordinated notes and IDSS, if applicable, or other securities in connection with any such acquisitions and investments. 128 MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS The following summary describes the material U.S. federal income tax considerations of the ownership of IDSS as of the date hereof by U.S. Holders (as defined below) and Non-U.S. Holders (as defined below). Except where noted, it deals only with IDSS held as capital assets by holders who acquired IDSS upon their original issuance at their initial offering price and does not deal with special situations, such as those of: - dealers in securities or currencies, - financial institutions, - regulated investment companies, - real estate investment trusts, - tax-exempt entities, - insurance companies, - persons holding subordinated notes as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, - traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, - persons liable for alternative minimum tax, - investors in pass-through entities or - U.S. Holders (as defined below) of the Notes whose "functional currency" is not the U.S. dollar. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof, and such authorities may be repealed, revoked, modified or subject to differing interpretations, possibly on a retroactive basis, so as to result in U.S. federal income tax consequences different from those discussed below. A "U.S. Holder" of an IDSS means a holder that is for U.S. federal income tax purposes: - an individual citizen or resident of the United States, - a corporation created or organized in or under the laws of the United States or any political subdivision thereof, - an estate the income of which is subject to U.S. federal income taxation regardless of its source, or - a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. If a partnership or other entity treated as a partnership for U.S. federal income tax purposes holds IDSS, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding IDSS, you should consult your own tax advisors. No statutory, administrative or judicial authority directly addresses the treatment of IDSS or instruments similar to IDSS for U.S. federal income tax purposes. As a result, we cannot assure you that the IRS or the courts will agree with the tax consequences described herein. A different treatment from that assumed below could adversely affect the amount, timing and character of income, gain or loss in respect of an investment in the IDSS, and, in the case of foreign holders, could subject payments to such holders to U.S. federal withholding or estate taxes. Payments to foreign holders would not be grossed-up for any such taxes. In addition, a different treatment could result in the loss by us of all or part of the 129 deduction for interest paid on the subordinated notes. IF YOU ARE CONSIDERING THE PURCHASE OF IDSS, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO YOU OF THE OWNERSHIP OF IDSS, AS WELL AS ANY CONSEQUENCES TO YOU ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. IDSS ALLOCATION OF PURCHASE PRICE We intend to treat your acquisition of an IDSS as an acquisition of the shares of our common stock and the subordinated note constituting the IDSS and, by purchasing an IDSS, you will be deemed to have agreed to such treatment. The remainder of this discussion assumes that the acquisition of an IDSS will be treated as an acquisition of shares of our common stock and a subordinated note. The purchase price of each IDSS will be allocated between the shares of common stock and a subordinated note in proportion to their respective fair market values at the time of purchase. Such allocation will establish your initial tax basis in the shares of common stock and the subordinated note. We will report the initial fair market value of each share of common stock as $ and the initial fair market value of each subordinated note as $ , and by purchasing IDSS, you will be deemed to agree to such allocation. The remainder of this discussion assumes that this allocation of the purchase price will be respected. DEPOSIT, WITHDRAWAL AND CANCELLATION If you deliver an IDSS to the depositary in exchange for shares of common stock and a subordinated note or deliver shares of common stock and a subordinated note to the depositary in exchange for an IDSS, you generally will not recognize gain or loss upon the delivery or release of IDSS or shares of common stock and subordinated notes. You will continue to take into account items of income or deduction otherwise includible or deductible, respectively, with respect to the shares of common stock and the subordinated note, and your tax basis in the shares of common stock and the subordinated note will not be affected by the delivery and release. The U.S. federal income tax consequences of the delivery of shares of common and subordinated notes are unclear in certain circumstances. See "Subordinated Notes -- Exchange Rights and Additional Issuances." SUBORDINATED NOTES CHARACTERIZATION OF SUBORDINATED NOTES As discussed in more detail in the following paragraphs, the subordinated notes should be treated as debt for U.S. federal income tax purposes. We, and, by acquiring an IDSS, each holder agrees to treat the subordinated notes as our indebtedness for all tax purposes. Assuming such conclusion is respected, stated interest on the subordinated notes will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for U.S. federal income tax purposes. The determination of whether an instrument is classified as debt or equity for U.S. federal income tax purposes is based on the facts and circumstances. There is no clear statutory definition of debt and its characterization is governed by principles developed in case law, which analyzes numerous factors that are intended to identify the economic substance of the investor's interest in the corporation. The determination that the subordinated notes should be treated as debt for U.S. federal income tax purposes is based in part on advice from an investment bank supporting a determination that: - the term, interest rate, and other provisions of the subordinated notes are reasonable and substantially similar to the term, interest rate and other provisions of a loan to which an unrelated lender bargaining at arm's length with us, would reasonably agree; - the aggregate principal amount of the subordinated notes in relation to our aggregate capital will be commercially reasonable in the circumstances and, based on our detailed financial forecasts and 130 taking into account the interest deferral feature and 179 day forebearance period, we are likely to be able to pay the principal amount of and interest on the subordinated notes in full in accordance with their terms; and - upon completion of this offering, the fair market value of our assets will exceed the fair market value of our liabilities, and the ratio of (A) the sum of (1) the principal amount of the subordinated notes, (2) the principal amount of our senior secured notes and (3) the amount outstanding under the revolving line of credit of the new credit facility, to (B) the fair market value of our equity will not exceed . The consequences to U.S. Holders and Non-U.S. Holders described below assumes the subordinated notes will be respected as debt. However, no ruling on this issue has been requested from the IRS and thus, there can be no assurance that such a position would be sustained if challenged by the IRS. If the subordinated notes were treated as equity rather than debt for U.S. federal income tax purposes, then the stated interest on the subordinated notes could be treated as a dividend, and interest on the subordinated notes would not be deductible by us for U.S. federal income tax purposes. Our inability to deduct interest on the subordinated notes could materially increase our taxable income and, thus, our U.S. federal income tax liability. This would reduce our after-tax income available for interest and dividend payments and could significantly reduce our future cash flow, thereby affecting our ability to make payments on the subordinated notes and the common stock. Additionally, there can be no assurance that the IRS will not challenge the determination that the interest rate on the subordinated notes represents an arm's length rate and, if successful, any excess amount over arm's length could be recharacterized as a dividend payment instead of an interest payment for U.S. federal income tax purposes. In such case, we would be unable to fully deduct interest on the subordinated notes, which could materially increase our taxable income and, thus, our U.S. federal income tax liability. If the interest rate were determined to be less than the arm's length rate, the subordinated notes would be treated as issued with original issue discount, which you would be required to include in income over the term of the subordinated notes. SALE, EXCHANGE OR RETIREMENT OF SUBORDINATED NOTES Upon the sale, exchange, retirement or other disposition of an IDSS, you will be treated as having sold, exchanged, retired or disposed of the subordinated note constituting the IDSS. Upon the sale, exchange, retirement or other disposition of a subordinated note, you will recognize gain or loss equal to the difference between the portion of the proceeds allocable to your subordinated note (less an amount equal to any accrued and unpaid interest which will be treated as a payment of interest for U.S. federal income tax purposes) and your adjusted tax basis in the subordinated note. As described above under "IDSS -- Allocation of Purchase Price," your tax basis in a subordinated note generally will be the portion of the purchase price of your IDSS allocable to the subordinated note. Such gain or loss will generally be capital gain or loss. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. DEFERRAL OF INTEREST Under applicable Treasury regulations, a "remote" contingency that stated interest will not be timely paid will be ignored in determining whether a debt instrument is issued with original issue discount, referred to as OID. We believe that the likelihood of deferral of interest payment on the subordinated notes is remote within the meaning of the Treasury regulations. Based on the foregoing, we believe that, although the matter is not free from doubt, the subordinated notes will not be considered to be issued with OID at the time of their original issuance. Accordingly, stated interest on the subordinated notes will generally be included in the gross income of a U.S. holder as ordinary interest income at the time accrued or received, in accordance with such U.S. holder's method of accounting for U.S. federal income tax purposes. 131 Under the Treasury regulations, if deferral of any payment of interest were determined not to be "remote," or if the interest payment deferral actually occurred, the subordinated notes would be treated as issued with OID at the time of issuance or at the time of such occurrence, as the case may be. Then, all stated interest on the subordinated notes would thereafter be treated as OID as long as the subordinated notes remained outstanding. In such event, all of a U.S. holder's taxable interest income relating to the subordinated notes would constitute OID that would have to be included in income on an economic accrual basis, possibly before the receipt of the cash attributable to the interest, regardless of such U.S. holder's method of tax accounting, actual payments of stated interest would not be reported as taxable income, any amount of OID included in your gross income (whether or not during a deferral period) with respect to the subordinated notes would increase your tax basis in such notes, and the amount of payments in respect of such accrued OID would reduce your tax basis in such subordinated notes. Consequently, during a deferral period, a U.S. holder would be required to include OID in gross income even though we would not make any actual cash payments on the subordinated notes. No rulings or other interpretations have been issued by the IRS which have addressed the meaning of the term "remote" as used in the Treasury regulations, and it is possible that the IRS could take a position contrary to the interpretation in this prospectus. EXCHANGE RIGHTS AND ADDITIONAL ISSUANCES As described under "Description of IDSS -- Deposit, Withdrawal and Cancellation," the deposit agreement permits you to deposit shares of our common stock and a subordinated note in exchange for an IDSS or withdraw the shares of our common stock and a subordinated note in exchange for your IDSS. Additionally, the deposit agreement contemplates that shares of our common stock and subordinated notes we subsequently issue can be exchanged for IDSS. Subordinated notes may also be deposited if we sell IDSS in a separate offering or if holders of our exchangeable participating preferred stock exercise their rights to exchange their shares of exchangeable participating preferred stock for shares of our common stock and subordinated notes and such holders deposit such shares of our common stock and subordinated notes in exchange for IDSS. Such subordinated notes may be issued with original issue discount. The U.S. federal income tax consequences to you of the deposit with the depositary of subordinated notes with original issue discount or a deposit of subordinated notes following such deposit are unclear. We intend to take the position that any such deposit of subordinated notes will not result in a taxable exchange of your subordinated notes for U.S. federal income tax purposes. With respect to the portion of any subordinated note with original issue discount that you would then be deemed to own, you would be required to include any original issue discount in income as it accrues. Alternatively, a deposit of subordinated notes could be treated as a taxable exchange to both the depositor and holders of IDSS of a portion of the subordinated notes represented by your IDSS for a portion of the subordinated notes subsequently deposited with the depositary. In such case, you would recognize any gain (but not loss) on the deemed exchange in an amount equal to the difference between the fair market value on the date of the deemed exchange of the subordinated notes deemed to have been received in the exchange and your adjusted tax basis in the subordinated notes deemed to have been transferred in the exchange. You would be required to include any original issue discount on any subordinated note issued with original issue discount deemed to have been received in the exchange in income as ordinary income as it accrues, in advance of the receipt of cash attributable to such income. Your initial tax basis in the subordinated notes deemed to have been received in the exchange would be the fair market value of such subordinated notes on the date of the deemed exchange, and your holding period for the such subordinated notes would begin on the day after the deemed exchange. 132 COMMON STOCK DIVIDENDS The gross amount of dividends paid to you will be treated as dividend income to you to the extent paid out of current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such income will be includable in your gross income as ordinary income on the day received by you or by the depositary. Proposed legislation has been introduced by the Bush Administration that, if enacted, could exempt certain dividend income from taxation, reduce the tax rate imposed on dividends or partially eliminate the current dividends received deduction. Prospects for the enactment of this legislation are uncertain. TAXATION OF CAPITAL GAINS Upon the sale, exchange, retirement or other disposition of an IDSS, you will be treated as having sold, exchanged, retired or disposed of the shares of common stock constituting the IDSS. Upon the sale, exchange, retirement or other disposition of shares of our common stock, you will recognize capital gain or loss in an amount equal to the difference between the portion of the proceeds allocable to your shares of common stock and your tax basis in the shares of common stock. As described above under "IDSS -- Allocation of Purchase Price", your tax basis in the shares of common stock generally will be the portion of the purchase price of your IDSS allocable to the shares of common stock. As discussed above, capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. INFORMATION REPORTING AND BACKUP WITHHOLDING In general, information reporting requirements will apply to payments of principal, interest and dividends paid on an IDSS and to the proceeds of sale of an IDSS paid to a U.S. Holder other than certain exempt recipients (such as corporations). A backup withholding tax will apply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS. CONSEQUENCES TO NON-U.S. HOLDERS The following discussion applies only to Non-U.S. Holders. A "Non-U.S. Holder" is a holder, other than an entity or arrangement classified as a partnership for U.S. federal income tax purposes, that is not a U.S. Holder. Special rules may apply to certain Non-U.S. Holders, such as: - U.S. expatriates, - "controlled foreign corporations," - "passive foreign investment companies," - "foreign personal holding companies," - corporations that accumulate earnings to avoid U.S. federal income tax, and - investors in pass-through entities that are subject to special treatment under the Code. Such Non-U.S. Holders should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. SUBORDINATED NOTES CHARACTERIZATION OF SUBORDINATED NOTES As discussed above under "Subordinated Notes -- Characterization of Subordinated Notes," the subordinated notes should be treated as debt for U.S. federal income tax purposes. However, no ruling on 133 this issue has been requested from the IRS and thus there can be no assurance that such a position would be sustained if challenged by the IRS. If the subordinated notes were treated as equity rather than debt for U.S. federal income tax purposes, then the subordinated notes would be treated in the same manner as shares of common stock as described below under "Consequences to Non-U.S. Holders -- Common Stock -- Dividends," and payments on the subordinated notes would be subject to U.S. federal withholding taxes. Payments to Non-U.S. Holders would not be grossed-up on account of any such taxes. U.S. FEDERAL WITHHOLDING TAX Subject to the discussion below concerning backup withholding, no withholding of U.S. federal income tax should be required with respect to the payment of principal or interest on a subordinated note owned by you under the "portfolio interest rule," provided that: - interest paid on the subordinated note is not effectively connected with your conduct of a trade or business in the United States, - you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of section 871(h)(3) of the Code and the regulations thereunder, - you are not a controlled foreign corporation that is related to us through stock ownership, - you are not a bank whose receipt of interest on a subordinated note is described in section 881(c)(3)(A) of the Code, and - you satisfy the statement requirement (described generally below) set forth in section 871(h) and section 881(c) of the Code and the regulations thereunder. To satisfy the requirement referred to in the final bullet above, you, or a financial institution holding the subordinated note on your behalf, must provide, in accordance with specified procedures, our paying agent with a statement to the effect that you are not a U.S. person. Currently, these requirements will be met if (1) you provide your name and address, and certify, under penalties of perjury, that you are not a U.S. person (which certification may be made on an IRS Form W-8BEN), or (2) a financial institution holding the subordinated note on your behalf certifies, under penalties of perjury, that such statement has been received by it and furnishes a paying agent with a copy thereof. The statement requirement referred to in the final bullet above may also be satisfied with other documentary evidence with respect to a subordinated note held in an offshore account or through certain foreign intermediaries. If you cannot satisfy the requirements of the "portfolio interest rule" described in the bullets above, payments of interest made to you will be subject to a 30% withholding tax unless you provide us or our paying agent, as the case may be, with a properly executed: - IRS Form W-8BEN claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty, or - IRS Form W-8ECI stating that interest paid on the subordinated note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. Alternative documentation may be applicable in certain situations. U.S. FEDERAL INCOME TAX If you are engaged in a trade or business in the United States and interest on the subordinated note is effectively connected with the conduct of such trade or business, you, although exempt from the withholding tax discussed above (provided the certification requirements described above are satisfied), will be subject to U.S. federal income tax on such interest on a net income basis in the same manner as if you were a U.S. Holder. In addition, if you are a foreign corporation, you may be subject to a branch 134 profits tax equal to 30% (or lesser rate under an applicable income tax treaty) of such amount, subject to adjustments. SALE, EXCHANGE OR RETIREMENT OF SUBORDINATED NOTES Upon the sale, exchange, retirement or other disposition of an IDSS, you will be treated as having sold, exchanged, retired or disposed of the subordinated note constituting the IDSS. Any gain realized upon the sale, exchange, retirement or other disposition of a subordinated note generally will not be subject to U.S. federal income tax unless: - such gain is effectively connected with your conduct of a trade or business in the United States, or - you are an individual, you are present in the United States for 183 days or more in the taxable year of such sale, exchange, retirement or other disposition, and certain other conditions are met. U.S. FEDERAL ESTATE TAX A subordinated note beneficially owned by an individual who at the time of death is a Non-U.S. Holder should not be subject to U.S. federal estate tax, provided that any payment to such individual on the notes would be eligible for exemption from the 30% U.S. federal withholding tax under the rules described above under "-- Consequences to Non-U.S. Holders -- Subordinated Notes -- U.S. Federal Withholding Tax" without regard to the statement requirement described therein. COMMON STOCK DIVIDENDS Dividends paid to you generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty (which, in the case of Canada, would generally be 15%). However, dividends that are effectively connected with your conduct of a trade or business within the United States and, where a tax treaty applies, are attributable to your U.S. permanent establishment, are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates. Certain certification and disclosure requirements must be satisfied for effectively connected income to be exempt from withholding. If you are a foreign corporation, any such effectively connected dividends received by you may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty (which, in the case of Canada, would be 5%). If you wish to claim the benefit of an applicable treaty rate (and avoid backup withholding as discussed below) for dividends, you will be required to: - complete IRS Form W-8BEN (or other applicable form) and certify under penalties of perjury, that you are not a U.S. person or - if the shares of our common stock are held through certain foreign intermediaries, satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain Non-U.S. Holders that are entities rather than individuals. If you are eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. GAIN ON DISPOSITION OF COMMON STOCK Upon the sale, exchange, retirement or other disposition of an IDSS, you will be treated as having sold, exchanged, retired or disposed of the shares of common stock constituting the IDSS. You generally will not 135 be subject to U.S. federal income tax with respect to gain recognized on a sale or other disposition of shares of our common stock unless: - the gain is effectively connected with your conduct of a trade or business in the United States, and, where a tax treaty applies, is attributable to your U.S. permanent establishment, - if you are an individual and hold shares of our common stock as a capital asset, you are present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met, or - we are or have been a "U.S. real property holding corporation" for U.S. federal income tax purposes. If you are an individual and are described in the first bullet above, you will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. If you are an individual and are described in the second bullet above, you will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses (even though you are not considered a resident of the United States). If you are a foreign corporation and are described in the first bullet above, you will be subject to tax on your gain under regular graduated U.S. federal income tax rates and, in addition, may be subject to the branch profits tax equal to 30% of your effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty (which, in the case of Canada, would be 5%). We believe we are not and do not anticipate becoming a "U.S. real property holding corporation" for U.S. federal income tax purposes. U.S. FEDERAL ESTATE TAX Shares of our common stock held by an individual Non-U.S. Holder at the time of death will be included in such holder's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING The amount of interest payments and dividends paid to you and the amount of tax, if any, withheld with respect to such payments will be reported annually to the IRS. Copies of the information returns reporting such interest payments, dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty. In general, backup withholding will be required with respect to payments made by us or any paying agent to you, unless a statement described in the fifth bullet under "Consequences to Non-U.S. Holders -- Subordinated Notes -- U.S. Federal Withholding Tax" has been received (and we or the paying agent do not have actual knowledge or reason to know that you are a U.S. person). Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of IDSS within the United States or conducted through U.S.-related financial intermediaries unless a statement described in the fifth bullet under "Consequences to Non-U.S. Holders -- Subordinated Notes -- U.S. Federal Withholding Tax" has been received (and we or the paying agent do not have actual knowledge or reason to know that you are a U.S. person) or you otherwise establish an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS. 136 CERTAIN ERISA CONSIDERATIONS The following is a summary of certain considerations associated with the purchase of the IDSS by employee benefit plans that are subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of the Code or ERISA (collectively, "Similar Laws"), and entities whose underlying assets are considered to include "plan assets" of such plans, accounts and arrangements (each, a "Plan"). GENERAL FIDUCIARY MATTERS ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA Plan") and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan, or who renders investment advice for a fee or other compensation to such a Plan, is generally considered to be a fiduciary of the ERISA Plan. In considering an investment in the IDSS of a portion of the assets of any Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary's duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws. PROHIBITED TRANSACTION ISSUES Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are "parties in interest," within the meaning of ERISA, or "disqualified persons," within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. Whether or not the underlying assets of the Issuer are deemed to include "plan assets," as described below, the acquisition and/or holding of the IDSS by an ERISA Plan with respect to which the Issuer, the Underwriter, the Trustee or the Guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor (the "DOL") has issued prohibited transaction class exemptions, or "PTCEs," that may apply to the acquisition and holding of the IDSS. These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers, although there can be no assurance that all of the conditions of any such exemptions will be satisfied. PLAN ASSET ISSUES ERISA and the Code do not define "plan assets." However, regulations (the "Plan Asset Regulations") promulgated under ERISA by the DOL generally provide that when an ERISA Plan acquires an equity interest in an entity that is an "operating company", or the equity interest is a "publicly-offered security" (in each case as defined in the Plan Asset Regulations), such equity interest 137 will not be deemed a "plan asset." The Plan Asset Regulations define an "equity interest" as any interest in an entity, other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features. Therefore, we anticipate that shares of our Common Stock would be considered an equity interest and our notes should be treated as indebtedness. Under the Plan Asset Regulations, an "operating company" is defined as "an entity that is primarily engaged, directly or through a majority owned subsidiary or subsidiaries, in the production or sale of a produce or service other than the investment of capital." We believe that the Issuer is an "operating company" for purposes of the Plan Asset Regulations, although no assurance can be given in this regard. Alternatively, under the Plan Asset Regulations, a "publicly offered security" is a security that is (a) "freely transferable", (b) part of a class of securities that is "widely held," and (c)(i) sold to the Plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933 and the class of securities to which such security is a part is registered under the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year of the issuer during which the offering of such securities to the public has occurred, or (ii) is part of a class of securities that is registered under Section 12 of the Exchange Act. The Issuer intends to effect such a registration under the Securities Act and Securities Exchange Act. The Plan Asset Regulations provide that a security is "widely held" only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and one another. A security will not fail to be "widely held" because the number of independent investors falls below 100 subsequent to the initial offering thereof as a result of events beyond the control of the issuer. It is anticipated that the IDSS will be "widely held" within the meaning of the Plan Asset Regulations, although no assurance can be given in this regard. The Plan Asset Regulations provide that whether a security is "freely transferable" is a factual question to be determined on the basis of all the relevant facts and circumstances. It is anticipated that the IDSS will be "freely transferable" within the meaning of the Plan Asset Regulations, although no assurance can be given in this regard. PLAN ASSET CONSEQUENCES If VSA ceases to be an operating company for purposes of the Plan Asset Regulations and the IDSS cease to be publicly-offered securities within the meaning of the Plan Asset Regulations, the assets of the Issuer could be deemed to be "plan assets" under ERISA, unless, at such time, another exemption is available under the Plan Asset Regulations. This would result, among other things, in (i) the application of the prudence and other fiduciary responsibility standards of ERISA to investments made by the Issuer, and (ii) the possibility that certain transactions in which the Issuer might seek to engage could constitute "prohibited transactions" under ERISA and the Code. Because of the foregoing, the IDSS should not be purchased or held by any person investing "plan assets" of any Plan, unless such purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or similar violation of any applicable Similar Laws. REPRESENTATION Accordingly, by acceptance of the IDSS, each purchaser and subsequent transferee of the IDSS will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to acquire and hold the IDSS constitutes assets of any Plan or (ii) the purchase and holding of the IDSS by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or similar violation under any applicable Similar Laws. The foregoing discussion is general in nature and is not intended to be all-inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering purchasing the IDSS on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the purchase and holding of the IDSS. 138 UNDERWRITING We have entered into an underwriting agreement dated, , 2003 with the underwriters named below. CIBC World Markets Corp. is acting as the representative of the underwriters. The underwriting agreement provides for the purchase of a specified number of IDSS and underlying shares of common stock and subordinated notes, by each of the underwriters. The underwriters' obligations are several, which means that each underwriter is required to purchase a specified number of IDSS but is not responsible for the commitment of any other underwriter to purchase the IDSS. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of IDSS set forth opposite its name below:

Under the underwriting agreement, we have agreed to sell and the underwriters have agreed to purchase the IDSS offered under this offering at a price of $ , payable in cash to us against delivery. However, the underwriters have agreed to purchase all of the IDSS offered in this offering (other than those covered by the over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase the IDSS, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances. This offering is being made concurrently in the United States and in all of the provinces of Canada. The IDSS will be offered in the United States and Canada through the underwriters either directly or through their respective U.S. or Canadian registered broker-dealer affiliates. Subject to applicable law, the underwriters may offer the IDSS outside of the United States and Canada. The IDSS should be ready for delivery on or about , 2003 but in any event no later than , 2003 against payment in immediately available funds. The underwriters are offering the IDSS subject to various conditions and may reject all or part of any order. The representative has advised us that the underwriters propose to offer the IDSS directly to the public at the public offering price that appears on the cover page of this prospectus. In addition, the representative may offer some of the IDSS to other securities dealers at such price less a concession of $ per IDSS. The underwriters may also allow, and such dealers may reallow, a concession not in excess of $ per IDSS to other dealers. After the IDSS are released for sale to the public, the representative may change the offering price and other selling terms at various times. The IDSS are being offered in the United States in U.S. dollars and in Canada in Canadian dollars, at the same offering price and underwriting discounts and commissions per IDSS, calculated based on the noon buying rate on the date of this prospectus as quoted by the Federal Reserve Bank of New York. We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase a maximum of additional IDSS from us to cover all over-allotments. If the underwriters exercise all or part of this option, they will purchase the IDSS covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $ , and the total proceeds to us will be $ . The underwriters have severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional IDSS proportionate to the underwriter's initial amount reflected in the foregoing table. 139 The following table provides information regarding the amount of the discount to be paid to the underwriters by us:

We estimate that our total expenses of this offering, excluding the underwriting discount, will be approximately $ . We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933. We, our executive officers and directors and certain of our stockholders have agreed to a -day "lock up" with respect to the IDSS and shares of our common stock, including securities that are convertible into such securities and securities that are exchangeable or exercisable for such securities, subject to specified exceptions. This means that for a period of days following the date of this prospectus we and such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the representative, subject to specified exceptions. However, we may issue IDSS, shares of our common stock and the subordinated notes to our existing stockholders in connection with the recapitalization described elsewhere in this prospectus. The representative has informed us that they do not expect discretionary sales by the underwriters to exceed 5% of the IDSS offered by this offering. There is no established trading market for the shares of our common stock, the notes or the IDSS. The offering price for the IDSS will be determined by us and the representative based on the following factors: - prevailing market and general economic conditions, - our financial information, - our history and prospects, - the history of and prospects for the industry in which we compete, - an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues, and - the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. We will apply to list the IDSS on the American Stock Exchange under the symbol " " and on the Toronto Stock Exchange under the symbol " ." We will also apply to list the underlying shares of our common stock on the under the symbol " ." Rules of the Commission may limit the ability of the underwriters to bid for or purchase IDSS before the distribution of the IDSS is completed. However, the underwriters may engage in the following activities in accordance with the rules: - Stabilizing transactions -- The representative may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the IDSS, so long as stabilizing bids do not exceed a specified maximum. - Over-allotment and syndicate covering transactions -- The underwriters may sell more IDSS in connection with this offering than the number of IDSS that they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either "covered" short sales or "naked" short sales. Covered short sales are short sales made in an amount not greater than the underwriters' over-allotment option to purchase additional IDSS in this offering described above. The underwriters may close out any covered short position either by exercising their over-allotment option or by purchasing IDSS in the open market. To determine 140 how they will close the covered short position, the underwriters will consider, among other things, the price of IDSS available for purchase in the open market as compared to the price at which they may purchase IDSS through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing IDSS in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price of the IDSS that could adversely affect investors who purchase IDSS in this offering. - Penalty bids -- If the representative purchases IDSS in the open market in a stabilizing transaction or syndicate covering transaction, it may reclaim a selling concession from the underwriters and selling group members who sold those IDSS as part of this offering. In accordance with policy statements of the Commission des valeurs mobilieres du Quebec and the Ontario Securities Commission, the underwriters in Canada may not, throughout the period of distribution, bid for or purchase the IDSS. Such restriction is subject to certain exceptions, provided that the bid or purchase was not engaged in for the purpose of creating actual or apparent active trading in, or raising the price of the IDSS, including: (1) a bid or purchase permitted under the by-laws and rules of the Toronto Stock Exchange relating to market stabilization and passive market making activities; and (2) a bid or purchase made for and on behalf of a customer where the order was not solicited during the period of the distribution. Under the first mentioned exemption, in connection with this offering, the underwriters may over-allot or effect transactions which stabilize or maintain the market price of the IDSS at a level other than that which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time. Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales or to stabilize the market price of the IDSS may have the effect of raising or maintaining the market price of the IDSS or preventing or mitigating a decline in the market price of the IDSS. As a result, the price of the IDSS may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the IDSS if it discourages resales of the IDSS. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of the IDSS. These transactions may occur on , the Toronto Stock Exchange or otherwise. If such transactions are commenced, they may be discontinued without notice at any time. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representative may agree to allocate a number of IDSS to underwriters for sale to their online brokerage account holders. The representative will allocate IDSS to underwriters that may make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on any of these websites and any other information contained on a website maintained by an underwriter or syndicate member is not part of this prospectus. We and the underwriters expect that the IDSS will be ready for delivery on the th business day following the date of this prospectus. Under Commission regulations, secondary market trades are required to settle in three business days following the trade date (commonly referred to as "T+3"), unless the parties to the trade agree to a different settlement cycle. As noted above, the IDSS will settle in T+ . Therefore, purchasers who wish to trade on the date of this prospectus or during the next succeeding business day(s) must specify an alternate settlement cycle at the time of the trade to prevent a failed settlement. Purchasers of the IDSS who wish to trade IDSS on the date of this prospectus or during the next succeeding business day(s) should consult their own advisors. CIBC World Markets Inc., an affiliate of CIBC World Markets Corp., is the lead arranger and sole bookrunner of the new credit facility. The underwriters have provided, and may continue to provide, from time to time investment banking, commercial banking, advisory and other services to us and the existing investors for customary fees and expenses in the ordinary course of their business. 141 LEGAL MATTERS The validity of the issuance of our shares of common stock and subordinated notes offered hereby will be passed upon for us by Simpson Thacher & Bartlett, New York, New York. Certain legal matters relating to this offering will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. EXPERTS The consolidated financial statements as of January 2, 2001 and January 1, 2002, and for each of the three years in the period ended January 1, 2002, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed a Registration Statement on Form S-1 with the Commission regarding this offering. This prospectus, which is part of the registration statement, does not contain all of the information included in the registration statement, and you should refer to the registration statement and its exhibits to read that information. References in this prospectus to any of our contracts or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. As a result of the effectiveness of the registration statement, we are subject to the informational reporting requirements of the Exchange Act of 1934 and, under that Act, we will file reports, proxy statements and other information with the Commission. You may read and copy the registration statement, the related exhibits and the reports, proxy statements and other information we file with the SEC at the SEC's public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC. The site's Internet address is www.sec.gov. You may also request a copy of these filings, at no cost, by writing or telephoning us at: Volume Services America Holdings, Inc. 201 East Broad Street Spartanburg, South Carolina 29306 (864) 598-8600 142 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1 PART I FINANCIAL INFORMATION VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS OCTOBER 1, 2002 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-2 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS -- (CONTINUED) OCTOBER 1, 2002 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-3 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED OCTOBER 1, 2002 AND OCTOBER 2, 2001

See notes to consolidated financial statements. F-4 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE PERIOD JANUARY 1, 2002 TO OCTOBER 1, 2002

See notes to consolidated financial statements. F-5 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS THIRTY-NINE WEEK PERIODS ENDED OCTOBER 1, 2002 AND OCTOBER 2, 2001

See notes to consolidated financial statements. F-6 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THIRTY-NINE WEEK PERIODS ENDED OCTOBER 1, 2002 AND OCTOBER 2, 2001 1. GENERAL Volume Services America Holdings, Inc. ("Volume Holdings," and together with its subsidiaries, the "Company") is a holding company, the principal assets of which are the capital stock of its subsidiary, Volume Services America, Inc. ("Volume Services America"). Volume Holdings' financial information is therefore substantially the same as that of Volume Services America. Volume Services America is also a holding company, the principal assets of which are the capital stock of its subsidiaries, Volume Services, Inc. ("Volume Services") and Service America Corporation ("Service America"). The Company is owned by its senior management, Blackstone Capital Partners II Merchant Banking Fund, L.P. ("BCP II"), and General Electric Capital Corporation ("GE Capital"). The accompanying financial statements of Volume Holdings have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The results of operations for the thirty-nine week period ended October 1, 2002 are not necessarily indicative of the results to be expected for the fifty-two week fiscal year ending December 31, 2002 due to the seasonal aspects of the business. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the audited statements and notes thereto for the year ended January 1, 2002. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reclassifications. Certain amounts in 2001 have been reclassified, where applicable, to conform to the financial statement presentation used in 2002. New Accounting Standards. In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142 Goodwill and Other Intangible Assets, which became effective for the Company on January 2, 2002. SFAS No. 142 requires, among other things, discontinuing amortization of goodwill and identifiable intangible assets with indefinite lives. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. The Company has adopted SFAS No. 142 and completed the required transitional impairment test and found there to be no related impairments. In accordance with the standard, the Company discontinued the F-7 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amortization of goodwill and trademarks, identified intangible assets which management believes have indefinite lives. A reconciliation of net income (loss) to adjusted net income is as follows:

In August 2001, the FASB issued SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 superseded Statement of Financial Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 became effective for the Company on January 2, 2002. The adoption of SFAS 144 had no significant impact on the Company's financial position or results of operations. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. First, SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that statement, SFAS No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements. Because of the rescission of SFAS No. 4, the gains and losses from the extinguishment of debt are no longer required to be classified as extraordinary items. SFAS No. 64 amended SFAS No. 4 and is no longer needed because SFAS No. 4 is rescinded. Second, SFAS No. 145 rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers. This statement was originally issued to establish accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. As those transitions are complete, SFAS No. 44 is no longer needed. Third, SFAS No. 145 amends SFAS No. 13, Accounting for Leases, to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The amendment of SFAS No. 13 is effective for transactions occurring after May 15, 2002. There has been no impact on the Company due to the amendment of SFAS No. 13. Lastly, SFAS No. 145 makes various technical corrections to existing pronouncements that are not substantive in nature. The Company has not yet evaluated the impact on its financial position or results of operations of the rescission of SFAS No. 4, 44 and 64 and the other technical corrections prescribed by this statement, all of which become effective for the Company in fiscal 2003. F-8 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employees Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The Company has not yet evaluated the impact of this statement on its financial position or results of operations. On November 25, 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Interpretation expands on the accounting guidance of SFAS No. 5, Accounting for Contingencies, SFAS No. 57, Related Party Disclosures, and SFAS No. 107, Disclosures about Fair Value of Financial Instruments. The Interpretation also incorporates without change, the provisions of FASB Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others, which it supersedes. The Interpretation does identify several situations where the recognition of a liability at inception for a guarantor's obligation is not required. The initial recognition and measurement provisions of Interpretation 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosures are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company has not yet calculated the impact of this Interpretation on its financial position or results of operations. On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 148's amendment of the transition and annual disclosure requirements of SFAS No. 123 are effective for fiscal years ending after December 15, 2002. SFAS No. 148's amendment of the disclosure requirements of APB Opinion No. 28 is effective for financial reports containing consolidated financial statements for interim periods beginning after December 15, 2002. The Company has not yet evaluated the impact of this Statement on its financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. This Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. This Interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. The Company has not yet evaluated the impact of this Interpretation on its financial position or results of operations. F-9 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Contract Rights. During the thirty-nine weeks ended October 1, 2002, the Company entered into contracts to provide specified concession and other services. Contract rights of approximately $35.9 million were purchased and will be amortized on a straight line basis over the lives of the agreements. Insurance. At the beginning of fiscal 2002, the Company adopted a high deductible insurance program for general liability, auto liability and workers' compensation risk. During the fiscal years 1999 through 2001, the Company had a premium-based insurance program for general liability, automobile liability and workers' compensation risk. Prior to fiscal 1999, the Company was primarily self-insured for general liability, automobile liability and workers' compensation risks, supplemented by stop-loss type insurance policies. Management determines the estimate of the reserve for the deductible and self- insurance considering a number of factors, including historical experience and actuarial assessment of the liabilities for reported claims and claims incurred but not reported. The Company became self-insured for employee health insurance in December 1999. Prior to December 1999, the Company had a premium-based insurance program. The reserve for the employee health self-insurance liability is based on claims filed and estimates for claims incurred but not reported. Income Taxes. The provision for income taxes includes federal, state and foreign taxes currently payable, and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established for deferred tax assets when it is more likely than not that the benefits of such assets will not be realized. Income taxes for the thirty-nine weeks ended October 1, 2002 and October 2, 2001 are calculated using the projected effective tax rate for fiscal 2002 and 2001, respectively, which in fiscal 2002 includes the reversal of approximately $0.8 million of valuation allowances on deferred tax assets and the utilization of approximately $0.9 million of wage and tip credits. 3. CONTRACT RELATED LOSSES Contract related losses for the thirty-nine weeks ended October 1, 2002 reflect an impairment charge of approximately $0.7 million for the write-down of contract rights. For the thirty-nine weeks ended October 2, 2001, contract related losses consist of approximately $1.8 million for the write-down of property and equipment and a receivable reserve of $2.3 million related to two of the Company's customers which filed for reorganization under Chapter 11 of the Bankruptcy Code. 4. COMMITMENTS AND CONTINGENCIES The Company is from time to time involved in various legal proceedings incidental to the conduct of its business. In the opinion of management, any liabilities arising out of any currently pending proceedings will not have a material adverse effect on our financial condition or results of operations. 5. EXECUTIVE EMPLOYMENT AGREEMENT Effective April 15, 2002, the Company entered into an Executive Employment Agreement (the "Agreement") with its Chief Executive Officer, Lawrence E. Honig. The Agreement provides for the grant of stock options equal to three percent of the total outstanding number of shares of Volume Holdings on the option issuance date, pursuant to a stock option plan that was to be adopted within 180 days of the effective date of the Agreement. Subsequently, the board of directors has engaged an outside firm to evaluate various management long-term incentive plans. F-10 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. NON-GUARANTOR SUBSIDIARIES FINANCIAL STATEMENTS The Company's $100 million in 11 1/4% senior subordinated notes due 2009 are jointly and severally guaranteed by Volume Holdings and all of the subsidiaries of Volume Service America (the "Guarantor Subsidiaries"), except for certain non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary (together the "Non-Guarantor Subsidiaries"). The following table sets forth the condensed consolidating financial statements of Volume Holdings, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of October 1, 2002 and January 1, 2002 (in the case of the balance sheets), for the thirteen and thirty-nine week periods ended October 1, 2002 and October 2, 2001 (in the case of the statements of operations and comprehensive income (loss)) and for the thirty-nine week periods ended October 1, 2002 and October 2, 2001 (in the case of the statements of cash flows). CONSOLIDATING CONDENSED BALANCE SHEET, OCTOBER 1, 2002

F-11 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) THIRTEEN WEEK PERIOD ENDED OCTOBER 1, 2002

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME THIRTY-NINE WEEK PERIOD ENDED OCTOBER 1, 2002

F-12 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS THIRTY-NINE WEEK PERIOD ENDED OCTOBER 1, 2002

F-13 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET, JANUARY 1, 2002

F-14 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME THIRTEEN WEEK PERIOD ENDED OCTOBER 2, 2001

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) THIRTY-NINE WEEK PERIOD ENDED OCTOBER 2, 2001

F-15 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS THIRTY-NINE WEEK PERIOD ENDED OCTOBER 2, 2001

F-16 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Volume Services America Holdings, Inc.: We have audited the accompanying consolidated balance sheets of Volume Services America Holdings, Inc. and subsidiaries (collectively the "Company") as of January 2, 2001 and January 1, 2002, and the related consolidated statements of operations and comprehensive loss, stockholders' deficiency, and cash flows for each of the three years in the period ended January 1, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Volume Services America Holdings, Inc. and its subsidiaries at January 2, 2001 and January 1, 2002, and the results of its operations and cash flows for each of the three years in the period ended January 1, 2002 in conformity with accounting principles generally accepted in the United States of America. March 8, 2002 (except for the second to last paragraph of note 2, as to which the date is August 31, 2002) Charlotte, North Carolina F-17 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS JANUARY 2, 2001 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-18 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS -- (CONTINUED) JANUARY 2, 2001 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-19 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS YEARS ENDED DECEMBER 28, 1999, JANUARY 2, 2001 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-20 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY YEARS ENDED DECEMBER 28, 1999, JANUARY 2, 2001 AND JANUARY 1, 2002

See notes to consolidated financial statements F-21 VOLUME SERVICES AMERICA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 28, 1999, JANUARY 2, 2001 AND JANUARY 1, 2002

See notes to consolidated financial statements. F-22 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 28, 1999, JANUARY 2, 2001 AND JANUARY 1, 2002 1. GENERAL Volume Services America Holdings, Inc. ("Volume Holdings," and together with its subsidiaries, the "Company") is a holding company, the principal assets of which are the capital stock of its subsidiary, Volume Services America, Inc. ("Volume Services America"). Volume Holdings' financial information is therefore substantially the same as that of Volume Services America. Volume Services America is also a holding company, the principal assets of which are the capital stock of its subsidiaries, Volume Services, Inc. ("Volume Services") and Service America Corporation ("Service America"). The Company is owned by its senior management, Blackstone Capital Partners II Merchant Banking Fund, L.P. ("BCP II"), and General Electric Capital Corporation ("GE Capital"). GE Capital controlled 36.4 percent of the Company at January 1, 2002. As of January 1, 2002, the remainder of the Company's capital stock was owned by BCP II through its limited partnerships, BCP Volume L.P. and BCP Offshore Volume L.P. ("Blackstone") (59.4 percent) and by current and former management employees of the Company (4.2 percent). At January 1, 2002, the Company had approximately 128 contracts to provide specified concession services, including catering and novelty merchandise items at stadiums, sports arenas, convention centers and other entertainment facilities at various locations in the United States and Canada. Contracts to provide these services were generally obtained through competitive bids. In most instances, the Company has the right to provide these services in a particular location for a period of several years, with the duration of time often a function of the required investment in facilities or other financial considerations. The contracts vary in length generally from 1 to 20 years. Certain of the contracts contain renewal clauses. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements include the accounts of Volume Holdings, and its wholly owned subsidiary, Volume Services America, and its wholly owned subsidiaries, Volume Services and Service America. All significant intercompany transactions have been eliminated. Fiscal Year. The Company has adopted a 52-53 week period ending on the Tuesday closest to December 31 as its fiscal year end. The 1999 and 2001 fiscal years consisted of 52 weeks and fiscal year 2000 contained 53 weeks. Cash and Cash Equivalents. The Company considers temporary cash investments purchased with an original maturity of three months or less to be cash. Revenue Recognition. The Company typically enters into one of three types of contracts: 1) profit and loss contracts, 2) profit sharing contracts, and 3) management fee contracts. Under profit and loss and profit-sharing contracts, revenue from food and beverage concessions and catering contract food services is recognized as net sales when the services are provided. Management fee contracts provide the Company with a fixed fee or a fixed fee plus an incentive fee and the Company bears no profit or loss risk. Fees received for management fee contracts are included in net sales when earned. The aggregate amount of sales recognized by the Company and sales collected on behalf of others under management fee contracts from services provided to the end users of the products is defined as "managed revenues." The Company's total managed revenues for fiscal years 1999, 2000 and 2001 were approximately $452,679,000, $542,324,000 and $554,677,000, respectively. Merchandise Inventories. Merchandise inventories consist of food, beverage, team and other merchandise. Inventory is valued primarily at the lower of cost or market, determined on the first-in, first-out basis. F-23 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Depreciation. Property and equipment is stated at cost and is depreciated on the straight-line method over the lesser of the estimated useful life of the asset and the term of the contract at the site where such property and equipment is located. Following are the estimated useful lives of the property and equipment: - Leasehold improvements -- generally 10 years -- limited by the lease term or contract term, if applicable - Merchandising equipment -- generally 5 to 10 years limited by the contract term, if applicable - Vehicles and other equipment -- generally 2 to 10 years limited by the contract term, if applicable Contract Rights. Contract rights, net of accumulated amortization, consist primarily of certain directly attributable costs incurred by the Company in obtaining or renewing contracts with clients and the adjustment to fair value of contract rights acquired in the acquisitions of Volume Services in 1995 and Service America in 1998. These costs for the Company are amortized on a straight-line basis over the contract life of each such contract, which range from 1-20 years, including optional renewal periods where the option to renew rests solely with the Company. Accumulated amortization was approximately $29,789,000 at January 2, 2001 and $35,321,000 at January 1, 2002. Cost in Excess of Net Assets Acquired. Cost in excess of net assets acquired (goodwill) is being amortized on the straight-line basis over 30 years. Accumulated amortization was approximately $4,977,000 at January 2, 2001 and $6,748,000 at January 1, 2002. Trademarks. Trademarks are being amortized on a straight-line basis over 30 years. Accumulated amortization was approximately $2,865,000 at January 2, 2001 and $3,551,000 at January 1, 2002. Deferred Financing Costs. Deferred financing costs are being amortized as interest expense over the life of the respective debt using the interest method. Accumulated amortization was approximately $3,062,000 at January 2, 2001 and $4,492,000 at January 1, 2002. Impairment of Long-Lived Assets and Contract Losses. The Company reviews long-lived assets and contract assets for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Accordingly, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss for long-lived assets, such as property, and certain identifiable intangibles, is based on the estimated fair value of the asset determined by future discounted net cash flows. The Company assesses cost in excess of net assets acquired (goodwill) for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. To analyze recoverability, the Company projects future undiscounted cash flows over the remaining life of goodwill. If the sum of the expected future undiscounted cash flows is less than the carrying amount of goodwill, an impairment loss is recognized. Measurement of an impairment loss for goodwill is based upon the difference between the carrying amount of goodwill and the future undiscounted cash flows. Derivative Financial Instruments. The Company accounts for derivative financial instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of the Financial Accounting Standards Board ("FASB") Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which became effective for the Company on January 3, 2001. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities measured at fair value. In addition, all derivatives used in hedging F-24 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) relationships must be designated, reassessed and documented pursuant to the provisions of SFAS No. 133. The adoption of SFAS No. 133 had an insignificant impact on the Company's financial position. The Company is exposed to fluctuations in the fair value of certain liabilities. The Company uses derivative financial instruments such as interest rate swap agreements to manage exposure to fluctuations in the fair value of its fixed-rate debt instruments. The Company does not hold or issue any derivative financial instruments for trading purposes and is not a party to leveraged instruments. The credit risks associated with the Company's derivative financial instruments are controlled through the evaluation and monitoring of the creditworthiness of the counterparties. Although the Company may be exposed to losses in the event of nonperformance by the counterparties, the Company does not expect such losses, if any, to be significant. Insurance. At the beginning of fiscal 1999, the Company adopted a premium-based insurance program for general liability, automobile liability and workers' compensation risk. Prior to fiscal 1999, the Company was primarily self-insured for general liability, automobile liability and workers' compensation risks, supplemented by stop-loss type insurance policies. Management determines its estimate of the reserve for self-insurance considering a number of factors, including historical experience and actuarial assessment of the liabilities for reported claims and claims incurred but not reported. The self-insurance liabilities for estimated incurred losses were discounted (using rates between 4.92 percent and 5.11 percent at January 2, 2001 and 2.17 percent and 5.07 percent at January 1, 2002), to their present value based on expected loss payment patterns determined by experience. The total discounted self-insurance liabilities recorded by the Company at January 2, 2001 and January 1, 2002 were $2,755,000 and $2,061,000, respectively. The related undiscounted amounts were $3,256,000 and $2,184,000, respectively. The Company became self-insured for employee health insurance in December 1999. Prior to December 1999, the Company had a premium-based insurance program. The employee health self-insurance liability is based on claims filed and estimates for claims incurred but not reported. The total liability recorded by the Company at January 2, 2001 and January 1, 2002 was $793,000 and $951,000, respectively. Cash Overdrafts. The Company has included in accounts payable on the accompanying consolidated balance sheets cash overdrafts totaling $7,068,000 and $6,614,000 at January 2, 2001 and January 1, 2002, respectively. Foreign Currency. The balance sheet and results of operations of the Company's Canadian subsidiary (a subsidiary of Service America) are measured using the local currency as the functional currency. Assets and liabilities have been translated into United States dollars at the rates of exchange at the balance sheet date. Revenues and expenses are translated into United States dollars at the average rate during the period. The exchange gains and losses arising on transactions are charged to income as incurred. Translation gains and losses arising from the use of differing exchange rates from year to year are included in accumulated other comprehensive loss. These amounts were not significant for any period reported. Transaction Related Expenses. Transaction related expenses in fiscal year 1999 primarily include personnel costs, rental costs and professional fees associated with downsizing Service America Corporation's Stamford, Connecticut office. Transaction related expenses in fiscal year 2000 consist primarily of nonrecurring strategic corporate costs. Income Taxes. The provision for income taxes includes federal, state and foreign taxes currently payable, and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established for deferred tax assets when it is more likely than not that the benefits of such assets will not be realized. F-25 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Segment Reporting. The combined operations of the Company, consisting of contracts to provide concession services, including catering and novelty merchandise items at stadiums, sports arenas, convention centers and other entertainment facilities, comprise one reportable segment. Reclassifications. Certain amounts in 1999 and 2000 have been reclassified, where applicable, to conform to the financial statement presentation used in 2001. Noncash Compensation. The Company has elected to follow the accounting provisions of Accounting Principles Board Opinion ("APBO") No. 25, Accounting for Stock Issued to Employees for Stock-Based Compensation. New Accounting Standards. The Company adopted SFAS No. 141, Business Combinations, as of July 4, 2001. SFAS No. 141 requires, among other things, the purchase method of accounting for business combinations initiated after June 30, 2001, eliminates the pooling-of-interests method and clarifies the criteria for recording intangible assets separate from goodwill. The adoption of SFAS No. 141 had no significant impact on the Company's financial position or results of operation. In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets which became effective for the Company on January 2, 2002. SFAS No. 142 requires, among other things, the discontinuance of goodwill and trademark amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. The Company has adopted SFAS No. 142 as of January 2, 2002 and completed the required transitional impairment test and found there to be no related impairments. Goodwill and trademark amortization (pre-tax) was approximately $2,504,000, $2,458,000, and $2,458,000 for fiscal years 1999, 2000 and 2001, respectively. Had SFAS No. 142 been in effect for these fiscal years, the adjusted net income would have been as follows:

F-26 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 will be effective for the Company on January 2, 2002. The Company is currently assessing, but has not yet determined the impact of SFAS No. 144 on its financial position and results of operations. 3. CHANGE IN ACCOUNTING PRINCIPLE In fiscal year 1999, the Company adopted the provisions of the American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start-up Activities, which requires that costs of start-up activities be expensed as incurred, as of December 28, 1999. As a result, the Company recorded a charge of $256,000 net of tax (approximately $170,000) reflecting the effect of the change in accounting principle during fiscal year 1999. 4. SIGNIFICANT RISKS AND UNCERTAINTIES Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's most significant financial statement estimates include the estimate of the recoverability of contract rights and related assets, potential litigation claims and settlements, the liability for self-insured claims, the valuation allowance for deferred tax assets and the allowance for doubtful accounts. Actual results could differ from those estimates. Certain Risk Concentrations. Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash equivalents, short-term investments and accounts receivable. The Company places its cash equivalents and short-term investments with high-credit qualified financial institutions and, by practice, limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to accounts receivable are limited due to many customers comprising the Company's customer base and their dispersion across different geographic areas. For the fiscal years ended December 28, 1999, January 2, 2001 and January 1, 2002, the Company had one customer that accounted for approximately 11.1 percent, 9.8 percent, and 10.0 percent of operating revenues, respectively. The Company's revenues and earnings are dependent on various factors such as attendance levels and the number of games played by the professional football and baseball teams which are tenants at facilities serviced by the Company, which can be favorably impacted if the teams qualify for post-season play, or adversely affected if there are stoppages such as strikes by the teams. F-27 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEBT Long-term debt consists of the following (in thousands):

1998 Credit Agreement. On December 3, 1998, Volume Services America (the "Borrower") entered into a credit agreement, which provided for $160,000,000 in term loans, consisting of $40,000,000 of Tranche A term loans ("Term Loan A") and $120,000,000 of Tranche B term loans ("Term Loan B" and together with Term Loan A, the "Term Loans") and a $75,000,000 revolving credit facility (the "Revolving Credit Facility"). Borrowings under the Term Loans were used to repay in full all outstanding indebtedness of Volume Services and Service America under their then existing credit facilities and to pay fees and expenses incurred in connection with the acquisition of Service America and the credit agreement. All borrowings under the credit facility are secured by substantially all the assets of Volume Holdings and the majority of its subsidiaries, including Volume Services and Service America. The commitments under the Revolving Credit Facility are available to fund capital investment requirements, working capital and general corporate needs of the Company. On March 4, 1999, the $40,000,000 of Term A borrowings and $5,000,000 of Term B borrowings were repaid with the proceeds from the Senior Subordinated Notes discussed below. Installments of Term Loan B are due in consecutive quarterly installments on the last day of each fiscal quarter with 25 percent of the following annual amounts being paid on each installment date: $1,150,000 in each year from 2002 through 2005, and $106,950,000 in 2006. The Revolving Credit Facility allows the Company to borrow up to $75,000,000 and includes a sub-limit of $35,000,000 for letters of credit which reduce availability under the Revolving Credit Facility and a sub-limit of $5,000,000 for Swingline Loans. Revolving Loans must be repaid at the Revolving Credit Facility maturity date and Swingline Loans must be either repaid within one month or converted to Revolving Loans. The Revolving Credit Facility will mature on December 3, 2004. At January 1, 2002, $12,750,000 was outstanding under the Revolving Credit Facility, consisting of $8,000,000 in Revolving Loans and $4,750,000 in Swingline Loans (included in short-term note payable), and approximately $12,039,000 of letters of credit were outstanding but undrawn. Borrowings under the credit agreement bear interest at floating rates based upon the interest rate option elected by the Company and the Company's leverage ratio. The weighted average interest rates at January 2, 2001 were 10.25 percent for Term Loan B and 11.5 percent for the Revolving Credit Facility. The weighted average interest rates at January 1, 2002 were 6.38 percent for Term Loan B and 5.61 percent for the Revolving Credit Facility. The credit agreement calls for mandatory prepayment of the loans under certain circumstances and optional prepayment without penalty. The credit agreement contains covenants that require the Company to comply with certain financial covenants, including a maximum net leverage ratio, an interest coverage ratio and a minimum consolidated cash net worth test, as defined. At January 1, 2002, the Company was in compliance with all covenants. In addition, Volume Services America is restricted in its ability to pay F-28 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) dividends and other restricted payments in an amount greater than approximately $49,500,000 at January 1, 2002. Senior Subordinated Notes. On March 4, 1999, Volume Services America completed a private placement of 11 1/4 percent Senior Subordinated Notes in the aggregate principal amount of $100 million. On September 30, 1999, the Company exchanged the Senior Subordinated Notes for notes which have been registered under the Securities Act of 1933, as amended. The notes mature on March 1, 2009 and interest is payable on March 1 and September 1 of each year, beginning on September 1, 1999. Such notes are unsecured, are subordinated to all the existing debt and any future debt of Volume Services America, rank equally with all of the other Senior Subordinated debt of Volume Services America, and senior to all of Volume Services America's existing and subordinated debt. Furthermore, the debt is guaranteed by the Company and all of the subsidiaries of Volume Services America, except for certain non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary. The proceeds of the notes were used to (i) repay $40,000,000 of Term A Borrowings and $5,000,000 of Term B Borrowings, (ii) fund the repurchase by Volume Holdings of 194 shares of Volume Holdings common stock for $49,500,000 and the repayment by Volume Holdings of a $500,000 note in favor of GE Capital and (iii) pay fees and expenses incurred in connection with the notes and the consent from lenders to an amendment to the Credit Agreement. In conjunction with the notes, Volume Services America recognized an extraordinary loss of $873,000, net of taxes (approximately $570,000), in its statement of operations for the early extinguishment of $45,000,000 of Term Loans in fiscal year 1999. Aggregate annual maturities of long-term debt at January 1, 2002 are as follows (in thousands): 2002........................................................ $ 1,150 2003........................................................ 1,150 2004........................................................ 9,150 2005........................................................ 1,150 2006........................................................ 106,950 Thereafter.................................................. 100,000 -------- Total.................................................. $219,550 ========

6. CAPITAL LEASE OBLIGATION The Company is obligated to make minimum lease payments under a capital lease agreement. The following is a schedule of future minimum lease payments under the capital lease as of January 1, 2002 (in thousands): 2002........................................................ $279 Less -- amount representing interest........................ (12) ---- Total capital lease obligation......................... $267 ====

Under the terms of the lease agreement, certain equipment is pledged to secure performance as follows (in thousands): Equipment................................................... $ 914 Accumulated depreciation.................................... (343) ----- Total.................................................. $ 571 =====

F-29 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INCOME TAXES The components of deferred taxes are (in thousands):

At January 1, 2002, the Company has approximately $15,105,000 of net operating loss carryforwards, $7,754,000 of which are from the acquisition of Service America. These carryforwards expire in varying amounts beginning in years 2004 through 2020. The Company's future ability to utilize the acquired Service America net operating loss carryforward is limited to some extent by Section 382 of the Internal Revenue Code of 1986, as amended. At January 1, 2002, the Company has approximately $5,212,000 of tax credit carryforwards. These tax credit carryforwards resulted primarily from wage credits generated pursuant to a review of prior year returns. These carryforwards expire in varying amounts beginning in years 2005 through 2021. At January 1, 2002, the Company established a valuation allowance of $2,257,000 related to net operating losses and credit carryforwards. Management believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of these net operating losses and credit carryovers. These carryovers are dependent upon future income. Although realization of the net deferred tax assets is not assured, management believes that it is more likely than not that all of the net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable, however, could be reduced in the near term based on changing conditions. F-30 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The benefit for income taxes is as follows (in thousands):

The difference between the statutory federal income tax rate and the effective tax rate on net loss is as follows:

8. EQUITY TRANSACTIONS Stock Redemption. From the proceeds of the Senior Subordinated Notes described in Note 5, Volume Services America paid a $50,000,000 dividend in 1999 to Volume Holdings. Volume Holdings used the proceeds to redeem 194 shares of its common stock (the "Stock Redemption") and to repay a $500,000 note in favor of GE Capital. Loans to Related Parties. At January 2, 2001 and January 1, 2002, the Company has made loans to VSI Management Direct L.P. and another partnership which hold a direct and an indirect ownership, respectively, in the Company. The loans were used to fund the repurchase of partnership interests from former members of management. Accordingly, these amounts have been included as a reduction to stockholders' equity. Noncash Compensation. During fiscal 2000, certain management employees purchased units in two partnerships that have an indirect ownership in the Company. These purchases were financed with nonrecourse loans. The terms of the purchase agreements are such that the issuance of these units is a variable plan, which requires the Company to revalue the units at each measurement date for changes in the fair value of the units. The related compensation expense is recorded in selling, general, and administrative expenses in the statement of operations and comprehensive loss, for fiscal years 2000 and 2001. Had compensation costs been determined as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, the effect on the Company's net earnings would not have been significant. F-31 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. INTEREST RATE HEDGING ARRANGEMENTS Effective April 15, 1999, the Company entered into an interest cap transaction with the Union Bank of California ("UBOC") for a $10,000,000 notional amount for $4,200. The interest rate cap protected the Company if the three-month LIBOR exceeds 7.5 percent through January 16, 2001. The Company entered into an interest rate swap transaction on April 16, 1999 with UBOC for a $30,000,000 notional amount with no up front cost. This swap provided that the Company pay UBOC one-month LIBOR and that UBOC pay the Company 5.375 percent each month until April 20, 2001. On October 20, 1999, the Company sold an interest rate floor on this swap to UBOC and received $34,000. The interest rate floor was marked-to-market. Consequently, in the event that one-month LIBOR was less than 5.375 percent the Company would pay 5.375 percent. All interest rate hedging arrangements expired in fiscal 2001. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments and related underlying assumptions are as follows: Long-Term Debt. The Company estimates that the carrying value at January 2, 2001 and January 1, 2002 approximates the fair value of the Term Loans and Revolving Credit Facility based upon the variable rate of interest and frequent repricing. The Company estimates the fair value of the Senior Subordinated Notes to be approximately $87,000,000 (book value of $100,000,000) at January 2, 2001 and $97,000,000 (book value $100,000,000) at January 1, 2002 based on third-party quotations for the same or similar issues. Interest Rate Hedging Arrangements. At January 2, 2001, the Company estimated the fair values of the interest rate swap, cap and floor as a loss of $114,389, $0 and a loss of $620, respectively. These figures represent the estimated amounts the Company would have paid or received to terminate these financial instrument agreements, as quoted by the financial institution. As of January 1, 2002 all arrangements the Company had been party to have matured. Current Assets and Current Liabilities. The Company estimates the carrying value of these assets and liabilities to approximate their fair value based upon the nature of the financial instruments and their relatively short duration. 11. COMMITMENTS AND CONTINGENCIES Leases and Client Contracts. The Company operates primarily at its clients' premises pursuant to written contracts. The length of a contract generally ranges from 1 to 20 years. Certain of these client contracts provide for payment by the Company to the client for both fixed and variable commissions and royalties. Aggregate commission and royalty expense under these agreements was $131,056,000, $168,782,000 and $183,324,000 for fiscal years 1999, 2000 and 2001, respectively. Minimum guaranteed commission and royalty expense was approximately $9,955,000, $10,223,000 and $7,016,000 for fiscal years 1999, 2000 and 2001, respectively. The Company leases a number of real properties and other equipment under varying lease terms which are noncancelable. In addition, the Company has numerous month-to-month leases. Rent expense was approximately $1,085,000, $1,080,000 and $961,000 in fiscal 1999, fiscal 2000 and fiscal 2001, respectively. F-32 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum commitments for all operating leases and minimum commissions and royalties due under client contracts are as follows (in thousands):

Employment Contracts. The Company has employment agreements and arrangements with its executive officers and certain management personnel. The agreements generally continue until terminated by the executive or the Company, and provide for severance payments under certain circumstances. The agreements include a covenant against competition with the Company, which extends for a period of time after termination for any reason. As of January 1, 2002, if all of the employees under contract were to be terminated by the Company without good cause (as defined) under these contracts, the Company's liability would be approximately $6.0 million. Commitments. Pursuant to its contracts with various clients, the Company is committed to spend approximately $11,307,000 during 2002 and $1,186,000 during 2003 for equipment improvements and location contract rights. At January 1, 2002, the Company has $7,468,000 of letters of credit collateralizing the Company's performance and other bonds, and $3,145,000 in letters of credit collateralizing the self-insurance reserves of the Company, and $1,426,000 in other letters of credit. Contingencies. On April 20, 2001 one of the Company's customers filed for Chapter 11 bankruptcy. The Company had approximately $3.2 million of receivables and leasehold improvements recorded at the time of the filings relating to this customer. The proceedings of the filing are in the preliminary stages; however, based on the most recent information, the Company wrote-off $2.5 million of other assets primarily representing long term receivables. The Company had approximately $600,000 in equipment and leasehold improvements recorded at January 1, 2002. In July 2000, the Company entered into an agreement to manage an arena in the City of Bridgeport, Connecticut once the City completed its construction. The City recently asserted a claim against the Company of approximately $2.1 million dollars for certain construction charges the City incurred in building the arena. The Company believes that it has a strong defense to the claim. Litigation. There are various claims and pending legal actions against or indirectly involving the Company. It is the opinion of management, after considering a number of factors, including, but not limited to, the current status of the litigation (including any settlement discussions), views of retained counsel, the nature of the litigation, the prior experience of the Company, and the amounts which the Company has accrued for known contingencies, that the ultimate disposition of these matters will not materially affect the financial position or future results of operations of the Company. F-33 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. RELATED PARTY TRANSACTIONS Management Fees. Certain administrative and management functions are provided to the Company by the Blackstone Group and GE Capital through monitoring agreements. The Company paid Blackstone Management Partners II L.P., an affiliate of Blackstone, a fee of $250,000 in fiscal years 1999, 2000 and 2001. GE Capital was paid management fees of $167,000 in fiscal years 1999, 2000 and 2001. Such amounts are included in selling, general and administrative expenses. Leasing Services. GE Capital and its affiliates provide leasing and financing services to the Company. Payments to GE Capital and its affiliates for fiscal years 1999, 2000 and 2001 for such services, net of discounts earned, were approximately $185,000, $165,000 and $95,000, respectively, and are included in selling, general and administrative expenses. The Company also leases equipment from GE Capital under a capital lease (Note 6). Management Incentive Agreement. The Company maintains a discretionary incentive plan whereby general managers and senior management personnel qualify for incentive payments in the event that the Company has exceeded certain financial performance targets determined on an annual basis. The Company has accrued approximately $1,597,000 and $1,096,000 in accrued salaries and vacations in the accompanying balance sheets at January 2, 2001 and January 1, 2002, respectively, for such incentives payable to certain general managers and senior management personnel. These amounts are included in selling, general, and administrative expenses. 13. RETIREMENT PLAN Effective February 15, 2000, the Volume Service 401(k) plan was merged into the Service America 40l(k) plan, forming the Volume Services America 401(k) defined contribution plan. This plan covers substantially all Volume Services America employees. Employees may contribute up to 16 percent of their eligible earnings and the Company will match 25 percent of employee contributions up to the first 6 percent of employee compensation, with an additional discretionary match up to 50 percent. The Company's contributions to the previous individual plans and the combined plan were approximately $178,000 for fiscal 1999, $319,000 for fiscal 2000 and $397,000 in fiscal 2001. Multi-Employer Pension Plans. Certain of the Company's union employees are covered by multi-employer defined benefit pension plans administered by unions. Under the Employee Retirement Income Security Act ("ERISA"), as amended, an employer upon withdrawal from a multi-employer pension plan is required to continue funding its proportionate share of the plan's unfunded vested benefits. Amounts charged to expense and contributed to the plans were not material for the periods presented. 14. CONTRACT RELATED LOSSES During fiscal years 1999, 2000 and 2001, several contracts which the Company intends to continue operating were identified as impaired, as the future undiscounted cash flows of each of these contracts was estimated to be insufficient to recover the related carrying value of the property and equipment and contract rights associated with each contract. As such, the carrying values of these contracts were written down to the Company's estimate of fair value based on the present value of the discounted future cash flows. The Company wrote down approximately $573,000 of property and equipment and $448,000 of contract rights in fiscal 1999 and approximately $976,000 of property and equipment, $221,000 of contract rights and $269,000 of other assets in fiscal 2000. In fiscal 2001, the Company wrote down approximately $2.3 million of property and equipment and contract rights. In addition, the Company recorded an impairment charge of approximately $2.5 million for the write down of other assets, as described in Note 11. F-34 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During fiscal 1999, the Company recorded a loss for an underperforming contract to reserve for the estimated future losses of approximately $401,000. On June 12, 1998, Service America commenced arbitration proceedings through the American Arbitration Association in New York, New York against Silver Huntington Realty LLC and Silver Huntington LLC. In May 2000, the arbitrator reached a decision in this matter. The decision provided for no payment from either party to the other. As a result, the Company wrote off related assets in the amount of $754,000 and recorded approximately $305,000 in related legal fees. 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Quarterly operating results for the years ended January 2, 2001 and January 1, 2002 are as follows (in thousands):

F-35 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 16. NON-GUARANTOR SUBSIDIARIES FINANCIAL STATEMENTS The senior subordinated notes are jointly and severally guaranteed by the Company and all of the subsidiaries of Volume Services America, except for certain non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary. The following table sets forth the condensed consolidated financial statements of the Parent Company, Guarantor Subsidiaries and Non-Guarantor Subsidiaries as of and for the periods ended January 2, 2001 and January 1, 2002 (in the case of the balance sheet) and for the years ended December 28, 1999, January 2, 2001 and January 1, 2002 (in the case of the statement of operations and the cash flows): CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS, YEAR ENDED DECEMBER 28, 1999

F-36 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED DECEMBER 28, 1999

F-37 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET, JANUARY 2, 2001

F-38 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS, YEAR ENDED JANUARY 2, 2001

F-39 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED JANUARY 2, 2001

F-40 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET, JANUARY 1, 2002

F-41 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS, YEAR ENDED JANUARY 1, 2002

F-42 VOLUME SERVICES AMERICA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED JANUARY 1, 2002

F-43 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INCOME DEPOSITARY SECURITIES (IDSS) VOLUME SERVICES AMERICA HOLDINGS, INC. [VOLUME SERVICES LOGO] ------------------------- PROSPECTUS ------------------------- , 2003 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THIS PROSPECTUS. UNTIL , 2003 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE OUR IDSS, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PART II ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Volume Services America Holdings, Inc. in connection with the offer and sale of the securities being registered. All amounts are estimates except the registration fee. SEC Registration fee........................................ $25,300 NASD filing fee............................................. $28,000 Amex listing fee*........................................... TSX listing fee*............................................ listing fee*........................................ Transfer agent's fee*....................................... Depositary's fee*........................................... Trustee's fee*.............................................. Printing and engraving expenses*............................ Legal fees and expenses*.................................... Accounting fees and expenses*............................... Miscellaneous*.............................................. ------- Total..................................................... $ =======

--------------- * To be completed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS DELAWARE. The General Corporation Law of the State of Delaware ("DGCL") authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors' fiduciary duties. The certificates of incorporation of the Delaware registrants include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director, except for liability for breach of duty of loyalty; for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law; under Section 174 of the DGCL (unlawful dividends); or for transactions from which the director derived improper personal benefit. The certificates of incorporation of the Delaware registrants provide that these registrants must indemnify their directors and officers to the fullest extent authorized by the DGCL and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking, by or on behalf of an indemnified 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. The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our certificate of incorporation, our by laws, agreement, vote of stockholders or disinterested directors or otherwise. Volume Services America Holdings, Inc. maintains insurance to protect itself and its directors, officers and representatives and those of its subsidiaries against any such expense, liability or loss, whether or not it would have the power to indemnify them against such expense, liability or loss under applicable law. KANSAS. Under Section 17-6305 of the Kansas General Corporation Code, a corporation may indemnify a director, officer, employee, or agent of the corporation (or other entity if such person is serving in such capacity at the corporation's request) against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the II-1 corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify a director, officer, employee, or agent of the corporation (or other entity if such person is serving in such capacity at the corporation's request) against expenses (including attorneys' fees) actually and reasonably incurred by him if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to the corporation unless a court determines that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses as the court shall deem proper. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. Section 17-6002(b)(8) of the Kansas General Corporation Code provides that directors shall not be personally liable for monetary damages for breaches of their fiduciary duty as directors, except for (i) breaches of their duty of loyalty to their corporations or their stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or knowing violations of law, (iii) certain transactions under Section 17-6424 of the Kansas General Corporation Code (unlawful payment of dividends), or (iv) transactions from which a director derives an improper personal benefit. Consistent with Section 17-6305 of the Kansas General Corporation Code, the bylaws of the Kansas registrants provide that they will indemnify their directors and voting trustees against costs and expenses actually and necessary incurred by or empowered upon them in connection with the defense of any action, suit, or proceeding, except in relation to any matters as to which they shall have been adjudged liable (without such judgment being reversed) for gross misconduct in the performance of their duties as such directors or such voting trustees. MARYLAND. The certificate of incorporation of the Maryland registrant provides that the Maryland registrant shall, to the fullest extent permitted by the Maryland General Corporation Law and in accordance with Section 2-418 of the Maryland General Corporation Law, indemnify any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters referred to in or covered by the Maryland General Corporation Law. Section 2-418 of the Maryland General Corporation Law (the "MGCL") generally permits indemnification of any director made a party to any proceedings by reason of service as a director unless it is established that: (i) the act or omission of such person was material to the matter giving rise to the proceedings and was committed in bad faith or was the result of active and deliberate dishonesty; (ii) such person actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceedings, such person had reasonable cause to believe that the act or omission was unlawful. The indemnity may include judgments, penalties, fines, settlements and reasonable expenses (including attorneys' fees) actually incurred by the director in connection with the proceeding; but, if the proceeding is one by or in the right of the corporation, indemnification is not permitted with respect to any proceeding in which the director has been adjudged to be liable to the corporation, or if the proceeding is one charging improper personal benefit to the director, whether or not involving action in the director's official capacity, indemnification of the director is not permitted if the director was adjudged to be liable on the basis that personal benefit was improperly received. In addition, under Maryland law and unless limited by the charter, the Maryland registrant is required to indemnify a current or former director or officer in any proceeding arising out of such individual's official capacity if a court of appropriate jurisdiction determines such individual is entitled to indemnification. However, indemnification with respect to any proceeding by or in the right of the corporation or in which a director was adjudged liable on the basis that personal benefit was improperly received shall be limited to expenses. II-2 Under Maryland law, the Maryland registrant may pay or reimburse, in advance of final disposition of a proceeding, reasonable expenses incurred by a current or former director of officer, if such individual affirms in good faith that he or she has satisfied the applicable standard of conduct necessary for indemnification and agrees to repay amounts paid to such individual if it is determined that such standard is not met. Indemnification under the provision of Maryland law is not deemed exclusive of any other rights, by indemnification or otherwise, to which a director may be entitled under the charter, bylaws, any resolution of stockholders or directors, any agreement or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. The statute permits a Maryland corporation to indemnify its officers, employees and agents to the same extent as its directors. WYOMING. Section 17-16-851 of the Wyoming Business Corporation Act ("WBCA") provides that a corporation may indemnify an individual who is a party to a proceeding because he is a director against liability incurred in the proceeding if, among other factors: (i) he conducted himself in good faith; and (ii) he reasonably believed that his conduct was in or at least not opposed to the corporation's best interests; and (iii) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. Such indemnification must be authorized by directors, legal counsel or shareholders as provided in Section 17-16-855. Unless ordered by a court under WBCA Section 17-16-854(a)(iii), a corporation may not indemnify a director under Section 17-16-851: (i) in connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the standard of conduct as set forth in the preceding paragraph; or (ii) in connection with any proceeding with respect to conduct for which he was adjudged liable on the basis that he received a financial benefit to which he was not entitled. Pursuant to Section 17-16-852 of the WBCA, a corporation is required to indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding. Pursuant to Section 17-16-853 of the WBCA, a corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse reasonable expenses incurred by a director who is a party to a proceeding because he is a director, if he delivers to the corporation: (i) a written affirmation of his good faith belief that he has met the standard of conduct described in WBCA Section 17-16-851; and (ii) his written undertaking to repay any funds advanced if he is not entitled to mandatory indemnification under Section 17-16-852 (above) and it is determined that he has not met the standard of conduct described in WBCA Section 17-16-851. Section 17-16-856 of the WBCA provides that a corporation may indemnify and advance expenses to an officer of the corporation who is a party to a proceeding because he is an officer of the corporation: (i) to the same extent as a director; and (ii) if he is an officer but not a director, to such further extent as may be provided by the articles of incorporation, the by-laws, a resolution of the board of directors or contract, except for: (A) liability in connection with a proceeding by or in the right of the corporation other than for reasonable expenses incurred in connection with the proceeding; or (B) liability arising out of conduct that constitutes: receipt by him of a financial benefit to which he is not entitled; an intentional infliction of harm on the corporation or the shareholders; or an intentional violation of criminal law. An officer of a corporation who is not a director is entitled to mandatory indemnification under Section 17-16-852 of the WBCA, and may apply to a court under Section 17-16-854 of the WBCA for indemnification or an advance for expenses, in each case to the same extent to which a director may be entitled to indemnification or advance for expenses under those provisions. WISCONSIN. The Wisconsin registrant is incorporated under the Wisconsin Business Corporation Law (the "WBCL"). Under Section 180.0851(1) of the WBCL, the Wisconsin registrant is required to II-3 indemnify a director or officer, to the extent such person is successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if such person was a party because he or she was a director or officer of the corporation. In all other cases, the Wisconsin registrant is required by Section 180.0851(2) to indemnify a director or officer against liability incurred in a proceeding to which such person was a party because he or she was a director or officer of the corporation, unless it is determined that he or she breached or failed to perform a duty owed to the corporation and the breach or failure to perform constitutes: - a willful failure to deal fairly with the Wisconsin registrant or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; - a violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful; - a transaction from which the director or officer derived an improper personal profit; or - willful misconduct. Section 180.0858(1) provides that, subject to certain limitations, the mandatory indemnification provisions do not preclude any additional right to indemnification or allowance of expenses that a director or officer may have under the Wisconsin registrant's articles of incorporation, bylaws, any written agreement or a resolution of the board of directors or shareholders. Section 180.0859 of the WBCL provides that it is the public policy of the State of Wisconsin to require or permit indemnification, allowance of expenses and insurance to the extent required or permitted under Sections 180.0850 to 180.0858 of the WBCL, for any liability incurred in connection with a proceeding involving a federal or state statute, rule or regulation regulating the offer, sale or purchase of securities. Section 180.0828 of the WBCL provides that, with certain exceptions, a director is not liable to a corporation, its shareholders, or any person asserting rights on behalf of the corporation or its shareholders, for damages, settlements, fees, fines, penalties or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director, unless the person asserting liability proves that the breach or failure to perform constitutes any of the four exceptions to mandatory indemnification under Section 180.0851(2) referred to above. Under Section 180.0833 of the WBCL, directors of the Wisconsin registrant against whom claims are asserted with respect to the declaration of improper dividends or distributions to shareholders or certain other improper acts which they approved are entitled to contribution from other directors who approved such actions and from shareholders who knowingly accepted an improper dividend or distribution, as provided therein. Bylaws. The Wisconsin registrant's bylaws contains provisions that generally parallel the indemnification provisions of the WBCL and cover certain procedural matters not dealt with in the WBCL. TEXAS. Article 2.02-1 of the Texas Business Corporation Act (the "TBCA") provides that a director of a Texas corporation may be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred by him in connection with any action, suit or proceeding in which he was, is, or is threatened to be made a named defendant by reason of his position as director or officer, provided that he conducted himself in good faith and reasonably believed that, in the case of conduct in his official capacity as a director or officer of the corporation, such conduct was in the corporation's best interests; and, in all other cases, that such conduct was at least not opposed to the corporation's best interests. If a director is found liable to the corporation or is found liable on the basis that personal benefit was improperly received by the person, the indemnification is limited to reasonable expenses actually incurred by the person in connection with the proceeding and shall not be made in respect of any proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of his duty to the corporation. In the case of a criminal proceeding, a director or officer may be indemnified only if he had no reasonable cause to believe his conduct was unlawful. If a director or officer is wholly II-4 successful, on the merits or otherwise, in connection with such a proceeding, such indemnification is mandatory. The TBCA further provides that a corporation may indemnify and advance expenses to an officer, employee or agent of the corporation, and to those who are not or were not officers, employees or agents but who are or were serving at the request of the corporation, to the same extent that it my indemnify and advance expenses to directors. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES See "Summary -- Our Recapitalization" in the enclosed prospectus. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits. The following exhibits are filed as part of this Registration Statement, or incorporated herein by reference:

II-5

--------------- * To be filed by amendment. (b) Financial Statement Schedules ITEM 17. UNDERTAKINGS 1. The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. 2. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. In the event that a claim for indemnification by the registrant against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 3. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon II-6 Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. VOLUME SERVICES AMERICA HOLDINGS, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. VOLUME SERVICES AMERICA, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. VOLUME SERVICES, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. EVENTS CENTER CATERING, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. SERVICE AMERICA CONCESSIONS CORPORATION By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. SERVICE AMERICA CORPORATION OF WISCONSIN By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. SERVO-KANSAS, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. SVM OF TEXAS, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. VOLUME SERVICES, INC. By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Spartanburg, South Carolina on February 13, 2003. SERVICE AMERICA CORPORATION By: /s/ LAWRENCE E. HONIG ------------------------------------ Name: Lawrence E. Honig Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence E. Honig, Kenneth R. Frick and Janet L. Steinmayer, or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to the Registration Statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits hereto, and other documents in connection therewith, with the Securities and Exchange Commission, and does hereby grant unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on the 13th day of February, 2003.

II-17 EXHIBIT INDEX

--------------- * To be filed by amendment.

VOLUME SERVICES INC/KS S-1