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

(X) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 28, 1999 or

( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____ to _____

Commission file number:  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.

                            (X) YES ( ) 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. ( )

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 March 21, 2000, was $0.

The number of shares  outstanding of the  registrant's  Common Stock,  par value
$.01 per share, at March 21, 2000, was 100.


<PAGE>

                                     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  concession,  high-end  catering  and  merchandise  services for sports
facilities, convention centers and other entertainment facilities throughout the
United States. We currently provide services at 122 client facilities, typically
pursuant to long-term  contracts  that grant us the  exclusive  right to provide
various food and beverage (and, under some contracts,  merchandise) products and
services  within the  facility.  The  breakdown of  facilities  that we serve by
primary  client  category is as follows:  61 sports  facilities,  28  convention
centers and 33 other entertainment  facilities. At one facility, we also provide
full facility management services.

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 61 such
facilities,  including stadiums and arenas. 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.

     Concession-style  sales of food and beverages represent the majority of our
business at sports  facilities.  High-end  catering for premium seating,  luxury
suites and in-stadium  restaurants is responsible for a  significantly  smaller,
but growing, portion of net sales at sports facilities.

     Our contracts  with sport  facilities  are typically for terms ranging from
five to twenty  years.  In  general,  stadium  and,  to a lesser  extent,  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.

     At one arena, we provide full facility management services.  These services
include  licensing  the arena  (and its suites and  premium  seats) for  events,
providing parking operations,  security and ushering,  maintaining the arena and
preparing it for events,  distributing  tickets,  printing  programs and selling
advertising.
<PAGE>

     The  following  chart lists some of our major  contracts  within the sports
facilities category:
<TABLE>
<CAPTION>
NAME                               LOCATION                SPORTS TEAM TENANT            SEATING CAPACITY (SPORT)
<S>                                <C>                     <C>                           <C>
ALLTEL Stadium Florida             Jacksonville, FL        Jacksonville Jaguars          73,000 (NFL)*
HHH Metrodome                      Minneapolis, MN         Minnesota Vikings,            64,000 (NFL) (College Football)
                                                           Minnesota Twins               44,000 (MLB)*
FedEx Field                        Landover, MD            Washington Redskins           80,000 (NFL)
Palace of Auburn Hills             Auburn Hills, MI        Detroit Pistons               21,000 (NBA)*
Qualcomm Stadium                   San Diego, CA           San Diego Chargers,           71,400 (NFL)
                                                           San Diego Padres              60,750 (MLB)
RCA Dome                           Indianapolis, IN        Indianapolis Colts            60,000 (NFL)
Rose Bowl                          Pasadena, CA            N/A                           102,000 (College Football)
3Com Park                          San Francisco, CA       San Francisco 49ers,          68,000 (NFL)
                                                           San Francisco Giants          52,200 (MLB)
Tropicana Field                    St. Petersburg, FL      Tampa Bay Devil Rays          48,500 (MLB)
Truman Sports Complex`             Kansas City, MO         Kansas City Chiefs            79,000 (NFL)
                                                           Kansas City Royals            40,600 (MLB)
Yankee Stadium                     New York, NY            New York Yankees              55,000 (MLB)
<FN>

*    "NFL" means National Football League, "MLB" means Major League Baseball and
     "NBA" means "National Basketball Association".
</FN>
</TABLE>

     Convention Centers

     We currently have contracts to provide services, including banquet catering
and food court operations, to 28 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, including planning, preparing and serving banquets, providing
food court  operations,  assisting in planning  events,  and marketing  clients'
facilities.

     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.  The following chart lists some
of our major contracts within the convention center category:
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   Size
Name                                        Location                                        (approx. sq. ft)1
<S>                                         <C>                                                <C>

American Royal Center                       Kansas City, MO                                      372,000
Cobb Galleria Center                        Atlanta, GA                                          133,000
Colorado Convention Center                  Denver, CO                                           300,000
Cow Palace                                  San Francisco, CA                                    300,000
Indiana Convention Center                   Indianapolis, IN                                     400,500
Jacob K. Javits Center                      New York, NY                                         900,000
Kentucky Fair & Expo Center                 Louisville, KY                                     1,068,000
Miami Beach Convention Center               Miami Beach, FL                                      503,000
National Trade Center                       Toronto, ON Canada                                 1,000,000
San Diego Convention Center                 San Diego, CA                                        349,000
Washington, DC Convention Center            Washington, DC                                       381,000
------------------
<FN>

1 Sources:   Tradeshow Week Exhibit Hall Directory (1999) and IAAM Member and Service Directory
             2000 Guide
</FN>
</TABLE>

     Other Entertainment Facilities

     We  have  contracts  to  provide  a wide  range  of  services  to 33  other
entertainment  facilities located throughout the United States.  Such facilities
include horse racing tracks, music amphitheaters,  motor speedways, state parks,
skiing facilities, theme parks and zoos.

     While the services that we provide can vary widely depending on the type of
facility  concerned,  we primarily provide  concession  services at theme parks,
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
facilities varies from facility to facility.

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

<TABLE>
<CAPTION>

Name                                             Location                         Venue Type
<S>                                              <C>                              <C>

Alpine Valley Amphitheater                       Walworth, WI                     Music Amphitheater
Belmont, Saratoga and Aqueduct Tracks            New York                         Horse Racing Tracks
Chicago Auditorium Theater                       Chicago, IL                      Theater
Glen Helen Pavilion                              San Bernardino, CA               Music Amphitheater
Irvine Meadows                                   Laguna Hills, CA                 Music Amphitheater
Lake Perris State Park                           Perris, CA                       Marina Operation
Lake Placid Ski Resort                           Lake Placid, NY                  Ski Resort
Los Angeles Zoo                                  Los Angeles, CA                  Zoo
Pine Knob Amphitheater                           Pontiac, MI                      Music Amphitheater
Sea Life Park                                    Oahu, HI                         Theme Park
</TABLE>


<PAGE>

     Significant  Clients.  One of our clients,  Yankee  Stadium,  accounted for
11.1% of our revenues in 1999.

CONTRACTS

     We typically enter into one of three types of contract with our clients:

o    Profit and Loss Contracts;

o    Profit Sharing Contracts; and

o    Management Fee Contracts.

     Each of our  contracts  falls into these  three  categories.  However,  any
particular  contract  may contain  elements of any of the other types as well as
other features specific to that contract.

     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 Contracts,  we generally 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 revenues and bear all of the expenses of the provision of our services at
a facility.  These expenses include  commissions paid to the client. 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. As of December 28, 1999, we
served 99 facilities under Profit and Loss Contracts.

     Profit Sharing  Contracts.  Under Profit Sharing  Contracts,  also commonly
referred  to in  the  industry  as  incentive  bonus  contracts,  we  receive  a
percentage  of any  profits  earned  from the  provision  of our  services  at a
facility after deducting expenses. These expenses include commissions payable to
the client. In addition, under some Profit Sharing Contracts, we receive a fixed
fee prior to the  determination  of profits  under the  contract.  Under  Profit
Sharing  Contracts,  we  generally  do not bear  responsibility  for any  losses
incurred in connection  with the provision of our services as we are  reimbursed
for our on-site  expenses.  However,  if a loss is incurred,  we typically  will
receive no payments under the contract other than  reimbursement of our expenses
and our fixed fee, if any.  As of December  28,  1999,  we served 15  facilities
under Profit Sharing Contracts.

     Management Fee  Contracts.  Under  Management  Fee Contracts,  we receive a
management fee, typically  calculated as a fixed dollar amount and/or a fixed or
variable percentage of various categories of sales. In addition, some Management
Fee Contracts  entitle us to incentive fees based upon our performance under the
contract,  as measured by factors  such as revenues or operating  costs.  We are
reimbursed for all of our on-site expenses under these contracts. As of December
28, 1999, we served 8 facilities under Management Fee Contracts.

                                       2
<PAGE>

     Under  one of our  Management  Fee  Contracts,  we  provide  full  facility
management  services  in  addition to food and  concession  services.  For these
services,  we receive a base fee and an  incentive  fee.  We have also agreed to
lend the facility  owner any amount by which the  facility's  net revenues  fall
below specified benchmarks.

     Substantially all 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.

     When we enter into new  contracts,  or extend or renew  existing  contracts
(particularly for sports facilities), we are often required to make some form of
up-front  or  committed  future  capital  investment  to help  finance  facility
construction  or  renovation.  This  expenditure  typically  takes  the  form of
investment in leasehold  improvements,  food service  equipment and/or grants to
owners or operators of facilities.  At the end of the contract term, all capital
investments that we have made typically  remain the property of the client,  but
generally  the client must  reimburse us for any  undepreciated  or  unamortized
capital  investments if the contract is terminated  early (other than due to our
default).

     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.

     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 of five to twenty
years.  Convention center contracts  generally require lower capital investments
and have average  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.


COMPETITION

     The   recreational   food  service   industry  is  highly   fragmented  and
competitive,  with several  national  food service  providers as well as a large
number of smaller  independent  businesses  serving  discrete local and regional
markets  and/or  competing  in  distinct  areas.  Those  companies  that  lack a
full-service  capability,  because,  for  example,  they cannot cater for luxury
suites at stadiums and arenas,  often bid for contracts in conjunction  with one
of the other national 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  food  service  providers,
including  ARAMARK,  Delaware North Corporation,  Ogden  Corporation,  Fine Host
Corporation and Levy  Restaurants.  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.

                                       3
<PAGE>

     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:

o        the ability to make capital investments;

o        profit and loss, profit sharing or management fee structure;

o        service innovation;

o        quality and breadth of products and services; and

o        reputation within the industry.

     Based on the  number of  facilities  that we serve,  we have a  substantial
market  position.  Management  believes  that our  position  in the  market is a
competitive strength because it increases the likelihood that we will be invited
to bid for new  contracts to supply food and beverage  services to  recreational
facilities.  Another  competitive  strength is our  ability to make  significant
capital  investments  in  clients'  facilities,  which has  become an  important
competitive   factor  in  the  bidding  process  for  contracts  to  serve  some
facilities, particularly sports facilities.

     However,  some of our  competitors may be prepared to accept less favorable
financial  returns  than we are when  bidding  for  contracts.  A number  of our
competitors also have  substantially  greater financial and other resources than
us. Furthermore,  we have more indebtedness than some of our competitors,  which
could place us at a competitive disadvantage.

PURCHASING

     We  have  a  national   distribution  contract  with  SYSCO  to  cover  our
operations.  We also have a number of national  purchasing  programs  with major
product suppliers that enable our general managers 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.

     We  generally  purchase any  equipment  that we require  directly  from the
manufacturer.  We  typically  obtain  several bids when filling our food service
equipment requirements.

EMPLOYEES

     As of December 28, 1999, we had  approximately  1,600 full-time  employees.
During calendar 1999,  approximately 29,800 employees 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 28, 1999, approximately 40% 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. At
some  locations,   local  charitable  groups  raise  funds  by  working  at  our
concessions operations in exchange for a percentage of gross revenues.


<PAGE>

SEASONALITY

     Our net sales and  operating  results  have  varied,  and are  expected  to
continue to vary, from quarter to quarter as a result of factors which include:

o        seasonal patterns within the industry;

o        the unpredictability in the number, timing and type of new contracts;

o        the timing of contract expirations and special events; and

o        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 sales are  concentrated in the second and
third  quarters,  the  majority of NFL  activity  occurs in the third and fourth
quarters and  convention  centers and arenas  generally host fewer events during
the summer months. Consequently, our results of operations for the first quarter
are  typically  substantially  lower than in other  quarters  and our results of
operations  for the third quarter are typically  higher than in other  quarters.
Results of  operations  for any  particular  quarter  may not be  indicative  of
results of operations in the future.


INTELLECTUAL PROPERTY

     We have  the  patents,  trademarks,  trade  names  and  licenses  that  are
necessary  for the  operation of our business as we currently  conduct it. We do
not consider our patents, trademarks, trade names and licenses to be material to
the operation of our business.

GOVERNMENT REGULATION

     Our operations  are subject to various  governmental  regulations,  such as
those governing:

o        the service of food and alcoholic beverages;

o        minimum wage regulations;

o        employment;

o        environmental protection; and

o        human health and safety.

     In addition, our facilities and products are subject to periodic inspection
by federal,  state, and local authorities.  The cost of regulatory compliance is
subject to additions to or changes in federal or state  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.


<PAGE>

     The United States Food and Drug  Administration  (the "FDA")  regulates and
inspects our kitchens.  Every commercial  kitchen in the United States must meet
the FDA's minimum standards  relating to the handling,  preparation and delivery
of food,  including  requirements  relating to the  temperature  of food and the
cleanliness of the kitchen and the hygiene of its personnel. We are also subject
to various state,  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  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,  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  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  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.

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  Holdings"),  a Delaware
corporation.   Volume  Holdings'  subsidiaries  include  Volume  Services,  Inc.
("Volume Services") and Service America Corporation ("Service America"),  each a
Delaware corporation.

     We have no operations  or assets in any foreign  country other than Canada.
During 1999, our Canadian  revenues and Canadian assets were less than 5% of our
total revenues and assets, respectively.

ITEM 2.  PROPERTIES.

     We lease our corporate  headquarters of approximately 19,300 square feet in
Spartanburg,  South Carolina,  the  headquarters of Service America in Stamford,
Connecticut of approximately 12,600 square feet, and a regional office in Fords,
New Jersey.  We are  currently  trying to sublease  much of the office  space in
Stamford.

     We currently  provide our services at 122 client  facilities,  all of which
are owned or leased by our clients.  Our  contracts  with our clients  generally
permit us to use certain areas within the facility to perform our administrative
functions  and  fulfill  our  warehousing  needs,  as well as  provide  food and
beverage services.

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

     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  Enterprises  LLC  (collectively,
"Silver").   Service   America  alleged  fraud,   misrepresentation,   negligent
misrepresentation,  breach of contract  and breach of the covenant of good faith
and fair  dealing  in  connection  with  Service  America's  Exclusive  Catering
Services  Agreement  with Silver dated  November 21, 1997, and sought damages in
excess of $1 million.  Silver  subsequently  filed  counterclaims  that  alleged
breach of contract,  sought an accounting and asserted that Service  America had
commenced  the  proceeding  and acted in bad faith.  Silver  claims  damages for
injury to its  business in an amount in excess of $11  million.  In light of our
meritorious defenses, we do not believe that Silver's claims are well-founded in
fact or law. We are  vigorously  pursuing  our claim and  defending  against the
counterclaims.  The  evidentiary  proceeding  has closed,  the parties have made
their final arguments in the  arbitration  and we are awaiting the  arbitrator's
decision.

     In addition, we are from time to time involved in various legal proceedings
incidental to the conduct of our business.

     In the opinion of  management,  any liability  arising out 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 1999 fiscal year.

                                     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.  As of March 23,
2000, the latest  practicable  date, there were four holders of Volume Holdings'
common stock. In connection with the offering of Volume Service America's senior
notes in 1999,  Volume Service America paid a dividend to Holdings in the amount
of $50.0 million. Holdings used the dividend to repay a $500,000 note to General
Electric Capital  Corporation ("GE Capital") and to repurchase 194 shares of its
stock from its  shareholders.  During our 1999 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 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.  This table contains selected  financial data and is qualified
by the more detailed consolidated  financial statements,  including notes to the
financial statements,  of Volume Holdings. The selected financial data should be
read in conjunction with the consolidated financial statements and "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included in this Annual Report on Form 10-K.
<PAGE>
<TABLE>
<CAPTION>


                                                Volume Services America Holdings, Inc.
                                                         (Dollars in millions)

Statement of Operations Data                      1995          1996          1997           1998          1999
                                                  ----          ----          ----           ----          ----
<S>                                          <C>            <C>           <C>           <C>            <C>

Net sales................................    $    164.7     $    190.4    $    196.0    $    283.4     $    431.5
Depreciation and amortization............          11.8           12.6          12.9          18.2           26.8
Operating income (loss)(a)...............          (0.3)           2.9           4.8           8.7           16.5
Interest expense.........................           0.5            7.3           7.9          11.3           23.0
Loss before income taxes,
    extraordinary item and cumulative
    effect of change in accounting
    principle............................          (1.0)          (3.9)         (2.8)         (2.2)          (6.1)
Income tax provision (benefit)...........          --             --             0.3           1.5           (1.5)
Net loss(b)  ............................          (1.0)          (3.9)         (3.1)         (5.2)          (5.6)

Balance Sheet Data
Total assets.............................         120.1          117.3         137.8         269.5          278.6
Total debt(c)............................          70.0           69.7          79.0         161.3          224.0
Total stockholders' equity (deficiency)..          26.6           21.9          25.1          52.2           (2.4)

Other Data
EBITDA(d)................................          12.4           16.3          20.8          32.1           47.1
Ratio of earnings to fixed charges(e)....          --             --            --            --             --
<FN>
----------

(a)  Operating  income (loss)  includes a non-cash charge of $2.5, $1.4 and $1.4
     in fiscal  years  1997,  1998 and 1999,  respectively,  related to contract
     termination costs (in fiscal 1997 and 1998) and the writedown of long-lived
     assets  identified  as impaired and a contract  loss  provision  (in fiscal
     1999).  Operating income (loss) for fiscal years 1995, 1996, 1997, 1998 and
     1999 includes  management fees paid to equity owners of $1.1,  $0.3,  $0.3,
     $0.3 and $0.4, respectively. Additionally, operating income (loss) includes
     $0.9 of trademark  fees charged by our former  owners for fiscal 1995.
(b)  Net income (loss) for Volume Holdings  includes an extraordinary  loss (net
     of income  taxes) of $1.5 and $0.9 for the  non-cash  write-off of deferred
     financing costs in fiscal years 1998 and 1999, respectively.  Additionally,
     net income  (loss) for fiscal 1999 includes a charge of $0.3 for the effect
     of a change in accounting principle (net of income taxes).
(c)  Includes the current portion of long-term debt.
(d)  EBITDA is defined as net income (loss) before interest expense,  income tax
     expense, depreciation and amortization, and:

     o    for fiscal  year 1997,  a $2.5  non-cash  charge  related to  contract
          termination costs;
     o    for  fiscal  year  1998,  $3.1  of  non-recurring  severance  expenses
          associated with Volume  Services'  employees and other Service America
          expenses  incurred  in  connection  with the  acquisition  of  Service
          America,  $1.4 of non-cash  charges  related to  contract  termination
          costs  for  Volume  Holdings,  and a $1.5  extraordinary  loss on debt
          extinguishment, net of taxes.
     o    for  fiscal  year  1999,  $1.5 of  non-recurring  expenses  related to
          downsizing the Service America corporate office in connection with the
          acquisition of Service  America,  $1.4 of non-cash  charges related to
          the writedown of impaired assets for certain  contracts and a contract
          loss provision, a $0.9 extraordinary loss on debt extinguishment,  net
          of taxes, and $0.3 for the cumulative effect of a change in accounting
          principle, net of taxes.
     o    for fiscal 1995, 1996, 1997, 1998 and 1999, $1.1, $0.3, $0.3, $0.3 and
          $0.4, respectively, for management fees paid to equity owners.
<PAGE>

(e)  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 $1.0,  $3.9, $2.8, $2.2 and $6.1 for fiscal years 1995, 1996, 1997, 1998
     and 1999, respectively.
</FN>
</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

FISCAL 1999 COMPARED TO FISCAL 1998

     Net sales.  Net sales increased 52.2% or $148.1 million from $283.4 million
in fiscal 1998 to $431.5  million in fiscal 1999. The increase was primarily due
to the August 24, 1998 acquisition of Service America (the "Acquisition")  which
resulted  in the  inclusion  of $186.8  million in net sales for fiscal  1999 as
compared  to  $75.5  million  in  fiscal  1998.  Excluding  the  effect  of  the
Acquisition, net sales increased by $36.7 million as a result of the addition of
eight new contracts,  including two NFL facilities,  Adelphia Coliseum,  home of
the  Tennessee  Titans,  and the Louisiana  Superdome and Arena;  one MLB venue,
Safeco  Field,  home of the  Seattle  Mariners;  and two minor  league  baseball
stadiums,  which together  generated $41.3 million in net sales. The improvement
was  partially  offset by the loss of net sales  associated  with the closure of
several accounts, including one NFL facility, the Trans World Dome.

     Cost of sales.  Cost of sales of $342.5  million in fiscal  1999  increased
$120.0  million from fiscal 1998  primarily  due to the  Acquisition  and to the
overall  increase  in net  sales.  Cost of sales as a  percentage  of net  sales
increased from 78.5% in fiscal 1998 to 79.4% in fiscal 1999 primarily reflecting
the higher variable costs, especially  commissions,  associated with two service
contracts acquired by Service America.

     Selling,  general and administrative.  Selling,  general and administrative
expenses  increased  $13.2  million  from $29.5  million in fiscal 1998 to $42.7
million in fiscal 1999, primarily due to the Acquisition. As a percentage of net
sales,  selling,  general and  administrative  expenses  declined  from 10.4% in
fiscal 1998 to 9.9% in fiscal  1999.  Overhead  expense,  one of the elements of
selling, general and administrative expenses,  declined substantially due to the
savings achieved  through the elimination of duplicate  costs.  Offsetting these
savings was an increase in other elements of selling, general and administrative
expenses primarily due to the increased cost structure associated with operating
convention centers, the primary component of Service America's business.
<PAGE>

     Depreciation and  amortization.  Depreciation  and  amortization  increased
47.4% from $18.2  million in fiscal 1998 to $26.8 million in fiscal 1999. Of the
$8.6  million  increase,  $4.8  million was due to an  increase in  amortization
arising from the application of purchase  accounting related to the Acquisition.
The  remaining  $3.8 million  increase was primarily  due to  depreciation  as a
result of the  assets  acquired  in the  Acquisition  and  fiscal  1999  capital
expenditures of $26.3 million.

     Transaction  related  expenses.  We incurred  $1.5  million in  transaction
related  expenses in fiscal 1999 as  compared  to $3.1  million in fiscal  1998.
These expenses relate to personnel  costs,  rental costs and  professional  fees
associated with the downsizing of the Stamford, Connecticut office in connection
with the Acquisition.

     Contract related losses.  We incurred  non-cash  contract related losses of
$1.4 million in both fiscal 1999 and fiscal 1998. The $1.4 million recognized in
fiscal 1999 resulted  primarily from our  determination  that certain  contracts
that  we  intend  to  continue  operating  are  impaired,  in  that  the  future
undiscounted  cash flows of these  contracts is estimated to be  insufficient to
recover the related  carrying  value of the property and  equipment and contract
rights  associated  with the  contracts.  As a result,  we have written down the
carrying  value of these  contracts  to our  estimate of fair value based on the
present value of the  discounted  future cash flows.  The $1.4 million in fiscal
1998 relates to the write-off of assets relating to three terminated  concession
contracts.

     Operating income. Operating income increased $7.8 million from $8.7 million
in 1998 to $16.5  million in fiscal 1999.  The increase was primarily due to the
factors discussed above.

FISCAL 1998 COMPARED TO FISCAL 1997

     Net sales.  Net sales increased 44.6% from $196.0 million in fiscal 1997 to
$283.4  million in fiscal 1998.  The increase  was  primarily  due to the to the
Acquisition which resulted in the inclusion of $75.5 million in revenues for the
period from  August 25, 1998 to the end of the fiscal  year.  In  addition,  net
sales at MLB venues  serviced by us  increased  by $11.6  million as a result of
post-season  playoff  games and a 20.7%  increase in average  attendance  at one
client facility.

     Cost of sales.  Cost of sales increased 41.7% from $157.0 million in fiscal
1997 to $222.5 million in fiscal 1998, primarily as a result of the Acquisition.
As a percentage of net sales,  cost of sales  declined from 80.1% in fiscal 1997
to 78.5% in fiscal 1998  principally  due to the  inclusion  of Service  America
whose cost of sales was 76.7% for the  eighteen  weeks ended  December 29, 1998,
compared to Volume  Holdings'  percentage of 79.0%  excluding  Service  America.
Other  factors  contributing  to the  decrease in cost of sales  percentage  are
directly  related to the net sales increase at Volume  Holdings' MLB facilities.
The  increased   attendance   at  MLB  regular   season  and  playoff  games  is
incrementally  more  profitable  due to the  ability of the  employment  base to
service more  customers  without a  corresponding  increase in labor  costs.  In
addition,  Volume  Holdings  secured a new  service  contract in 1998 that had a
lower  commission rate than the average of its other  contracts  contributing to
the reduction in cost of sales as a percentage of net sales.
<PAGE>

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  increased  56.1% from $18.9  million in fiscal 1997 to
$29.5  million in fiscal  1998,  primarily as a result of the  Acquisition.  The
percentage of selling,  general and  administrative  expenses as a percentage of
net  sales  increased  from 9.6% in fiscal  1997 to 10.4% in  fiscal  1998.  The
increase  as a  percentage  of net  sales is due to the  Acquisition,  with such
expenses representing 13.4% of its net sales.

     Depreciation and  amortization.  Depreciation  and  amortization  increased
41.1% from $12.9  million in fiscal 1997 to $18.2  million in fiscal  1998.  The
dollar increase was due to:

o    Service America's depreciation and amortization from August 24, 1998 to the
     end of the fiscal year of $2.4 million;

o    amortization  of trademark  fees,  step-up value of location  contracts and
     costs in  excess  of fair  value of net  assets  acquired  of $2.6  million
     resulting from the application of the purchase method of accounting for the
     Acquisition; and

o    amortization  of  capital  investments  made  in  connection  with  six new
     contracts of $1.3 million.

     Transaction related expenses.  Transaction related expenses of $3.1 million
in  fiscal  1998  primarily   include   non-recurring   severance   expense  and
non-recurring  expenses  principally  for Volume Services in connection with the
Acquisition.

     Contract related losses.  We incurred  non-cash  contract related losses of
$1.4 million in fiscal 1998 as compared to $2.5 million in fiscal 1997. The $1.4
million in fiscal  1998  relates to the  write-off  of assets  relating to three
terminated concession contracts.  The $2.5 million in fiscal 1997 relates to the
closure and subsequent  write-off of assets in connection with our contract with
Ericsson Stadium.

     Operating  income.  Operating income increased 81.2% from $4.8 million,  or
2.4% of net sales,  in fiscal  1997 to $8.7  million,  or 3.1% of net sales,  in
fiscal 1998. The increase was primarily due to the factors as discussed above.


LIQUIDITY AND CAPITAL RESOURCES

     For fiscal  1999,  net cash  provided  by  operating  activities  was $16.1
million  compared to $2.5 million  provided by operating  activities  for fiscal
1998.  The $13.6 million  increase in cash provided by operating  activities was
primarily  due to  increased  operating  activity,  mainly as the  result of the
Acquisition  and higher  overall  sales due to the  addition  of new NFL and MLB
venues and a $3.9 million net increase in working capital.

     For fiscal 1999,  net cash used in investing  activities  was $25.4 million
compared to $5.3 million in fiscal 1998. The primary components of net cash used
in  investing  activities  were the  purchase  of  property  and  equipment  and
investment  in  contract   rights  in  connection  with  acquiring  or  renewing
contracts.  In fiscal 1999, Volume Holdings made $14.6 million in investments in
acquiring  new contract  rights for Pacific Bell Park,  Louisiana  Superdome and
Arena and Adelphia Stadium and $1.3 million in contract  renewals as compared to
$6.2  million in fiscal 1998.  Investments  made in the purchase of property and
equipment  were $10.4  million in fiscal 1999 as  compared  to $12.6  million in
fiscal year 1998.  These  investments were partially offset by proceeds from the
sale of property  and  equipment  which were $.9  million  and $15.9  million in
fiscal years 1999 and 1998,  respectively.  Of the $15.9 million in proceeds for
fiscal 1998,  $12.6 million was due to the  termination of the Ericsson  Stadium
contract.
<PAGE>

     For fiscal  1999,  net cash  provided  by  financing  activities  was $12.8
million  compared to $6.3 million in fiscal 1998.  The 1999 figure  reflects the
issuance of $100.0 million of senior subordinated notes, and the use of proceeds
to retire  $45.0  million of senior  secured debt and $0.5 million of debt to GE
Capital,  redeem $49.5  million of stock,  and pay related fees of $6.2 million.
Excluding this financing,  $9.5 million was borrowed under the revolving  credit
facility to fund working  capital and capital  expenditures  and bank overdrafts
increased $7.4 million. This is compared to $6.9 million in borrowings under the
revolving  credit  facility,  a $1.8 million  decline in bank overdrafts and the
receipt of $3.5  million of cash equity from two  Blackstone  partnerships  (BCP
Volume, L.P. and BCP Offshore Volume L.P.) in fiscal 1998.

     For fiscal 1998, net cash provided by operating activities was $2.5 million
compared to $15.3 million provided by operating  activities for fiscal 1997. The
$12.9 million  decrease in cash provided by operating  activities  was primarily
due to an  increase  of $2.1  million in net loss and a net  increase in working
capital of $10.1  million,  primarily as a result of the  acquisition of Service
America.  This was partially  offset by a $5.3 million  increase in depreciation
and amortization and a $1.5 million extraordinary loss.

     For fiscal  1998,  net cash used in investing  activities  was $5.3 million
compared to $31.0  million for fiscal 1997.  The primary  components of net cash
used in investing  activities  for these periods were  purchases of property and
equipment and  investments  in contract  rights in connection  with acquiring or
renewing contracts.  Volume Holdings used $12.6 million and $26.0 million in the
purchase of  property  and  equipment  and $6.2  million  and $11.6  million for
investment in contract  rights,  for fiscal 1998 and fiscal 1997,  respectively.
The  difference in the amount of net cash used in investing  activities in these
two periods was primarily due to the large capital  investments  which were made
in FedEx Field (formerly Jack Kent Cooke  Stadium),  Tropicana Field and Pacific
Bell Park in fiscal 1997. In addition, in fiscal 1998, we received $12.6 million
in  proceeds  from assets held for sale after the  termination  of the  Ericsson
Stadium contract.

     For fiscal 1998, net cash provided by financing activities was $6.3 million
compared to $15.9  million in fiscal  1997.  The $9.6  million  decrease in cash
provided by financing activities was primarily due to decreased borrowings under
our revolving  credit  facilities and lower capital  investments  made to retain
contracts or to acquire new  contracts.  This decrease was  partially  offset by
additional borrowings net of debt repayments and payment of financing costs.

     Our  liquidity is generated  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 Chase
Manhattan Bank, Goldman Sachs Credit Partners and other lenders to refinance the
pre-Acquisition  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
notes  issuance  in 1999.  The credit  facility  also  includes a $75.0  million
revolving credit facility.
<PAGE>

     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.

     At December 28, 1999,  $53.3 million of the revolving  credit  facility was
available to be borrowed  under our credit  facility.  At that date,  there were
$9.5 million in outstanding borrowings and $12.2 million of outstanding, undrawn
letters of credit reducing availability.


FUTURE LIQUIDITY AND CAPITAL RESOURCES

     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
$6.3 million and $0.6 million in 2000 and 2001, respectively.

     We anticipate total capital investments of $15.0 million in fiscal 2000. In
addition, we are currently in negotiations for two potential new contacts. If we
enter into these  contracts,  we will be  required  to fund  additional  capital
investments  of  approximately  $5.7  million in fiscal 2001 and $8.0 million in
fiscal 2002.

NEW ACCOUNTING STANDARD

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS
No. 137. This  statement  establishes  accounting  and  reporting  standards for
derivative  instruments and for hedging  activities.  It requires that an entity
recognize all  derivatives  as either assets or liabilities on the balance sheet
and measures those  instruments at fair value. The accounting for changes in the
fair value of a derivative  (that is, gains and losses)  depends on the intended
use of the derivative.  For us, this new standard will become  effective for our
fiscal 2001 financial statements.  We have not yet completed our analysis of the
effects of this new standard on our results of operations or financial position.
The new statement may not be applied retroactively.

YEAR 2000

     Volume  Services has  experienced no business or service  disruptions  from
Year 2000 related issues as of mid-March  2000.  However,  there is no guarantee
that  there will not be any Year 2000  issues in the  future.  We have  budgeted
$5,000  for Year  2000-related  contractor  support  in the event that Tear 2000
issues arise during 2000.


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   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:
<PAGE>

o    our high degree of leverage and significant debt service obligations;

o    our history of net losses;

o    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 such events;

o    the risk of labor stoppages  affecting  sports teams at whose facilities we
     provide our services;

o    the risk of sports  facilities  at which we provide  services  losing their
     sports team tenants;

o    our ability to retain existing clients or obtain new clients;

o    the highly competitive nature of the recreational food service industry;

o    any future changes in management;

o    general risks associated with the food industry; and

o    future changes in government regulation.

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.  We use interest rate swaps to reduce  interest
rate  volatility to achieve a desired  proportion of variable  versus fixed rate
debt, based on current and projected market conditions. The table below provides
information  about our  derivative  financial  instruments  and other  financial
instruments that are sensitive to changes in interest rates,  including interest
rate  swaps and debt  obligations.  For debt  obligations,  the  table  presents
principal  cash flows and related  weighted  average  interest rates by expected
maturity  dates.  For interest rate swaps and caps, the table presents  notional
amounts and weighted average interest rates by expected  (contractual)  maturity
dates.  Notional  amounts are used to calculate the  contractual  payments to be
exchanged  under the  contract.  Weighted  average  variable  rates are based on
implied forward rates in the yield curve at the reporting date.
<TABLE>
<CAPTION>

                                                           December 28, 1999
                                                                                                             Fair
                                                                                                            Value
                                  2000      2001      2002      2003      2004    Thereafter     Total     12/28/99
<S>                            <C>        <C>       <C>       <C>       <C>       <C>          <C>        <C>


Long-term debt:                                            (In Millions)

    Variable rate:........      $  1.2    $   1.2   $  1.2    $  1.2    $  10.7   $   108.1    $ 123.4    $ 123.4

    Average interest rate:        10.0%      10.7%    10.8%     10.9%      10.9%       10.9%

    Fixed rate:...........      $   0     $    0     $   0     $   0     $   0     $  100.0   $  100.0    $  98.5

    Average interest rate:        11.25%     11.25%   11.25%    11.25%    11.25%

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                                                                                                 Fair
                                      Notional          Strike           Reference                              Value
                                       Amount            Rate               Rate             Period            12/28/99
                                       ------          --------         -----------        ----------         ----------
<S>                                     <C>              <C>              <C>               <C>                 <C>


Purchased interest rate cap             10.0             7.5%             3 month           4/15/99 -           $0.00
                                                                           LIBOR             6/16/01
</TABLE>
<TABLE>
<CAPTION>

                                                                       Fair Value
                                        2000             2001           12/28/99
<S>                                     <C>              <C>             <C>


Interest rate swap

  Fixed to variable                     $0.0             $30.0           $(0.5)

  Average pay rate                      5.9%

  Floor receive rate                    5.4%

</TABLE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        See index to financial statements at page F-1.

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.
<TABLE>
<CAPTION>

NAME                                   AGE    POSITION
<S>                                    <C>    <C>

                                              Chief Executive Officer and
John T. Dee.....................       61      Chairman of the Board of Directors
Kenneth R. Frick................       44     Vice President and Chief Financial Officer
Janet L. Steinmayer.............       44     Vice President, General Counsel and Secretary
Howard A. Lipson................       36     Director
David Blitzer ..................       30     Director
Peter Wallace...................       25     Director
</TABLE>

     John  T.  Dee,  Chief  Executive  Officer  and  Chairman  of the  Board  of
Directors.  Mr. Dee has served as Chief  Executive  Officer and  Chairman of the
Board of Directors of Volume  Services  America  since August 1998.  Mr. Dee has
served as President,  Chief Executive  Officer and a director of Service America
since January 1993 and as a consultant to Service  America from November 1992 to
January 1993. He has been Chairman of the Board of Directors of Service  America
since  January  1997.  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  (a  food  service  company)  with
responsibility  for ARAMARK's  recreational  food service and public  restaurant
operations. From 1979 to 1980, he held senior positions, including President, at
Sportservice  Corporation  (a food service  company),  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,
including Vice  President-Sales  and President of the Leisure  Services Group, a
division of ARAMARK engaged in the recreational food service industry.
<PAGE>

     Kenneth R. Frick, Vice President and Chief Financial Officer. Mr. Frick has
served as Chief Financial  Officer of Volume Services  America since August 1998
and as Chief  Financial  Officer of Volume Services since 1995. 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,  and for seven years was
Assistant  Controller and Southeast Regional Controller of Volume Services.  Mr.
Frick is a certified public accountant.

     Janet L.  Steinmayer,  Vice President,  General Counsel and Secretary.  Ms.
Steinmayer  has been Vice  President,  General  Counsel and  Secretary of Volume
Services  America since August 1998.  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. ("TWA"). From 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.

     Howard A. Lipson,  Director.  Mr. Lipson is Senior Managing Director of The
Blackstone  Group L.P.,  referred  to in this Annual  Report on Form 10-K as the
"Blackstone  Group",  which he joined in 1988.  He has been a director of Volume
Services America since 1995.  Prior to joining the Blackstone  Group, Mr. Lipson
was a member of the Mergers and  Acquisitions  Group of Salomon Brothers Inc. He
currently serves on the Board of Directors of Allied Waste Industries, Inc., AMF
Group Inc., Ritvik Holdings Inc., Prime Succession Inc. and Roses, Inc. and is a
member of the Advisory Committee of Graham Packaging Company.

     David Blitzer,  Director.  Mr. Blitzer is a Senior Managing Director of the
Blackstone  Group,  which he joined in 1991.  He has been a  director  of Volume
Services  America  since  1995.  Mr.  Blitzer  is  also  a  director  of  Haynes
International,  Inc., Republic Engineered Steels,  Inc., Bar Technologies,  Inc.
and The Imperial Home Decor Group Inc.

     Peter  Wallace,   Director.  Mr.  Wallace  has  been  associated  with  the
Blackstone  Group since 1997. He has been a director of Volume Services  America
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.


<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

     The table below provides  information  concerning the total compensation of
the Chief Executive Officer and all other executive  officers of Volume Services
America  based on 1999  salary and  bonuses.  These  officers  are  referred  to
together as the "Named Executives".
<TABLE>
<CAPTION>

                                                  ANNUAL COMPENSATION
                                                  -------------------
                                           YEAR           SALARY  BONUS(1)        OTHER ANNUAL           ALL OTHER
                                           ----           ------  --------      COMPENSATION(2)       COMPENATION (3)
                                                                                ---------------       ---------------

<S>                                        <C>          <C>         <C>                                           <C>

John T. Dee
Chief Executive Officer and Chairman of
the Board of Directors                     1999         $467,354    $137,895             --                $7,497
                                           1998          483,716          --             --                    --
Kenneth R. Frick
Vice President and Chief Financial
Officer                                    1999          194,808      40,000             --                 2,852
                                           1998          153,175      20,535             --                 4,584
Janet L. Steinmayer
Vice President, General Counsel and
Secretary                                  1999          256,876      59,737             --                   199
                                           1998          291,900     150,000          18,300                   --
------------------
</TABLE>

(1)  Bonuses  are made  pursuant  to Volume  Service  America's  bonus  plan for
     general  managers  and  senior  management  personnel.  Eligible  personnel
     qualify  for bonus  payments  in the event  that  Volume  Services  America
     exceeds annual  financial  performance  targets or at the discretion of the
     board of directors.
(2)  Perquisites  and other  personal  benefits  did not  exceed  the  lesser of
     $50,000 or 10% of the total salary and bonus of any Named Executive for the
     years shown.
(3)  All other  compensation  for Mr.  Dee and Ms.  Steinmayer  consists  of the
     dollar value of insurance  premiums paid by the  registrant  for that Named
     Executive.  For Mr.  Frick,  all  other  compensation  consists  of $699 in
     insurance  premiums  paid for him,  $392 in interest on investor  notes and
     $1,761 in employer matching contributions to our 401(k) plan.

DIRECTOR COMPENSATION

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

EMPLOYMENT AND SEVERANCE AGREEMENTS

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

     On August 24, 1998,  Volume Holdings  entered into an employment  agreement
with Mr. Dee.  The  agreement  provides  that Mr. Dee will be employed by Volume
Holdings at an annual base salary of $465,000 for a term of five years,  subject
to earlier  termination by Volume  Holdings for or without Cause,  or by Mr. Dee
for Good  Reason,  each as defined in the  agreement.  Mr. Dee is  entitled to a
bonus at the  discretion  of the Board of  Directors  of Volume  Holdings and to
participate  in  any  executive  bonus  plan  and  all  employee  benefit  plans
maintained by Volume Holdings.  The agreement  provides for severance pay in the
case of a termination  by Volume  Holdings  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  benefits.  During and for two years after Mr.
Dee's employment, Mr. Dee has agreed that, without the written consent of Volume
Holdings, he will not:

o    be engaged,  in any  capacity,  in any business  that  competes with Volume
     Holdings' business; or

o    solicit any person who was employed by Volume Holdings during the 12 months
     preceding such solicitation.

     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  until he resigns or is  dismissed  by Volume  Services  for or without
Cause,  as defined in the agreement.  Mr. Frick's base salary under the contract
is $195,000  subject to annual review.  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.  In the case of  termination  without Cause by
Volume Services, Mr. Frick will receive a one-time payment of two times his base
annual salary plus any accrued but unpaid bonus.  During and for two years after
his employment, Mr. Frick has agreed not to:

o    solicit  employees of Volume Services to cease such employment  without the
     written consent of Volume Services; or

o    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.

     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 at an annual base salary of $180,000,  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 for
Good Reason,  each as defined in the agreement.  Ms. Steinmayer is entitled to a
bonus at the  discretion  of the Board of  Directors  of Volume  Holdings and to
participate  in  any  executive  bonus  plan  and  all  employee  benefit  plans
maintained by Volume Holdings.  The agreement  provides for severance pay in the
case of a termination by Volume Holdings without Cause or by Ms.  Steinmayer for
Good  Reason in an amount  equal to two times her  compensation  in the one year
period prior to the date of  termination  (annualized in the case of termination
prior to the end of the first year), plus ancillary benefits. During and for two
years  after Ms.  Steinmayer's  employment,  she has  agreed  that she will not,
without the prior written consent of Volume Holdings:
<PAGE>

o    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
     Volume Holdings operates; or

o    solicit any employee of Volume Holdings to leave its employment.


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

     Volume Services  America is a wholly owned  subsidiary of Volume  Holdings.
The following  table and  accompanying  footnotes set forth certain  information
concerning the beneficial  ownership of the Volume Holdings common stock. Except
as disclosed below,  none of our officers or directors  beneficially owns any of
our stock.  Except as indicated in the footnotes to this table,  we believe that
the  persons  named in the table  have sole  voting  and  investment  power with
respect to all shares shown as beneficially owned by them.

<TABLE>
<CAPTION>

                                                                       Shares
Name and Address                                                 Beneficially Owned            Percentage Owner
<S>                                                                    <C>                          <C>

Blackstone Management Associates II L.L.C.(1)
Peter G. Peterson(1)
Stephen A. Schwartzman(1)
345 Park Avenue
New York, NY  10154....................................                 211.8                       63.7%

BCP Volume L.P.(1)
Blackstone Capital Partners II Merchant
   Banking Fund L.P.(1)
345 Park Avenue
New York, NY  10154....................................                 157.0                       47.2%

General Electric Capital Corporation(2)
Recreational Services L.L.C.(2)
201 High Ridge Road
Stamford, Connecticut  06927...........................                 120.8                       36.3%

BCP Offshore Volume L.P.(1)
Blackstone Offshore Capital Partners II L.P.(1)
345 Park Avenue
New York, NY  10154....................................                 40.7                        12.3%

VSI Management Direct L.P.(1)(3)
VSI Management I, L.L.C. (1)(3)
Kenneth R. Frick(3)
c/o Volume Services, Inc.
201 East Broad Street
Spartanburg, South Carolina  29306.....................                 14.1                         4.2%
</TABLE>

(1)  Blackstone  Management  Associates  II   L.L.C.  ("BMA  II")  is one of two
     managing members of VSI Management I, L.L.C.  ("VSI I"), BMA II is also the
     general  partner of Blackstone  Capital  Partners II Merchant  Banking Fund
     L.P. ("BCP II") and the investment  general partner of Blackstone  Offshore
     Capital  Partners II  L.P. ("BOC II"). BMA II thus exercises  shared voting
     and dispositive  power with respect to VSI I (see note (3)) and sole voting
     and dispositive  authority with respect to BCP II and BOC II. BCP II is the
     general partner of BCP Volume L.P and exercises sole voting and dispositive
     power with  respect to its shares.  BOC II is the  general  partner for BCP
     Offshore Volume L.P. and exercises sole voting and  dispositive  power with
     respect to its  shares.  VSI 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 BMA 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.
<PAGE>

(2)  Recreational  Services  L.L.C.   ("Recreational  Services")  is  a  limited
     liability company, the managing member of which is GE Capital.

(3)  VSI Management Direct L.P. is a limited partnership, the general partner of
     which is VSI I. The  managing  members of VSI I are Kenneth R.  Frick,  our
     Vice President and Chief Financial  Officer,  and BMA II, and they exercise
     shared voting and dispositive power over the shares owned by VSI Management
     Direct L.P. Mr. Frick disclaims beneficial ownership of such shares.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ASSIGNMENT AND ASSUMPTION AGREEMENT

     Pursuant  to  an  assignment  and  assumption  agreement,  Service  America
assigned the promissory  notes and common stock of Compass Group PLC ("Compass")
received from the sale to Compass of Service America's institutional vending and
dining  business,  which were  valued by the  parties at $108.4  million,  to GE
Capital in consideration for:

o    the  forgiveness  of $17.9 million of debt and interest and $3.8 million of
     accrued dividends owed by Service America to GE Capital; and

o    the  assumption  by GE Capital of a  percentage  of certain  categories  of
     liabilities  on Service  America's  balance sheet as of the closing date of
     the Compass transaction.  These percentages represented an approximation of
     the  amount  of  each   category  of   liabilities   attributable   to  all
     institutional  vending and dining  operations sold by Service America on or
     prior to September 27, 1996.

     Pursuant to the assignment and assumption agreement, Service America serves
as GE Capital's agent for purposes of paying and discharging all of such assumed
liabilities,  and these  transactions  with GE Capital are  reflected in Service
America's  financial  statements.  Certain liabilities assumed by GE Capital are
subject to an aggregate maximum of approximately $16.3 million,  but this amount
does not apply to:

o    certain anticipated or contingent  liabilities,  which were assumed 100% by
     GE Capital;

o    casualty insurance, including worker's compensation;

o    medical insurance; and

o    certain accrued taxes.
<PAGE>

     In addition, GE Capital agreed to reimburse Service America for its part of
the  compensation for one of its employees  between August 1998 and August 1999.
The total  amount  that GE Capital  paid  Service  America  during 1999 for this
reimbursement was $175,000.

     As of December  28, 1999,  GE Capital had assumed  accrued  liabilities  of
$16.3  million  subject  to  the  limit.  We do  not  believe  that  outstanding
liabilities  subject to the limit will  exceed the $0.6  million  which  remains
available,  but we  cannot  assure  you  that  this  will be the  case.  If such
liabilities  do exceed the limit,  we will be liable  for them.  As of  December
28,1999, approximately $2.0 million of liabilities not subject to the limit were
outstanding.  GE Capital will be solely  responsible for these liabilities until
April 20, 2000. On April 20, 2000, GE Capital will pay us a sum equal to 125% of
the total  liabilities  that we agree with GE  Capital  to be then  outstanding.
After this payment,  we will be responsible  for the entire actual amount of all
liabilities.

TAX INDEMNITY AGREEMENT

     Service  America  ceased  being a member of the  General  Electric  Company
consolidated  group,  referred to as the "GE  Consolidated  Group",  for federal
income tax purposes by reason of the Acquisition.  Accordingly,  Service America
and GE Capital in January  1997 entered into a tax  indemnity  agreement.  Under
this agreement:

o    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

o    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

LETTERS OF CREDIT

     Upon entering into the senior credit  facilities in December  1998,  Volume
Services  America obtained two letters of credit in favor of GE Capital for $1.1
million and $6.8 million, respectively. These letters of credit were obtained to
reimburse  GE  Capital  for any  liability  that it may  incur  pursuant  to its
guarantee  of certain  letters of credit  provided  to  support  obligations  of
Service  America prior to the  acquisition of Service America by Volume Holdings
and which  were then still  outstanding.  During  1999,  the  maximum  aggregate
outstanding amount of these letters of credit was $7.9 million.  Both letters of
credit were cancelled by August 1999.


AMENDED STOCKHOLDERS' AGREEMENT

     On December 21, 1995, VSI Management  Direct L.P. ("VSI  Management"),  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".
<PAGE>

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

o    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";

o    pursuant to a public offering of the Shares; or

o    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:

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

o    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.
<PAGE>

     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:

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

o    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;

o    the payment of the monitoring fee discussed below; or

o    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.

     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, but not yet paid.

     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.

     Financings.   The  amended  stockholders'  agreement  also  obliged  Volume
Holdings to use its reasonable  best efforts to consummate a financing by August
24, 1999.  The proceeds of the financing  were to be applied to pay related fees
and expenses, to repay debt of Volume Holdings and to repurchase Shares from the
holders in  accordance  with a formula set out in the  exchange  agreement  with
respect to our senior notes.  Volume  Holdings  satisfied  this  requirement  by
consummation of the senior credit  facilities and the issuance of Volume Service
America's senior notes.

LEASING SERVICES

     GE Capital and its  affiliates  provided us leasing and financing  services
during 1999 on  arms-length  terms.  Payments  to GE Capital and its  affiliates
during 1999, net of discounts earned, were approximately $185,000.

LOANS TO VSI PARTNERSHIPS

     During 1999, VSI  Management  and VSI Management II, L.P. ("VSI  Management
II") repurchased some of their partnership interests from some former members of
management.  To fund this purchase,  Volume Services  America loaned $854,000 to
VSI  Management  and $65,000 to VSI Management II. The loans were on arms-length
terms,  with interest  accruing at the  applicable  federal  rate,  and the full
amount of the loans remained outstanding at December 28, 1999.
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  See index to financial statements at page F-1.

(b)  We did not file any Current  Report on Form 8-K during the last  quarter of
     our 1999 fiscal year.

(c)  Exhibits:

         No.      Description
         ---      -----------

          2.   See Exhibit 10.1

          3.1  Restated Certificate of Incorporation of Volume Services America,
               Inc. Incorporated by reference to Exhibit 3.1 to our Registration
               Statement on Form S-4,  Commission File No.  333-79419 (the "Form
               S-4").

          3.2  By-laws  of  Volume  Services  America,   Inc.   Incorporated  by
               reference to Exhibit 3.2 to the Form S-4.

          3.3  Restated  Certificate of Incorporation of Volume Services America
               Holdings,  Inc.  Incorporated  by reference to Exhibit 3.3 to the
               Form S-4.

          3.4  By-laws of Volume Services America Holdings, Inc. Incorporated by
               reference to Exhibit 3.4 to the Form S-4.

          3.5  Restated  Certificate of Incorporation  of Volume Services,  Inc.
               Incorporated by reference to Exhibit 3.5 to the Form S-4.

          3.6  By-laws of Volume  Services,  Inc.  Incorporated  by reference to
               Exhibit 3.6 to the Form S-4.

          3.7  Restated   Certificate  of   Incorporation   of  Service  America
               Corporation. Incorporated by reference to Exhibit 3.7 to the Form
               S-4.

          3.8  By-laws  of  Service  America  Corporation.  Incorporated  by  re
               ference to Exhibit 3.8 to the Form S-4.

          3.9  Articles  of  Incorporation  of  Events  Center  Catering,   Inc.
               Incorporated by reference to Exhibit 3.9 to the Form S-4.

          3.10 Articles  of   Incorporation   of  Service  America   Concessions
               Corporation.  Incorporated  by  reference  to Exhibit 3.10 to the
               Form S-4.

          3.11 By-laws of Service America Concessions Corporation.  Incorporated
               by reference to Exhibit 3.11 to the Form S-4.

          3.12 Articles  of  Incorporation  of Service  America  Corporation  of
               Wisconsin.  Incorporated by reference to Exhibit 3.12 to the Form
               S-4.
<PAGE>

          3.13 By-laws of Service America Corporation of Wisconsin. Incorporated
               by reference to Exhibit 3.13 to the Form S-4.

          3.14 Articles of Incorporation of Servo-Kansas,  Inc.  Incorporated by
               reference to Exhibit 3.14 to the Form S-4.

          3.15 By-laws  of  Servo-Kansas,  Inc.  Incorporated  by  reference  to
               Exhibit 3.15 to the Form S-4.

          3.16 Articles  of   Incorporation   of   Servomation   Duchess,   Inc.
               Incorporated by reference to Exhibit 3.16 to the Form S-4.

          3.17 By-laws of Servomation Duchess, Inc. Incorporated by reference to
               Exhibit 3.17 to the Form S-4.

          3.18 Articles of Incorporation of SVM of Texas,  Inc.  Incorporated by
               reference to Exhibit 3.18 to the Form S-4.

          3.19 By-laws  of SVM of  Texas,  Inc.  Incorporated  by  reference  to
               Exhibit 3.19 to the Form S-4.

          3.20 Certificate   of   Incorporation   of   Volume   Services,   Inc.
               Incorporated by reference to Exhibit 3.20 to the Form S-4.

          3.21 By-laws of Volume  Services,  Inc.  Incorporated  by reference to
               Exhibit 3.21 to the Form S-4.

          4.1  Indenture,  dated as of March 4, 1999,  between  Volume  Services
               America,  Inc. and Norwest Bank Minnesota,  National Association.
               Incorporated  by  reference  to Exhibit 4.1 to the Form S-4.  4.2
               Exchange and Registration Rights Agreement,  dated March 4, 1999,
               between Volume Services America,  Inc., Chase Securities Inc. and
               Goldman,  Sachs & Co. Incorporated by reference to Exhibit 4.2 to
               the Form S-4.

          10.1 Purchase  Agreement,  dated  February  25, 1999,  between  Volume
               Services America,  Inc., Chase Securities Inc. and Goldman, Sachs
               & Co. Incorporated by reference to Exhibit 1 to the Form S-4.

          10.2 Share Exchange  Agreement,  dated as of July 27, 1998,  among VSI
               Acquisition II  Corporation,  as Buyer,  the  Stockholders of the
               Buyer  and  the  Sellers  specified   therein.   Incorporated  by
               reference to Exhibit 10.1 to the Form S-4.

          10.3 Amended and Restated Stockholders' Agreement,  dated as of August
               24, 1998, among VSI Acquisition II Corporation,  BCP Volume L.P.,
               BCP Offshore  Volume L.P.,  VSI Management  Direct L.P.,  General
               Electric  Capital  Corporation and  Recreational  Services L.L.C.
               Incorporated by reference to Exhibit 10.2 to the Form S-4.

          10.4 Credit  Agreement,  dated as of  December 3, 1998,  among  Volume
               Services America,  Inc., Volume Services America Holdings,  Inc.,
               certain  financial  institutions  as the Lenders,  Goldman  Sachs
               Credit Partners L.P., Chase Securities Inc., Chase Manhattan Bank
               Delaware and The Chase Manhattan Bank.  Incorporated by reference
               to Exhibit 10.3 to the Form S-4.

         *10.4.1.  First   Amendment,  dated  as  of   February  8, 1999 to  the
               Credit  Agreement,  dated as of  December 3, 1998,  among  Volume
               Services America, Inc., Volume Services  America Holdings,  Inc.,
               certain  financial  institutions  as the Lenders,  Goldman  Sachs
               Credit Partners, L.P.,  Chase  Securities,  Inc., Chase Manhattan
               Bank Delaware and The Chase Manhattan Bank.

          10.5 Volume Services,  Inc.,  Deferred  Compensation Plan,  Enrollment
               Information and Forms.  Incorporated by reference to Exhibit 10.4
               to the Form S-4.
<PAGE>

          10.6 Volume  Services  America,  1999  Bonus  Plan.   Incorporated  by
               reference to Exhibit 10.5 to the Form S-4.

          10.7 Service  America   Corporation,   Deferred   Compensation   Plan,
               effective  as of February 9, 1999.  Incorporated  by reference to
               Exhibit 10.6 to the Form S-4.

          10.8 Employment  Agreement dated as of August 24, 1998, by and between
               VSI Acquisition II Corporation  and John T. Dee.  Incorporated by
               reference to Exhibit 10.7 to the Form S-4.

          10.9 Employment  Agreement  dated  as of  November  17,  1998,  by and
               between  Volume  Services,  Inc.  (a  Delaware  corporation)  and
               Kenneth R. Frick.  Incorporated  by  reference to Exhibit 10.8 to
               the Form S-4.

          10.10Employment  Agreement,  dated as of September  29,  1998,  by and
               between  VSI  Acquisition  Corporation  and Janet L.  Steinmayer.
               Incorporated by reference to Exhibit 10.10 to the Form S-4.

          *12  Computation of Ratio of Earnings to Fixed Charges

          *21  List of Subsidiaries

          *27.1 Financial Data Schedule

         ------------------
         *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 1999 fiscal year.


<PAGE>

                                   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 21, 2000.


                                Volume Services America, Inc.


                                By: /s/ Kenneth R. Frick
                                -------------------------
                                    Name:    Kenneth R. Frick
                                    Title:   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 21, 2000.

          Signature                                Title


/s/  John T. Dee                   Chief Executive Officer and Chairman
-------------------------
John T. Dee                            (Principal Executive Officer)


/s/ Kenneth R. Frick               Vice President and Chief Financial Officer
-------------------------
Kenneth R. Frick                       (Principal Financial Officer)


/s/ Howard A. Lipson
--------------------
Howard A. Lipson


/s/ David Blitzer                                Directors
----------------------
David Blitzer


/s/ Peter Wallace
-----------------
Peter Wallace

<PAGE>



[GRAPHIC OMITTED]
    Volume Services America
    Holdings, Inc.
    Consolidated Financial Statements for the Years
    Ended December 29, 1998 and December 28,
    1999 and Independent Auditors' Report







<PAGE>




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 (the "Company") as of December 29, 1998
and December 28, 1999, and the related consolidated statements of operations and
comprehensive loss,  stockholders' equity (deficiency),  and cash flows for each
of the three  years in the period  ended  December  28,  1999.  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 the Company at December 29, 1998
and December 28, 1999,  and the results of its operations and its cash flows for
each of the three years in the period ended December 28, 1999 in conformity with
accounting principles generally accepted in the United States of America.


                             /s/ Deloitte & Touche
                             ---------------------



March 10, 2000
Greenville, South Carolina


                                                    - F1 -
<PAGE>



VOLUME SERVICES AMERICA HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1998 AND DECEMBER 28, 1999 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     DECEMBER 29,       DECEMBER 28,
ASSETS                                                                                1998                 1999
<S>                                                                               <C>                   <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                        $      8,828          $    12,281
  Accounts receivable, less allowance for doubtful accounts of
    $963 and $1,348 at December 29, 1998 and December 28, 1999,
    respectively                                                                         17,790               16,935
  Merchandise inventories                                                                 9,585               10,947
  Prepaid expenses and other                                                              3,975                6,870
  Deferred tax asset                                                                      2,082                3,756
                                                                                          -----                -----

          Total current assets                                                           42,260               50,789
                                                                                         ------               ------

PROPERTY AND EQUIPMENT:
  Leasehold improvements                                                                 40,048               44,518
  Merchandising equipment                                                                37,197               43,261
  Vehicles and other equipment                                                            5,702                6,953
  Construction in process                                                                   262                  474
                                                                                            ---                  ---
          Total                                                                          83,209               95,206
  Less accumulated depreciation and amortization                                        (12,226)             (25,805)
                                                                                        -------              -------

          Property and equipment, net                                                    70,983               69,401
                                                                                         ------               ------

OTHER ASSETS:
  Contract rights, net                                                                   72,935               73,808
  Cost in excess of net assets acquired, net                                             50,585               50,000
  Deferred financing costs, net                                                           7,783               11,459
  Trademarks, net                                                                        19,108               18,422
  Other                                                                                   5,894                4,742
                                                                                          -----                -----

          Total other assets                                                            156,305              158,431
                                                                                        -------              -------

TOTAL ASSETS                                                                         $  269,548           $  278,621
                                                                                     ==========           ==========

</TABLE>








                                                       - F2 -
<PAGE>



VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1998 AND DECEMBER 28, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                   DECEMBER 29,       DECEMBER 28,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                                       1998               1999

<S>                                                                                    <C>              <C>

CURRENT LIABILITIES:
  Note payable                                                                          $ 500           $    -
  Current maturities of long-term debt                                                  4,200              1,150
  Current maturities of capital lease obligation                                          189                206
  Accounts payable                                                                     16,410             17,116
  Accrued salaries and vacations                                                        8,336              8,050
  Liability for self-insured claims                                                     2,216              2,186
  Accrued taxes, including  income taxes                                                3,384              2,706
  Accrued commissions and royalties                                                     8,603             10,258
  Accrued interest                                                                      1,156              3,873
  Other                                                                                 3,664              4,304
                                                                                        -----              -----

          Total current liabilities                                                    48,658             49,849
                                                                                       ------             ------

LONG TERM LIABILITIES
  Long term debt                                                                      155,800            222,200
  Capital lease obligation                                                                622                416
  Deferred income tax                                                                   6,684              5,091
  Liability for self-insured claims                                                     2,949              1,370
  Other liabilities                                                                     2,594              2,081
                                                                                        -----              -----

          Total long term liabilities                                                 168,649            231,158
                                                                                      -------            -------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIENCY):
  Common stock, $0.01 par value:
    Authorized  - 1,000 shares; issued: 526 at December 29, 1998 and
      December 28, 1999; outstanding: 526 and 332 at December 29, 1998
      and December 28, 1999                                                               -                   -
  Additional paid-in capital                                                           66,474             66,474
  Accumulated deficit                                                                 (12,595)           (18,243)
  Accumulated other comprehensive loss                                                    (67)              (198)
  Treasury stock - at cost (none at December 29, 1998 and
     194 shares at December 28, 1999)                                                       -            (49,500)
  Other                                                                                (1,571)              (919)
                                                                                       ------               ----

          Total stockholders' equity (deficiency)                                      52,241             (2,386)
                                                                                       ------             ------

TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY (DEFICIENCY)                            $ 269,548          $ 278,621
                                                                                    =========          =========
</TABLE>

See notes to consolidated financial statements.







                                                       - F3 -
<PAGE>



VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 30, 1997, DECEMBER 29, 1998 AND DECEMBER 28, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                             1997            1998            1999
<S>                                                                       <C>             <C>             <C>


Net sales                                                                 $  196,032      $  283,441      $  431,453

Cost of sales                                                                156,965         222,533         342,489
Selling, general, and administrative                                          18,874          29,464          42,713
Depreciation and amortization                                                 12,895          18,197          26,815
Transaction related expenses                                                      -             3,081          1,529
Contract related losses                                                        2,505           1,423           1,422
                                                                               -----           -----           -----
Operating income                                                               4,793           8,743          16,485
Interest expense                                                               7,916          11,322          23,029
Other income, net                                                               (336)           (359)           (476)
                                                                                ----            ----            ----
Loss before income taxes                                                      (2,787)         (2,220)         (6,068)
Income tax provision (benefit)                                                   319           1,518          (1,549)
                                                                                 ---           -----          ------
Loss before extraordinary item and cumulative effect of
  change in accounting principle                                              (3,106)         (3,738)         (4,519)
Extraordinary loss on debt extinguishment, net of taxes                           -            1,499             873
Cumulative effect of change in accounting principle,
  net of taxes                                                                    -               -              256
                                                                                 ---            ----             ---

Net loss                                                                      (3,106)         (5,237)         (5,648)

Other comprehensive loss - foreign currency translation
  adjustment                                                                      -              (67)           (131)
                                                                                 ---             ---            ----

Comprehensive loss                                                        $    (3,106)    $   (5,304)    $    (5,779)
                                                                          ===========     ==========     ===========

</TABLE>

See notes to consolidated financial statements.



                                                       - F4 -
<PAGE>



VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 30, 1997, DECEMBER 29, 1998 AND DECEMBER 28, 1999
(IN THOUSANDS, except per share data)

<TABLE>
<CAPTION>
                                                                                                   ACCUMULATED
                                                    ADDITIONAL                                       OTHER
                                  COMMON   COMMON     PAID-IN      TREASURY      ACCUMULATED     COMPREHENSIVE
                                  SHARES   STOCK      CAPITAL        STOCK         DEFICIT           LOSS       OTHER       TOTAL
<S>                                 <C>      <C>     <C>              <C>     <C>                  <C>           <C>       <C>

BALANCE,
  DECEMBER 30, 1996                  270      $ 3     $ 26,997        $ -     $ (4,252)            $ -           $ (857)   $ 21,891
  Capital investment                  69        -        6,857          -            -               -             (457)      6,400
  Loan to investor                     -        -            -          -            -               -               (4)         (4)
  Reverse stock split                  -       (3)           3          -            -               -                -           -
  Net loss                             -        -            -          -        (3,106)             -                -      (3,106)
                                                                                 ------                                      ------

BALANCE,                                                                -
  DECEMBER 30, 1997                  339        -       33,857          -       (7,358)              -           (1,318)     25,181
  Capital investment                  37        -        3,750          -            -               -             (250)      3,500
  Shares issued in acquisition       150        -       28,867          -            -               -                -      28,867
  Loan to investor                     -        -            -          -            -               -               (3)         (3)
  Foreign currency translation         -        -            -          -            -             (67)               -         (67)
  Net loss                             -        -            -          -       (5,237)              -                -      (5,237)
                                                                                ------                                       ------

BALANCE,
  DECEMBER 29, 1998                  526        -       66,474          -      (12,595)            (67)          (1,571)     52,241

  Stock redemption                  (194)       -            -    (49,500)           -               -                -     (49,500)
  Loan to related entities             -        -            -          -            -               -             (912)       (912)
  Repayment of investor
     notes                             -        -            -          -            -               -            1,564       1,564
  Foreign currency
    translation                        -        -            -          -            -            (131)               -        (131)
  Net loss                             -        -            -          -        (5,648)             -                -      (5,648)
                                                                                 ------                                      ------

BALANCE,
  DECEMBER 28, 1999                  332      $ -     $ 66,474    $(49,500)    $(18,243)         $(198)          $ (919)   $ (2,386)
           === ====                  ===      ==      ========    ========     ========          =====           ======    ========

</TABLE>

See notes to consolidated financial statements












                                                       - F5 -
<PAGE>


VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1997, DECEMBER 29, 1998 AND DECEMBER 28, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                   YEARS ENDED
                                                          ------------------------------------------------------------
                                                               DECEMBER 30,         DECEMBER 29,          DECEMBER 28,
                                                                  1997                 1998                  1999

<S>                                                             <C>                  <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                      $ (3,106)             $ (5,237)            $ (5,648)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
    Extraordinary item                                                 -                 1,499                  873
    Cumulative effect of change in accounting
      principle                                                        -                     -                  256
    Depreciation and amortization                                 12,895                18,197               26,815
    Amortization of deferred financing costs                         354                   551                1,475
    Contract related losses                                        2,505                 1,423                1,422
    Deferred tax change                                                -                 1,159               (3,267)
    Gain on disposition of assets                                   (208)                  (15)                 (13)
    Other                                                              -                   242                 (131)
    Changes in assets and liabilities, net of
      effect of acquisition:
      Decrease (increase) in assets:
        Accounts and notes receivable                             (1,232)               (2,361)                 855
        Merchandise inventories                                      (36)                   15               (1,362)
        Prepaid expenses                                            (423)                 (470)              (2,577)
        Other assets                                              (2,009)               (1,479)                (639)
      Increase (decrease) in liabilities:
        Accounts payable                                           3,694                (4,459)              (4,857)
        Accrued salaries and vacations                             1,785                   453                 (466)
        Liabilities for self-insurance                               718                   733               (1,609)
        Other liabililities                                          411                (7,799)               4,963
                                                                     ---                ------                -----
          Net cash provided by operating activities               15,348                 2,452               16,090
                                                                  ------                 -----               ------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Decrease in restricted cash                                      5,939                     2                    -
  Cash purchased in acquisition of Service
    America                                                            -                 1,587                    -
  Payment of acquisition costs                                         -                (2,820)                   -
  Purchase of minority interest stock of Service
    America                                                            -                  (631)                   -
  Purchase of property and equipment                             (25,987)              (12,635)             (10,418)
  Proceeds from sale of property and equipment                       639                 3,349                  887
  Proceeds from assets held for sale                                   -                12,575                    -
  Additions to assets held for sale                                    -                  (607)                   -
  Purchase of contract rights                                    (11,599)               (6,169)             (15,882)
                                                                 -------                ------              -------

          Net cash used in investing activities                  (31,008)               (5,349)             (25,413)
                                                                 -------                ------              -------


</TABLE>






                                                       - F6 -
<PAGE>

VOLUME SERVICES AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1997, DECEMBER 29, 1998 AND DECEMBER 28, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                    YEARS ENDED
                                                         ----------------------------------------------------------------
                                                              DECEMBER 30,          DECEMBER 29,          DECEMBER 28,
                                                                 1997                  1998                  1999
<S>                                                            <C>                  <C>                   <C>


CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on long-term debt                         $ (6,800)            $(154,291)            $ (46,650)
  Net borrowings - revolving loans                               16,100                 6,897                 9,500
  Proceeds from long-term debt                                        -               160,000               100,000
  Payments of financing costs                                         -                (7,859)               (6,600)
  Principal payments on capital lease obligations                     -                  (103)                 (189)
  Increase (decrease) in bank overdrafts                            185                (1,842)                5,563
  Net increase (decrease) in other equity                            (4)                   (3)                  652
  Capital contribution                                            6,400                 3,500                     -
  Redemption of stock                                                 -                    -                (49,500)
                                                                  -----                 -----                -------
           Net cash provided by financing
            activities                                           15,881                 6,299                12,776
                                                                 ------                 -----                ------

INCREASE IN CASH                                                    221                 3,402                 3,453

CASH AND CASH EQUIVALENTS:
  Beginning of period                                             5,205                 5,426                 8,828
                                                                  -----                 -----                 -----

  End of period                                                 $ 5,426               $ 8,828              $ 12,281
                                                                =======               =======              ========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                                 $ 6,968               $ 5,892              $ 17,790
                                                                =======               =======              ========
  Income taxes paid                                                $ 43                 $ 449                 $ 578
                                                                   ====                 =====                 =====
  Noncash activities:
    Issuance of investors' notes receivable
      relating to capital contribution                            $ 457                 $ 250                   $ -
                                                                  =====                 =====                   ==
    Capital lease obligation                                        $ -                 $ 914                   $ -
                                                                    ==                  =====                   ==
    Purchase of Service America for stock and
      note payable                                                  $ -              $ 28,867                   $ -
                                                                    ==               ========                   ==

</TABLE>

See notes to consolidated financial statements.










                                                       - F7 -
<PAGE>


VOLUME SERVICES AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 30, 1997, DECEMBER 29, 1998 AND DECEMBER 28, 1999

1. GENERAL

     Volume Services America  Holdings,  Inc.  ("Volume  Holdings," and together
     with  its  subsidiaries,  the  "Company"),   formerly  VSI  Acquisition  II
     Corporation and subsidiaries  ("VSI"), is a holding company,  the principal
     assets of which are the capital stock of its  subsidiary,  Volume  Services
     America,  Inc.  ("Volume  Services  America").  Volume Holdings'  financial
     information is therefore  substantially the same as that of Volume Services
     America.  Volume Services America is also a holding company,  the principal
     assets of which are the capital stock of its subsidiaries, Volume Services,
     Inc.  ("Volume  Services")  and  Service  America   Corporation   ("Service
     America").  The  Company  is owned  by its  senior  management,  Blackstone
     Capital  Partners II Merchant  Banking Fund,  L.P.  ("BCP II"), and General
     Electric  Capital  Corporation  ("GE  Capital").  GE  Capital,  which as of
     December 28, 1999  controlled  36.4% of the Company through its controlling
     interest in Recreational  Services LLC, was the majority  stockholder (on a
     fully diluted basis) of Service America prior to the acquisition of Service
     America by Volume Holdings on August 24, 1998. As of December 28, 1999, the
     remainder of the Company's capital stock was owned by limited  partnerships
     controlled by BCP Volume L.P. and BCP Offshore  Volume L.P.  ("Blackstone")
     (59.4%) and by current and former  management  employees of Volume Services
     (4.2%).  At December 28, 1999, the Company had  approximately 122 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 one to  twenty  years.  Certain  of the  contracts  contain
     renewal clauses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the accounts of the  Company,  and its wholly  owned  subsidiaries,  Volume
     Services  America,  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 1997,  1998 and
     1999 fiscal years consisted of 52 weeks.

     CASH  AND  CASH  EQUIVALENTS  -  The  Company   considers   temporary  cash
     investments purchased with a maturity of three months or less to be cash.


                                                       - F8 -
<PAGE>


     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 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, only the amount
     of the fees  received  are  included  in net sales when  earned.  The total
     revenue received by the Company from services  provided to the end users of
     the products  without regard to the type of contract is defined as "managed
     revenues". The Company's total managed revenues for fiscal years 1997, 1998
     and 1999 were  approximately  $234,783,000,  $315,728,000 and $452,679,000,
     respectively.

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

     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  - esimated  useful  life  limited by the
               lease term (contract term)

          -    Merchandising  equipment  - five  to  ten  years  limited  by the
               contract term

          -    Vehicles  and other  equipment - two to ten years  limited by the
               contract term

     CONTRACT  RIGHTS - Contract  rights,  net of accumulated  amortization,  of
     approximately  $72,935,000 at December 29, 1998 and $73,808,000 at December
     28, 1999 consist primarily of certain directly  attributable costs incurred
     by the Company in obtaining or renewing contracts with clients and the fair
     value of contract  rights  acquired  related to the  acquisitions of VSI 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 $12,947,000 at December 29, 1998
     and $22,163,000 at December 28, 1999.

     COST IN  EXCESS OF NET  ASSETS  ACQUIRED  - Cost in  excess  of net  assets
     acquired  (goodwill) is being amortized on the straight-line  basis over 30
     years.  Amortization  expense was  approximately  $291,000 in fiscal  1997,
     $790,000  in  fiscal  1998,  and  $1,817,000  in fiscal  1999.  Accumulated
     amortization  was  approximately   $1,389,000  at  December  29,  1998  and
     $3,206,000 at December 28, 1999.

     TRADEMARKS - Trademarks  consist of the net book value of the trademarks of
     the Company of $19,108,000 at December 29, 1998 and $18,422,000 at December
     28, 1999 and are being  amortized on a  straight-line  basis over 30 years.
     Accumulated  amortization was approximately $1,492,000 at December 29, 1998
     and $2,178,000 at December 28, 1999.

     DEFERRED  FINANCING COSTS - The net book value of deferred  financing costs
     of $7,783,000 at December 29,  1998 and $11,459,000 at December 28, 1999 is
     being  amortized as interest  expense over the life of the respective  debt
     using the  interest  method.  Accumulated  amortization  was  approximately
     $76,000 at December 29, 1998 and $1,550,000 at December 28, 1999.

     IMPAIRMENT OF LONG-LIVED  ASSETS AND CONTRACT  LOSSES- The Company accounts
     for  impairment  of  long-lived  assets in  accordance  with  Statement  of
     Financial  Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for the
     Impairment  of  Long-Lived  Assets  and for  the  Long-Lived  Assets  to be
     Disposed of". SFAS No. 121 requires that long-lived  assets be reviewed for
     impairment  whenever events or changes in  circumstances  indicate that the
     book value of the asset may not be recoverable. In accordance with

                                      - F9 -
<PAGE>

     SFAS No. 121,  the Company  estimates  the future  undiscounted  cash flows
     expected to result from the use of the asset and its eventual  disposition.
     If the sum of the expected future  undiscounted cash flows is less than the
     carrying amount of the asset, an impairment loss is recognized. Measurement
     of an impairment loss for long-lived assets and identifiable intangibles is
     based  on the  estimated  fair  value of the  asset  determined  by  future
     discounted net cash flows.

     DERIVATIVE  FINANCIAL  INSTRUMENTS - The Company uses derivative  financial
     instruments,  including  interest rate swaps, caps and floors as a means of
     hedging  exposure to  interest  rate risks.  All  hedging  instruments  are
     designated as hedges and are highly  correlated to the  underlying  risk as
     required by generally accepted accounting  principles.  Instruments that do
     not  qualify  for  hedge  accounting  are  marked-to-market   with  changes
     recognized  in current  earnings.  The Company is the end-user and does not
     utilize  these  instruments  for  speculative  purposes.  The  Company  has
     rigorous standards regarding the financial stability and credit standing of
     its major counterparties.

     Interest  rate swaps and caps  involve  the  periodic  exchange of payments
     without the  exchange of  underlying  principal  or notional  amounts.  Net
     payments are  recognized as an adjustment to interest  expense.  Should the
     swaps or caps be  terminated,  unrealized  gains or losses are deferred and
     amortized  over the shorter of the  remaining  original term of the hedging
     instrument or the remaining life of the underlying debt instrument.

     INSURANCE - At the beginning of fiscal 1999, the Company  adopted a premium
     based insurance  program for general  liability,  automobile  liability and
     workers' compensation risk. Prior to fiscal 1999, the Company was primarily
     self-insured  for general  liability,  automobile  liability,  and workers'
     compensation  risks,  supplemented  by stop-loss type  insurance  policies.
     Management  determines  its  estimate  of the  reserve  for  self-insurance
     considering  a number  of  factors,  including  historical  experience  and
     actuarial  assessment  of the  liabilities  for reported  claims and claims
     incurred but not reported.  The  self-insurance  liabilities  for estimated
     incurred  losses were  discounted  using rates  between  4.51% and 4.68% at
     December  29,  1998 and 5.14% and 5.98 % at  December  28,  1999,  to their
     present  value  based on  expected  loss  payment  patterns  determined  by
     experience. The total discounted self-insurance liabilities recorded by the
     Company at December  29, 1998 and  December  28, 1999 were  $5,390,000  and
     $3,398,000,  respectively. The related undiscounted amounts were $5,803,000
     and $3,884,000, respectively.

     CASH  OVERDRAFTS  - The  Company has  included  in accounts  payable on the
     accompanying   consolidated   balance  sheets  cash   overdrafts   totaling
     $3,857,000  and  $9,420,000  at December  29, 1998 and  December  28, 1999,
     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.

     TRANSACTION  RELATED  EXPENSES -  Transaction  related  expenses  primarily
     include personnel costs, rental costs and professional fees associated with
     downsizing Service America Corporation's Stamford, CT office (see Note 5).


                                     - F10 -
<PAGE>


     INCOME TAXES - The Company  recognizes  deferred tax assets and liabilities
     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's  contracts
     comprises one operating segment.

     RECLASSIFICATIONS   -   Certain   amounts   in  1997  and  1998  have  been
     reclassified,  where  applicable,  to  conform to the  financial  statement
     presentation used in 1999.

     NEW ACCOUNTING STANDARDS - In June 1998, the Financial Accounting Standards
     Board  issued SFAS No.  133,  Accounting  for  Derivative  Instruments  and
     Hedging Activities as amended by SFAS No. 137.  This statement  establishes
     accounting  and reporting  standards  for  derivative  instruments  and for
     hedging activities. It requires that an entity recognize all derivatives as
     either  assets or  liabilities  on the  balance  sheet and  measures  those
     instruments at fair value.  The accounting for changes in the fair value of
     a derivative (that is, gains and losses) depends on the intended use of the
     derivative.  It will become  effective  for the Company for the fiscal year
     2001 financial  statements.  The Company has not yet completed its analysis
     of the  effects  of this new  standard  on its  results  of  operations  or
     financial position. The statement may not be applied retroactively.


3.   CHANGE IN ACCOUNTING PRINCIPLE

     The Company  adopted the provisions of the American  Institute of Certified
     Public  Accountants  Statement of Position 98-5,  Reporting on the Costs of
     Start-up  Activities,  which requires that costs of start-up  activities be
     expensed as incurred,  as of December 30,  1998.  As a result,  the Company
     recorded  a  charge  of  $256,000  net  of  tax  (approximately   $170,000)
     reflecting the effect of the change in accounting  principle  during fiscal
     year 1999.

4.   SIGNIFICANT RISKS AND UNCERTAINTIES

     USE OF ESTIMATES - The  preparation  of financial  statements in conformity
     with generally accepted  accounting  principles requires management to make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  financial  statements  and the  reported  amounts of  revenues  and
     expenses  during the  reporting  period.  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 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.


                                     - F11 -
<PAGE>


     Concentrations  of credit  risk with  respect to  accounts  receivable  are
     limited due to many customers  comprising  the Company's  customer base and
     their dispersion  across different  geographic  areas. For the fiscal years
     ended  December 30,  1997,  December 29, 1998 and  December  28, 1999,  the
     Company had one customer that accounted for approximately 16.4%, 15.8%, and
     11.1% of operating revenues, respectively.

     The Company's  revenues and earnings are dependent on various  factors such
     as  attendance  levels and the number of games  played by the  professional
     football and baseball teams which are tenants at facilities serviced by the
     Company,  which  can  be  favorably  impacted  if  the  teams  qualify  for
     post-season play, or adversely affected if the teams are on strike.

5.   ACQUISITION

     On August 24, 1998,  Volume Holdings,  BCP Volume L.P., BCP Offshore Volume
     L.P. and VSI Management  Direct L.P. ("VSI  Management"),  together with GE
     Capital and certain management  shareholders of Service America,  purchased
     substantially   all  of  the  capital   stock  of  Service   America   (the
     "Acquisition"). The purchase price was $32.8 million which consisted of (a)
     $1,000 in cash (b) 150 newly issued  shares of the Volume  Holdings  Common
     Stock representing  approximately  28.5% of the outstanding common stock of
     Volume  Holdings  on a fully  diluted  basis  after  giving  effect to such
     issuance  (c)  the  issuance  to GE  Capital  of a 6.0%  per  annum  senior
     subordinated  promissory  note,  due on December 31, 1999,  in an aggregate
     principal amount of $500,000 and (d) $2.8 million of transaction  costs. By
     December 1998,  the Company had purchased the remainder of Service  America
     capital stock and  contributed  all of the Service America capital stock to
     Volume  Services  America.  The purchase  method of accounting  was used to
     establish  and  record  a new  cost  basis  for  the  assets  acquired  and
     liabilities assumed. The difference between the purchase price and the fair
     market values of the assets acquired and  liabilities  assumed was recorded
     as goodwill in the amount of $44.5 million and is being  amortized  over 30
     years.  The results of Service  America's  operations have been included in
     the Company's  statement of operations  beginning  August 25, 1998 (date of
     acquisition).

     The following unaudited pro forma financial  information presents a summary
     of consolidated results of operations as if the Service America acquisition
     had  occurred  as of  January  1,  1997,  after  giving  effect to  certain
     adjustments,  including  amortization  of  goodwill,  interest  expense  on
     acquisition debt and related income tax effects. The pro forma results have
     been  prepared  for  comparative  purposes  only and do not  purport  to be
     indicative  of what would have  occurred had the  acquisition  been made on
     that date, nor are they  necessarily  indicative of results which may occur
     in the future.


                                                             PRO FORMA
                                                           (IN THOUSANDS)
                                                             YEAR ENDED
                                                             ----------
                                                     1997               1998

Net sales                                          $368,900          $ 405,900
Loss before extraordinary item                      (12,500)            (9,900)
Net loss                                            (14,300)           (11,900)




                                                       - F12 -
<PAGE>



6. DEBT

      Long Term Debt consists of the following (in thousands):
                                                      1998            1999

   Term A Borrowings                                 $ 40,000       $       -
   Term B Borrowings                                  120,000         113,850
   Revolving Credit Facility                                -           9,500
   Senior Subordinated Notes                                -         100,000
                                                      -------       ----------
                                                      160,000         223,350
   Less current portion of long-term debt              (4,200)         (1,150)
                                                       ------          ------

   Total long-term debt                              $155,800        $222,200
                                                     ========        ========



     1998 CREDIT  AGREEMENT - On December 3, 1998,  Volume Services America (the
     "Borrower")   entered  into  a  credit   agreement,   which   provided  for
     $160,000,000  in term loans,  consisting of  $40,000,000  of Tranche A term
     loans ("Term Loan A") and  $120,000,000 of Tranche B term loans ("Term Loan
     B" and  together  with  Term Loan A, the "Term  Loans")  and a  $75,000,000
     revolving  credit facility (the "Revolving  Credit  Facility").  Borrowings
     under  the  Term  Loans  were  used  to  repay  in  full  all   outstanding
     indebtedness  of Volume  Services  and  Service  America  under  their then
     existing  credit  facilities  and to pay  fees  and  expenses  incurred  in
     connection   with  the  acquisition  of  Service  America  and  the  credit
     agreement.   The  commitments  under  the  Revolving  Credit  Facility  are
     available  to fund capital  investment  requirements,  working  capital and
     general  corporate  needs of the Company.  In  conjunction  with the credit
     agreement, the Company recognized an extraordinary loss of $1,499,000,  net
     of taxes  (approximately  $999,000) on its statement of operations  for the
     early extinguishment of its previous debt in fiscal year 1998.

     On March 4, 1999,  the  $40,000,000  of Term A borrowings and $5,000,000 of
     Term  B  borrowings   were  repaid  with  the  proceeds   from  the  Senior
     Subordinated Notes discussed below.

     Installments of Term Loan B are due in consecutive  quarterly  installments
     on the last day of each fiscal  quarter  with 25% of the  following  annual
     amounts being paid on each installment  date:  $1,150,000 in each year from
     2000 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. The Revolving Credit Facility
     will mature on  December 3, 2004.  At December  28,  1999,  $9,500,000  was
     outstanding   under  the  Revolving   Credit  Facility  and   approximately
     $12,198,000 of letters of credit were outstanding but undrawn.

     The credit  agreement  bears  interest  at  floating  rates  based upon the
     interest  rate option  elected by the Company  and the  Company's  leverage
     ratio.  The interest  rates at December 29, 1998 were 8.25% for Term Loan A
     and 9% for Term Loan B. The interest  rates at December 28, 1999 were 9.94%
     for Term Loan B and 10.5% for the Revolving Credit Facility.


                                     - F13 -
<PAGE>


     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. 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 million at December 28, 1999.

     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 million.  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  debt and any future debt of Volume  Services  America,
     rank  equally  with all of the  other  Senior  Subordinated  debt of Volume
     Services America,  and senior to all of Volume Services  America's existing
     and subordinated debt.  Furthermore,  the debt is guaranteed by the Company
     and all of the subsidiaries of Volume Services America,  except for certain
     non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary.

     The  proceeds  of the notes  were used to (i) repay  $40,000,000  of Term A
     Borrowings and $5,000,000 of Term B Borrowings, (ii) fund the repurchase by
     Volume  Holdings  of  194  shares  of  Volume  Holdings  common  stock  for
     $49,500,000  and the  repayment  by Volume  Holdings of a $500,000  note in
     favor of GE Capital and (iii) pay fees and expenses  incurred in connection
     with the notes and the consent  from  lenders to an amendment to the Credit
     Agreement.   In  conjunction  with  the  notes,   Volume  Services  America
     recognized an extraordinary loss of $873,000,  net of taxes  (approximately
     $570,000) on its statement of operations  for the early  extinguishment  of
     $45,000,000 of Term Loans in fiscal year 1999.

     Aggregate  annual  maturities of long-term debt at December 28, 1999 are as
     follows (in thousands):

        2000                                                $ 1,150
        2001                                                  1,150
        2002                                                  1,150
        2003                                                  1,150
        2004                                                 10,650
        Thereafter                                          208,100
                                                            -------

        Total                                             $ 223,350
                                                          =========





                                     - F14 -
<PAGE>



7.   CAPITAL LEASE OBLIGATION

     The Company is  obligated to make minimum  lease  payments  under a capital
     lease  agreement.  The  following  is a schedule  of future  minimum  lease
     payments under the capital lease together with the present value of the net
     minimum lease payments as of December 28, 1999 (in thousands):

       FISCAL YEAR

       2000                                                             $ 250
       2001                                                               250
       2002                                                               196
       ----                                                               ---
       Total minimum lease payments                                       696
       Less:  Amount representing interest                                (74)
                                                                          ---
       Present value of minimum lease payments                            622
       Less current portion of capital lease obligation                  (206)
                                                                         ----

       Total long-term capital lease obligation                         $ 416
                                                                        =====


     Under the terms of the lease  agreement,  certain  equipment  is pledged to
     secure performance as follows (in thousands):

        Equipment                                                       $ 914
        Accumulated depreciation                                         (160)
                                                                         ----

        Total                                                           $ 754
                                                                        =====


8.   INCOME TAXES
<TABLE>
<CAPTION>

     The components of deferred taxes are (in thousands):

                                                                           1998            1999
     <S>                                                                <C>            <C>

     Deferred tax liabilities:
      Intangibles (goodwill, contract rights and trademarks)            $(13,648)      $ (9,746)
      Other prepaid assets                                                (1,265)          (525)
                                                                           ------           ----
                                                                         (14,913)       (10,271)
                                                                          -------        -------
     Deferred tax assets:
      Difference between book and tax basis of property                     1,764            17
      Bad debt reserves                                                       385           461
      Inventory reserves                                                       79            73
      Other reserves and accrued liabilities                                4,617         3,503
      General business credit carryforwards                                   978         1,491
      Accrued compensation and vacation                                       781           867
      Net operating loss carryforward                                       1,707         2,524
                                                                            -----         -----
                                                                           10,311         8,936
                                                                           ------         -----

     Net deferred tax liabilities                                        $ (4,602)     $ (1,335)
                                                                         ========       ========
</TABLE>





                                     - F15 -
<PAGE>
<TABLE>
<CAPTION>

                                                                          1998            1999
     <S>                                                               <C>             <C>

     Net deferred tax liability is recognized as follows in the
      accompanying 1998 and 1999 consolidated balance sheets:
      Current deferred tax asset                                        $ 2,082        $ 3,756
      Noncurrent deferred tax liability                                  (6,684)        (5,091)
                                                                         ------         ------

     Net deferred tax liability                                        $ (4,602)      $ (1,335)
                                                                       ========       ========
</TABLE>

     At December 28, 1999,  the Company has  $20,388,000  of net operating  loss
     carryforwards,  $13,000,000  of which are from the  acquisition  of Service
     America.  These  carryforwards  begin to expire in years 2005 through 2018.
     The Company's  future ability to utilize the acquired  Service  America net
     operating  loss  carryforward  is limited by  section  382 of the  Internal
     Revenue Code of 1986, as amended. The general business credit carryforwards
     begin to expire in 2005.

     As a result of the 1998  acquisition of Service  America  Corporation,  the
     Company's  valuation allowance was reduced for pre-acquisition tax benefits
     that  management  considers more likely than not to be realized at the date
     of acquisition.  This valuation  allowance reduction was recognized as part
     of purchase price adjustments and is not reflected in the tax provision for
     the year.

     As of December 28,  1999,  there was a change in  management's  estimate of
     certain items relating to the basis of tax liabilities  that existed at the
     date of the  acquisition of Service  America.  The effect of adjustments to
     these liabilities,  which approximates  $970,000, was applied as a decrease
     to goodwill attributable to the acquisition.

     The provision for income taxes is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                          FISCAL YEAR ENDED
                                                         ---------------------------------------------------------
                                                           DECEMBER 30,        DECEMBER 29,           DECEMBER 28,
                                                              1997                1998                1999
<S>                                                          <C>                <C>               <C>


     Current expense                                         $ 319              $ 359             $ 1,718
                                                             -----              -----             -------

     Deferred provision (benefit):
      Changes in temporary differences                       1,125              1,159              (3,267)
     Decrease in valuation                                  (1,125)                -                   -
                                                            ------

         Total deferred provision                                -              1,159              (3,267)
                                                            ------              -----              ------

     Total provision (benefit) for income taxes              $ 319            $ 1,518             $(1,549)
                                                             =====            =======             =======

</TABLE>







                                     - F16 -
<PAGE>


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


                                                              FISCAL YEAR ENDED
                                                  ------------------------------------------------------
                                                    DECEMBER 30,        DECEMBER 29,        DECEMBER 28,
                                                       1997                 1998                1999
<S>                                                     <C>                  <C>                 <C>


Statutory rate                                          (34)%                (34)%               (34)%

Differences:
  State income taxes                                      4                   33                  (3)
  Non-deductible expenses (meals and
    entertainment)                                        1                    2                   1
  Adjustment to valuation allowance                      40                   58                   -
  Goodwill                                                -                    8                   8
  Federal tax credits                                     -                    -                  (2)
  Foreign tax reserve                                     -                    -                   3
  Other                                                   -                    1                   1
                                                                               -                   -

Total provision (benefit) for income taxes               11 %                 68 %               (26)%
                                                         ==                   ==                 ===
</TABLE>



9.   EQUITY TRANSACTIONS

     SALE OF COMMON  STOCK - During  1997,  the  Company  issued  68.6 shares of
     common stock for $6,857,000.  Of the  $6,857,000,  $457,000 was financed by
     the Company in the form of investors'  notes and the remaining  balance was
     received in cash.

     During 1998, the Company issued 37.5 shares of common stock for $3,750,000.
     Of the  $3,750,000  , $250,000  was  financed by the Company in the form of
     investors' notes and the remaining balance was received in cash.

     STOCK  REDEMPTION  - From the  proceeds  of the Senior  Subordinated  Notes
     described in Note 5, Volume Services America paid a $50,000,000 dividend in
     1999 to Volume  Holdings.  Volume  Holdings used the proceeds to redeem 194
     shares of its common stock (the "Stock Redemption") and to repay a $500,000
     note in favor of GE Capital.

     OTHER - At December 30, 1997 and December 29, 1998,  other equity consisted
     of  investors'   notes  receivable  due  from  various   investors.   These
     nonrecourse notes were due if the Company should undergo a recapitalization
     as defined by the note  agreements.  Because the proceeds of the notes were
     used to buy Company stock,  the notes have been reflected as a reduction of
     stockholders'  equity.  All notes were repaid  during  fiscal 1999 with the
     proceeds received from the stock redemption noted above.

     At December 28, 1999,  other equity consists of loans by the Company to VSI
     Management and another partnership which holds an indirect ownership 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.


                                     - F17 -
<PAGE>



10.         INTEREST RATE HEDGING ARRANGEMENTS

     On January  26,  1998,  the  Company  entered  into an  interest  rate swap
     transaction   with  Chase  in  order  to  limit  its   exposure  to  future
     fluctuations  in London  Interbank  Offered Rate  ("LIBOR") rate related to
     debt  instruments  outstanding at that time.  The agreement  provided for a
     fixed rate of interest of 5.39% for a period  ending  January 12, 1999 on a
     notional amount of $80,000,000. On December 9, 1998, the Company terminated
     this transaction effective January 12, 1999 and entered into a new interest
     rate swap  transaction  providing a fixed  interest rate of 5.06% for a two
     year period on a notional  amount of  $80,000,000.  On March 15, 1999,  the
     Company  terminated  the interest  rate swap  effective  April 12, 1999 and
     received  $180,000  which was deferred and will be amortized as a reduction
     to interest expense over the original life of the terminated swap.

     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 protects the Company if
     the three month LIBOR exceeds 7.5% 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  provides  that the Company pays to UBOC one month LIBOR and that
     UBOC pays to the Company 5.375% 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,  which is being  marked-to-market.  Consequently,  in the
     event that one month LIBOR is less than 5.375% the Company must instead pay
     5.375%.

     The counterparties to the Company's  interest rate exchange  agreements are
     major  financial  institutions.  Such  financial  institutions  are leading
     market-makers  in the  financial  derivatives  markets and are  expected to
     fully perform under the terms of such exchange agreements.

11.  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 December
     29,  1998 and  December  28, 1999  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 that the fair value
     of the Senior  Subordinated  Notes to be  approximately  $98,500,000  (book
     value $100,000,000) based on third party quotations for the same or similar
     issues.

     INTEREST  RATE HEDGING  ARRANGEMENTS  - At December  29, 1998,  the Company
     estimates the fair value of the interest rate swap  agreement was a gain of
     approximately  $431,000.  At December 28, 1999,  the Company  estimates the
     fair  values  of the  interest  rate  swap,  cap  and  floor  are a loss of
     $450,250,  a loss of  $5,100  and a gain  of  $1,900,  respectively.  These
     figures represent the estimated amounts the Company would pay or receive to
     terminate these financial instrument agreements, as quoted by the financial
     institution.

     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.


                                     - F18 -
<PAGE>



12.  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  one to  twenty  years.  Certain  of  these  client
     contracts  provide for both fixed and variable  commissions  and royalties.
     Aggregate  commission  and  royalty  expense  under  these  agreements  was
     $60,402,000  (minimum  of  approximately  $4,500,000)  for fiscal  1997 and
     $86,489,000  (minimum  of  approximately  $3,634,000)  for fiscal  1998 and
     $131,056,000 (minimum of approximately $9,955,000) for fiscal 1999.

     The Company leases a number of real  properties and other  equipment  under
     varying lease terms which are noncancelable. Rent expense for all operating
     leases was  approximately  $255,000,  $1,317,000  and  $1,085,000 in fiscal
     1997, fiscal 1998 and fiscal 1999, respectively.

     Future minimum commitments for all operating leases and minimum commissions
     and royalties due under client contracts are as follows (in thousands):

                                                            COMMISSIONS
                                         OPERATING             AND
     YEAR                                  LEASES           ROYALTIES

     2000                                   $ 376             $ 10,222
     2001                                     312                8,630
     2002                                     191                6,409
     2003                                      86                5,249
     2004                                      37                4,510
     Thereafter                                 -               24,968
                                           ------               ------

     Total                                 $1,002              $59,988
                                           ======              =======


     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  28,  1999  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 $5.0 million.

     COMMITMENTS - Pursuant to its contracts with various  clients,  the Company
     is committed  to spend  approximately  $6,300,000  during 2000 and $605,000
     during 2001 for equipment  improvements and location  contract  rights.  In
     addition,  the Company  currently  is engaged in  negotiations  pursuant to
     which it expects  to enter  into a new  contract  which  will  require  the
     Company to fund  additional  future capital  investments  of  approximately
     $5,700,000, which would be invested in 2000 and 2001.

     The  Company  has  $5,858,000  of  letters  of credit  collateralizing  the
     Company's  performance and other bonds, and $4,893,000 in letters of credit
     collateralizing the self-insurance  reserves of the Company, and $1,448,000
     in other letters of credit.


                                     - F19 -
<PAGE>


     LITIGATION  - 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 Enterprises
     LLC    (collectively,    "Silver").    Service   America   alleged   fraud,
     misrepresentation,  negligent  misrepresentation,  breach of  contract  and
     breach of the  covenant of good faith and fair dealing in  connection  with
     Service America's  Exclusive  Catering Services Agreement with Silver dated
     November  21,  1997,  and sought  damages in excess of $1  million.  Silver
     subsequently  filed a counterclaim that alleged breach of contract,  sought
     an  accounting  and  asserted  that  Service   America  had  commenced  the
     proceeding and acted in bad faith.  Silver claims damages for injury to its
     business  in an  amount  in  excess  of $11  million.  In light of  Service
     America's  meritorious  defenses,  it does not believe that Silver's claims
     are well-founded in fact or law. Service America is vigorously pursuing its
     claim and defending against the counterlcaims.  The evidentiary  proceeding
     has closed,  the parties have made their final arguments in the arbitration
     and Service America is awaiting the artitrator's decision.

     There are  various  other  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.

13.  RELATED PARTY TRANSACTIONS

     MANAGEMENT  FEES - Certain  administrative  and  management  functions were
     provided to VSI by the Blackstone Group through a monitoring agreement. VSI
     paid  Blackstone  Management  Partners II L.P., an affiliate of Blackstone,
     management fees of approximately  $250,000 in fiscal 1997. Such amounts are
     included in selling, general and administrative expenses.

     As part of the  Acquisition  (see Note 5), the Company paid management fees
     to Blackstone  and GE Capital of $250,000 and $167,000,  respectively,  for
     consulting,  monitoring  and financial  advisory  services  provided to the
     Company. The fee of $250,000 paid to Blackstone Management Partners II L.P.
     in fiscal  1998 and fiscal 1999 is  consistent  with the amount paid by the
     Company in previous years.  The Company paid GE Capital  management fees of
     approximately  $42,000 and $167,000  for fiscal 1998 and fiscal 1999.  Such
     amounts are included in selling, general and administrative expenses.

     The  Company  also paid fees of  $125,000  in July 1998 and  $2,275,000  in
     December 1998 to the Blackstone  Group in connection with the  Acquisition,
     in accordance  with the terms of an  arrangement  entered into in May 1998.
     Such amounts were included in the calculation of goodwill.

     GE CAPITAL  RECEIVABLE - This  receivable  represents  amounts to reimburse
     Service America for future estimated  liabilities (an equal amount has been
     included in other  long-term  liabilities) to be paid by Service America on
     behalf of GE Capital.

     At December 28, 1999,  the  receivable  was  $2,061,000  and is included in
     prepaid and other assets as the receivable is scheduled to be finalized and
     settled in early 2000.  At December 29, 1998, the receivable was $2,364,000
     and has been recorded in prepaid and other assets.

     In  addition,  GE  Capital  agreed to  reimburse  Service  America  for its
     compensation  of one of its employees  between August 1998 and August 1999.
     The total amount that GE Capital paid Service  America during 1999 for this
     reimbursement was $175,000.


                                     - F20 -
<PAGE>


     LEASING  SERVICES - GE  Capital  and its  affiliates  provide  leasing  and
     financing  services  to  the  Company.  Payments  to  GE  Capital  and  its
     affiliates  for  fiscal  year  1998  and 1999  for  such  services,  net of
     discounts  earned,  were  approximately  $1,900,000  and  $185,000  and are
     included in selling, general and administrative expense on the statement of
     operations and comprehensive loss.

     MANAGEMENT  INCENTIVE  AGREEMENT - During  1998,  the Company  introduced 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.  The Company has accrued
     approximately  $373,000 and $865,000 in accrued  salaries and  vacations in
     the accompanying balance sheets at December 29, 1998 and December 28, 1999,
     respectively,  for such incentives  payable to certain general managers and
     senior management personnel.

14.  RETIREMENT PLAN

     Volume  Services  has a  40l(k)  defined  contribution  plan  which  covers
     substantially all Volume Services employees. Employees may contribute up to
     15% of their  eligible  earnings and the Company will match 25% of employee
     contributions up to the first 6% of employee compensation. Contributions to
     the plan were approximately  $203,000 for fiscal 1997,  $185,000 for fiscal
     1998 and $178,000 for fiscal 1999.

     Service  America  has a  401(k)  defined  contribution  plan  which  covers
     substantially all Service America employees. Employees may contribute up to
     16%  of  their   eligible   earnings.   The   Company's   contribution   is
     discretionary.  No  amounts  were  contributed  by the  Company to the plan
     during fiscal 1998 or 1999.

     Effective  January 2000,  the Volume Service and Service  America  40l(k)'s
     were merged into one plan.

     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.  The  Company  may  incur  a  withdrawal  liability  if a
     recreational  services  contract  is  terminated  or not  renewed.  Amounts
     charged to expense and  contributed  to the plans were not material for the
     periods presented.

15.  CONTRACT RELATED LOSSES

     In March 1998, the Company terminated a concession contract with one of its
     clients.   The  Company   recognized  a  loss  from  this   termination  of
     approximately  $2,505,000  during  fiscal 1997 which  includes a $1,100,000
     write-down on assets held for sale to their estimated  realizable value for
     the year ended  December 30, 1997. As part of the  settlement,  the Company
     sold certain assets to the former client. Net proceeds of the sale of these
     assets totaled $12,575,000 in fiscal 1998.

     The Company  terminated  three  additional  concession  contracts in fiscal
     1998.  The Company  recognized a loss of  approximately  $1,423,000 for the
     year ended  December  29,  1998,  which  relates to the write off of assets
     relating to the contracts.



                                     - F21 -
<PAGE>


     During fiscal 1999, several contracts which the Company intends to continue
     operating  were  identified as impaired,  as the future  undiscounted  cash
     flows  of each of these  contracts  was  estimated  to be  insufficient  to
     recover  the related  carrying  value of the  property  and  equipment  and
     contract rights associated with each contract. As such, the carrying values
     of these  contracts  were  written down to the  Company's  estimate of fair
     value based on the present value of the discounted  future cash flows.  The
     Company  wrote down  approximately  $573,000 of property and  equipment and
     $448,000 of contract rights in fiscal 1999.

     During  fiscal  1999,  the Company  recorded a loss for an  underperforming
     contract with estimated future losses of approximately $401,000.

16.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     Quarterly  operating  results  for the years  ended  December 29,  1998 and
     December 28, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>


       YEAR ENDED                                    FIRST         SECOND          THIRD        FOURTH
        DECEMBER 29, 1998                           QUARTER        QUARTER        QUARTER       QUARTER         TOTAL
       <S>                                         <C>            <C>           <C>            <C>           <C>


       Net sales                                   $ 27,294       $ 59,710      $ 99,699       $ 96,738      $ 283,441

       Cost of sales                                 22,422         46,734        77,226         76,151        222,533
       Selling, general, and administrative           4,460          5,037         9,365         10,602         29,464
       Depreciation and amortization                  2,907          3,598         5,182          6,510         18,197
       Transaction related expenses                       -              -           612          2,469          3,081
       Contract related losses                            -              -             -          1,423          1,423
                                                     ------          ------        -----           -----        ------
       Operating income (loss)                       (2,495)         4,341         7,314           (417)         8,743
       Interest expense, net                          2,287          2,263         2,739          4,033         11,322
       Other income, net                                (33)           (99)         (112)          (115)          (359)
                                                        ---            ---          ----           ----           ----
       Income (loss) before income taxes             (4,749)         2,177         4,687         (4,335)        (2,220)
       Income tax provision (benefit)                    19            (19)        1,870           (352)         1,518
                                                         --            ---         -----           ----          -----
       Loss before extraordinary item                (4,768)         2,196         2,817         (3,983)        (3,738)
       Extraordinary loss on debt
        extinguishment, net of taxes                     -              -             -           1,499          1,499
                                                     ------          -----         -----          -----          -----

       Net income (loss)                           $ (4,768)       $ 2,196       $ 2,817       $ (5,482)      $ (5,237)
                                                   ========        =======       =======       ========       ========

</TABLE>





                                     - F22 -
<PAGE>



<TABLE>
<CAPTION>

       YEAR ENDED                                    FIRST         SECOND         THIRD         FOURTH
        DECEMBER 28, 1999                           QUARTER       QUARTER        QUARTER       QUARTER         TOTAL
       <S>                                         <C>           <C>           <C>            <C>            <C>


       Net sales                                   $ 66,290      $ 116,341     $ 147,058      $ 101,764      $ 431,453

       Cost of sales                                 54,314         90,206       115,033         82,936        342,489
       Selling, general, and administrative           9,444         10,453        13,244          9,572         42,713
       Depreciation and amortization                  6,347          6,818         6,721          6,929         26,815
       Transaction related expenses                   1,018            209           328            (26)         1,529
       Contract related losses                           -              -             -           1,422          1,422
                                                      -----          -----        ------          -----          -----
       Operating income (loss)                       (4,833)         8,655        11,732            931         16,485
       Interest expense, net                          4,632          5,923         6,215          6,259         23,029
       Other income, net                               (101)          (113)          (53)          (209)          (476)
                                                       ----           ----           ---           ----           ----
       Income (loss) before income taxes             (9,364)         2,845         5,570         (5,119)        (6,068)
       Income tax provision (benefit)                (2,670)         2,650          (187)        (1,342)        (1,549)
                                                     ------          -----          ----         ------         ------
       Income (loss) before
        extraordinary item and
        cumulative effect of change
        in accounting principles                     (6,694)           195         5,757         (3,777)        (4,519)
       Extraordinary loss on debt
        extinguishment, net of taxes                    873             -            -              -              873
       Cumulative effect of change in
        accounting principles, net of
        taxes                                           256             -            -              -              256
                                                        ---           ---          ---            ---              ---

       Net income (loss)                           $ (7,823)        $  195       $ 5,757        $ (3,777)      $(5,648)
                                                   ========         ======       =======        ========       =======
</TABLE>


17.  NON-GUARANTOR SUBSIDIARIES FINANCIAL STATEMENTS

     The senior subordinated notes are jointly and severally,  guaranteed by the
     Company and all of the subsidiaries of Volume Service  America,  except for
     certain non-wholly owned U.S. subsidiaries and one non-U.S. subsidiary. The
     following table sets forth the condensed  consolidated financial statements
     of  the  Parent   Company,   Guarantor   Subsidiaries   and   Non-Guarantor
     Subsidiaries  as of and for the  fifty-two  week period ended  December 29,
     1998 and  December 28,  1999. As the nonguarantor  subsidiaries  related to
     Service  America which was acquired in 1998, no  information as of December
     30, 1997 and for the fifty-two week period then ended is provided.

                                     - F23 -
<PAGE>
                      CONSOLIDATING CONDENSED BALANCE SHEET
                        DECEMBER 29, 1998 (IN THOUSANDS)
  <TABLE>
  <CAPTION>

                                                            COMBINED       COMBINED
                                             PARENT         GUARANTOR    NON-GUARANTOR
     ASSETS                                  COMPANY       SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
     <S>                                      <C>            <C>             <C>            <C>             <C>


     Current Assets:
      Cash and cash equivalents                               $ 8,692         $ 136                         $ 8,828
      Accounts receivable                                      16,958           832                          17,790
      Other current assets                                     23,190         1,217         $ (8,765)        15,642
                                                               ------         -----         --------         ------
            Total current assets                               48,840         2,185           (8,765)        42,260
     Property and equipment                                    67,601         3,382                -         70,983
     Contract rights, net                                      69,407         3,528                -         72,935
     Cost in excess of net assets acquired,
      net                                                      50,585             -                -         50,585
     Investment in subsidiaries                $ 52,241             -             -          (52,241)             -
     Other assets                                    -         32,785             -                -         32,785
                                                 ------        ------                                        ------

     TOTAL ASSETS                              $ 52,241      $269,218       $ 9,095         $(61,006)      $269,548
                                               ========      ========       =======         ========       ========

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

     Current liabilities:
      Intercompany liabilities                                 $ 899        $ 7,866         $ (8,765)
      Other current liabilities                               46,991          1,667                -       $ 48,658
                                                              ------          -----                        --------
            Total current liabilities                         47,890          9,533           (8,765)        48,658
     Long-term debt                                          155,800              -                -        155,800
     Other liabilities                                        12,849              -                -         12,849
                                                              ------          -----            -----         ------
           Total liabilities                                 216,539          9,533           (8,765)       217,307
                                                             -------         ------           ------        -------

     Stockholders' equity (deficiency):
      Common stock                                 $ -             -              -                -              -
      Additional paid-in capital                66,474        66,474              -          (66,474)        66,474
      Accumulated deficit                      (12,595)      (12,224)          (371)          12,595        (12,595)
      Other                                     (1,638)       (1,571)           (67)           1,638         (1,638)
                                                ------        ------            ---            -----         ------
           Total stockholders' equity
            (deficiency)                        52,241        52,679            (438)        (52,241)        52,241
                                                ------        ------          ------         -------         ------

     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY
      (DEFICIENCY)                            $ 52,241      $269,218         $ 9,095        $(61,006)      $269,548
                                              ========      ========         =======        ========       ========
</TABLE>

                                      -F24-
<PAGE>
     CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                   YEAR ENDED DECEMBER 29, 1998 (IN THOUSANDS)
  <TABLE>
  <CAPTION>

                                                           COMBINED         COMBINED
                                            PARENT         GUARANTOR     NON-GUARANTOR
                                            COMPANY       SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
      <S>                                   <C>             <C>              <C>            <C>             <C>


      Net sales                                              $273,482         $9,959                        $283,441

      Cost of sales                                           214,776          7,757                         222,533
      Selling, general, and administrative                     27,755          1,709                          29,464
      Depreciation and amortization                            17,333            864                          18,197
      Transaction related expenses                              3,081              -                           3,081
      Contract related losses                                   1,423              -                           1,423
                                                                -----                                          -----
      Operating income (loss)                                   9,114           (371)                          8,743
      Interest expense                                         11,322              -                          11,322
      Other income, net                                          (359)            -                             (359)
                                                                 ----                                           ----
      Loss before income taxes                                 (1,849)          (371)                         (2,220)
      Income tax provision                                      1,518              -                           1,518
                                                                -----                                          -----
      Loss before extraordinary item                           (3,367)          (371)                         (3,738)
      Extraordinary loss                                        1,499              -                           1,499
      Equity in earnings of subsidiaries      $ (5,237)             -              -        $ 5,237                -
                                              --------          -----           ----        -------
      Net loss                                  (5,237)        (4,866)          (371)         5,237           (5,237)

      Other comprehensive loss                      -              -             (67)            -               (67)
                                              --------          -----            ---                             ---

      Comprehensive loss                      $ (5,237)      $ (4,866)        $ (438)       $ 5,237          $ (5,304)
                                              ========       ========         ======        =======          ========
</TABLE>




                                      -F25-


<PAGE>
                 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
                   YEAR ENDED DECEMBER 29, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                        COMBINED          COMBINED
                                                             PARENT     GUARANTOR       NON-GUARANTOR
                                                             COMPANY   SUBSIDIARIES      SUBSIDIARIES   CONSOLIDATED
     <S>                                                  <C>          <C>               <C>              <C>


     Cash Flows from Operating Activities                 $   (49)     $ 3,185           $ (434)          $  2,702
                                                          -------      -------           ------           --------

     Cash Flows Provided by Investing Activities:
      Decrease in restricted cash                               -             2               -                  2
      Cash purchased in acquisition of Service America          -         1,587               -              1,587
      Payment of acquisition costs                         (2,820)            -               -             (2,820)
      Purchase of minority interest stock of Service
       America                                               (631)            -               -               (631)
      Purchase of property and equipment                        -       (12,313)           (322)           (12,635)
      Proceeds from sale of property and equipment              -         3,349               -              3,349
      Proceeds from assets held for sale                        -        12,575               -             12,575
      Additions to assets held for sale                         -          (607)              -               (607)
      Purchase of contract rights                               -        (6,164)             (5)            (6,169)
                                                            -----        ------              --             ------

           Net cash used in investing activities           (3,451)       (1,571)           (327)            (5,349)
                                                           ------        ------            ----             ------

     Cash Flows from Financing Activities:
      Principal payments on long-term debt                      -      (154,291)              -           (154,291)
      Net borrowings - revolving loans                          -         6,897               -              6,897
      Proceeds from long-term debt                              -       160,000               -            160,000
      Payments of financing costs                               -        (7,859)              -             (7,859)
      Principal payments on capital lease obligations           -          (103)              -               (103)
      Decrease in bank overdrafts                               -        (2,555)            713             (1,842)
      Increase in other equity                                  -          (253)              -               (253)
      Capital contributions                                 3,500             -               -              3,500
                                                            -----                                            -----

           Net cash provided by financing activities        3,500         1,836             713              6,049
                                                            -----         -----             ---              -----

     Increase (decrease) in cash                                -         3,450             (48)             3,402

     Cash and cash equivalents - beginning of period            -         5,242             184              5,426
                                                            -----         -----             ---              -----

     Cash and cash equivalents - end of period                $ -       $ 8,692           $ 136            $ 8,828
                                                              ==        =======           =====            =======

</TABLE>




                                      -F26-
<PAGE>
                      CONSOLIDATING CONDENSED BALANCE SHEET
                        DECEMBER 28, 1999 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                            COMBINED       COMBINED
                                                PARENT      GUARANTOR    NON-GUARANTOR
                                                COMPANY    SUBSIDIARIES   SUBSIDIARIES       ELIMINATIONS    CONSOLIDATED
     <S>                                        <C>           <C>           <C>              <C>           <C>

     ASSETS

     Current Assets:
      Cash and cash equivalents                                $ 9,392       $ 2,889                       $ 12,281
      Accounts receivable                                       15,619         1,316                         16,935
      Other current assets                                      29,775           869         $(9,071)        21,573
                                                                ------           ---         -------         ------
             Total current assets                               54,786         5,074          (9,071)        50,789
      Property and equipment                                    65,343         4,058               -         69,401
      Contract rights, net                                      71,814         1,994               -         73,808
      Cost in excess of net assets acquired,
       net                                                      50,000             -               -         50,000
      Investment in subsidiaries                $ (2,386)            -             -           2,386
      Other assets                                    -         34,616             7               -         34,623
                                                   -----        ------             -           -----         ------

      TOTAL ASSETS                              $ (2,386)     $276,559      $ 11,133        $ (6,685)      $278,621
                                                ========      ========      ========        ========       ========

      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

      Current Liabilities:
       Intercompany liabilities                                              $ 9,071        $ (9,071)
       Other current liabilities                              $ 46,220         3,629                       $ 49,849
                                                              --------         -----                       --------
             Total current liabilities                          46,220        12,700          (9,071)        49,849
      Long-term debt                                           222,200             -               -        222,200
      Other liabilities                                          8,958             -               -          8,958
                                                                 -----        ------           -----          -----
             Total liabilities                                 277,378        12,700          (9,071)       281,007
                                                               -------        ------          ------        -------

      Stockholders' Equity (Deficiency):
       Common stock
       Additional paid-in capital              $ 66,474         16,974             -         (16,974)        66,474
       Accumulated deficit                      (18,243)       (16,874)       (1,369)         18,243        (18,243)
       Other                                    (50,617)          (919)         (198)          1,117        (50,617)
                                                -------           ----          ----           -----        -------
            Total stockholders' equity
             (deficiency)                        (2,386)          (819)       (1,567)          2,386         (2,386)
                                                 ------           ----        ------           -----         ------

       TOTAL LIABILITIES AND
       STOCKHOLDERS' EQUITY
       (DEFICIENCY)                            $ (2,386)      $276,559      $ 11,133        $ (6,685)      $278,621
                                               ========       ========      ========        ========       ========

</TABLE>







                                      -F27-

<PAGE>
     CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                   YEAR ENDED DECEMBER 28, 1999 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                           COMBINED           COMBINED
                                            PARENT        GUARANTOR         NON-GUARANTOR
                                            COMPANY      SUBSIDIARIES       SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
      <S>                                     <C>          <C>               <C>               <C>          <C>


      Net sales                                            $ 402,150         $ 29,303                       $ 431,453

      Cost of sales                                          318,627           23,862                         342,489
      Selling, general, and administrative                    39,123            3,590                          42,713
      Depreciation and amortization                           24,402            2,413                          26,815
      Transaction related expenses                             1,529                -                           1,529
      Contract related losses                                    972              450                           1,422
                                                                 ---              ---                           -----
      Operating income (loss)                                 17,497           (1,012)                         16,485
      Interest expense                                        23,029                -                          23,029
      Other income, net                                         (461)             (15)                           (476)
                                                                ----              ---                            ----
      Loss before income taxes                                (5,071)            (997)                         (6,068)
      Income tax benefit                                      (1,549)              -                           (1,549)
                                                              ------                                           ------
      Loss before extraordinary item
       and cumulative effect of change in
       accounting principle                                   (3,522)            (997)                         (4,519)
      Extraordinary item, net of
       taxes                                                     873                -                             873
      Cumulative effect of change in
       accounting principle, net of
       taxes                                                     256                -                             256
      Equity in earnings of subsidiaries     $ (5,648)             -                -        $ 5,648                -
                                             --------          -----             ----        -------            -----
      Net loss                                 (5,648)        (4,651)            (997)         5,648           (5,648)
      Other comprehensive loss
       foreign currency                           -               -              (131)            -              (131)
                                             --------          -----   -          ----         -----              ----

      Comprehensive loss                     $ (5,648)      $ (4,651)        $ (1,128)       $ 5,648         $ (5,779)
                                             ========       ========         ========        =======         ========

</TABLE>






                                  -F28-

<PAGE>
                 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
                   YEAR ENDED DECEMBER 28, 1999 (IN THOUSANDS)
<TABLE>
<CAPTION>


                                                                       COMBINED          COMBINED
                                                           PARENT      GUARANTOR       NON-GUARANTOR
                                                           COMPANY    SUBSIDIARIES     SUBSIDIARIES     CONSOLIDATED
     <S>                                                     <C>      <C>               <C>               <C>

     Cash Flows from Operating  Activities                   $ -      $ 11,759          $ 4,331           $ 16,090
                                                             --       --------          -------           --------

     Cash Flows from Investing Activities:
      Purchase of property and equipment                       -        (9,423)            (995)           (10,418)
      Proceeds from sale of property, plant and
       equipment                                               -           887                -                887
      Purchase of contract rights                              -       (15,221)            (661)           (15,882)
                                                              --       -------             ----            -------

           Net cash used in investing activities               -       (23,757)          (1,656)           (25,413)

     Cash Flows from Financing Activities:
      Principal payments on long-term debt                     -       (46,650)               -            (46,650)
      Net borrowings - revolving loans                         -         9,500                -              9,500
      Proceeds from long-term debt                             -       100,000                -            100,000
      Payments of financing costs                              -        (6,600)               -             (6,600)
      Principal payments on capital lease obligations          -          (189)               -               (189)
      Increase in bank overdrafts                              -         5,483               80              5,563
      Dividend from subsidiary                            49,500       (49,500)               -                  -
      Redemption of stock                                (49,500)            -                -            (49,500)
      Increase in other equity                                 -           652                -                652
                                                              --           ---                                 ---

           Net cash provided by financing activities           -        12,696               80             12,776
                                                              --        ------               --             ------

      Increase in cash                                         -           698            2,755              3,453

      Cash and cash equivalents - beginning of period          -         8,692              136              8,828
                                                              --         -----              ---              -----

      Cash and cash equivalents - end of period               $ -       $ 9,390          $ 2,891           $ 12,281
                                                              ==        =======          =======           ========



</TABLE>




                                      -F29-