VOLUME SERVICES AMERICA INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 333-79419

VOLUME SERVICES AMERICA, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 57-0969174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

201 EAST BROAD STREET
SPARTANBURG, SOUTH CAROLINA 29306
(Address of principal executive offices) (Zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(864) 598-8600

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates
(shareholders holding less than 5% of the outstanding common stock, excluding
directors and officers), as of each of July 1, 2002 and March 20, 2003, was $0.

The number of shares outstanding of the registrant's Common Stock, par
value $0.01 per share, at March 20, 2003, was 100.

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PART I

ITEM 1. BUSINESS.

OVERVIEW

Volume Services America, Inc. ("Volume Services America"), a Delaware
corporation, operates through its subsidiaries as 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. We currently provide services at 129 client facilities, typically
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. The breakdown of
facilities that we serve by primary client category is as follows: 66 sports
facilities, 31 convention centers and 32 other entertainment facilities. At two
sports facilities, we have contracts to provide full facility management
services.

On February 11, 2003, we announced that we changed our tradename for our
operating subsidiaries, Volume Services, Inc. ("Volume Services") and Service
America Corporation ("Service America") from Volume Services America to
Centerplate.

Throughout this document, we refer to Volume Service America Holdings,
Inc., a Delaware corporation and the parent of Volume Services America, as
"Volume Holdings," and, together with its consolidated operations, as "we,"
"our" and "us," unless otherwise indicated.

SERVICES AND CLIENT CATEGORIES

SPORTS FACILITIES

We currently have contracts to provide services, including food and
beverage concessions and, in some cases, the selling of merchandise, at 66
sports facilities, including stadiums and arenas throughout the United States.
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 the National
Football League ("NFL") and college football games, Major League Baseball
("MLB") or minor league baseball games, the National Basketball Association
("NBA") and college basketball games, National Hockey League ("NHL") and minor
league hockey games, concerts, ice shows and circuses.

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. 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.

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The following chart lists all of our major league sports facility tenants
as of December 31, 2002:

CONVENTION CENTERS

We currently have contracts to provide services, including banquet catering
and food court operations, to 31 convention centers, two of which are located in
Canada. Convention centers typically host conventions, industrial and trade
shows, company meetings, banquets, receptions and consumer exhibitions, such as
auto, boat or computer shows.

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 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. 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

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commission structure at facilities where we have made larger capital
investments. The following chart lists some of our major contracts:

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(1) Sources: Tradeshow Week's Major Exhibit Hall Directory 2002

OTHER ENTERTAINMENT AND RECREATIONAL FACILITIES

We have contracts to provide a wide range of services to 32 other
entertainment and recreational 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.

The duration, level of capital investment required and commission or
management fee structure of the contracts for these other entertainment and
recreational facilities vary from facility to facility. We typically receive a
more favorable commission structure at facilities where we have made larger
capital investments.

The following chart lists some of our contracts within the other
entertainment facilities category:

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.

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In general, our contract categories differ in the amount of risk that we
bear and potential reward (profits or fees) we can receive. For example, in our
profit and loss contracts, we generally retain most profits and are responsible
for most losses; this offers the highest potential upside and downside of our
contracts. In our profit sharing contracts, we generally receive a share of
profits, and sometimes a fee, and receive no payments if there are losses. In
our management fee contract, we earn a fee (but no profits) and are not
responsible for losses; both our upside and downside potential are low.

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. 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 December 31, 2002, we
served 101 facilities under profit and loss contracts.

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 December 31, 2002, we served 27 facilities under
profit sharing contracts.

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 December 31, 2002, we served
one facility under a management fee contract.

Additional Contract Features. 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.

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 we provide. 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 the profits under the contract.

When we enter into new contracts, or extend or renew existing contracts, we
are sometimes contractually required to make some form of up-front or future
capital investments to help finance facility improvement,

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construction or renovation. Contractually required capital expenditures
typically take the form of investment in leasehold improvements, food service
equipment and/or grants to clients. At the end of the contact term or its
earlier termination, assets such as equipment and leasehold improvements
typically become the property of the client, but generally the client must
reimburse us for any undepreciated or unamortized capital expenditures.

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 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.

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 (in which
Compass Group plc has a majority ownership interest). 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 many 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 or by
local service providers.

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 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;

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- 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.

EMPLOYEES

As of December 31, 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 2002, 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 December 31, 2002, approximately 39.6% 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 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

- the level of attendance at facilities that 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

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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 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
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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 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.

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.

GENERAL INFORMATION

Volume Services America was formed on December 31, 1992. Its principal
offices are at 201 East Broad Street, Spartanburg, SC 29306, and its telephone
number is (864) 598-8600. Volume Services America is the wholly-owned subsidiary
of Volume Services America Holdings, Inc. Volume Services America's subsidiaries
include Volume Services and Service America, each a Delaware corporation.

We have no operations or assets in any foreign country other than Canada.
During 2002, our Canadian revenues and Canadian long-lived assets were less than
3% of our total net sales and long-lived assets, respectively.

ITEM 2. 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 129 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 facilities to perform our
administrative functions and fulfill our warehousing needs, as well as provide
food and beverage services.

ITEM 3. LEGAL PROCEEDINGS.

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 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

We did not submit any matters to a vote of security holders during the
fourth quarter of our 2002 fiscal year.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Each registrant, other than Volume Holdings, is a direct or indirect
wholly-owned subsidiary of Volume Holdings. There is no established public
trading market for the equity securities of Volume Holdings. On February 13,
2003, Volume Holdings filed an S-1 registration statement with respect to a
proposed offering of IDSS securities, which will represent shares of its common
stock and its subordinated notes. Volume Holdings has not declared any dividends
with respect to its common stock in either of the past two fiscal years, and it
has no current intention to pay cash dividends in the foreseeable future except,
if the IDSS offering is consummated, as described in the S-1 registration
statement filed with respect to the IDSS offering. The indenture governing our
senior subordinated notes and our current credit facility include substantial
restrictions on our ability to pay dividends. As of March 20, 2003, the latest
practicable date, there were four holders of Volume Holdings' common stock.
During our 2002 fiscal year, we did not sell any equity securities that were not
registered under the Securities Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA.

The following selected consolidated financial data is that of Volume
Holdings, Volume Services America's parent company. Volume Holdings is a
guarantor of the senior subordinated notes issued by Volume Services America in
1999 and has no substantial operations or assets other than its investment in
Volume Services America. As a result, the consolidated financial condition and
results of operations of Volume Holdings are substantially the same as those of
Volume Services America.

The following table sets forth our selected consolidated financial
information derived from our audited consolidated financial statements for each
of our fiscal years in the five year period ended December 31, 2002. The
information in the table below is only a summary and should be read in
conjunction with our audited consolidated financial statements for fiscal 2000,
2001 and 2002 and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," all as included elsewhere in
this Form 10-K.

VOLUME SERVICES AMERICA HOLDINGS, INC.

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(a) We acquired Service America in 1998 and our results for fiscal 1998 include
the results of operations for Service America from the acquisition in
August 1998.

(b) Operating income includes a non-cash charge of $1.4 million, $1.4 million,
$2.5 million, $4.8 million and $0.7 million in fiscal years 1998, 1999,
2000, 2001 and 2002, respectively, related to contract termination costs
(in fiscal 1998), the write-down of long-lived assets identified as
impaired and a contract loss provision (in fiscal 1999) and the write-down
of long-lived assets identified as impaired (in fiscal 2000, 2001 and
2002). Operating income for fiscal years 1998, 1999, 2000, 2001 and 2002
includes management fees paid to entities affiliated with equity owners of
$0.3 million, $0.4 million, $0.4 million, $0.4 million and $0.4 million,
respectively.

(c) Net income (loss) for Volume Holdings includes an extraordinary loss (net
of income taxes) of $1.5 million and $0.9 million for the non-cash
write-off of deferred financing costs in fiscal years 1998 and 1999,
respectively. Additionally, net loss for fiscal 1999 includes a charge of
$0.3 million for the effect of a change in accounting principle (net of
income taxes). In fiscal 2002, net income includes $1.4 million in income
for the return of bankruptcy funds to Service America.

(d) Includes the current portion of long-term debt.

(e) Adjusted EBITDA as defined is net income (loss) before interest expense,
income tax expense, depreciation and amortization, and:

- for fiscal year 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, $1.4
million of non-cash charges related to contract termination costs, and a
$1.5 million extraordinary loss on debt extinguishment, net of taxes.

- for fiscal year 1999, $1.5 million of cash expenses related to the
elimination of redundant personnel and office functions resulting from
the business combination of Volume Services and Service America, $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 and a contract loss provision, a $0.9 million
extraordinary loss on debt extinguishment, net of taxes, and $0.3 million
of non-cash charges for the cumulative effect of a change in accounting
principle, net of taxes.

- for fiscal year 2000, $1.1 million of cash non-recurring corporate costs
consisting primarily of expenses incurred in connection with the analysis
of a potential recapitalization and strategic investment opportunities,
$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

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carrying costs of the related long-lived assets, $0.7 million for the write-off
of assets related to a litigation settlement and a non-recurring $0.3 million
cash expense in related legal fees and $0.3 million in non-cash compensation
expense.

- for fiscal year 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 and $0.1 million in
non-cash compensation expense.

- for fiscal year 2002, $0.7 million of non-cash charges related to the
write-down of impaired assets for one contract, $0.6 million in non-cash
compensation expense, $0.6 million acquisition related costs relating
primarily to expenses incurred in connection with the structuring and
evaluation of financing and recapitalization strategies and $1.4 million
for the return of bankruptcy funds to Service America.

- for fiscal 1998, 1999, 2000, 2001 and 2002, $0.3 million, $0.4 million,
$0.4 million, $0.4 million and $0.4 million, respectively, for management
fees paid to entities affiliated with equity owners.

We believe that Adjusted EBITDA, as defined, provides useful information
regarding our ability to service debt. In addition, we believe it provides
additional information to investors about non-cash and certain
non-recurring items and is useful because covenants in the indenture
governing our 11 1/4% senior subordinated notes due 2009 contain ratios
based on that measure. However, it is not a measure in accordance with
generally accepted accounting principles and should not be considered as an
alternative to net income or cash flow data prepared in accordance with
generally accepted accounting principles. Our measure of Adjusted EBITDA,
as defined, may not be comparable to similarly titled measures used by
other companies due to differences in methods of calculation.

(f) 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. Earnings were insufficient to cover fixed charges
by $2.2 million, $6.1 million, $5.5 million and $4.0 million for fiscal
years 1998, 1999, 2000 and 2001, respectively.

ITEM 7. 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. This following discussion
should be read in conjunction with "Selected Financial Data" and the financial
statements, including the related notes, appearing elsewhere in this Form 10-K.
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
December 31, 2002, net property and equipment of $56.1 million and net
contract rights of $101.7 million were recorded. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, we evaluate
long-lived assets with definite lives for

11

possible impairment when an event occurs which would indicate that its carrying
amount may not be recoverable. 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, discontinuation of a sports league or a significant increase in
competition that could reduce the future profitability of the contract,
among others. As of December 31, 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 more likely than not reduce the
fair value of a reporting unit below its carrying amount, 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 supplemented by
stop-loss type insurance policies. We are required to estimate and accrue
for the amount of losses that we expect to incur and will ultimately have
to pay for under the deductible during the policy year. These amounts are
recorded in cost of sales and selling, general and administrative
expenses on the 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 than 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 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 service.

12

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 fiscal 2000, 2001,
and 2002:

RESULTS OF OPERATIONS

FISCAL 2002 COMPARED TO FISCAL 2001

Net sales. Net sales of $577.2 million during fiscal 2002 increased $34.1
million or approximately 6% from $543.1 million in fiscal 2001. Our sports
facility accounts accounted for approximately $20.2 million of the increase, of
which $10.5 million was related to NFL venues. Five additional NFL games were
played in our clients' facilities in fiscal 2002, including four games that had
been postponed from fiscal 2001 due to the events of September 11, 2001, and
Super Bowl XXXVI. Additionally, a slight increase ($0.8 million) was generated
at MLB venues due primarily to an increase in sales as a result of post-season
activity, including the World Series. Sales at convention centers and other
entertainment facilities increased $2.3 million and $6.2 million, respectively.
In addition, newly acquired service contracts generated net sales of $4.6
million.

Cost of sales. Cost of sales of $470.9 million for fiscal 2002 increased
by $24.3 million from $446.6 million for fiscal 2001. The increase was due
primarily to the increase in sales volume. Cost of sales as a percentage of net
sales decreased by approximately 0.4% from fiscal 2001 to 81.6%. This decrease
was due mainly to efficiencies associated with the greater sales volume.

Selling, general and administrative expenses. Selling, general and
administrative expenses of $55.3 million increased approximately 0.7% as a
percentage of net sales as compared to fiscal 2001. 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. Depreciation and amortization was $26.2
million in fiscal 2002 compared to $24.5 million in fiscal 2001. 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 ($2.5 million) in accordance with Statement
of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets.

Transaction related expenses. Acquisition related costs of $0.6 million
were incurred in fiscal 2002 relating primarily to expenses incurred in
connection with the structuring and evaluation of financing and recapitalization
strategies, including proposals for securities offerings that preceded the
proposed IDSS offering and the related refinancing of the existing credit
facility and senior subordinated notes. No such expenses were incurred in 2001.

Contract related losses. Contract related losses of $0.7 million in fiscal
2002 reflected an impairment charge related to a write-down of contract rights
for one contract. In fiscal 2001, contract related losses of $4.8 million
reflected an impairment charge of $2.3 million for equipment, leasehold
improvements and location contracts with respect to certain contracts. Most of
the $2.3 million impairment charge related to two of our clients which filed for
Chapter 11 bankruptcy in 2001. Additionally, $2.5 million in other assets,
chiefly long-term receivables related to one of those clients, was written off.

Operating income. Operating income increased approximately $4.3 million in
fiscal 2002 as compared to fiscal 2001 due to the factors described above.

13

Interest expense. Interest expense decreased by $2.7 million from fiscal
2001 due primarily to lower interest rates on our variable rate debt.

Other income, net. During fiscal 2002, Service America received
approximately $1.4 million in connection with funds 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 such funds.

Income taxes. Management has evaluated the available evidence about future
taxable income and other possible sources of realization of deferred tax assets,
and, based on its best current estimates, believes taxable income or benefit
will be realized in fiscal 2002 and beyond. Accordingly, in fiscal 2002 we have
reduced the valuation allowance by $1.3 million and recorded a tax benefit of
approximately $0.2 million in comparison to the recognition of a benefit of $0.4
million in fiscal 2001.

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 net new accounts
(approximately 5%) and an increase in MLB sales (approximately 3%). We commenced
operations at 17 new accounts during fiscal 2001 including one NFL stadium and
six minor league baseball facilities generating additional revenues 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 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 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 sales declined 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.

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 corporate costs of $1.1
million were incurred during fiscal 2000 relating primarily to expenses incurred
in connection with the analysis of a potential recapitalization and strategic
investment opportunities. 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 at certain contracts under 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
14

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 operate and a $0.7 million charge for the
write-off of a customer receivable and $0.3 million in related legal fees for a
terminated service contract.

Operating income. Operating income declined $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.

LIQUIDITY AND CAPITAL RESOURCES

For fiscal 2002, net cash provided by operating activities was $38.6
million as compared to $24.7 million in fiscal 2001. The $13.9 million increase
was principally attributable to a $8.1 million increase in net income, mainly as
the result of the $4.3 million improvement in operating income, $2.7 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 higher accrued commissions,
insurance and legal fees.

Net cash used in investing activities was $45.0 million in fiscal 2002
compared to $29.3 million in fiscal 2001, primarily reflecting a higher level of
investment in contract rights and property and equipment associated with
renewals of existing contracts in fiscal 2002.

Net cash provided by financing activities was $1.7 million in fiscal 2002
as compared to $5.0 million in fiscal 2001. As of December 31, 2002, $15.0
million in revolving loans were outstanding under our revolving credit facility
as compared to $12.8 million at the end of fiscal 2001; however, the increase in
net borrowings was only $2.3 million in fiscal 2002 versus $6.8 million in
fiscal 2001. In addition, net cash provided by bank overdrafts increased by
approximately $1.4 million in fiscal 2002 as compared to fiscal 2001.

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 reflected net borrowings of $6.8 million under our revolving
credit facility used primarily to finance capital investments as compared to the
$3.5 million in net repayments in fiscal 2000. Additionally, bank overdrafts
declined $0.5 million compared to $2.4 million in fiscal 2000.

Our liquidity is generated primarily from cash flows from operations as
described above and from revolving credit borrowings available through our
credit facility. In December 1998, we entered into this credit facility with JP
Morgan Chase Bank, Goldman Sachs Credit Partners and other lenders to refinance
the prior debt of Volume Services and Service America. At closing of the
facility, we borrowed $160.0 million in term loans to refinance that debt, and
we repaid $45.0 million of these term loans from the proceeds of our senior
subordinated notes issuance in 1999. The credit facility also includes a $75.0
million revolving credit facility.

We use the money we borrow under the revolving credit facility to fund our
working capital needs and for the capital investments we make in connection with
our contracts. Revolving credit borrowings may be made at prime rate or at a
LIBO rate (available for various interest periods) plus, in each case, the
applicable margin. All borrowings under the credit facility are secured by
substantially all the assets of Volume Holdings and most of its subsidiaries,
including Volume Services and Service America.
15

At December 31, 2002, $43.7 million was available to be borrowed under our
revolving credit facility. At that date, there were $15.0 million in outstanding
borrowings and $16.3 million of outstanding, undrawn letters of credit reducing
availability.

We are also often required to obtain performance bonds, bid bonds or
letters of credit to secure our contractual obligations. As of December 31,
2002, we had requirements outstanding for performance bonds and letters of
credit of $13.2 million and $16.3 million, respectively.

If we proceed with the IDSS offering, we intend for Volume Services America
to enter into a new credit facility to refinance its existing credit facility
and to undertake a tender offer and consent solicitation for all of its
outstanding 11 1/4% senior subordinated notes due 2009 and for Volume Holdings
to redeem shares of Volume Holdings' outstanding common stock from our existing
shareholders with the proceeds of the IDSS offering and our new credit facility.
We cannot assure you that the IDSS offering or any of the above transactions
will occur and we may elect not to proceed with the IDSS offering or any or all
of the above transactions due to changes in our business or strategic plans,
general economic and market conditions or any other factors.

We believe that cash flow from operating activities, together with
borrowings available under the revolving credit facility, will be sufficient to
fund our currently anticipated capital investment requirements, interest and
principal payment obligations and working capital requirements. We are currently
committed under client contracts to fund capital investments of approximately
$18.8 million and $1.8 million in 2003 and 2004, respectively. We anticipate
total capital investments of $24.3 million in fiscal 2003.

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
December 31, 2002 are summarized in the tables below:

CONTRACTUAL COMMITMENTS

- ---------------

(1) Represents capital commitments in connection with several long-term
concession contracts.

NEW ACCOUNTING PRONOUNCEMENTS

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
Correction. 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 extinguishments 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
16

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 to 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 do not believe that the
impact on our financial position and 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, will be
material.

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 94-3, Liability Recognition for
Certain Employees Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring). We do not believe that
the impact of the statement on our financial position or results of operations
will be material.

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 No. 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 do not believe that the impact of
this Interpretation on our financial position or results of operations will be
material or that additional disclosures are required.

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. The
implementation of this Statement will not materially affect 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 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
17

year restated. The implementation of this Interpretation will not materially
affect our financial position or results of operations.

FORWARD LOOKING AND CAUTIONARY STATEMENTS

Except for the historical information and discussions contained herein,
statements contained in this Form 10-K may constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially, including, among
other things:

- 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate volatility with regard to existing
issuances of variable rate debt. The table presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.

As of December 31, 2002, we had approximately $110,400,000 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
amounts being paid on each installment date; $1,150,000 in each year from 2003
through 2005 and $106,950,000 due in 2006. As of December 31, 2002, we also had
$15,000,000 outstanding on our revolving credit facility which becomes due when
the credit facility matures on December 3, 2004. In addition, Volume Services
America has senior subordinated notes outstanding in an aggregate principal
amount of $100,000,000. These notes mature on March 1, 2009.

18

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

VOLUME SERVICES AMERICA HOLDINGS, INC.

TABLE OF CONTENTS

19

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 1, 2002 and December 31, 2002, and the related consolidated
statements of operations and comprehensive income (loss), stockholders'
deficiency, and cash flows for each of the three years in the period ended
December 31, 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 subsidiaries at January 1, 2002 and December 31, 2002, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets as of January 2, 2002.

/s/ Deloitte & Touche LLP
Charlotte, North Carolina
March 5, 2003

20

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2002 AND DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)

See notes to consolidated financial statements.
21

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
JANUARY 1, 2002 AND DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)

See notes to consolidated financial statements.
22

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
YEARS ENDED JANUARY 2, 2001, JANUARY 1, 2002 AND DECEMBER 31, 2002

See notes to consolidated financial statements.
23

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED JANUARY 2, 2001, JANUARY 1, 2002 AND DECEMBER 31, 2002

See notes to consolidated financial statements.
24

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 2, 2001, JANUARY 1, 2002 AND DECEMBER 31, 2002

See notes to consolidated financial statements.
25

VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JANUARY 2, 2001, JANUARY 1, 2002 AND DECEMBER 31, 2002

See notes to consolidated financial statements.
26

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 2, 2001, JANUARY 1, 2002 AND DECEMBER 31, 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 beneficially owned by
its senior management, entities affiliated with Blackstone Management Associates
II L.L.C. ("Blackstone"), and General Electric Capital Corporation ("GE
Capital"). GE Capital controlled 36.3 percent of the Company at December 31,
2002. As of December 31, 2002, the remainder of the Company's capital stock was
beneficially owned by Blackstone through its limited partnerships, BCP Volume
L.P. and BCP Offshore Volume L.P. (59.4 percent) and by current and former
management employees of the Company (4.2 percent).

At December 31, 2002, the Company had approximately 129 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.

On February 11, 2003, the Company announced that it changed its tradename
for its operating subsidiaries, Volume Services and Service America, from Volume
Services America to Centerplate.

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 2001 and 2002 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.

Merchandise Inventories -- Merchandise inventories consist of food,
beverage, team and other merchandise. Inventory is valued at the lower of cost
or market, determined on the first-in, first-out basis.

27

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 -- 10 years subject to limitation by the lease
term or contract term, if applicable

- Merchandising equipment -- 5 to 10 years subject to limitation by the
contract term, if applicable

- Vehicles and other equipment -- 2 to 10 years subject to limitation 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 over the
contract life of each such contract, including optional renewal periods where
the option to renew rests solely with the Company. Accumulated amortization was
approximately $35,321,000 at January 1, 2002 and $34,396,000 at December 31,
2002. Amortization expense for fiscal 2003-2007 is estimated to be $13,700,000,
$12,500,000, $11,600,000, $10,000,000 and $9,200,000, respectively.

Cost in Excess of Net Assets Acquired and Trademarks -- At the beginning of
fiscal 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible
Assets. With the adoption of SFAS No. 142, cost in excess of net assets acquired
(goodwill) and trademarks were no longer subject to amortization, rather they
are subject to at least an annual assessment for impairment by applying a fair
value based test. The Company has completed the impairment tests required by
SFAS No. 142, which did not result in an impairment charge. Accumulated
amortization for goodwill and trademarks were approximately $6,748,000 and
$3,551,000, respectively at December 31, 2002. Goodwill and trademark
amortization (pre-tax) was approximately $2,458,000 in each of fiscal years 2000
and 2001. Had SFAS No. 142 been in effect for those fiscal years, the adjusted
net income (loss) would have been as follows:

28

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Financing Costs -- Deferred financing costs are being amortized as
interest expense over the life of the respective debt using the effective
interest method. Accumulated amortization was approximately $4,492,000 at
January 1, 2002 and $5,923,000 at December 31, 2002.

Impairment of Long-Lived Assets and Contract Losses -- In accordance with
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
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 group may not be recoverable. Accordingly, the Company estimates the
future undiscounted cash flows expected to result from the use of the asset
group and their eventual disposition. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset group, 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.

Derivative Financial Instruments -- The Company accounts for derivative
financial instruments in accordance with Statement of Financial Accounting
Standards ("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.
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 relationships must be designated, reassessed and documented pursuant to
the provisions of SFAS No. 133.

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 2002, the Company adopted a high
deductible insurance program for general liability, auto liability, and workers'
compensation risk supplemented by stop-loss type insurance policies. 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 self-insurance
liabilities for estimated incurred losses were discounted (using rates between
2.17 percent and 5.07 percent at January 1, 2002 and 1.32 percent and 3.83
percent at December 31, 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 1, 2002 and December 31, 2002
were $2,061,000 and $4,654,000, respectively. The related undiscounted amounts
were $2,184,000 and $4,955,000, 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 1, 2002 and December 31, 2002 was $951,000 and
$1,222,000, respectively.

29

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash Overdrafts -- The Company has included in accounts payable on the
accompanying consolidated balance sheets cash overdrafts totaling $6,614,000 and
$7,582,000 at January 1, 2002 and December 31, 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
2000 consist primarily of expenses incurred in connection with the analysis of a
potential recapitalization and strategic investment opportunities. Transaction
related expenses in fiscal year 2002 consisted primarily of expenses incurred in
connection with the structuring and evaluation of financing and recapitalization
strategies, including proposals for securities offerings that preceded the
proposed initial public offering of Income Deposit SecuritieS ("IDSS") and the
related refinancing of the existing credit facility and senior subordinated
notes.

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.

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 2000 and 2001 have been
reclassified, where applicable, to conform to the financial statement
presentation used in 2002.

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. The Company will
continue to account for existing stock-based compensation on the non-recourse
loans using the fair value method and will apply the disclosure provisions of
SFAS No. 148, Accounting for Stock-Based Compensation -- Transition and
Disclosure (see new Accounting Standards).

New Accounting Standards -- 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 Correction. 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 extinguishments 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 to 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 does not believe the impact on our financial position and
results of operations of the

30

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

rescission of SFAS Nos. 4, 44, and 64 and the other technical corrections
prescribed by this statement, all of which become effective for the Company in
fiscal 2003, will be material.

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 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 does not
believe the impact of the statement on our financial position or results of
operations will be material.

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 No. 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 does not believe the impact
of this Interpretation on its financial position or results of operations will
be material or that additional disclosure is required.

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 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
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. The implementation of this
Statement will not materially affect the Company's 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 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 implementation of this interpretation will not materially
affect the Company's financial position or results of operations.

31

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. 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 January
2, 2001, January 1, 2002 and December 31, 2002, the Company had one customer
that accounted for approximately 9.8 percent, 10.0 percent and 8.6 percent of
net sales, 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 sports
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 players of the teams.

4. DEBT

Long-term debt consists of the following (in thousands):

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.

32

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 2003
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 December 31, 2002, $15,000,000 in Revolving Loans
were outstanding under the Revolving Credit Facility, and approximately
$16,277,000 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 1, 2002 were 6.38 percent
for Term Loan B and 5.61 percent for the Revolving Credit Facility. The weighted
average interest rates at December 31, 2002 were 5.19 percent for Term Loan B
and 4.80 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
December 31, 2002, the Company was in compliance with all covenants. In
addition, Volume Services America is restricted in its ability to pay dividends
and other restricted payments in an amount greater than approximately
$49,500,000 at December 31, 2002.

Senior Subordinated Notes -- On March 4, 1999, Volume Services America
completed a private placement of 11 1/4% Senior Subordinated Notes in the
aggregate principal amount of $100,000,000. On September 30, 1999, the Company
exchanged the Senior Subordinated Notes for notes which have been registered
under the Securities Act of 1933. 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 senior debt
and any future senior debt of Volume Services America, rank equally with all of
the other senior subordinated debt of Volume Services America, and rank senior
to all of Volume Services America's existing subordinated debt and any future
subordinated debt. Furthermore, the debt is guaranteed by Volume Holdings 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 Revolving Credit Facility.

Aggregate annual maturities of long-term debt at December 31, 2002 are as
follows (in thousands):

2003........................................................ $ 1,150
2004........................................................ 1,150
2005........................................................ 16,150
2006........................................................ 106,950
2007........................................................ --
Thereafter.................................................. 100,000
--------
Total....................................................... $225,400
========

33

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The components of deferred taxes are (in thousands):

At December 31, 2002, the Company had approximately $14,233,000 of federal
net operating loss carryforwards, $6,597,000 of which are from the acquisition
of Service America. These carryforwards expire in varying periods ending on or
before 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 December 31, 2002, the
Company has approximately $4,732,000 of federal general business tax credit
carryforwards. These carryforwards expire in various periods ending on or before
2021. In addition, the Company has approximately $637,000 of Canadian net
operating loss carryforwards. These carryforwards expire in various periods
ending on or before 2008.

At December 31, 2002, the Company had a valuation allowance of
approximately $942,000 related to the deferred tax assets associated with
certain net operating loss and credit carryforwards. Management believes that,
based on a number of factors, the available objective evidence creates
sufficient uncertainty regarding the realizability of certain of these net
operating losses and credit carryovers. These carryovers are dependent upon
future income. Management has reduced the valuation allowance in fiscal year
2002 by approximately $1,315,000.

34

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

The components of the benefit for income taxes on income (loss) are as
follows (in thousands):

A reconciliation of the provision for income taxes on continuing operations
to the federal statutory rate follows:

6. EQUITY TRANSACTIONS

Loans to Related Parties -- At January 1, 2002 and December 31, 2002, the
Company had outstanding 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 the two partnerships described above. 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 income
(loss) for fiscal years 2000, 2001 and 2002. 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.

35

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. 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 exceeded 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 and no
arrangements were entered into during fiscal 2002.

8. 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
1, 2002 and December 31, 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 $97,000,000 (book value $100,000,000) at January 1, 2002 and
$95,000,000 (book value $100,000,000) at December 31, 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 had matured and
no additional arrangements were entered into during fiscal 2002.

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.

9. 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 $168,782,000, $183,324,000 and $192,499,000 for fiscal years 2000, 2001 and
2002, respectively. Minimum guaranteed commission and royalty expense was
approximately $10,223,000, $7,016,000 and $7,625,000 for fiscal years 2000, 2001
and 2002, 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 $1,080,000,
$961,000 and $1,112,000 in fiscal 2000, fiscal 2001 and fiscal 2002,
respectively.

36

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 December 31, 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 $6.5 million.

Commitments -- Pursuant to its contracts with various clients, the Company
is committed to spend approximately $18.8 million during 2003 and $1.8 million
during 2004 for equipment improvements and location contract rights.

At December 31, 2002, the Company has $8,502,000 of letters of credit
collateralizing the Company's performance and other bonds, and $6,344,000 in
letters of credit collateralizing the self-insurance reserves of the Company,
and $1,431,000 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. In fiscal 2001, the Company wrote-off $2.5 million of other assets
primarily representing long term receivables. In 2002, the Company filed a
bankruptcy claim in the amount of $3.2 million. Subsequently, the Company has
negotiated a settlement agreement with the customer the terms of which have been
agreed upon but not yet finalized.

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. In
2001, the City asserted a claim against the Company of approximately $2.1
million for certain construction charges the City incurred on building the
arena. The Company settled the claim with the City for less than $100,000 in the
third quarter of fiscal 2002.

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.

37

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. 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 2000, 2001 and
2002. GE Capital was paid management fees of $167,000 in fiscal years 2000, 2001
and 2002. 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 2000, 2001 and 2002 for such services, net of discounts earned,
were approximately $165,000, $95,000 and $75,000, respectively, and are included
in selling, general and administrative expenses.

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 $1,096,000 and $951,000 in accrued salaries and vacations
in the accompanying balance sheets at January 1, 2002 and December 31, 2002,
respectively, for such incentives payable to certain general managers and senior
management personnel. These amounts are included in selling, general, and
administrative expenses. Under the plan, the payment of the executive officers'
bonuses for 2002 was contingent on the Company's financial performance in 2002.
The bonus amounts paid to each executive officer do not reflect the full amount
of the annual bonus that each executive officer would have received as a 2002
bonus payment. At our board of directors' request, the named executive officers
agreed to forfeit the balance of their 2002 bonus in exchange for a commitment
that the Company will pay bonuses (the sum of which, in the aggregate, will not
exceed $1,000,000) upon a successful refinancing or other similar extraordinary
transaction by the Company. If such a refinancing or other similar transaction
is not completed, these contingent bonuses will not be paid.

11. 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 $319,000 for fiscal 2000,
$397,000 in fiscal 2001 and $313,000 in fiscal 2002.

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.

12. CONTRACT RELATED LOSSES

During fiscal years 2000, 2001 and 2002, 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 $976,000 of property and equipment, $221,000 of
contract rights and

38

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$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. In fiscal 2002, the Company wrote
down approximately $699,000 in contract rights related to a certain contract.

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, in fiscal 2000, the Company wrote off
related assets in the amount of $754,000 and recorded approximately $305,000 in
related legal fees.

13. OTHER INCOME

During fiscal 2002, Service America received approximately $1.4 million
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 such funds. These funds were
recorded in Other income, net.

14. EXECUTIVE EMPLOYMENT AGREEMENTS

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. As of the date hereof, the Company and the
Chief Executive Officer are working to develop the stock option plan or the
equivalent, which they anticipate will be completed in the near future. In
addition, if a sale of all or substantially all of Volume Holdings' stock and/or
assets 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 exercise price is to be equivalent to the fair value of
the common stock as established by the board of directors on the grant date and
the stock options will vest 20% per year during a period of five years. The
stock options will terminate ten years from the grant date. The Company plans to
measure compensation cost, if any, associated with the stock options based upon
the intrinsic value of the stock options measured at the grant date, in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.

15. SUBSEQUENT EVENTS

On February 13, 2003, Volume Services America Holdings, Inc. filed a
registration statement on Form S-1 with the Securities and Exchange Commission
for the proposed IDSS offering. The Company has also filed a preliminary
prospectus with the Canadian provincial securities regulatory authorities. In
connection with this offering, Volume Services America would commence a tender
offer and consent solicitation for its outstanding 11 1/4% senior subordinated
notes due 2009 and would refinance its existing credit facility. Under the
proposed IDSS offering, Volume Holdings would be the proposed issuer of the new
subordinated notes but the non-guarantor subsidiaries would remain the same.
There is no guarantee that the IDSS offering will occur and the Company may
elect not to proceed with the IDSS offering or any or all of the related
transactions due to changes in the Company's business or strategic plans,
general economic and market conditions or any other factors.

39

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarterly operating results for the years ended January 1, 2002 and
December 31, 2002 are as follows (in thousands, except per share data):

40

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. NON-GUARANTOR SUBSIDIARIES FINANCIAL STATEMENTS
The senior subordinated notes are jointly and severally guaranteed by
Volume Holdings 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 consolidating financial statements of
the Parent Company, Guarantor Subsidiaries (including Volume Services America,
the issuer) and Non-Guarantor Subsidiaries as of January 1, 2002 and December
31, 2002 (in the case of the balance sheet) and for the years ended January 2,
2001, January 1, 2002 and December 31, 2002 (in the case of the statement of
operations and comprehensive income (loss) and the statement of cash flows):

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS, YEAR
ENDED JANUARY 2, 2001

41

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED JANUARY 2, 2001

42

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED BALANCE SHEET, JANUARY 1, 2002

43

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS, YEAR
ENDED JANUARY 1, 2002

44

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED JANUARY 1, 2002

45

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED BALANCE SHEET, DECEMBER 31, 2002

46

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME, YEAR
ENDED DECEMBER 31, 2002

47

VOLUME SERVICES AMERICA HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS, YEAR ENDED DECEMBER 31, 2002

48

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides information about each of our directors and
executive officers as of March 20, 2003.

David Blitzer is a member of our board of directors. Since January 2000,
Mr. Blitzer has been a senior managing director of The Blackstone Group L.P.,
referred to in this Form 10-K as "Blackstone," which he joined in 1991. He has
been one of our directors since 1995.

John T. Dee 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. 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 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 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 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

49

Department Stores Company. Previously, he was a principal of McKinsey & Company,
Inc., an international consulting firm.

Howard A. Lipson is a member of our board of directors. Mr. Lipson is a
senior managing director of Blackstone, which he joined in April 1988. He has
been one of our directors since December 1995. Prior to joining Blackstone, 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 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. 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 is a member of our board of directors. Mr. Wallace joined
Blackstone in July 1997 as an analyst and became an associate in January 2001.
He has been one of our directors since October 1999.

The discussion of the amended stockholders' agreement in Certain
Relationships and Related Transactions -- Amended Stockholders' Agreement below
(with respect to the rights of management and various Blackstone entities to
appoint directors) and the discussion of the employment agreements in "Executive
Compensation" below, are incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

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.

- ---------------

(1) Bonuses were paid pursuant to Volume Services America's bonus plan for
general managers and senior management personnel. Under the plan, the
payment of the executive officers' bonuses for 2002 was contingent on Volume
Services America's financial performance in 2002. The bonus amounts paid to
each named executive officer reflect only a portion of the annual bonus that
each named executive officer would have received as a 2002 bonus payment. At
our board of directors' request, the named executive officers agreed to
forfeit the balance of their 2002 bonus in exchange for a commitment that
the Company

50

will pay bonuses (the sum of which, in the aggregate, will not exceed
$1,000,000) upon a successful refinancing or other similar transaction by the
Company. If such a refinancing or other similar transaction is not completed,
these contingent bonuses will not be paid.

(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) Service America has historically maintained split dollar life insurance
policies for certain of its named executive officers and other executives.
In light of recent changes in the law, Service America has determined not to
pay the premiums due for 2003 and is taking appropriate actions to provide
alternatives to these arrangements.

(4) 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.

(5) Amount includes $49,822 in relocation benefits and $2,509 in insurance
premiums.

(6) Amount includes $117,423 in insurance premiums, including $13,400 in split
dollar life insurance premiums, and $2,750 in Volume Services America's
contributions under its 401(k) plan.

(7) Amount includes $2,750 in Volume Services America's contributions under its
401(k) plan and $8,047 in insurance premiums.

(8) Amount includes $890 in insurance premiums.

DIRECTOR COMPENSATION

Directors of Volume Services America do not receive compensation, except in
their capacity as officers or employees.

MANAGEMENT AGREEMENTS

We have entered into the following arrangements with our directors and
executive officers:

Agreement with Mr. Dee. On May 1, 2002, Volume Holdings 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 or
without 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 in an amount equal to Mr. Dee's annual base
salary for the balance of the term of employment, and ancillary employee
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, Volume Holdings entered into
an employment agreement with Mr. Honig. The agreement provides that Mr. Honig
will be employed by Volume Holdings as Chief Executive Officer until April 14,
2004, subject to automatic one-year extensions of the term of his agreement and
his employment with Volume Holdings, 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
Volume Holdings' 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
51

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 Volume Holdings without cause, by Mr. Honig for good reason (as
such terms are defined in the agreement) or in the event of a sale of all or
substantially all of Volume Holdings' 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 Volume Holdings 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.

Agreement with Mr. Frick. On November 17, 1995, Volume Services entered
into an employment agreement with Mr. Frick. The agreement provides that Mr.
Frick will be employed by Volume Services as Chief Financial Officer until he
resigns or is dismissed by Volume Services for or without cause, as defined in
the agreement. Mr. Frick's annual base salary under the contract is $225,000,
subject to annual review by Volume Services's chief executive officer. Mr. Frick
is also entitled to receive an annual bonus pursuant to any management incentive
compensation plan established by Volume Services. 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 Volume Services, 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 Volume Services to cease such employment without the
written consent of Volume Services; or

- have any involvement in any capacity in any contract concessions business
similar to that of Volume Services in those states in the United States
in which Volume Services does business and over which Mr. Frick has had
supervisory responsibility.

Agreement with Ms. Steinmayer. On September 29, 1998, Volume Holdings
entered into an employment agreement with Ms. Steinmayer. The agreement provides
that Ms. Steinmayer will be employed by Volume Holdings 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 Volume Holdings 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 Volume Holdings
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

52

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.

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 Volume Services
America 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
Adjusted 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

53

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.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table and accompanying footnotes show information regarding
the beneficial ownership of shares of our common stock and show the number of
and percentage owned by:

- each person who is known by us to own beneficially more than 5% 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 noted in the footnotes to this table, each person has sole voting
and investment power with respect to all shares attributable to such person.

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- ---------------

(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 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 Corporation.

(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 "Item 13. Certain Relationships and Related Party
Transactions -- Management Ownership and Transactions with Management."

ITEM 13. CERTAIN RELATIONSHIPS AND 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 Corporation ("GE
Capital") in January 1997 entered into a tax indemnity agreement. Under this
agreement:

- GE 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 GE Capital
realized in connection with the recapitalization of Service America
effected in January 1997 by GE Capital and some members of Service
America's management.

Annual Fees. Blackstone and GE 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 GE Capital. The fees payable to BMP II and GE
Capital have been accounted for as an expense.

Leasing Services. GE Capital and its affiliates provided us leasing and
financing services during 2002 on arms'-length terms. Payments to GE Capital and
its affiliates during 2002, net of discounts earned, were

55

approximately $95,000. We also leased equipment from GE Capital under a capital
lease; payments to GE Capital under this lease were approximately $267,000 in
2002. The lease expired as of December 31, 2002.

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 L.P. ("VSI
Management Direct") and VSI Management II L.P. ("VSI Management II"). VSI
Management Direct owns a 4.2% ownership interest in us, and VSI Management II
holds a limited partnership interest in each of BCP Volume and BCP Offshore
Volume that represents 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.
Currently:

- Mr. Dee owns a 6.8% limited partnership interest in VSI Management Direct
and a 7.5% limited partnership interest in VSI Management II;

- Mr. Frick owns 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 owns 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, Volume Services America 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. In October 2002, VSA acquired
the interests in the two partnerships for $96,000 from a departing former member
of management. VSA owns a 2.0% limited partnership interest in VSI Management
Direct and a 2.2% limited partnership interest in VSI Management II.

VSI Management Direct and VSI Management II also made loans to certain
members of the then-current management team of Volume Services America 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
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.

In addition to the transactions with management described above, Lawrence
E. Honig borrowed $200,000 from Volume Services America in April 2002 as a
bridge loan on the sale of his previous residence. This amount was repaid in
full on July 30, 2002.

AMENDED STOCKHOLDERS' AGREEMENT

On December 21, 1995, VSI Management Direct, BCP Volume L.P., BCP Offshore
Volume L.P. and Volume Holdings entered into a stockholders' agreement. On
August 24, 1998, these parties, together with GE Capital and Recreational
Services, entered into an amended and restated stockholders' agreement. In the
discussion of the stockholders' agreement below, we refer to BCP Volume L.P. and
BCP Offshore Volume L.P. collectively as "Blackstone."

Management; Board of Directors. The Board of Volume Holdings will be
comprised of a Chairman, one director appointed by VSI Management Direct
(provided that the Chairman is not a partner of VSI Management Direct and that
VSI Management Direct consults with Blackstone prior to the appointment) and
three directors appointed by Blackstone (provided that Blackstone is the sole
Controlling Stockholder, as defined in the agreement). If Blackstone ceases to
be the sole Controlling Stockholder, each of Blackstone and

56

GE Capital will have the right to appoint two directors. Until GE Capital is
entitled to appoint a director, it is entitled to appoint an Observer, as
defined in the agreement, who is not entitled to vote on any Board matters.

Transfers of Shares. No transfers of the shares of Volume Holdings' common
stock, referred to as the "Shares," may be made by any stockholder, as defined
in the agreement, within one year from the date of the amended stockholders'
agreement other than:

- to a defined category of persons affiliated with or successors in title
to existing stockholders, each of whom agrees to be bound by the terms of
the amended stockholders' agreement, each referred to as a "Permitted
Transferee;"

- pursuant to a public offering of the Shares; or

- in accordance with the exercise of the drag-along or tag-along rights
discussed below.

If either of Blackstone or Recreational Services, for these purposes,
referred to as the "Transferring Stockholder," intends to transfer its Shares
while the amended stockholders' agreement is in effect (other than by way of a
public offering or pursuant to Rule 144 under the Securities Act or to a
Permitted Transferee) and the Transferring Stockholder still beneficially owns
at least one-third of the number of Shares on a fully diluted basis that it held
at the date of the amended stockholders' agreement, then each other stockholder
will have the right to require the purchaser of such Transferring Stockholder's
Shares to purchase the same proportion of the Shares that such stockholder owns,
on the same terms as those offered to the Transferring Stockholder, referred to
as the "tag-along right."

If all of the Controlling Stockholders accept an offer by a party other
than a stockholder, referred to as a "Third Party," to purchase all of the
Shares owned by the stockholders (and the Controlling Stockholder to whom the
offer was made still owns at least one-third of the Shares owned by it at the
date of the amended stockholders' agreement), then each stockholder is obliged
to transfer its Shares to the Third Party on the same terms as those accepted by
the Controlling Stockholders, referred to as the "drag-along right."

After one year from the date of the amended stockholders' agreement, a
stockholder may also transfer Shares:

- pursuant to a transfer that is exempt from the registration requirements
of the Securities Act; or

- if such stockholder is not a Controlling Stockholder, after offering the
Shares first to Volume Holdings and then to each of Blackstone and
Recreational Services in proportion to their respective holdings of
Shares.

Unless a stockholder transfers Shares pursuant to a public offering, Rule
144 under the Securities Act or the drag-along right, all transferees are
required to become bound by the terms of the amended stockholders' agreement.

Restrictions on Corporate Action. For so long as Recreational Services
owns at least 20% of the Shares, we may not take certain fundamental corporate
actions without the consent of each of Recreational Services and Blackstone,
including the amendment of the certificate of incorporation or by-laws of Volume
Holdings or the modification of any stock option, bonus or benefit plan.
Similarly, as long as Recreational Services owns at least 20% of the Shares,
Volume Holdings may not enter into any transaction with Blackstone, or its
affiliates, without the consent of Recreational Services, except for:

- the payment of regular fees or expenses to its directors;

- transactions that are reasonable in the light of industry practice and
that are of a value not greater than $500,000 individually and $1,000,000
in the aggregate in any one year;

- the payment of the monitoring fee discussed below; or

- transaction fees up to 1% of the value of a company being acquired by
Volume Holdings, as long as GE Capital also receives a proportional fee
based on Recreational Services' Share ownership relative to Blackstone's
Share ownership.

57

Annual Fees. The amended stockholders' agreement permits the payment of
annual monitoring fees by Volume Holdings of $250,000 to Blackstone and $167,000
to GE Capital. The fees payable to Blackstone and GE Capital have been accounted
for as an expense.

Registration Rights. Blackstone has the right to demand registration of
the Shares by Volume Holdings under the Securities Act at any time, subject to a
maximum of three such registrations. Recreational Services has the right to
demand such registration on one occasion only, at any time on or after the third
anniversary of the date of the amended stockholders' agreement.

ITEM 14. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures within 90 days of the filing date of this annual report,
and, based on their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that these controls and procedures are effective. There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.

Disclosure controls and procedures are our controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) See financial statements beginning at page 19.

(b) We did not file any Current Report on Form 8-K during the last quarter
of our 2002 fiscal year.

(c) Exhibits:

- ---------------

* Filed herewith

(d) Financial Statement Schedules

SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

We have not sent to shareholders any annual report to security holders,
proxy statement, form of proxy or other proxy soliciting material during or with
respect to our 2002 fiscal year.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 20, 2003.

VOLUME SERVICES AMERICA, INC.

By: /s/ KENNETH R. FRICK
------------------------------------
Name: Kenneth R. Frick
Title: Executive Vice President
and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each
registrant and in the capacities indicated on March 20, 2003.

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CERTIFICATION

I, Lawrence E. Honig, certify that:

1. I have reviewed this annual report on Form 10-K of Volume Services
America, Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

(a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions);

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ LAWRENCE E. HONIG
--------------------------------------
Lawrence E. Honig
Chief Executive Officer

Date: March 20, 2003

62

CERTIFICATION

I, Kenneth R. Frick, certify that:

1. I have reviewed this annual report on Form 10-K of Volume Services
America, Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

(a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions);

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ KENNETH R. FRICK
--------------------------------------
Kenneth R. Frick
Chief Executive Officer

Date: March 20, 2003

63