UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
February 23, 1995
(Date of Report)
Date of earliest event reported: February 8, 1995
DAKA International, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-17229 04-3024178
(Commission File Number) (I.R.S.Employer Identification No.)
One Corporate Place
55 Ferncroft Road
Danvers, Massachusetts 01923
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(508) 774-9115
<PAGE>
Item 2. Acquisition or Disposition of Assets
On February 8, 1995, Daka, Inc. ("Daka"), a
wholly-owned subsidiary of DAKA International, Inc. (the
"Registrant"), acquired an 80.01% general partnership interest
in a newly-formed limited partnership, Daka Restaurants, L.P. ("DRLP"),
which on the same date acquired substantially all of
the assets and foodservice contracts comprising the educational
foodservice business of ServiceMaster Management Services L.P.
("SMLP"). SMLP owns a 19.99% limited partnership interest in
DRLP. Daka, as the sole general partner of DRLP, will control
DRLP and will be responsible for providing day-to-day management
for the 110 contracts acquired which in 1994 generated annual managed
volume of approximately $80 million.
The purchase price of approximately $10.3 million for
certain assets and foodservice contracts was substantially all
paid in cash using available borrowing capacity under the
Registrant's line of credit agreement with the Chase Manhattan Bank, N.A.
and Shawmut Bank, N.A. In addition, DRLP acquired certain working capital
assets such as cash on hand, inventory, accounts receivable and prepaid
expenses, and assumed certain liabilities related to the acquired contracts.
The purchase price for the working capital assets is estimated to be
approximately $10 million and will be paid to SMLP in cash on
August 7, 1995. The Registrant has guaranteed the August 7,
1995 payment to be made by DRLP.
In connection with the formation of DRLP and the transfer of assets by
SMLP to DRLP, whereby SMLP acquired its limited partnership interest
in DRLP, the Registrant and SMLP have entered into
a Put and Call Agreement pursuant to which SMLP may require the
Registrant to purchase SMLP's limited partnership interest in
DRLP at any time during the ten year term of the partnership.
The purchase price to be paid to SMLP upon exercise of its put
rights shall be $2.6 million plus SMLP's portion of any net
undistributed earnings of DRLP. Pursuant to the Put and Call
Agreement, the Registrant may require SMLP to sell its limited
partnership interest to the Registrant after the fifth
anniversary of the formation of the partnership. The purchase price to
be paid to SMLP upon exercise by the registrant of its call rights shall be
120% of $2.6 million plus SMLP's portion of any net undistributed
earnings of DRLP.
Item 7. Financial Statements and Exhibits
Since the acquired assets and foodservice contracts
were part of a larger business, and therefore do not have
separate historical financial statements, at the time of the
filing of this Form 8-K, it is impracticable for the Registrant
to provide (a) the required financial information related to the
acquired assets and foodservice contracts and (b) the pro forma
financial information relating to such acquisition referred to
in (a). Such required financial information will be filed with
the Commission under cover of Form 8-K/A not later than April
24, 1995, in accordance with Form 8-K Item 7, paragraphs (a)(4)
and (b)(2).
<PAGE>
Exhibits:
10.22 Business Transfer Agreement by and between
Daka Restaurants, L.P. as Transferee and ServiceMaster
Management Services L.P. as Transferor as of February 8, 1995.
10.23 Limited Partnership Agreement of Daka Restaurants, L.P.
as of February 8, 1995
10.24 Put and Call Agreement by and between DAKA
International, Inc. and ServiceMaster Management Services
L.P. as of February 8, 1995.
The schedules to exhibit 10.22 are not included
herein. The Registrant will furnish to the Securities and
Exchange Commission, supplementally, a copy of any omitted
schedule upon the Securities and Exchange Commission's request.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
DAKA International, Inc.
Date: February 23, 1995 By: /s/Louie Psallidas
--------------------------
Louie Psallidas
Vice President, Controller
BUSINESS TRANSFER AGREEMENT
by and between
Daka Restaurants, L.P.
as Transferee
and
ServiceMaster Management Services L.P.
as Transferror
as of February 8, 1995
<PAGE>
BUSINESS TRANSFER AGREEMENT
INDEX
Page
SECTION 1. TRANSFER OF ASSETS 1
1.1 Transfer of Assets 1
1.2 Excluded Assets 4
1.3 Assumption of Liabilities 5
1.4 Purchase Price and Payment 7
1.5 Procedure for Obtaining Clients' Consents and
Assignment of Permits; Non-assignable Contracts 7
1.6 Uncollected Accounts Receivable 8
1.7 Time and Place of Closing; Closing Deliveries 9
1.8 Determination and Payment of the DRLP Payoff
Obligation 10
1.9 Further Assurances 15
1.10 Allocation of Consideration for Federal and
State Income Tax Purposes 15
SECTION 2. REPRESENTATIONS AND WARRANTIES OF
SERVICEMASTER 15
2.1 Organization and Qualifications of
ServiceMaster 15
2.2 Authority of ServiceMaster 16
2.3 Sufficiency of Subject Assets 16
2.4 Tangible Property 16
2.5 Intellectual Property 17
2.6 Contracts 17
2.7 Financial Information 19
2.8 Absence of Certain Changes 19
2.9 Suppliers 19
2.10 Litigation 20
2.11 Compliance with Laws 20
2.12 Finder's Fee 20
2.13 Permits 20
2.14 Employee Benefit Programs 20
2.15 Labor Matters 21
2.16 Environmental Matters 22
<PAGE>
SECTION 3. COVENANTS OF SERVICEMASTER 23
3.1 Preparation of Audited Financial Statements 23
3.2 Non-Competition and Non-Solicitation 23
3.3 Option to Purchase Manufacturing Business 24
3.4 Delivery of Books and Records 24
3.5 Food Services Supplies 24
3.6 Instruments of Transfer 24
SECTION 4. REPRESENTATIONS AND WARRANTIES OF DRLP 25
4.1 Organization of DRLP; Absence of Operating
History 25
4.2 Authority of DRLP 25
4.3 Litigation 26
4.4 Finder's Fee 26
SECTION 5. COVENANTS OF DRLP 26
5.1 DRLP's Non-Solicitation 26
5.2 Option to Purchase Manufacturing Business 26
5.3 Security Deposit Reimbursement 26
5.4 Services 26
SECTION 6. REPRESENTATIONS AND WARRANTIES OF DAKA
INTERNATIONAL 27
6.1 Organization of DAKA International 27
6.2 Authority of DAKA International 27
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO
CLOSING 28
7.1 Survival of Warranties 28
7.2 Employment Matters 28
7.3 Employee Benefit Matters 29
7.4 Accounting, Payroll and Data Processing Services 31
7.5 Design Business 32
SECTION 8. INDEMNIFICATION 32
8.1 Indemnification by ServiceMaster 32
8.2 Limitations on Indemnification by ServiceMaster 33
8.3 Indemnification by DRLP 34
8.4 Limitations on Indemnification by DRLP 35
8.5 Notice; Defense of Claims 35
SECTION 9. DEFINITIONS 36
SECTION 10. MISCELLANEOUS 44
10.1 Bulk Sales Law 44
10.2 Fees and Expenses 44
10.3 DAKA International Guaranty 44
10.4 Governing Law 47
10.5 Notices 48
10.6 Entire Agreement 48
10.7 Assignability; Binding Effect 49
<PAGE>
10.8 Captions and Gender 49
10.9 Execution in Counterparts 49
10.10 Amendments 49
10.11 Arbitration 49
10.12 Specific Performance 49
10.13 Compensation for Late Payment or Performance 50
10.14 Severability 50
10.15 No Third-Party Beneficiaries 51
Exhibit A Form of Client's Consent
<PAGE>
INDEX TO SCHEDULES
(Schedule numbers correspond to the Section
of the Agreement in which the schedule is described)
Schedule 1.1(a) "Tangible Personal Property"
Schedule 1.1(c) "Branded Concepts and Products" and
"Signature Concepts and Other Trademarks and Tradenames"
Schedule 1.1(d) "Dining Contracts"
Schedule 1.1(f) "Leases"
Schedule 1.2(a) "Retained Notes Receivable"
Schedule 1.2(b) "Retained Dining Contracts"
Schedule 1.2(h) "Other Excluded Assets"
Schedule 2.1 "States in which ServiceMaster is
Qualified to do Business"
Schedule 2.6(a) "Dining Contracts Out to Bid, Notices
of Re-Bid and Terminations within 90 Days"
Schedule 2.6(b) "Other Contracts (other than Dining
Contracts)"
Schedule 2.6(c) "Business Restrictions"
Schedule 2.7(a) "Disclosures with respect to
Financial Statements"
Schedule 2.7(b) "Profit and Loss Statements for the Design Business"
Schedule 2.8 "Certain Changes in the Business"
Schedule 2.9 "Principal Suppliers"
Schedule 2.10 "Litigation"
Schedule 2.14 "Employee Programs and ERISA Matters"
Schedule 2.15(a)(i) "List of Employees"
Schedule 2.15(a)(ii) "Collective Bargaining
Agreements"
Schedule 2.15(b) "Disclosure with respect to certain
labor matters, disturbances and policies"
Schedule 4.4 "Finder's Fee"
<PAGE>
BUSINESS TRANSFER AGREEMENT
BUSINESS TRANSFER AGREEMENT (the "Agreement")
entered into February 8, 1995 by and between Daka Restaurants,
L.P., a Delaware limited partnership ("DRLP"), and ServiceMaster
Management Services L.P., a Delaware limited partnership
("ServiceMaster").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions hereof,
ServiceMaster desires to transfer those tangible and intangible
assets used or held by ServiceMaster for use primarily in the
business of (i) maintaining dining operations at and providing
dining services to colleges, universities, schools, academies,
correctional facilities and other businesses listed on Schedule
1.1(d) hereto (the "Dining Services Business"); (ii) providing
construction management services in the food service industry
(the "Design Business") and (iii) manufacturing, fabricating,
selling and installing fixtures and equipment used in the food
service industry (except as engaged in by ServiceMaster
exclusively in connection with its healthcare services business)
(the "Manufacturing Business"). The businesses described in
clauses (i) and (ii) of the preceding sentence are referred to
collectively, as the "Business."
WHEREAS, subject to the terms and conditions hereof,
DRLP desires to acquire and accept said properties and assets of
ServiceMaster in exchange for certain consideration specified
herein;
NOW, THEREFORE, in order to consummate said transfer
and conveyance and in consideration of the mutual agreements set
forth herein, the parties hereto agree as follows:
SECTION 1. TRANSFER OF ASSETS.
1.1 Transfer of Assets. Subject to the
provisions of this Agreement, ServiceMaster hereby conveys,
transfers and assigns to DRLP and DRLP hereby accepts and
acquires, all of ServiceMaster's right, title and interest,
legal and equitable, in and to all tangible and intangible
assets of ServiceMaster used or held by ServiceMaster for use in
the Dining Services Business and located on-site at any facility
at which ServiceMaster provides dining or other food services
(each a "Dining Location"); located off-site of any Dining
Location but used exclusively in connection with the Dining
Services Business or used exclusively in the Design Business,
wherever located (collectively, the "Subject Assets"), including
without limitation, ServiceMaster's right, title and interest in
the following:
<PAGE>
(a) Tangible Personal Property. All equipment,
furniture, fixtures, smallwares, uniforms and other tangible
personal property, whether owned or leased, including without
limitation the items listed on Schedule 1.1(a) (collectively,
the "Tangible Personal Property").
(b) Inventory.
(i) All inventories, supplies and materials of
any kind used in the Dining Services Business, including food,
paper supplies, packaging materials and the like ("Dining
Inventory") but excluding all Proprietary Inventory (as defined
below) and Customer-Owned Inventory (as defined below).
"Proprietary Inventory" means items such as glassware, paper
goods, packaging, utensils and similar items which bear the
words "ServiceMaster" or "We serve" and associated logos.
"Customer-Owned Inventory" means any inventory that is owned by
the college, university, school, academy, correctional
institution or business to which food services are provided, or
any other person except ServiceMaster.
(ii) All inventories, supplies and materials of
any kind used or held exclusively for use in the Design Business
(the "Design Inventory" and collectively with the Dining
Inventory (the "Inventory")).
(c) Subject to the limitations set forth in
Section 1.5 of this Agreement, ServiceMaster hereby conveys,
transfers and assigns to DRLP all ServiceMaster's right, title
and interest in and to the branded concepts and products owned
by others and licensed to ServiceMaster and used exclusively in
the conduct of the Dining Services Business and listed under the
heading "Branded Concepts and Products" on Schedule 1.1(c). At
the Closing, ServiceMaster and DRLP shall enter into a
conditional sublicense granting DRLP a right to use in the Dining Services
Business the recipe management and access control software owned by The
CBORD Group, Inc. and licensed to ServiceMaster. Such
sublicense shall be contingent upon receipt by DRLP of the
written consent of The CBORD Group, Inc. and shall be for a
limited term ending June 30, 1995. At the Closing,
ServiceMaster and DRLP shall enter into a license granting DRLP a
right to use in the Dining Services Business certain accounting software
owned by ServiceMaster and known as the ServiceMaster Financial
Management System ("FMS Software"). Such license shall be for a
limited term ending June 30, 1995. At the Closing,
ServiceMaster and DRLP shall enter into a license granting DRLP a
right to use in the Dining Services Business the signature concepts
and other trademarks and trade names owned by
ServiceMaster listed under the heading "Signature Concepts and
other Trademarks and Trade Names" on Schedule 1.1(c).
All of the rights in the foregoing Intellectual Property which are to be
transferred to DRLP are referred to herein as the "Transferred Intellectual
Property".
(d) Dining Contracts. All contracts, commitments
or agreements to which ServiceMaster is a party or by which
ServiceMaster is bound, with respect to the maintenance of
dining operations at or the provision of dining or other food
services to colleges, universities, schools, academies,
correctional facilities and businesses listed under the caption
"Current Dining Contracts" on Schedule 1.1(d) hereto (such
contracts, commitments or agreements, collectively, the "Current
Dining Contracts"); any and all other food service contracts
with colleges, universities, schools, academies, correctional
facilities or businesses, which have been awarded but not yet
executed and delivered, oral contracts subject to documentation,
renewals of expired contracts and the like listed under the
caption "New Dining Contracts" on Schedule 1.1(d) hereto ("New
Dining Contracts"); and any and all of ServiceMaster's rights
relating to other food service contracts with colleges,
universities, schools, academies, correctional institutions or
other businesses with respect to which ServiceMaster has made a
bid or proposal for such contract which bid or proposal has not
been awarded or rejected, listed under the caption "Open Bids"
on Schedule 1.1(d) hereto (such bids and proposals, the "Open
Bids"). The Current Dining Contracts, the New Dining Contracts
and the Open Bids are referred to herein, collectively, as the
"Dining Contracts."
<PAGE>
With respect to each Current and New Dining Contract
listed in Schedule 1.1(d), such Schedule sets forth the
following information: (w) actual Managed Volume for the twelve
(12) month period ended in December, 1994 and the budgeted
Managed Volume for the twelve month period ending in December,
1995; (x) actual Contribution for the twelve (12) month period
ended in December, 1994 and the budgeted Contribution for the
twelve month period ending in December, 1995; and (y) an
estimate of the total Required Investment and those portions of
such amount which are funded and unfunded as of the Closing
Date, provided that not later than February 21, 1995,
ServiceMaster shall deliver a revised estimate of Required
Investments.
(e) Accounts Receivable. All accounts receivable
of the Business relating to Dining Contracts (the "Accounts
Receivable"), including, without limitation all other
obligations with respect to sales of goods or services but
excluding (i) receivables relating to goods or services sold in
connection with which the purchaser paid by use of a credit card
and (ii) intercompany receivables.
(f) Leases. All operating leases of Tangible
Personal Property, including without limitation the leases
listed on Schedule 1.1(f) (the "Leases").
(g) Other Contracts. All other contracts,
commitments or agreements including, without limitation,
service, maintenance, cleaning, linen supply and similar
contracts relating primarily to the Business to which
ServiceMaster or any of its affiliates is a party or by which
ServiceMaster or any of its affiliates is bound, or by which the
Subject Assets are bound, and which are not excluded by the
preceding provisions, including without limitation those listed
on Schedule 2.6(b) but excluding any collective bargaining
agreements other than the collective bargaining agreement for
Cleveland State University (the "Other Contracts"); and any
written or oral renewals, extensions, amendments or
modifications of the foregoing.
(h) Permits. All governmental permits, licenses
(including without limitation liquor licenses), certifications,
authorizations and other approvals (the "Permits") (and any
renewals, extensions, amendments or modifications thereof) to
the extent such Permits pertain primarily to or are used
primarily in the operation of the Business to the extent
assignable or transferable in accordance with applicable law.
<PAGE>
(i) Records. All records, books, accounts, files,
logs, ledgers and journals, or portions thereof (including any
of the same stored in computer readable form or format)
pertaining primarily to the operation of the Business (the
"Books and Records"); provided that delivery of all such Books
and Records shall not be made at the Closing but shall be made
pursuant to Section 3.4 hereof.
(j) Operating Cash. All cash on hand at Dining
Locations, including, without limitation, cash held in
registers, petty cash, spare change funds and the like
("Operating Cash"), but excluding all cash held in bank accounts
or at financial institutions and checks, negotiable instruments,
credit card receivables and the like.
(k) Miscellaneous Assets. All prepaid expenses and
all goodwill of the Business (the "Miscellaneous Assets").
1.2 Excluded Assets. Notwithstanding any provision
of this Agreement to the contrary, ServiceMaster shall not sell,
convey, transfer or assign to DRLP, but shall retain all of its
right, title and interest in and to, the following assets held
by it on the Closing Date ("Excluded Assets"):
(a) The notes receivable listed on Schedule 1.2(a)
(the "Retained Notes Receivable");
(b) The contracts for the provision of dining or
other food services listed on Schedule 1.2(b) and all of
ServiceMaster's assets used or held for use primarily in
connection with such contracts;
(c) All collective bargaining agreements other than
the collective bargaining agreement for Cleveland State
University;
(d) All Proprietary Inventory and Customer-Owned
Inventory;
(e) All cash and cash equivalents held in bank
accounts or at other financial institutions, in lock boxes or
other investments, and all checks, negotiable instruments,
credit card receivables and the like;
(f) All performance bonds;
(g) The right to use the name "ServiceMaster," the
mark "We serve" and all other trademarks, proprietary rights,
manuals, know-how or other Intellectual Property of
ServiceMaster or any party controlling, controlled by or under
common control with ServiceMaster not specifically listed on
Schedule 1.1(c)(ii);
(h) Those other assets listed on Schedule 1.2(h);
and
(i) Any and all property which does not constitute
Subject Assets.
<PAGE>
1.3 Assumption of Liabilities.
(a) Except as provided in Section 1.3(b) and
without limitation of DRLP's rights under Section 8.1(c), DRLP
hereby assumes all of ServiceMaster's obligations (the "Assumed
Liabilities") under:
(i) The Leases;
(ii) the licenses and agreements relating to the
Transferred Intellectual Property listed on Schedule 1.1(c)
under the heading "Branded Concepts and Products";
(iii) The Dining Contracts;
(iv) The Other Contracts;
(v) Any outstanding purchase orders or similar
commitments with respect to Inventory (other than Proprietary
Inventory and Customer-Owned Inventory) or tangible personal
property of ServiceMaster issued in the ordinary course of the
Business consistent with ServiceMaster's past practices (the
contracts, agreements and commitments referred to in clauses (i)
- - - - - (v) hereof other than New Dining Contracts and Open Bids, the
"Contracts"); and
(vi) Liabilities of the Business arising in
connection with violations of regulatory requirements which (A)
are unknown as of the Closing Date, (B) are identified
post-Closing and relate to required changes in the day-to-day
operating procedures at any Dining Location, routine
modifications to the equipment or design of such a location or
the routine purchase or installation of safety devices and (C)
would not individually or in the aggregate, have a Material
Adverse Effect but excluding any costs or expenses (including
attorneys' fees) relating to litigation or other proceedings
relating to such regulatory violations any and all fines, costs,
penalties imposed by any governmental body having authority to
regulate the Business (the liabilities assumed pursuant to this
Section 1.3(a)(vii), the "Assumed Regulatory Liabilities").
(b) The Assumed Liabilities shall in no event
include any liability or obligation arising from any breach or
default by ServiceMaster under any Contract prior to the
assignment thereof to DRLP provided that to the extent any such
liability or obligation results in a set off or failure to pay
any Account Receivable (or any amount billed by DRLP to the
respective Client) then (except as indicated in the next
sentence) ServiceMaster shall not be obligated to compensate or
indemnify DRLP by reason of such set off or failure to pay any
Account Receivable (or any amount billed by DRLP to the
respective Client) except as otherwise provided in Section 1.6
or in the next sentence. DRLP shall be entitled to
reimbursement or indemnification from ServiceMaster for any
failure to pay any Account Receivable included in the DRLP
Payoff Obligation to the extent such failure results from (i)
double billing or other bookkeeping errors by ServiceMaster,
(ii) billing by ServiceMaster prior to the date hereof for
services claimed by ServiceMaster to have been performed prior
to the date hereof, but which were not in fact performed by
ServiceMaster, and (iii) liability for costs, damages and other
losses incurred or suffered by that customer as a result of any
failure by ServiceMaster to perform services prior to the date
hereof which ServiceMaster was required to perform but
wrongfully failed to perform (provided that clauses (ii) and
(iii) do not apply to services which were performed but which
were not performed to the standards required by the applicable
Contract).
<PAGE>
(c) Except for the Assumed Liabilities and except
as provided in Section 1.3(b) or in other express provisions of
this Agreement or expressly stated in other agreements executed
in connection herewith, DRLP does not, and will not, assume or
in any manner be liable for or be bound by any duties,
responsibilities, obligations or liabilities of ServiceMaster of
any kind or nature, known, unknown, contingent or otherwise.
Without limiting the generality or effect of the foregoing, it
is understood that DRLP does not, and will not, assume,
undertake or accept any duties, responsibilities, obligations or
liabilities of ServiceMaster or any of the partners, officers,
directors, employees, agents or representatives of ServiceMaster
(including without limitation any that exist now or that may
arise in the future with respect to matters occurring at or
prior to the Closing):
(i) except as provided in Section 7, to employees
or former employees, including compensation, benefits,
severance, accrued vacation, accrued sick leave, pension,
post-retirement health care or other liabilities arising from
employment with ServiceMaster prior to the Closing or the
termination of employment by ServiceMaster immediately prior to
the Closing;
(ii) to the Pension Benefit Guaranty Corporation
or any successor or similar organization, whether arising out of
the employment by ServiceMaster or any of its affiliates of any
employees or former employees and whether triggered by the
transfer made under this Agreement or otherwise;
(iii) with respect to any Taxes;
(iv) under any law, including but not limited to
antitrust, civil rights, wages, hours, health, safety, labor,
discrimination and environmental laws or laws relating to Taxes
other than Assumed Regulatory Liabilities;
(v) incurred in connection with this Agreement and
the transactions provided for herein, including counsel and
accountants' fees, transfer and other taxes and expenses
pertaining to the performance by ServiceMaster or its
obligations hereunder; or
(vi) in connection with or relating to any of the
following which may be pending or threatened: actions (at law or
in equity), asserted claims, proceedings, and judgments
including, without limitation, interest, penalties, reasonable
attorneys' and accountants' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing.
<PAGE>
All duties, responsibilities, obligations and
liabilities of ServiceMaster other than the Assumed Liabilities
and except for those duties, responsibilities, obligations and
liabilities expressly assumed in other provisions of this
Agreement or in other agreements executed in connection herewith
are referred to as the "Retained Obligations."
1.4 Purchase Price and Payment.
(a) In consideration of the transfer,
conveyance and contribution by ServiceMaster to DRLP of the
Subject Assets DRLP agrees to: (w) transfer and convey to
ServiceMaster in accordance with Section 1.4(b) an aggregate
amount of $10,085,439; (x) to deliver to ServiceMaster, on
Monday, August 7, 1995, a payment in immediately available funds
in an amount equal to the DRLP Payoff Obligation determined in
accordance with Section 1.8; and (y) pursuant to that certain
Limited Partnership Agreement of Daka Restaurants, L.P., dated
the date hereof, to issue to ServiceMaster limited partnership
interests in DRLP representing a 19.99% limited partnership
interest in DRLP (the consideration to be delivered pursuant to
this Section 1.4(a), the "Consideration").
(b) The cash portion of the aggregate Consideration
set forth in Section 1.4(a) shall be transferred and conveyed by
DRLP to ServiceMaster at the Closing by wire transfer of
immediately available funds to one or more accounts designated
by ServiceMaster.
1.5 Procedure for Obtaining Clients' Consents
and Assignment of Permits; Non-assignable Contracts.
(a) Following the execution and delivery of
this Agreement and the Closing, the parties hereto shall
cooperate with one another to obtain (i) the execution by each
Client of a consent (a "Consent") substantially in the form of
Exhibit A, relating to the consent of the colleges,
universities, schools, academies, correctional institutions and
businesses which are parties to the Dining Contracts ("Clients")
to the assignment of such contracts to DRLP pursuant hereto and
(ii) any required consent or approval of any federal, state or
local governmental authority to the assignment by ServiceMaster
to DRLP of all Permits (including without limitation liquor
licenses), to the extent such Permits may be assigned or
transferred in accordance with applicable law pursuant hereto.
In connection with the obtaining of such Clients' Consents and
governmental approvals, the parties shall cooperate with one
another to make full and complete disclosure of all facts
material to and all applications or submissions necessary for
the giving thereof.
(b) Not more than four (4) business days after the
Closing, ServiceMaster shall notify all of the Clients of the
transactions contemplated by this Agreement and as soon as
practicable thereafter shall contact personally (by telephone or
face-to-face) at least one of the Managers, as hereafter
defined, of each of such Clients for the purpose of assisting
DRLP to procure the execution by such clients of Clients'
Consents. ServiceMaster shall use its best efforts to assist
DRLP in the procurement of such execution as soon as possible.
Representatives of DRLP shall have the right to participate with
representatives of ServiceMaster in any contacts with Managers
after the Closing. The term "Managers" as used herein shall
mean persons who have or share the power to decide on behalf of
a Client whether to execute a Client's Consent. As soon as
practicable after the Closing, the parties shall make all
required filings and applications with governmental authorities,
bodies or agencies with respect to the transfer or assignment of
the Permits.
<PAGE>
(c) Nothing in this Agreement will constitute a
transfer or an attempted transfer of any Contract, New Dining
Contract, Open Bid or Permit to be transferred pursuant to
Section 1 which is not capable of being transferred without the
consent, approval, waiver or novation of a third person or
entity (including without limitation a Client or a governmental
authority), or with respect to which such transfer or attempted
transfer would constitute a breach thereof or a violation of any
law or regulation, other than those for which Client Consents or
other required consents to transfer or assignment shall be
obtained by DRLP (all such nontransferable Contracts, New Dining
Contracts, Open Bids and Permits being collectively referred to
herein as "Unassigned Contracts").
(d) To the extent that the consents, approvals,
waivers and novations referred to in Section 1.5(c) are not
obtained by DRLP, ServiceMaster will, as to each Unassigned
Contract, during the original term thereof take any and all
reasonable actions as DRLP may from time to time request to
provide to DRLP all benefits (including all profits, if any) of
such Unassigned Contracts; provided that DRLP shall reimburse
ServiceMaster for all reasonable expenses incurred by
ServiceMaster in connection with complying with any such request
and that ServiceMaster will not be obligated to refund any
portion of the Consideration.
(e) Each of ServiceMaster and DRLP hereby
acknowledge and agree that certain Contracts, New Dining
Contracts or Open Bids may include restrictions and other
limitations on the assignability of such Contract and further
acknowledge that DRLP has assumed and accepted the risk that one
or more of such Contracts, New Dining Contracts or Open Bids may
be terminated upon any assignment or attempted assignment
thereof or that claims may be raised stemming from any
allegation that such assignment caused or constituted a breach
of such Contract, New Dining Contract or Open Bid.
1.6 Uncollected Accounts Receivable. Any and
all Accounts Receivable which remain outstanding from time to
time are herein referred as the "Uncollected Accounts." DRLP
and ServiceMaster hereby agree that on August 7, 1995,
ServiceMaster shall pay to DRLP an amount equal to the lesser of
(i) 50% of the aggregate then unpaid balance of all Uncollected
Accounts outstanding as of July 31, 1995 or (ii) $200,000. For
the purpose of determining amounts collected by DRLP with
respect to Accounts Receivable, each payment by an account
debtor shall be applied to the specific Account Receivable as
directed by such account debtor or if not specified by such
account debtor in which case such payment shall be applied to
the oldest Account Receivable of such account debtor. In the
event that any account debtor of an Uncollected Account with
respect to which ServiceMaster has reimbursed DRLP in accordance
with the provisions of this Section 1.6 shall subsequently make
a payment to either DRLP or ServiceMaster of any or all of the
amounts outstanding under such Uncollected Account (any such
payment a "Late Payment") (i) until such time that the balance
of the outstanding Uncollected Accounts has been reduced to
$400,000, DRLP shall receive and retain all Late Payments or
that portion of any Late Payment which reduces such balance to
$400,000 and (ii) after such balance shall have been reduced to
$400,000, 50% of any subsequent Late Payment shall be paid to
DRLP and 50% of such Late Payment shall be paid to
ServiceMaster. In addition, DRLP's right to such reimbursement
shall not be subject to the limitation set forth in Section
8.2(a) hereof.
<PAGE>
1.7 Time and Place of Closing; Closing
Deliveries.
(a) The closing of the transactions provided
for in this Agreement (herein called the "Closing") shall be
held at the offices of Goodwin, Procter & Hoar at Exchange
Place, Boston, Massachusetts contemporaneously with the
execution and delivery of this Agreement as of the date first
set forth above (such date, the "Closing Date").
(b) At the Closing, ServiceMaster shall deliver to
DRLP, unless such delivery is waived by DRLP, the following:
(i) one or more originally executed copies of this
Agreement;
(ii) one or more executed copies of the sublicense
and licenses to use certain Intellectual Property entered into
pursuant to Section 1.1(c);
(iii) Certified resolutions of the Board of
Directors of the general partner of ServiceMaster approving the
execution and delivery of this Agreement and authorizing the
consummation of the transactions contemplated hereby and thereby;
(iv) Governmental certificates certifying that
ServiceMaster is organized in good standing in the State of
Delaware and is qualified to do business in the States of
Delaware and Illinois and in the Commonwealth of Massachusetts
(which may be in so-called "short form");
(v) Governmental certificates certifying that the
general partner of ServiceMaster is organized and in good
standing in the State of Delaware; and
(vi) A certificate of the Secretary of the
general partner of ServiceMaster certifying as to the incumbency
of each officer who shall execute the Agreement or other
documents on behalf of ServiceMaster.
(c) At the Closing, DRLP shall deliver to
ServiceMaster, unless such delivery is waived by ServiceMaster,
the following:
(i) one or more executed original copies of this
Agreement;
(ii) one or more executed copies of the sublicense
and licenses to use certain Intellectual Property entered into
pursuant to Section 1.1(c);
(iii) Payment of the cash portion of
Consideration in accordance with Section 1.4(b);
(iv) Certified copies of resolutions adopted by
the Boards of Director of each of Daka, Inc., a Massachusetts
corporation and the general partner of DRLP ("Daka"), and DAKA
International, Inc., a Delaware corporation and the corporate
parent of Daka ("DAKA International") authorizing the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby
(v) Governmental certificate certifying that DRLP
is organized and in good standing in the State of Delaware;
<PAGE>
(vi) Governmental certificates certifying that
Daka is organized and in good standing in the Commonwealth of
Massachusetts;
(vii) Governmental certificates certifying that
DAKA International is organized and in good standing in the
State of Delaware; and
(viii) A certificate of the Clerk of Daka
attesting as to the incumbency of each officer who shall execute
the Agreement or any of the other documents on behalf of DRLP.
1.8 Determination and Payment of the DRLP Payoff
Obligation.
(a) Closing Procedures. At the close of
business on February 8, 1995 (the "Closing Time"), ServiceMaster
and DRLP will cause the personnel at each Dining Location to
make a physical count of the Inventory and Operating Cash on
hand at each Dining Location. In addition ServiceMaster and
DRLP will cause Arthur Andersen LLP to observe certain of these
physical counts as of the Closing Time .
(b) Unpaid Balance Components. The amount of each
of the following shall be determined in accordance with this
Section 1.8 as of the Closing Time:
(1) Operating Cash (as defined in Section 1.1(j)).
(2) Inventory.
(3) Accounts Receivable (without any allowance for
doubtful accounts).
(4) the amount of prepaid expenses relating to the
Business (the "Prepaid Expenses").
(5) the amounts paid to ServiceMaster prior to the
Closing Time for meal cards, meal plans, or other programs which
entitle a customer to food or services after the Closing Time
under the Dining Contracts and which would be shown as deferred
revenue on a balance sheet for the Business prepared as of the
Closing Time (the "Deferred Revenue").
(6) cash deposited with ServiceMaster by customers
under the Dining Contracts which DRLP will be obligated to
refund to customers under the obligations under the Dining
Contracts assumed by DRLP (herein called "Customer Deposits").
<PAGE>
(7) Unfunded Investments.
(8) the accrued amount of the obligation for budget
guarantees for Clients and any profit splits or profit caps
settled on an annual basis, if any (the "Accrued Budget
Guarantees").
The eight (8) items listed immediately above are
herein called the "Unpaid Balance Components." Each of the
Unpaid Balance Components shall be determined in accordance with
GAAP and to the extent consistent with GAAP, ServiceMaster's
past practices with respect to the Business (such principles and
practices are herein called the "Accounting Requirements").
(c) ServiceMaster's Determinations. ServiceMaster
shall in good faith make a determination of the amount of each
of the Unpaid Balance Components and the amounts so determined
are herein called "ServiceMaster's Determinations."
ServiceMaster shall deliver ServiceMaster's Determinations to
DRLP not later than the close of business on February 21, 1995.
In addition, ServiceMaster shall respond to such questions as
DRLP may have with respect to ServiceMaster's Determinations and
provide DRLP with access to the calculations and data on which
the ServiceMaster's Determinations are based and other
information available to ServiceMaster which DRLP may reasonably
deem relevant to verifying or checking ServiceMaster's
Determinations.
(d) Proposed Adjustments. From February 21, 1995
until March 31, 1995 each party may deliver to the other one or
more reports setting forth (i) every adjustment which such party
believes to be necessary to conform ServiceMaster's
Determinations to the Accounting Requirements, (ii) the amount
of such adjustment, and (iii) an explanation of the reasons such
party believes the adjustment is required by the Accounting
Requirements. In addition, each party shall have the right
until May 31, 1995 to provide the other with additional reports
setting forth (i) every additional adjustment which such party
believes to be necessary to conform ServiceMaster's
Determination of the Unfunded Investments to the Accounting
Requirements, (ii) the amount of such adjustment, and (iii) an
explanation of the reasons such party believes the adjustment is
required by the Accounting Requirements. All of the adjustments
proposed by either party in accordance with this paragraph shall
be deemed a "Proposed Adjustment" for purposes of this
Agreement. Any adjustment not identified in a written report
delivered to one party by the other by the date prescribed in
this paragraph shall not be considered or have any effect upon
the determination of any Unpaid Balance Component.
(e) Agreed Adjustments. The parties shall
negotiate in good faith to attempt to resolve each Proposed
Adjustment. The amount of each adjustment which the parties
shall agree in writing to make in response to each Proposed
Adjustment shall be deemed an "Agreed Adjustment." Every
Proposed Adjustment which shall not be resolved by an Agreed
Adjustment shall be deemed a "Disagreement."
<PAGE>
(f) Imposed Adjustments. Every Disagreement
remaining on June 1, 1995 shall be submitted on that date to
Price Waterhouse & Company's Chicago Office ("Price Waterhouse")
for resolution. The parties hereby agree that (except as
provided in Section 1.8(i)), Price Waterhouse shall have the
authority to determine every Disagreement and that Price
Waterhouse's assignment under this Agreement shall be to make
such determination by July 15, 1995. Each party shall provide
Price Waterhouse with such information available to such party
as Price Waterhouse shall reasonably request and shall provide
such cooperation and assistance as Price Waterhouse shall
reasonably request. In the event any party shall fail to
provide any information or to take any action reasonably
requested by Price Waterhouse by such time as Price Waterhouse
shall request, Price Waterhouse shall be entitled to resolve the
issue with respect to which such information or action was
requested adverse to the party failing to provide such
information or to take such action. Price Waterhouse's
determination as to every Disagreement shall be conclusive and
binding on the parties and every other person concerned. If for
any reason Price Waterhouse shall decline or fail to resolve any
Disagreement by July 15, 1995, then such Disagreement shall be
resolved by arbitration in accordance with Section 10.11, the
arbitrator shall have the same authority provided to Price
Waterhouse with respect to such Disagreement, and the
determination of the arbitrator with respect to such
Disagreement shall be conclusive and binding on the parties and
every other person concerned. Each of the two parties shall be
obligated to pay half the fees and expenses of Price Waterhouse
and the arbitrator under this subsection (f) and in no event
shall any party have any right to damages or compensation from
Price Waterhouse or any arbitrator because of any action or
failure to act by Price Waterhouse or such arbitrator. The
resolution of every Disagreement pursuant to this subsection (f)
shall be deemed an Imposed Adjustment.
(g) Payoff Amount. The "Payoff Amount" of every
Unpaid Balance Component shall be the amount of such Component
as determined by ServiceMaster pursuant to Section 1.8(c) as
adjusted by every Agreed Adjustment made prior to August 7, 1995
and every Imposed Adjustment made before August 7, 1995.
<PAGE>
(h) DRLP Payoff Obligation. The "DRLP Payoff
Obligation" shall be equal to the total of:
(A) the sum the Payoff Amount of the Accounts
Receivable, plus the Payoff Amount of Operating Cash, plus the
Payoff Amount of Inventory, plus the Payoff Amount of the
Prepaid Expenses, plus $164,561
minus
(B) the sum of the Payoff Amount of the Deferred
Revenues, plus the Payoff Amount of the Customer Deposits, plus
the Payoff Amount of the Unfunded Investments, plus the Payoff
Amount of Accrued Budget Guarantees.
(i) Special Rules For Unfunded Investments. To
the extent that any Disagreement shall result from a
disagreement between the parties as to the amount which DRLP
will be required to expend after the Closing Time for any
particular Required Investment, then (i) the procedures
prescribed in Section 1.8(f) shall not be used to resolve such
disagreement (and accordingly there shall be no Imposed
Adjustment of such Disagreement); and (ii) the Payoff Amount of
the component of the Unfunded Investments attributable thereto
shall be the amount determined by ServiceMaster pursuant to
Section 1.8(c). If the actual amount expended by DRLP for the
particular Required Investment shall exceed the amount of such
Investment estimated by ServiceMaster pursuant to Section
1.8(c), then ServiceMaster shall be obligated to reimburse DRLP
for such excess expenditures immediately after DRLP shall
request reimbursement for such excess expenditures. If on the
other hand the actual amount expended by DRLP for the particular
Required Investment shall be less than the amount of such
Investment estimated by ServiceMaster pursuant to Section
1.8(c), then upon completion of the expenditures for that
particular Investment, DRLP shall be obligated to pay
ServiceMaster (i) the amount of such shortfall plus (ii)
interest on such shortfall accrued at 200 basis points over
prime rate from August 7, 1995 to the time of such payment by
DRLP compounded quarterly as of the end of every calendar
quarter. In the event DRLP shall elect to expend more with
respect to any Required Investment than the amount required by
any Current or New Dining Contract as constituted at the Closing
Time, then such excess expenditures shall be ignored for
purposes of this subsection (i). Any disagreement between the
parties as to whether any obligation under a Contract
constitutes a Required Investment or whether any expenditure in
response to that obligation was required by that Contract as
constituted at the Closing Time shall be resolved in the manner
prescribed by Section 1.8(f).
(j) Bulletproof Obligation. DRLP shall be
absolutely and unconditionally obligated to convey to
ServiceMaster immediately available cash funds on August 7, 1995
in the full amount of the DRLP Payoff Obligation calculated as
prescribed in Section 1.8(h) and shall not be entitled to setoff
any claim of any kind which DRLP may have against ServiceMaster
or any of its affiliates or anyone else whether arising under or
by reason of this Agreement or for any other reason of any kind.
Without limiting by implication the generality of the forgoing,
DRLP shall be obligated to pay ServiceMaster on August 7, 1995
the full amount of the DRLP Payoff Obligation regardless of any
default by ServiceMaster under this agreement, any failure by
ServiceMaster to pay any amount owed under this Agreement
(including but not limited to any amount owed under Section 1.6,
Section 1.8(i) or Section 1.8(k)), any failure by ServiceMaster
to provide any reimbursement or indemnification payment to which
DRLP shall be entitled, and disagreement by the parties as to
any amount owed under this Agreement or any other wrongful
action by ServiceMaster or any of its affiliates or anyone else
of any kind whatsoever. In the event DRLP shall not pay the
entire DRLP Payoff Obligation on August 7, 1995 for any reason,
then in any proceeding instituted by ServiceMaster, no defense
by DRLP to its obligation to pay such amount whether by
counterclaim, affirmative defense, or new matter shall be
interposed or shall be of any force or effect, said defenses
being waived for the purposes of such proceeding. ServiceMaster
shall have the right to institute suit for collection of the
DRLP Payoff Obligation in any court and shall not be required to
institute any arbitration proceedings to obtain payment of the
DRLP Payoff Obligation. The foregoing notwithstanding, this
Section 1.8(j) shall not constitute or be deemed to be a waiver
of any rights of DRLP under this Agreement in any proceeding in
which the payment of the DRLP Payoff Obligation or DRLP's
obligation to pay the DRLP Payoff Obligation is not at issue.
With respect only to any non-payment of the DRLP Payoff Obligation by DRLP
under this Section 1.8, DRLP hereby consents to personal jurisdiction,
service of process and venue in the federal and state courts of Illinois
in which any claim under this Section 1.8 is brought by ServiceMaster.
<PAGE>
(k) Late Imposed Adjustments. In the event any
Imposed Adjustment shall be made after August 6, 1995 (a "Late
Imposed Adjustment"), then the party which shall owe money
because of such Imposed Adjustment shall pay the amount owed
promptly after being advised of such Imposed Adjustment. For
purposes of this Agreement, an Imposed Adjustment shall be
deemed "made" when the amount of such adjustment is finally
determined under the procedures prescribed in Section 1.8(f) or
when the parties agree in writing on such Adjustment.
(l) Default Adjustments. In the event that at any
time prior to August 7, 1995, the maturity of any obligation
for borrowed money in an amount in excess of $5 million owed by
DAKA International and/or its majority-owned subsidiaries shall
have been accelerated and have become due and payable then (i)
the Payoff Amounts of the Unpaid Components shall be determined
under Section 1.8(g) as of the date upon which such acceleration
occurs (the "Acceleration Date") rather than August 7, 1995;
(ii) the amount of the DRLP Payoff Obligation shall be
determined under Section 1.8(h) as of the Acceleration Date
rather than August 7, 1995; (iii) the DRLP Payoff Obligation as
so determined shall be immediately due and payable on the
Acceleration Date and the provisions of Section 1.8(j) shall
continue to apply with respect to such Obligation; (iv)
ServiceMaster shall not be obligated to make any payment under
Section 1.6, Section 1.8(i) or Section 1.8(k) after the
Acceleration Date; and (v) all other references to August 7,
1995 which appear in this Section 1.8 shall be deemed to refer
instead to the Acceleration Date.
1.9 Further Assurances. ServiceMaster from time to
time after the Closing at the request of DRLP and without
further consideration shall execute and deliver further
instruments of transfer and assignment and take such other
action as DRLP may reasonably require to more effectively
transfer and assign to, and vest in, DRLP each of the Subject
Assets, provided that DRLP shall reimburse ServiceMaster for all
reasonable out-of-pocket expenses incurred by ServiceMaster in
complying with such request.
<PAGE>
<Body Text> 1.10 Allocation of Consideration for Federal and
State Income Tax Purposes. DRLP and ServiceMaster agree that
(x) a portion of each of the Subject Assets shall be treated as
having been contributed to DRLP in exchange for the Partnership
Interest in a transaction governed by Section 721 of the
Internal Revenue Code of 1986, as amended (the "Code") and (y)
the remaining portion of each of the Subject Assets shall be
treated as having been sold to DRLP in a taxable transaction.
The portion of each of the Subject Assets sold in the taxable
transaction described in clause (y) of the first sentence of
this Section 1.10 shall be determined pursuant to the Treasury
Regulations promulgated under Section 707 of the Code. The
purchase price as determined for Federal income tax purposes of
the portion of the Subject Assets described in clause (y) of the
first sentence of this Section 1.10 shall be allocated among
such portion of the Subject Assets in accordance with the rules
of Section 1060 of the Code. Such allocation shall be completed
as soon as practicable after the Closing Date and DRLP and
ServiceMaster agree to cooperate in good faith to reach a
mutually acceptable allocation on reasonable terms. Each of
DRLP and ServiceMaster shall properly complete and file form
8594 on a timely basis with the Internal Revenue Service on a
basis that is consistent with the allocation referred to in the
preceding sentence.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF
SERVICEMASTER.
ServiceMaster hereby represents and warrants to
DRLP as of the Closing Date as follows:
2.1 Organization and Qualifications of
ServiceMaster. ServiceMaster is a limited partnership duly
organized, validly existing and in good standing under the laws
of the State of Delaware with full partnership power and
authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties
are owned or leased or such business is currently conducted.
ServiceMaster is not in violation of any term of its Certificate
of Limited Partnership or Limited Partnership Agreement, as
amended to the date hereof, or in violation of any term of any
agreement, instrument, judgment, decree or order that
individually or in the aggregate except where any such violation
would not have a Material Adverse Effect. With respect to the
Business, ServiceMaster is duly qualified to do business as a
foreign entity in the states listed on Schedule 2.1, and it is
not required to be licensed or qualified to conduct the Business
in any other jurisdiction, except where the failure to be so
qualified would not have a Material Adverse Effect.
<PAGE>
2.2 Authority of ServiceMaster.
(a) ServiceMaster has full right, authority and
power to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by ServiceMaster
pursuant to this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by
ServiceMaster of this Agreement and each such other agreement,
document and instrument have been duly authorized by all
necessary action of ServiceMaster and its managing general
partner and no other action on the part of ServiceMaster or its
managing general partner is required in connection therewith.
(b) Subject to Section 1.5 hereof, this Agreement
and each agreement, document and instrument executed and
delivered by ServiceMaster pursuant to this Agreement
constitutes, or when executed and delivered will constitute,
valid and binding obligations of ServiceMaster enforceable in
accordance with their terms.
2.3 Sufficiency of Subject Assets. Subject to the
provisions of Section 1.5 hereof, the Subject Assets include all
of ServiceMaster's right, title and interest in the assets,
properties and rights of every type and description, real,
personal and mixed, tangible and intangible, used to conduct the
Business in the manner in which the Business has been and is now
conducted, with the exception of the Excluded Assets.
Immediately after the Closing and subject to Section 1.5 hereof,
there shall be sufficient assets at each Dining Location to
perform each Dining Contract at the pertinent Dining Location as
performed by ServiceMaster in accordance with its usual and
customary practices except where the absence of any such assets
would not, individually or in the aggregate, have a Material
Adverse Effect.
2.4 Tangible Property.
(a) Real Property. ServiceMaster does not own
or lease any real property which is used or held by
ServiceMaster for use primarily in the Business.
(b) Leased Property. ServiceMaster does not lease
any Tangible Personal Property which is used or held by
ServiceMaster for use primarily in the Business other than the
Tangible Personal Property subject to the Leases listed on
Schedule 1.1(f), except for Tangible Personal Property involving
rental payments of less than $5,000 per lease per annum.
<PAGE>
(c) Tangible Personal Property and Inventory. To
ServiceMaster's Knowledge, ServiceMaster does not own or lease
any tangible personal property which is used or held by
ServiceMaster for use primarily in the Business other than the
Tangible Personal Property and any tangible personal property
included in the Excluded Assets. ServiceMaster has good and
marketable title to all of the Tangible Personal Property other
than the portion of that property which is leased or owned by
Clients or other parties not affiliated with ServiceMaster (the
"Owned Tangible Personal Property") and Inventory, and none of
the Owned Tangible Personal Property or Inventory is subject to
any mortgage, lien, conditional sale agreement, security
agreement, pledge, assignment, encumbrance or other charge
(collectively, "Liens"). The Tangible Personal Property (other
than Inventory) has been maintained in accordance with
ServiceMaster's usual and customary practices and is in good
state of repair and operating condition except where the failure
to be in such a state of repair or operating condition would
not, individually or in the aggregate, have a Material Adverse
Effect. All items included within the Inventory are of a
quality and quantity useable or salable in the ordinary course
of operation of the Business. Purchase commitments for
Inventory or other tangible personal property are not in excess
of normal requirements and none are to make a material amount of
purchases at prices materially in excess of current market
prices.
2.5 Intellectual Property.
(a) ServiceMaster has the rights to use the
Intellectual Property listed under the heading "Signature
Concepts and Other Trademarks and Trade Names" on Schedule
1.1(c) and the FMS Software in the operation of the Dining
Services Business in the manner in which it has been and is now
conducted.
(b) Subject to Section 1.5 hereof, to
ServiceMaster's Knowledge, ServiceMaster has the right and
authority to use the Intellectual Property listed under the
heading "Branded Concepts and Products" on Schedule 1.1(c) in
the operation of the Dining Services Business in the manner in
which it has been and is now conducted. All franchise
agreements with respect to the Intellectual Property listed
under the heading "Branded Concepts and Products" on Schedule
1.1(c) are in full force and effect, and to the Knowledge of
ServiceMaster (subject to Section 1.5), there is no material default
by any party thereto. To the Knowledge of ServiceMaster,
the other parties thereto had all requisite power and
authority to grant the rights purported to be conferred thereby.
(c) There are no claims or demands of any other
person pertaining to any of the Intellectual Property listed
under the heading "Signature Concepts and other Trademarks and
Trade Names" on Schedule 1.1(c) and the FMS Software and no
proceedings have been instituted or are pending or, to the
Knowledge of ServiceMaster, threatened which challenge the
rights of ServiceMaster in respect thereof.
<PAGE>
2.6 Contracts.
(a) Except for (i) the Current Dining Contracts
and New Dining Contracts listed on Schedule 1.1(d), (ii)
contracts with ServiceMaster's headquarters located at One
ServiceMaster Way, Downers Grove, Illinois, George Washington
University and Baptist Bible College, and (iii) contracts
associated with health care facilities, ServiceMaster is not a
party to or subject to, nor are the assets or properties of
ServiceMaster bound by or subject to, any contract, commitment
or agreement with respect to the maintenance of dining
operations at or the provision of dining services to any
college, university, school, academy, correctional institution
or business. With respect to the Dining Contracts, (i) the data
set forth in Schedule 1.1(d) (which excludes any Excluded
Assets) with respect to Managed Volume, Contribution and
Required Investments (both funded and unfunded) as of December
21, 1994, have been prepared in accordance with GAAP (except as
disclosed in Schedule 2.7(a)) applied on a contract-by-contract
basis, and have been fairly derived from ServiceMaster's books
and records with respect to the Business, which books and
records have been made available to DRLP and (ii) the data
regarding amounts budgeted for calendar year 1995 have been
prepared by ServiceMaster in the ordinary course of business in
accordance with ServiceMaster's historic practices. To
ServiceMaster's Knowledge, (i) ServiceMaster has made available
to DRLP prior to the date hereof complete and correct copies of
all Current Dining Contracts, together with all amendments,
supplements, schedules and other attachments or additions
thereto and, (ii) except for the provisions of such Dining
Contracts contained in documents so made available by
ServiceMaster to DRLP, ServiceMaster is not subject to or bound
by any agreement or arrangement with any Client which may,
individually or in the aggregate, have a Material Adverse
Effect. To ServiceMaster's Knowledge, Schedule 2.6(a) sets
forth a complete and correct list of all Current Dining
Contracts (i) which are the subject of bidding proceedings, (ii)
with respect to which the Client has given a notice of re-bid,
or (iii) which are due or scheduled to expire or terminate
within ninety (90) days after the date hereof.
(b) Schedule 2.6(b) lists all of the Other
Contracts to be assumed by Buyer under this Agreement except
contracts which may be terminated without penalty upon not more
than 30 days notice or under which the aggregate obligations to
be assumed by Buyer do not exceed $10,000 per contract.
(c) Each Current Dining Contract with respect to
which Schedule 1.1(d) sets forth historical or budgeted
information regarding Managed Volume and Contribution (i) is in
full force and effect and is a valid and binding agreement of
ServiceMaster, enforceable against ServiceMaster in accordance
with its terms, and ServiceMaster is not in breach of or default
under any such Contract, except for any such breach or default
which, individually or in the aggregate, would not have a
Material Adverse Effect, provided that any Client claims or
counterclaims for non-performance of ServiceMaster (other than
such claims or counterclaims arising out of the bases for
failure to pay set forth in clauses (i), (ii) and (iii) of
Section 1.3(b)) shall not constitute a breach of this
representation and warranty to the extent that such claims or
counterclaims result in a setoff against or other failure to pay
an Account Receivable (or any amount billed by DRLP to the
respective Client) in which case DRLP's rights shall be limited
to those provided in Section 1.6 hereof; (ii) to ServiceMaster's
Knowledge, each such Contract is a valid and binding agreement
of the other parties thereto; and (iii) except as set forth on
Schedule 2.6(c), ServiceMaster is not restricted by any Contract
from carrying on the Business anywhere in the world.
<PAGE>
(d) ServiceMaster has not received formal written
notice from any Client that such Client plans or intends to
terminate or to cancel its relationship with DRLP following the
Closing or that any Client will not permit any automatic renewal
provision of any Contract to take effect.
2.7 Financial Information.
(a) The profit and loss statements for each
Dining Location for the twelve months ended December 21, 1994
from which the information set forth in Schedule 1.1(d) was
derived (i) have been previously delivered to DRLP by
ServiceMaster, (ii) agreed with the books and records of
ServiceMaster with respect to the Dining Services Business, and
(iii) were prepared in accordance with GAAP (except as disclosed
in Schedule 2.7(a)) on a contract by contract basis and applied
consistently during the periods covered thereby. Schedule
2.7(b) is a copy of the profit and loss statements for the
Design Business for the twelve months ended December 21, 1994
which profit and loss statements (i) agreed with the books and
records of ServiceMaster with respect to the Design Business,
and (ii) were prepared in accordance with GAAP (except as
disclosed in Schedule 2.7(a) applied consistently during the
periods covered thereby. The fixed assets records as of
December 21, 1994 set forth in Schedule 1.1(a) with respect to
each Dining Location (i) agreed with the books and records of
ServiceMaster with respect to the Dining Services Business and
(ii) were prepared in accordance with GAAP (except as disclosed
in Schedule 2.7(a)) on a contract by contract basis and applied
consistently during the periods covered thereby. All budgets
relating to the 1995 fiscal year delivered to DRLP with respect
to the Dining Services Business for each Dining Location from
which the information in Schedule 1.1(d) was derived and with
respect to the Design Business and have been prepared by
ServiceMaster for each Dining Location and the Design Business
respectively, in the ordinary course of business in accordance
with ServiceMaster's historic practices.
(b) All of the Accounts Receivable existing as of
the Closing Date are valid and enforceable claims; provided that
any Client claims or counterclaims for non-performance of
ServiceMaster (other than such claims or counterclaims for which
DRLP is entitled to indemnification under the last sentence of
Section 1.3(b)) shall not constitute a breach of this
representation and warranty to the extent that such claims or
counterclaims result in a setoff against or other failure to pay
an Account Receivable (or any amount billed by DRLP to the
respective Client) in which case DRLP's rights shall be limited
to those provided in Section 1.6 hereof.
2.8 Absence of Certain Changes. Except as disclosed
on Schedule 2.8 or the other Schedules to this Agreement, since
December 21, 1994, there has not been any change in the Business
which, individually or in the aggregate would have a Material
Adverse Effect.
2.9 Suppliers. To the Knowledge of ServiceMaster,
Schedule 2.9 is a true and complete list of the material
suppliers of ServiceMaster relating to the Business during
calendar year 1994. To ServiceMaster's Knowledge, ServiceMaster
has not received any written notice from any material supplier
stating that such supplier has any plan or intention to
terminate or reduce its business with ServiceMaster or to
otherwise modify its relationship with ServiceMaster in a manner
which ServiceMaster reasonably expects to have a Material
Adverse Effect. For purposes of this Section 2.9, a supplier
shall be deemed material if it provided at least $100,000 in
supplies to the Business during calendar year 1994.
<PAGE>
2.10 Litigation. Except as described on Schedule
2.10, (i) there is no litigation or other proceedings pending
or, to the Knowledge of ServiceMaster, threatened against
ServiceMaster and arising out of the conduct of the Business
(other than worker's compensation claims) which ServiceMaster
reasonably believes could have a Material Adverse Effect, (ii)
to the Knowledge of ServiceMaster, there is no basis for any
such litigation or other proceeding which ServiceMaster
reasonably believes could have a Material Adverse Effect; and
(iii) there are no existing or, to the Knowledge of
ServiceMaster, impending, orders, judgments or decrees of any
court or governmental agency naming ServiceMaster which will
have a Material Adverse Effect.
2.11 Compliance with Laws. ServiceMaster does not
have Knowledge (i) that the Business is not in compliance with
any statutes, ordinances, orders, rules and regulations
promulgated by any federal, state, municipal or other
governmental authority which apply to the conduct of the
Business except for routine interactions in the ordinary course
of business with governmental authorities arising out of
inspections of the Business' operations or (ii) that
ServiceMaster has received written notice from any governmental
authority of any failure to comply with any such statutes,
ordinances, orders, rules or regulations.
2.12 Finder's Fee. ServiceMaster has not incurred
or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated
by this Agreement.
2.13 Permits. To ServiceMaster's Knowledge,
ServiceMaster has obtained all Permits or other approvals from
governmental authorities necessary for ServiceMaster to operate
the Business as it was conducted immediately prior to the
Closing.
<PAGE>
2.14 Employee Benefit Programs.
(a) Schedule 2.14 sets forth a list of the
material Employee Programs maintained or contributed to by
ServiceMaster as of the Closing with respect to the persons
employed by ServiceMaster in connection with the Business (such
Employee Programs are referred to herein as the "Subject
Employee Programs"). For purposes of this section, "Employee
Program" means (A) all employee benefit plans within the meaning
of ERISA Section 3(3) including, but not limited to, all pension
and profit sharing plans and all Multiemployer Plans and (B) all
stock or cash option plans, restricted stock plans, bonus or
incentive award plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above,
and "Multiemployer Plan" means a pension benefit plan to which
more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
Information with respect to all Subject Employee Programs have been made
available to DRLP.
(b) ServiceMaster does not know, and has no reason
to know, of any failure of any party to comply with any laws
applicable to the Subject Employee Programs except where such
failure would not have a Material Adverse Effect. With respect
to any Subject Employee Program ever maintained by
ServiceMaster, there has occurred no "prohibited transaction,"
as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Code, or breach of any duty under ERISA or other applicable
law (including, without limitation, any health care continuation
requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could
result, directly or indirectly, in any taxes, penalties or other
liability to DRLP.
(c) ServiceMaster has not incurred any liability to
the PBGC, the Internal Revenue Service, or any Multiemployer
Plan with respect to any employee pension benefit plan or with
respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of
companies (as defined in Section 302(d)(8)(C) of ERISA) that
includes ServiceMaster (the "Controlled Group") that has not
been satisfied in full, and no condition exists that presents a
material risk to ServiceMaster or any member of the Controlled
Group of incurring such a liability, other than liability for
premiums due the PBGC. All payments and/or contributions
required to have been made with respect to all Multiemployer
Plans maintained by the Controlled Group, for all periods prior
to the Closing, have been made. With respect to any Subject Employee
Program, there has been no (nor will be any as a result of the
transaction contemplated by this Agreement) event or condition
that may cause the Controlled Group or DRLP to incur a liability
or have a lien imposed on its assets under the Code, ERISA or
any other applicable statute.
<PAGE>
2.15 Labor Matters.
(a) Schedule 2.15(a)(i) sets forth a complete
and accurate list of the names of all persons who are employed
by ServiceMaster in the operation of the Business, job titles,
the current annual salary, original date of hire and any
employment agreements with such person which are not terminable
at will without liability to DRLP. True and complete copies of
sample employee handbooks, policy memoranda and procedure
manuals or similar documents applicable to any such employees
have been made available by ServiceMaster to DRLP. Except as
disclosed on Schedule 2.15(a)(ii), ServiceMaster is not a party
to any collective bargaining agreement covering employees
utilized in the Business. None of the collective bargaining
agreements listed on Schedule 2.15(a)(ii) are material to the
operation of Business.
(b) Except as disclosed on Schedule 2.15(b):
(i) No person employed by ServiceMaster in the
operation of the business with the title of field food service
director, general manager, customer service team leader,
director of operations (or any similar title) or higher has
given notice to ServiceMaster of an intention to cancel or
otherwise terminate the employment relationship with
ServiceMaster.
(ii) There are neither pending nor, to the
Knowledge of ServiceMaster threatened, any labor strikes,
disputes, slow downs, stoppages, suits, actions, administrative
proceedings, union organizing activities, arbitrations, material
grievances or other labor-related proceedings against or
affecting the Business.
(iii) In the operation of the Business,
ServiceMaster has complied with all contractual and federal,
state and local laws, rules and regulations relating to the
employment of labor, including, without limitation, the
Immigration Reform Control Act of 1986, as amended, and those
relating to wages, hours, collective bargaining, affirmative
action, discrimination, sexual harassment, wrongful discharge
and the withholding and payment of taxes and contributions,
except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect.
ServiceMaster has withheld all amounts required by law or
agreement to be withheld from the wages or salaries of its
employees.
<PAGE>
2.16 Environmental Matters. To ServiceMaster's
Knowledge and except for matters which ServiceMaster reasonably
believes would not have a Material Adverse Effect:
(a) ServiceMaster has no liability under, has never
been in violation and is not now in violation of any
Environmental Law (as defined below) arising from or relating to
any activity engaged in primarily in connection with the
Business. ServiceMaster, any Site and any facilities and
operations thereon are presently in compliance in all material
respects with all applicable Environmental Laws. With respect to
any Site or any activity engaged in primarily in connection with
the Business, ServiceMaster has never entered into or been
subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health
and safety matter or received any request for information,
notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental
Law. ServiceMaster has not received any notice that any of the
items enumerated in the preceding sentence will be forthcoming.
(b) No Site contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls
("PCBs") or equipment containing PCBs, or any urea formaldehyde
foam insulation with respect to which ServiceMaster has an
obligation (i) to remove or to provide for the removal of any of
the foregoing under any Dining Contract or (ii) to provide
services other than construction management or supervisory
services under any contract entered into in connection with the
Design Business.
(c) For purposes of this Section 2.16, (i)
"Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or by-law at
the foreign, federal, state, or local level, whether existing as
of the date hereof, previously enforced, or subsequently
enacted; and (ii) "ServiceMaster" shall mean and include
ServiceMaster, its predecessors and all other entities for whose
conduct ServiceMaster is or may be held responsible under any
Environmental Law.
<PAGE>
SECTION 3. COVENANTS OF SERVICEMASTER.
ServiceMaster hereby covenants and agrees as
follows:
3.1 Preparation of Audited Financial Statements.
ServiceMaster acknowledges that (i) DAKA International is
obligated to file periodic and other reports pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the rules and regulations of the Securities and Exchange
Commission thereunder (the "Rules") and (ii) pursuant to the Act
and the Rules, DAKA International is required to include in such
reports audited financial statements with respect to the
Business and the Subject Assets consisting of audited balance
sheets as of the end of each of the two most recent fiscal years
and audited statements of income and cash flows for each of the
three most recent fiscal years. Insofar as ServiceMaster does
not have audited financial statements with respect to the
Business and the Subject Assets, DAKA International will be
required to have such audited financial statements prepared and
certified by its independent public accountants after the
Closing. ServiceMaster shall cooperate fully with all
reasonable requests of DAKA International and its auditors in
connection with the preparation of such audited financial
statements and hereby consents to the use and disclosure by DAKA
International of such audited financial statements (and any
unaudited financial statements for periods since the end of the
last fiscal year of ServiceMaster) in reports to be filed by
DAKA International under the Act and the Rules. In particular,
after the Closing, and upon reasonable notice, ServiceMaster
will give, or cause to be given, to the representatives,
employees, counsel and accountants of DAKA International access,
during normal business hours, to all books, records, documents
and files of ServiceMaster with respect to the Business and the
Subject Assets ("Records") relating to periods prior to the
Closing, and will permit such persons to examine and copy such
Records to the extent reasonably requested by DAKA International
in connection with the preparation of audited or unaudited
financial statements, as well as in connection with audits,
legal proceedings or other legitimate business purposes of DAKA
International; provided, however, that nothing herein will
obligate ServiceMaster to take actions that would unreasonably
disrupt the normal course of its business or violate the terms
of any law or any contract to which it is a party or to which it
or any of its assets is subject or to waive rights in connection
with claims against ServiceMaster.
3.2 Non-Competition and Non-Solicitation.
ServiceMaster agrees that for five (5) years after the Closing
Date, it will not, without the prior written consent of DRLP,
directly or indirectly, engage or participate in, be employed by
or assist in any manner or in any capacity, or have any interest
in or make any loan to any person, firm, corporation or business
which engages (i) in the business of or makes one or more bid or
proposal for the maintenance of dining operations or the
provision food service or other dining operations to any entity
identified on Schedule 1.1(d) hereto or (ii) the provision of
construction management services in the food service industry
(except as engaged in as of the Closing Date by ServiceMaster
exclusively in its healthcare services business) or (iii) those
activities to be conducted at and on behalf of George Washington
University; provided, however, that no provision set forth
herein shall prohibit ServiceMaster from being a passive owner
of, in the aggregate, less than 5% of the outstanding capital
stock, or other equity interest, of any class of a corporation
or other entity which is publicly traded so long as neither
ServiceMaster, nor any other party controlling, controlled by or
under common control with ServiceMaster has any active
participation in the management of such entity. In addition,
during such five year period, ServiceMaster shall refrain from
soliciting or encouraging any employee of DRLP to terminate his
or her employment by DRLP and to become employed by
ServiceMaster, or any business or entity with which it is
affiliated as an owner, investor, lender or in any other
capacity.
<PAGE>
3.3 Option to Purchase Manufacturing Business.
ServiceMaster hereby covenants and agrees that at any time on or
prior to the 45th day after the Closing DRLP shall have the
option (the "Option") to purchase all of ServiceMaster's right,
title and interest in the assets primarily used or held for use
in the Manufacturing Business (the "Manufacturing Assets") at a
purchase price of $150,000 payable to ServiceMaster in cash
immediately upon consummation of that acquisition. The
Manufacturing Assets shall include, without limitation, all of
ServiceMaster's right, title and interest in all tangible
personal property, inventory, contracts, leasehold interests of
real or personal property, and other assets owned or held
primarily in connection with the Manufacturing Business.
ServiceMaster further covenants and agrees that the terms,
conditions, representations and warranties of any agreement
pursuant to which any such purchase may be consummated shall be
substantially similar to the terms, conditions, representations
and warranties set forth in this Agreement.
3.4 Delivery of Books and Records. ServiceMaster
hereby covenants and agrees that, promptly upon receipt of a
written request from DRLP, ServiceMaster shall deliver all Books
and Records to DRLP at the address set forth in such request.
The parties acknowledge and agree that, any Books and Records
located at any Dining Location shall be deemed to have been
delivered if such Books and Records are left by ServiceMaster at
such location.
3.5 Food Services Supplies. ServiceMaster hereby
covenants and agrees for a period of six (6) months after the
Closing Date to sell to DRLP such paper goods, consumables and
other products bearing those trade marks, service marks and
logos licensed to DRLP pursuant to the licenses granted by ServiceMaster
pursuant to Section 1.1(c) hereof in such quantities as are necessary to
conduct the Business substantially as the Business was conducted
immediately prior to the Closing upon the same terms and
conditions as such goods are supplied to the operators of Dining
Locations immediately prior to the Closing.
3.6 Instruments of Transfer. Without in any way
limiting Section 1.9 above, ServiceMaster hereby covenants and
agrees that upon request by DRLP it shall execute a bill of sale
(the "Bill of Sale") vesting in DRLP all of ServiceMaster's
right, title and interest in the Subject Assets and an
assignment and assumption agreement (the "Assignment and
Assumption Agreement") assigning all of ServiceMaster's rights
under the Contracts, New Dining Contracts and Open Bids to DRLP;
provided that the provisions of the Bill of Sale and the
Assignment and Assumption Agreement shall not alter, amend, or
modify the terms and conditions of this Agreement, shall not
convey to DRLP any property or right beyond those to which DRLP
is entitled under the provisions of this Agreement other than
this Section 3.6 or subject ServiceMaster to any liability or
obligation for which ServiceMaster is to be responsible under
the provisions of this Agreement other than this Section 3.6.
DRLP shall be responsible for initiating the process
contemplated by this Section 3.6 and ServiceMaster shall not be
responsible for signing any instrument contemplated by this
Section 3.6 until and unless DRLP shall provide ServiceMaster
with the form of such instrument proposed by DRLP.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
DRLP.
DRLP hereby represents and warrants to
ServiceMaster as follows:
4.1 Organization of DRLP; Absence of Operating
History. DRLP is a limited partnership, validly existing under
the laws of the State of Delaware with full partnership power to
own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or
leased or such business is conducted by it. DRLP was formed on
February 7, 1995 and, therefore has no operating history. DRLP
has no liabilities or obligations except those arising in
connection with the transactions contemplated hereby.
4.2 Authority of DRLP.
(a) DRLP has full right, authority and power to
enter into this Agreement and each agreement, document and
instrument to be executed and delivered by DRLP pursuant to this
Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance by DRLP of this
Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary partnership action of
DRLP and no other action on the part of DRLP is required in
connection therewith. This Agreement and each other agreement,
document and instrument executed and delivered by DRLP pursuant
to this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of DRLP
enforceable in accordance with their terms.
(b) The execution, delivery and performance by DRLP
of this Agreement and each such agreement, document and
instrument:
(i) does not and will not violate any provision of
the Agreement of Limited Partnership of DRLP;
(ii) does not and will not violate any laws of the
United States or any state or any other jurisdiction applicable
to DRLP or require DRLP to obtain any approval, consent or
waiver of, or make any filing with, any person or entity
(governmental or otherwise) which has not been obtained or made;
and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or
give rise to a right of termination of any indenture, loan or
credit agreement, or any other agreement, mortgage, lease,
permit, order, judgment or decree to which DRLP is a party.
<PAGE>
4.3 Litigation. There is no litigation or
governmental or administrative proceeding or investigation
pending or, to its knowledge, threatened against DRLP or the
general partner of the DRLP which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.4 Finder's Fee. Except as set forth on Schedule
4.4 hereto, DRLP has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection
with the transactions contemplated by this Agreement.
SECTION 5. COVENANTS OF DRLP.
DRLP hereby represents and agrees as follows:
5.1 DRLP's Non-Solicitation. DRLP agrees that
for a period of five (5) years after the Closing Date, DRLP
shall refrain from soliciting or encouraging any employee of
ServiceMaster to terminate his or her employment with
ServiceMaster and to become employed by DRLP or any business or
entity with which it is affiliated as an owner, investor, lender
or in any other capacity.
5.2 Option to Purchase Manufacturing Business. DRLP
hereby covenants and agrees that, in the event that DRLP
exercises the Option to purchase the Manufacturing Assets, the
terms, conditions, representations and warranties of any
agreement pursuant to which such purchase may be consummated
shall be substantially similar to the terms, conditions,
representations and warranties set forth herein.
5.3 Security Deposit Reimbursement. DRLP hereby
covenants and agrees that, to the extent any of the Subject
Assets are comprised of security deposits made with respect to
leased Tangible Personal Property (the "Security Deposits"),
upon the termination of each such lease the corresponding
Security Deposit shall be paid to ServiceMaster within five (5)
days of receipt of such Security Deposit from the applicable
lessor.
5.4 Services. During the period ending December 31,
1995, DRLP shall purchase from ServiceMaster cleaning supplies,
cleaning services and pest control services; provided that DRLP
shall have no obligation to purchase any of the foregoing from
ServiceMaster to the extent that DRLP is bound on the date hereof by any
contract, commitment or agreement to purchase such supplies or
services from any third party contractor and to the extent that
ServiceMaster does not offer DRLP such supplies and services at prices
competitive with those offered to DRLP by vendors from which
Daka purchases such supplies and services.
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF
DAKA INTERNATIONAL.
DAKA International hereby represents and
warrants to ServiceMaster as follows:
6.1 Organization of DAKA International. DAKA
International is a corporation, validly existing and in good
standing under the laws of the State of Delaware with full
corporate power to own or lease its properties and to conduct
its business in the manner and in the places where such
properties are owned or leased or such business is conducted by
it.
6.2 Authority of DAKA International.
(a) DAKA International has full right,
authority and power to enter into this Agreement (with respect
to certain provisions hereof including, but not limited to,
Section 10.3) and to execute, deliver and perform all of DAKA
International's obligations under this Agreement and each other
agreement, document and instrument to be executed and delivered
by DAKA International pursuant to this Agreement and to carry
out the transactions contemplated hereby. The execution,
delivery and performance by DAKA International of this Agreement
and each other agreement, document and instrument have been duly
authorized by all necessary corporate action of DAKA
International and no other action on the part of DAKA
International is required in connection therewith. This
Agreement (with respect to certain provisions hereof) executed
and delivered by DAKA International pursuant to this Agreement
constitute valid and binding obligations of DAKA International
enforceable in accordance with their terms.
(b) The execution, delivery and performance by DAKA
International of this Agreement (with respect to certain
provisions hereof):
(i) does not and will not violate any provision of
the Certificate of Incorporation, as amended to the date hereof,
of DAKA International;
(ii) does not and will not violate any laws of the
United States or any state or any other jurisdiction applicable
to DAKA International or require DAKA International to obtain
any approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) which has not been
obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or
give rise to a right of termination of any indenture, loan or
credit agreement, or any other agreement, mortgage, lease,
permit, order, judgment or decree to which DAKA International is
a party.
<PAGE>
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO
CLOSING.
7.1 Survival of Warranties. All
representations, warranties, agreements, covenants and
obligations herein shall survive the Closing regardless of any
investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such
representations, warranties, agreements, covenants and
obligations shall expire on the same dates as and to the extent
that the rights to indemnification with respect thereto under
Section 8 shall expire. Each of the parties hereby acknowledges
and agrees that the representations and warranties by every other
party expressly set forth herein constitute all of the representations
and warranties made by such other party hereunder and no further
representations and warranties are implied or may be inferred.
7.2 Employment Matters.
(a) Transfer of Employees. Substantially all
employees of the Business (including employees of the Business
on sick leave and vacation) shall be offered employment by DRLP
which offers shall be for wages or salaries which are reasonably
similar to such employees' wages or salaries immediately prior
to the Closing. All such persons who become employees of DRLP
shall be referred to herein as "DRLP Employees." Except to the
extent prohibited by an applicable collective bargaining
agreement, effective as of the Closing, the DRLP Employees will
be offered the opportunity to participate under the employee
benefit plans, programs and policies established by DRLP to the
extent provided for under the terms of such employee benefit
plans, programs and policies. Except as may be otherwise
required by an applicable collective bargaining agreement, the
employee benefit plans and programs established by DRLP shall
credit the DRLP Employees covered thereby with all service with
ServiceMaster (or any predecessor or affiliated employers) to
the extent such service recognized by ServiceMaster prior to the
Closing for all purposes under such employee plans to the same
extent as if such service were service with DRLP, and in the
case of any group medical or dental insurance or other health
care plan, DRLP Employees shall be covered under such plan
without regard to any pre-existing condition restrictions, but
only to the extent such condition did not also apply under
ServiceMaster's health care plan, and with credit for payments
made during the current plan year as to annual maximum
out-of-pocket, co-payments and deductibles. Effective as of the
Closing, the DRLP Employees shall cease to be covered under the
Employee Programs (as defined in Section 2.14) maintained by
ServiceMaster. DRLP shall indemnify and hold ServiceMaster
harmless against any and all claims, losses, expenses,
liabilities and other obligations, including legal fees, which
arise out of or result from actions taken by DRLP on or after
the Closing with respect to the terms and conditions of DRLP's
employment of the DRLP Employees.
(b) ServiceMaster will provide DRLP, in a timely
manner, any information with respect to any Employee's
employment with and compensation from ServiceMaster or rights or
benefits under any employee benefit plan of ServiceMaster which
DRLP may reasonably request. ServiceMaster agrees to fully
cooperate with DRLP in connection with any offer by DRLP or any
affiliate of DRLP to hire after the Closing any person formerly
employed by ServiceMaster in the operation of the Business and
will not take any action, directly or indirectly, to prevent any
such person from becoming employed by DRLP or any affiliate of
DRLP from and after the Closing.
(c) ServiceMaster acknowledges and agrees that DRLP
shall not acquire any rights or interest in, or assume or have
any obligations or liabilities under, any employment contracts
or agreements between ServiceMaster and Employees.
(d) Except as described in Section 7.3(c),
ServiceMaster acknowledges and agrees that DRLP shall not
acquire any rights or interests of ServiceMaster in, or assume
or have any obligations or liabilities of ServiceMaster under,
ServiceMaster's Employee Programs.
<PAGE>
7.3 Employee Benefit Matters.
(a) DRLP's Medical Plan. Effective as of the
Closing, DRLP shall adopt and make available to those DRLP
Employees (as defined in Section 7.2) who were covered by the
medical and dental plans of ServiceMaster immediately prior to
the Closing, a medical plan and dental plan (the "Interim
Plans") which are substantially similar to the medical plan and
dental plan maintained by ServiceMaster for such employees
immediately prior to the Closing but with such modifications, if
any, which the DRLP deems appropriate. DRLP shall make the
Interim Plans available to the DRLP Employees through June 30,
1995 or such earlier date as may be determined by DRLP in its
sole discretion (the "Transition Period"). During the
Transition Period, ServiceMaster shall administer the Interim
Plans on behalf of DRLP in accordance with their terms (provided
the modifications made to the Interim Plan can be reasonably
administered by ServiceMaster) using due care and diligence in
doing so and in any event will exercise at least as much due
care and diligence as ServiceMaster exercises in administering
its own medical plan and dental plan. Upon the expiration of
the Transition Period, DRLP shall provide such medical and/or
dental coverage to the DRLP Employees as it deems proper. DRLP
shall be responsible for, and shall pay, all costs related to
the Interim Plans, including all actual cost of claims, fees
owed to third party administrators, vendors for administrative
services, and any stop-loss insurance, as required by law or
under the terms of the plans, and the reasonable costs of
ServiceMaster incurred with respect to its administration of the
Interim Plans. Except as otherwise provided, the current
elections made by the DRLP Employees prior to the Closing with
respect to the medical and dental plan shall continue in effect
and apply to the Interim Plans. DRLP agrees to enter into
agreements with ServiceMaster, vendors and third party
administrators to the extent necessary to provide all of the
services related to the continued administration of the Interim
Plans.
(b) Defined Contribution Plan. With respect to the
ServiceMaster defined contribution plans in which the DRLP
Employees participate (the"Savings Plan"), except as otherwise
provided, ServiceMaster agrees that it shall be solely
responsible to DRLP Employees with respect to benefits accrued
thereunder as of the Closing. ServiceMaster shall contribute to
the Savings Plans, in accordance with the terms of said plans,
all amounts attributable to Employees which are owed to or under
the plans as of the Closing. DRLP Employees will be entitled to
a distribution of their account balance in the Savings Plans in
accordance with the terms of the plans.
(c) Section 125 Plan. As of the Closing,
ServiceMaster shall cause the credits and debits of the accounts
of the DRLP Employees under its Section 125 Flexible Spending
Account plan to be segregated into an identical separate Section
125 Plan to be maintained and continued by DRLP as of the
Closing and the DRLP Employees shall cease participation in
ServiceMaster's Section 125 Plan as of the Closing. The Section
125 Plan to be maintained by DRLP shall give full effect to, and
continue in effect, salary reduction elections made under
ServiceMaster's 125 plan. ServiceMaster will continue to
administer the plan established by DRLP after the Closing
through the Transition Period and DRLP hereby agrees to
reimburse ServiceMaster for any and all reasonable expenses
related thereto. During the Transition Period, ServiceMaster
shall administer DRLP's Section 125 Plan on behalf of DRLP in
accordance with its terms using due care and diligence in doing
so and in any event will exercise at least as much due care and
diligence as ServiceMaster exercises in administering its own
Section 125 Plan.
(d) DRLP will not be obligated on or after the
Closing to retain in effect or establish any medical plan,
disability plan or other benefit program, plan, or arrangement
presently or heretofore available to employees except as
specifically provided in this Agreement or as required by
federal or state law.
(e) As soon as practicable after the Closing, DRLP
shall receive from the Seller such pertinent data or information
as the DRLP may reasonably require to determine the DRLP
Employees' service with ServiceMaster as of the Closing. DRLP
and ServiceMaster agree to take all such actions as required to
effectuate a smooth transition of coverage for DRLP Employees as
of the Closing.
<PAGE>
(f) ServiceMaster shall retain the liability for
all other claims which are incurred under any other benefit plan
maintained by ServiceMaster prior to the Closing and DRLP shall
have no responsibility or liability for the payment of such
benefits. More specifically, ServiceMaster shall retain
liability for (i) all benefits of any kind for former or current
employees of ServiceMaster and who are not DRLP Employees and
their dependents, spouses and beneficiaries; (ii) incurred but
unpaid life insurance claims; (iii) long term disability claims
made prior to Closing and not yet paid; (iv) medical and dental
claims incurred before the Closing and not yet reported or
claims made and not yet paid; (v) medical coverage (to the
extent provided) for individuals disabled as of the Closing who
are not DRLP Employees; (vi) benefits to all individuals
entitled to benefits required to be provided by the continuation
health care coverage requirements of Section 4980B of the Code
and Sections 601 through 607 of ERISA as of the Closing; and
(viii) continuation of benefit coverage for surviving spouses of
employees (to the extent provided) who die prior to the Closing.
DRLP shall be liable for all such claims incurred under any
employee benefit plan maintained by it with respect to any DRLP
Employee.
(g) ServiceMaster and DRLP agree to share equally
in any severance obligation which becomes payable to any DRLP
Employee on or before December 31, 1995 which is payable solely
because of the person's employment with ServiceMaster and the
person's terms and conditions of employment with ServiceMaster
prior to the Closing.
7.4 Accounting, Payroll and Data Processing
Services.
(a) Services To Be Provided. For a period of
six months following the Closing (or until earlier discontinued
by DRLP as provided below), ServiceMaster shall perform and
provide to DRLP all of DRLP's requirements for accounting,
payroll, data processing and related services consistent in all
material respects with ServiceMaster's practices in the ordinary
course of business as of the Closing Date with respect to the
operation of the Business by DRLP after the date hereof (the
"Services"). The Services shall be provided by ServiceMaster to
DRLP in a manner consistent with, and to the same extent as,
ServiceMaster's performance of such services with respect to the
Business prior to the date of this Agreement, and shall meet the
same levels of performance as were being achieved by
ServiceMaster in its performance of such services prior to the
date of this Agreement (or such higher level of performance of
such services as ServiceMaster may achieve generally after the
date hereof with respect to comparable businesses of
ServiceMaster). However, ServiceMaster shall have no obligation
hereunder to make available to DRLP in connection with the
Services any addition, improvement, enhancement, upgrade or
modification made by ServiceMaster after the date of this
Agreement with respect to its payroll, accounting, data
processing and related services and systems used in connection
with comparable businesses of ServiceMaster. ServiceMaster
agrees to perform the Services in a commercially reasonable
manner, using due care and diligence in executing its
obligations hereunder, and in any event will exercise at least
as much care and diligence providing Services to DRLP as
ServiceMaster exercises in providing such services with respect
to comparable businesses of ServiceMaster. ServiceMaster will
perform the Services for the benefit of and in furtherance of
the interests of DRLP and will act as the agent of DRLP with
respect to the aspects of the Business over which ServiceMaster
will have control hereunder. ServiceMaster shall provide
reasonable training and support to employees of DRLP sufficient
to familiarize such employees with the Services.
(b) Costs of Services. DRLP shall pay
ServiceMaster for the performance of the Services, on the first
day of each month in arrears for the previous month, the amount
of $35,000 which shall be prorated for any partial months.
DRLP may discontinue its agreement with ServiceMaster with
respect to the Services at any time upon twenty-one (21) days
notice to ServiceMaster. Additional costs that will be charged
DRLP with respect to Dining Contracts are detailed in Schedule
7.4(b), provided that DRLP may terminate the services referred
to therein upon notice to ServiceMaster.
(c) Data Provided. All data furnished by DRLP to
ServiceMaster in connection with ServiceMaster's performance of
the Services, and all data derived therefrom, shall be and
remain the property of DRLP. Such data shall not be used by
ServiceMaster, and ServiceMaster shall not permit such data to
be used by any third party, for any purpose other than
performing Services on behalf of DRLP hereunder. All such data
will be received by ServiceMaster in confidence and shall not be
disclosed by ServiceMaster or any of its employees or agents to
any third party without the prior written consent of DRLP.
ServiceMaster shall allow DRLP reasonable access to
ServiceMaster's facilities and to DRLP's data in the possession
of ServiceMaster.
(d) Discontinuation of Services. Upon the
discontinuation of Services hereunder, ServiceMaster will
reasonably assist DRLP with an orderly transfer to another data
processing system operated by DRLP or a third party selected by
DRLP, and will provide to DRLP copies of all of DRLP's data
maintained by ServiceMaster hereunder in such form or format
(including computer readable form or format if the same exists
in such form) as DRLP may reasonably request, provided that
DRLP shall reimburse ServiceMaster for the cost of preparing
such copies if DRLP requests that such copies be prepared in a
form or format that may not be prepared by ServiceMaster without
incurring additional expense. Upon delivery by ServiceMaster to
DRLP of all such copies requested by DRLP, ServiceMaster shall
purge all of DRLP's data from ServiceMaster's computer systems
and programs and destroy all copies thereof in the
ServiceMaster's possession.
7.5 Design Business. DRLP hereby agrees to provide
the services of the Design Business to ServiceMaster to support
ServiceMaster's Healthcare Food Service and Long Term Care
businesses on terms and conditions to be negotiated in good
faith by the parties as soon as practicable after the Closing.
<PAGE>
SECTION 8. INDEMNIFICATION.
8.1 Indemnification by ServiceMaster. Except as
expressly provided in Section 8.2, ServiceMaster agrees
subsequent to the Closing to indemnify and hold DRLP and its
subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof other than
ServiceMaster (individually a "DRLP Indemnified Party" and
collectively the "DRLP Indemnified Parties") harmless from and
against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation,
reasonable fees and expenses of counsel) of any kind or nature
whatsoever (whether or not arising out of third-party claims, in
the case of clause (a) and, in all cases, including all amounts
paid in investigation, defense or settlement of the foregoing
pursuant to this Section 8) which may be sustained or suffered
by any of them arising out of or based upon any of the following
matters:
(a) any breach of any representation, warranty or
covenant of ServiceMaster under this Agreement or by reason of
any claim, action or proceeding asserted, instituted or arising
out of any matter or thing constituting a breach of such
representations, warranties or covenants provided that with
respect to ServiceMaster's covenant to provide services under
Section 7.4 and with respect to the covenant to continue to
operate any Unassigned Contract pursuant to Section 1.5(d) with
respect to which ServiceMaster is the operator of the Dining
Location relating to such Unassigned Contract, only grossly
negligent or willful breaches will give rise to a claim for
indemnification;
(b) any claim made by a Client for which DRLP is
entitled to indemnification under the last sentence in Section
1.3(b).
(c) any third party claim relating to the ownership
or operation of the Business or the Subject Assets prior to the
Closing, including without limitation (i) any liability for
Taxes arising from such ownership or operation, (ii) any breach
or default by ServiceMaster of any obligation under any Permit, Contract,
New Dining Contract or Open Bid relating to obligations to be performed
by ServiceMaster prior to the Closing (other than as provided in
Section 1.3(b) or as specifically set forth in 8.1(b) above), (iii)
any harm or damage caused by any failure or defect relating to any product
or service sold or provided by ServiceMaster prior to the
Closing (other than as provided in Section 1.3(b)) and (iv) any
liability arising out of the noncompliance by ServiceMaster with
the provisions of the Bulk Sales Act, if applicable, in
connection with the transactions contemplated hereby; or
(d) third party claims relating to any failure by
ServiceMaster to perform and discharge any of the Retained
Obligations.
8.2 Limitations on Indemnification by ServiceMaster.
Notwithstanding the foregoing, the right of DRLP Indemnified
Parties to indemnification under Section 8.1 shall be subject to
the following provisions:
(a) No indemnification shall be payable pursuant to
Subsection 8.1 above to any DRLP Indemnified Party, unless the
total of all claims for indemnification pursuant to Section
8.1(a) and (c) shall exceed $25,000 in the aggregate; provided,
however, that the foregoing limitation shall not apply with
respect to any breach of a covenant or agreement to pay money,
assume liabilities or otherwise share in the payment of monetary
liabilities, costs, expenses and the like, including, without
limitation, the matters set forth in Sections 1.8 and Section 7
hereof.
(b) In the event it shall turn out that any of the
Subject Assets shall be alleged or be found to be in violation
of any law or other governmental requirement (including but not
limited to any health or licensing law, any OSHA requirement, or
any environmental requirement), then: (i) ServiceMaster and not
DRLP shall be responsible for any fine or penalty imposed by
reason of any violation of law by ServiceMaster during the
period prior to the Closing Time, (ii) DRLP shall be responsible
for any fine or penalty which shall be imposed for any violation
by the Subject Assets or DRLP which occurred after the Closing
Time and shall bear the cost of bringing the Subject Assets into
compliance with the applicable legal requirements, (iii) the
costs and expenses of defending against any such claim
(including, without limitation, reasonable fees and expenses of
counsel) shall be allocated between ServiceMaster and DRLP on
the basis of the relative responsibility for fines and penalties
and (iv) ServiceMaster shall not have any other obligation under
Section 8.1 by reason of such situation. For example, if it
were found that the Subject Assets violated any governmental
requirement, such violation lasted from ten days prior to the
closing Time until DRLP put the assets in compliance five days
after the Closing Time and if the government imposed a fine of
$10 per day for each day of such violation, then ServiceMaster
would be obligated to pay fines of $100, DRLP would be required
to pay fines of $50, the defense costs would be allocated in the
ratio of 2-to-1 between ServiceMaster and DRLP and DRLP would be
required to bear the expense of bringing the assets into
compliance with the applicable legal requirement.
<PAGE>
(c) No indemnification shall be payable to a DRLP
Indemnified Party with respect to claims asserted pursuant to
Section 8.1(a) or (b) after December 31, 1997 (the
"Indemnification Cut-Off Date"); provided, however that DRLP's
right to indemnification with respect to (i) claims asserted
pursuant to Section 8.1(a) and relating to any breach of a
representation, warranty or covenant with respect to
ServiceMaster's organization, authority, title to any or all
Subject Assets, or environmental matters or pursuant to Sections
8.1(c) shall continue without limitation as to time and (ii) any
breach of a representation, warranty or covenant with respect to
Taxes or Tax-related matters shall continue until six (6) months
after the termination of the applicable statute of limitations
relating to the subject matter covered by such provisions, it
being understood and agreed that (x) DRLP shall not extend any
applicable statute of limitations without ServiceMaster's
consent and (y) if prior to the applicable date of expiration a
specific state of facts shall have become known which is
reasonably likely to constitute or give rise to any claim as to
which an indemnity may be payable and a DRLP Indemnified Party
shall have given notice of such facts to ServiceMaster prior to
such date, then the right to indemnification with respect
thereto shall remain in effect until such matter shall have been
finally determined and disposed of and any indemnification due
in respect thereof shall have been paid.
(d) No indemnification shall be payable pursuant to
Section 8.1 above to any DRLP Indemnified Party after the
cumulative amount of all indemnification payments exceeds an
amount equal to $10,250,000 plus the DRLP Payoff Obligation
following all post-closing adjustments pursuant to Section 1;
provided, however, that ServiceMaster's maximum liability with
respect to indemnification claims relating to a breach of the
representations and warranties set forth in Section 2.16 shall
be limited to $10,250,000.
8.3 Indemnification by DRLP. DRLP agrees subsequent
to the Closing to indemnify and hold ServiceMaster and its
subsidiaries and affiliates and persons serving as officers,
directors or employees thereof (individually a "ServiceMaster
Indemnified Party" and collectively the "ServiceMaster
Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses
(including, without limitation, reasonable fees of counsel) of
any kind or nature whatsoever (whether or not arising out of
third-party claims, in the case of (a), and, in all cases,
including all amounts paid in investigation, defense or
settlement of the foregoing pursuant to this Section 8) which
may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(a) a breach of any representation, warranty or
covenant made by DRLP in this Agreement or by reason of any
claim, action or proceeding asserted, instituted or arising out
of any matter or thing constituting such a breach;
(b) third party claims relating to the ownership or
operation of the Business or the Subject Assets from and after
the Closing, including without limitation (i) any liability for
Taxes arising from such ownership or operation, (ii) any
liability in respect of persons employed in the operation of the
Business relating to periods of employment from and after the
Closing, (iii) any breach or default of any obligation under any
Contract, New Dining Contract or Open Bid relating to
obligations to be performed from and after the Closing and (iv)
any harm or damage caused by any failure or defect relating to
any product or service sold or provided by DRLP from and after
the Closing; or
<PAGE>
(c) third party claims relating to any failure by
DRLP to perform and discharge any of the Assumed Liabilities or
its obligations under this Agreement.
8.4 Limitations on Indemnification by DRLP.
Notwithstanding the foregoing, the right of ServiceMaster
Indemnified Parties to indemnification under Section 8.3 shall
be subject to the following provisions:
(a) No indemnification pursuant to Section 8.3(a)
shall be payable to ServiceMaster Indemnified Parties, unless
the total of all claims for indemnification pursuant to Section
8.3(a) shall exceed $25,000 in the aggregate; provided, however,
that the foregoing limitation shall not apply with respect to
any breach of a covenant or agreement to pay money, assume
liabilities or otherwise share in the payment of monetary
liabilities, costs, expenses and the like including, without
limitation, the matters set forth in Sections 1.8 and Section 7
hereof.
(b) No indemnification shall be payable to
ServiceMaster Indemnified Parties with respect to claims
asserted pursuant to Section 8.3(a) above after the
Indemnification Cut-Off Date; provided, however, that
ServiceMaster's right to indemnification with respect to claims
asserted pursuant to Section 8.3(a) and relating to any breach
of a representation, warranty or covenant with respect to DRLP's
organization or authority or pursuant to Sections 8.3(b) or (c)
shall continue without limitation as to time.
8.5 Notice; Defense of Claims. Promptly after
receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations
hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission
to so notify the indemnifying party promptly will not relieve
the indemnifying party from any liability except to the extent
that the indemnifying party shall have been prejudiced as a
result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the
amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under
which the liability or obligation is asserted. If within 20
days after receiving such notice the indemnifying party gives
written notice to the indemnified party stating that it disputes
and intends to defend against such claim, liability or expense
at its own cost and expense, then counsel for the defense shall
be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably
withheld) and the indemnified party shall make no payment on
such claim, liability or expense as long as the indemnifying
party is conducting a good faith and diligent defense. The
indemnifying party shall not have the right to settle any claim
without the consent of the indemnified party unless such
settlement is on reasonable terms, the indemnifying party shall
pay the full cost of such settlement and such settlement shall
include a full release of the indemnified party. The parties
hereby acknowledge and agree that the assumption of such defense
does not constitute an admission of liability with respect to
any claim or an agreement to indemnify the other party upon
resolution of such claim. Notwithstanding anything herein
stated, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly
or through counsel. If no such notice of intent to dispute and
defend is given by the indemnifying party, or if such diligent
good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying
party, undertake the defense of such claim, liability or expense
(with counsel selected by the indemnified party), and shall have
the right to compromise or settle the same (exercising
reasonable business judgment). If such claim, liability or
expense is one that by its nature cannot be defended solely by
the indemnifying party, then the indemnified party shall make
available all information and assistance that the indemnifying
party may reasonably request and shall cooperate with the
indemnifying party in such defense.
<PAGE>
SECTION 9 DEFINITIONS.
As used in this Agreement, unless the context
otherwise explicitly requires, the following terms shall have
the meanings set forth below:
"Acceleration Date" shall have the meaning given to
such term in Section 1.8(l).
"Accounting Requirements" shall have the meaning
given to such term in Section 1.8(b) hereof.
"Accounts Receivable" shall have the meaning given
to such term in Section 1.1(e) of this Agreement.
"Accrual Initiation Time" shall have the meaning
given to that term in Section 10.14(a) of this Agreement.
"Accrued Budget Guarantees" shall have the meaning
given to such term in Section 1.8(b) of this Agreement.
"Adjustment Amount" shall have the meaning given to
such term in Section 1.8(c) of this Agreement.
"Adjustment List" shall have the meaning given to
such term in Section 1.8(c) of this Agreement.
"Affiliate" shall have the meaning given to such
term in Section 2.14(f)(iii) of this Agreement.
"Agreed Adjustment" shall have the meaning given to
such term in Section 1.8(e) of this Agreement.
"Agreement" shall have the meaning given to such
term in the preamble to this Agreement.
"Assignment and Assumption Agreement" shall have the
meaning given to such term in Section 3.6 of this Agreement.
<PAGE>
"Assumed Liabilities" shall have the meaning given
to such term in Section 1.3(a) of this Agreement.
"Assumed Regulatory Liabilities" shall have the
meaning given to such term in Section 1.3(a) of this Agreement.
"Books and Records" shall have the meaning given to
such term in Section 1.1(i) of this Agreement.
"Business" shall have the meaning given to such term
in the recitals to this Agreement.
"Clients" shall have the meaning given to such term
in Section 1.5(a) of this Agreement.
"Closing" shall have the meaning given to such term
in Section 1.7(a) of this Agreement.
"Closing Date" shall have the meaning given to such
term in Section 1.7(a) of this Agreement.
"Closing Time" shall have the meaning given to such
term in Section 1.8(a) of this Agreement.
"Code" shall have the meaning given to such term in
Section 1.10 of this Agreement.
"Consent" shall have the meaning given to such term
in Section 1.5(a) of this Agreement.
"Consideration" shall have the meaning given to such
term in Section 1.4(a) of this Agreement.
"Contracts" shall have the meaning given to such
term in Section 1.3(a)(v) of this Agreement.
<PAGE>
"Contribution" shall mean (x) with respect to any
food service contract that is a so-called "profit and loss"
contract, the difference between total revenues and direct
operating costs (excluding general and administrative fees), in
each case determined in accordance with GAAP and (y) with
respect to any food service contract that is a so-called
"management fee" contract, the sum of management fees and
support fees, minus any costs incurred in connection with any
guaranteed budgeted subsidy, in each case determined in
accordance with GAAP.
"Current Dining Contracts" shall have the meaning
given to such term in Section 1.1(d) of this Agreement.
"Customer Deposits" shall have the meaning given to
such term in Section 1.8(b) of this Agreement.
"Customer-Owned Inventory" shall have the meaning
given to such term in Section 1.1(b) of this Agreement.
"Daka" shall have the meaning given to such term in
Section 1.7(c) of this Agreement.
"DAKA International" shall have the meaning given to
such term in Section 1.7(c) of this Agreement.
"Defaulting Party" shall have the meaning given to
such term in Section 10.14(b) of this Agreement.
"Deferred Revenue" shall have the meaning given to
such term in Section 1.8(b).
"Design Business" shall have the meaning given to
such term in the recitals to this Agreement.
"Design Inventory" shall have the meaning given to
such term in Section 1.1(b) of this Agreement.
"Dining Contracts" shall have the meaning given to
such term in Section 1.1(d) of this Agreement.
"Dining Inventory" shall have the meaning given to
such term in Section 1.1(b) of this Agreement.
"Dining Location" shall have the meaning given to
such term in Section 1.1 of this Agreement.
"Dining Services Business" shall have the meaning
given to such term in the preamble to this Agreement.
"Disagreement" shall have the meaning given to such
term in Section 1.8(e) of this Agreement.
"DRLP" shall have the meaning given to such term in
the preamble to this Agreement.
"DRLP Employee" shall have the meaning given to such
term in Section 7.2(a) of this Agreement.
"DRLP Indemnified Parties" shall have the meaning
given to such term in Section 8.1 of this Agreement.
"DRLP Payoff Obligation" shall have the meaning
given to such term in Section 1.8(h) of this Agreement.
"Employees" shall have the meaning given to such
term in Section 8.2(a) of this Agreement.
"Employee Program" shall have the meaning given to
such term in Section 2.14(f)(i) of this Agreement.
"ERISA" shall have the meaning given to such term in
Section 2.18(c) of this Agreement.
"Excluded Assets" shall have the meaning given to
such term in Section 1.2 of this Agreement.
"GAAP" shall mean generally accepted accounting
principles.
"General Partner" means Daka, Inc., a Massachusetts
corporation and the general partner of the DRLP.
"Imposed Adjustment" shall have the meaning given to
such term in Section 1.8(f) of this Agreement.
"Indemnification Cut-Off Date" shall have the
meaning given to such term in Section 8.2(c) of this Agreement.
<PAGE>
"Intellectual Property" shall mean copyrights, trade
secrets, trade names, trademarks, service marks, symbols, logos,
computer software or other proprietary rights owned by or
licensed to ServiceMaster and primarily used in the conduct of
the Business.
"Interim Plan" shall have the meaning given to such
term in Section 7.2(a) of this Agreement.
"Inventory" shall have the meaning given to such
term in Section 1.1(b) of this Agreement.
"IRS" shall have the meaning given to such term in
Section 2.14(b) of this Agreement.
"Knowledge," "Knowledge of ServiceMaster,"
"ServiceMaster's Knowledge" or any similar phrase shall mean the
conscious knowledge of the following ServiceMaster personnel at
the Closing Time: Brian D. Oxley, President and Chief Operating
Officer, Pat Asp, Vice President - Purchasing and Development,
Richard D. Abele, Vice President - Customer Services
Development, Alan Sutherland, Senior Vice President - Finance,
Susan Krause, Vice President and General Counsel - Management
Services, Andrew Bratzel, Vice President and Legal Counsel,
Sandie Schaus, Vice President and Controller, Robert Barker,
Vice President - Procurement, Timothy Young, Director of
Accounting, and any and all other legal, accounting or corporate
staff of ServiceMaster who have from time to time been assigned
to work on substantive matters relating to the Business. For
the purposes of this definition, any information received in
writing by any party named or otherwise identified in the
preceding sentence shall be deemed to be consciously known by
such party.
"Late Imposed Adjustment" shall have the meaning
given to such term in Section 1.8(k) of this Agreement.
"Late Payment" shall have the meaning given to such
term in Section 1.6 of this Agreement.
"Leases" shall have the meaning given to such term
in Section 1.1(f) of this Agreement.
"Liens" shall have the meaning given to such term in
Section 2.4(c) of this Agreement.
"Maintains" shall have the meaning given to such
term in Section 2.14(f)(ii) of this Agreement.
<PAGE>
"Managed Volume" shall mean the total revenues,
determined in accordance with GAAP, from any and all contracts,
arrangements or other agreements relating to any activity of the
Business (for those accounts operated on a management fee basis,
the amount of total revenues shall be calculated as if such
account had been operated on a profit and loss basis), plus any
subsidy paid to the contract food service provider or payable by
any party under any such contract, arrangement or agreement.
"Managers" shall have the meaning given to such term
in Section 1.5(b) of this Agreement.
"Manufacturing Assets" shall have the meaning given
to such term in Section 3.3 of this Agreement.
"Manufacturing Business" shall have meaning given to
such term in the recitals to the Agreement.
"Material Adverse Effect" shall mean a material
adverse effect on the business, operations, results of
operations, assets, properties, condition (financial or other)
or prospects of the Business.
"Miscellaneous Assets" shall have the meaning given
to such term in Section 1.1(k) of this Agreement.
"Multiemployer Plan" shall have the meaning given to
such term in Section 2.14(f)(iv) of this Agreement.
"New Dining Contracts" shall have the meaning given
to such term in Section 1.1(d) of this Agreement.
"Other Party"shall have the meaning given to such
term in Section 10.14(b) of this Agreement.
"Open Bids" shall have the meaning given to such
term in Section 1.1(d) of this Agreement.
"Operating Cash"shall have the meaning given to such
term in Section 1.1(j) of this Agreement.
"Option" shall have the meaning given to such term
in Section 3.3 of this Agreement.
"Other Contracts" shall have the meaning given to
such term in Section 1.1(g) of this Agreement.
<PAGE>
"Owned Tangible Personal Property" shall have the
meaning given to such term in Section 2.4(c) of this Agreement.
"Payoff Amount" shall have the meaning given to such
term in Section 1.8(g) of this Agreement.
"Permits" shall have the meaning given to such term
in Section 1.1(h) of this Agreement.
"Prepaid Expenses" shall have the meaning given to
such term in Section 1.8(b) of this Agreement.
"Price Waterhouse" shall have the meaning given to
such term in Section 1.8(f) of this Agreement.
"Prime Rate" shall mean that interest rate reported
in the Wall Street Journal (Eastern Edition) as the "Prime Rate"
in its guide to money rates and described as the base rate on
corporate loans at large U.S. money center commercial banks on
the relevant date.
"Proposed Adjustments" shall have the meaning given
to such term in Section 1.8(d) of this Agreement.
"Proprietary Inventory"shall have the meaning given
to such term in Section 1.1(b) of this Agreement.
"Purchase Price" shall have the meaning given to
such term in Section 1.4(a) of this Agreement.
"Required Investment" as applied to any Current or
New Dining Contract shall mean (except as otherwise indicated in
the remainder of this paragraph) the amount ServiceMaster is
required to spend under provisions in that Contract which
require ServiceMaster to provide specified improvements or
renovations for a Client or to make other payments to or for the
benefit of the Client. Required Investments do not include:
rents, commissions; capital improvements not specifically
identified and required in a Current Dining Contract (such as
fixed asset purchases during the term of the Contract);
contributions or cash donations required by the Contract (such
as contributions to the client's general improvement fund or
president's fund); and other kind of payment which under
ServiceMaster's regular accounting practices were expenses over
a period of one year or less; or any payment or obligation of
any kind arising under any Contract or obligation which is not a
Current Dining Contract.
"Retained Notes Receivable" shall have the meaning
given to such term in Section 1.2(a) of this Agreement.
"Retained Obligations" shall have the meaning given
to such term in Section 1.3(c) of this Agreement.
"Savings Plan" shall have the meaning given to such
term in Section 7.3(b) of this Agreement.
"Security Deposit" shall have the meaning given to
such term in Section 5.3 of this Agreement.
"ServiceMaster" shall have the meaning given to such
term in the preamble to this Agreement.
"ServiceMaster's Determinations" shall have the
meaning given to that term in Section 1.8(c) of this Agreement.
"ServiceMaster Indemnification Parties" shall have
the meaning given to such term in Section 8.3 of this Agreement.
<PAGE>
"Services" shall have the meaning given to such term
in Section 7.3(a) of this Agreement.
"Site" shall mean any Dining Location or any
location owned, leased or operated in connection with the Design
Business or any other location, site or facility owned, leased
or operated primarily for use in connection with the Business.
"Subject Assets" shall have the meaning given to
such term in Section 1.1 of this Agreement.
"Subject Employee Programs" shall have the meaning
given to such term in Section 2.14(a) of this Agreement.
"Tangible Personal Property" shall have the meaning
given to such term in Section 1.1(a) of this Agreement.
"Taxes" shall mean all federal, state, local,
foreign, and other taxes, including, without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes,
sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property
taxes, whether or not measured in whole or in part by net
income, and all deficiencies, or other additions to tax,
interest, fines and penalties owed in connection with any of the
foregoing.
"Tax Purchase Price" shall have the meaning given to
such term in Section 1.10 of this Agreement.
"Tax Taxable Purchase Price" shall have the meaning
given to such term in Section 1.10 of this Agreement.
"Transferred Intellectual Property" shall have the
meaning given to such term in Section 1.1(c) of this Agreement.
"Transition Period" shall have the meaning given to
such term in Section 7.2(a) of this Agreement.
"Unassigned Contracts" shall have the meaning given
to such term in Section 1.5(c) of this Agreement.
"Uncollected Accounts" shall have the meaning given
to such term in Section 1.6 of this Agreement.
"Unfunded Investments" means that amount of all
Required Investments which are required by the terms of the
Current Dining Contracts and New Dining Contracts as constituted
immediately prior to the Closing to be made after the Closing
Date and which DRLP shall make. In the event there shall be any
reasonable doubt about the scope of any capital improvement or
other Required Investment, DRLP shall consult ServiceMaster
prior to making such improvement or other investment, and in no
event shall any payment or investment which DRLP shall make be
deemed an Unfunded Investment unless it is required under a
Current Dining Contract and New Dining Contracts as constituted
immediately prior to the Closing.
"Unpaid Balance Components" shall have the meaning
given to such term in Section 1.8(b) of this Agreement.
<PAGE>
SECTION 10. MISCELLANEOUS.
10.1 Bulk Sales Law. DRLP waives compliance by
ServiceMaster with the provisions of any applicable bulk sales,
fraudulent conveyance or other law for the protection of
creditors in connection with the transfer of the Subject Assets
under this Agreement.
10.2 Fees and Expenses. Each of the parties will
bear its own expenses in connection with the negotiation and the
consummation of the transactions contemplated by this Agreement,
and no expenses of ServiceMaster relating in any way to the
purchase and sale of the Subject Assets hereunder and the
transactions contemplated hereby, including without limitation
legal, accounting or other professional expenses of
ServiceMaster, shall be charged to or paid by DRLP. The costs,
fees and expenses of the DRLP shall be borne by Daka or DAKA
International.
10.3 DAKA International Guaranty.
(a) DAKA International hereby unconditionally,
irrevocably and absolutely guarantees payment in full on August
7, 1995 of the DRLP Payoff Obligation. DAKA International shall
be primarily and directly liable for the DRLP Payoff Obligation
and shall be obligated to pay the DRLP Payoff Obligation
immediately upon demand on August 7, 1995 regardless of whether
ServiceMaster shall have made any attempt to obtain payment of
any of the DRLP Payoff Obligation from DRLP.
(b) DAKA International shall be absolutely and
unconditionally obligated to pay the DRLP Payoff Obligation
and all interest and other amounts due under Section 10.3(c) in
immediately available funds in full on August 7, 1995 in the
full amount calculated as prescribed in Section 1.8 and shall
not be entitled to setoff any claim of any kind which DRLP or
DAKA International may have against anyone whether arising under
or by reason of this Agreement or for any other reason of any
kind. Without limiting by implication the generality of the
forgoing, DAKA International shall be obligated to pay
ServiceMaster on August 7, 1995, the full amount of the DRLP
Payoff Obligation regardless of any default by ServiceMaster
under this Agreement, any failure by ServiceMaster to pay any
amount owed under this Agreement (including but not limited to
any amount owed under Section 1.6, Section 1.8(i) or Section
1.8(k)), any failure by ServiceMaster to provide any
reimbursement or indemnification payment to which DAKA
International or DRLP shall be entitled, any disagreement by the
parties as to any amount owed under this Agreement or any other
wrongful action by ServiceMaster or any of its affiliates or
anyone else of any kind whatsoever. In the event that
ServiceMaster shall not for any reason receive on August 7, 1995
full payment of the entire DRLP Payoff Obligation, then in any
proceeding instituted by ServiceMaster, no defense by DAKA
International, or DRLP to its obligation to pay the DRLP Payoff
Obligation whether by counterclaim, affirmative defense or new
matter shall be interposed or shall be of any force or effect,
said defenses being waived for purposes of such proceeding.
ServiceMaster shall have the right to institute suit for
collection of the DRLP Payoff Obligation in any court and shall
not be required to institute any arbitration proceedings to
obtain payment of the DRLP Payoff Obligation. The foregoing
notwithstanding, this Section 10.3(b) shall not constitute or be
deemed to be a waiver of any rights of DAKA International under
this Agreement in any proceeding in which the payment of the
DRLP Payoff Obligation or DAKA International's obligation to pay
it in full is not at issue.
<PAGE>
(c) In the event DAKA International for any reason
fails to pay the DRLP Payoff Obligation on August 7, 1995, then
(i) interest shall begin to accrue from August 7, 1995 on the
DRLP Payoff Obligation remaining from time to time unpaid at a
rate equal to the lower of (A) a rate 400 basis points in excess
of the Prime Rate or (B) the highest rate of interest allowed by
applicable law and (ii) DAKA International shall be solely
liable for the payment of all interest so accrued and for
payment of all costs prescribed by Section 10.13(b) including
all reasonable attorneys' fees ServiceMaster shall incur to
enforce such payment of the DRLP Payoff Obligation against DRLP
or DAKA International and such accrued interest. Under no circumstances
whatsoever shall DRLP have any reimbursement obligation or liability to
Daka International with respect to such accrued interest or payment of
the costs prescribed by Section 10.13(b). All accrued interest shall
compound monthly as of the end of each calendar month. Accrued
interest shall be due for immediate payment. Interest shall begin
to accrue (i) on the DRLP Payoff Obligation on August 7, 1995
at the rate prescribed by this paragraph and (ii) in the event any
Late Imposed Adjustment shall become payable by DRLP under
Section 1.8(k), then interest shall accrue under this Section 10.3
from August 7, 1995 on the amount of such adjustment and such interest
shall be payable by Daka International at the time such adjustment
shall be made.
(d) DAKA International shall remain obligated
hereunder notwithstanding that, without any reservation of
rights against DAKA International, and without notice to or
further assent by DAKA International, any demand for payment of
any of the DRLP Payoff Obligation made by ServiceMaster may be
rescinded, and any of the DRLP Payoff Obligation continued, and
the DRLP Payoff Obligation, or the liability of any other party
upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered
or released by ServiceMaster, and this Agreement, and any other
agreements or documents executed and delivered in connection
herewith may be amended, modified, supplemented or terminated,
in whole or in part, as ServiceMaster may deem advisable from
time to time, and any collateral security, guarantee or right of
offset at any time held by ServiceMaster for the payment of the
DRLP Payoff Obligation may be sold, exchanged, waived,
surrendered or released. ServiceMaster shall not have any
obligation to protect, secure, perfect or insure any Lien at any
time held by it as security for the DRLP Payoff Obligation or
for DAKA International's obligations under this Section 10.3 or
any property subject thereto.
(e) DAKA International waives any and all notice of
the creation, renewal, extension or accrual of any component of
the DRLP Payoff Obligation or any action under Section 1.8 and
notice of or proof of reliance by ServiceMaster upon this
Section 10.3 or acceptance of this Section 10.3; the DRLP Payoff
Obligation shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this
Section 10.3; and all dealings between DRLP or DAKA
International, on the one hand, and ServiceMaster, on the other,
shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Section 10.3. DAKA
International waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon DRLP or
DAKA International with respect to the DRLP Payoff Obligation.
DAKA International's obligations under this Section 10.3 shall
be construed as a continuing, absolute and unconditional
guarantee of payment with regard to pay the DRLP Payoff
Obligation and shall not be diminished or impaired by (i) any
defense, set-off or counterclaim (other than a defense of
payment) which may at any time be available to or be asserted by
DRLP or DAKA International against ServiceMaster, or (ii) any
other circumstance whatsoever (with or without notice to or
knowledge of DRLP or DAKA International) which constitutes, or
might be construed to constitute, an equitable or legal
discharge of DRLP from the DRLP Payoff Obligation, or of DAKA
International under this Section 10.3, in bankruptcy or in any
other instance. ServiceMaster may, but shall be under no
obligation to, pursue such rights and remedies as it may have
against DRLP or any other person or against any collateral
security or guarantee for the DRLP Payoff Obligation or any
right of offset with respect thereto, and any failure by
ServiceMaster to pursue such other rights or remedies or to
collect any payments from DRLP or any such other person or to
realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of DRLP or any
such other person or of any such collateral security, guarantee
or right of offset, shall not relieve DAKA International of any
liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter
of law, of ServiceMaster against DAKA International.
(f) This Section 10.3 shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the DRLP Payoff
Obligation is rescinded or must otherwise be restored or
returned by ServiceMaster upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of DRLP or upon or as
a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, DRLP or any
substantial part of its property, or otherwise, all as though
such payments had not been made.
<PAGE>
(g) All payments made by DAKA International under
this Section 10.3 shall be made free and clear of, and without
deduction or withholding for or account of, any present or
future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any
governmental authority.
(h) Any provision of this Section 10.3 which is
prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) ServiceMaster shall not by any act (except by a
written instrument pursuant to Section 10.5 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any default
or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of
ServiceMaster, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by ServiceMaster of any right or
remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which ServiceMaster would otherwise
have on any future occasion. The rights and remedies provided
in this Section 10.3 are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies
provided by law.
(j) For the purposes of this Section 10.3 only,
DAKA International hereby consents to personal jurisdiction,
service of process and venue in the federal and state courts of
Illinois in which any claim under this Section 10.3 is brought
by ServiceMaster.
(k) In the event that the Acceleration Date shall
occur before August 7, 1995 under the provisions of Section
1.8(l), then that date prior to August 7, 1995 shall be
substituted for August 7, 1995 in each provision of this Section
10.3 and the payments owed by DAKA International under this
Section 10.3 shall be due in full on that earlier date.
10.4 Governing Law. This Agreement shall be
construed under and governed by the internal laws of the
Commonwealth of Massachusetts without regard to its conflict of
laws provisions.
10.5 Notices. Any notice, request, demand or
other communication required or permitted hereunder shall be in
writing and shall be deemed to have been given if sent by
registered or certified mail, upon the sooner of the date on
which receipt is acknowledged or the expiration of three days
after deposit in United States post office facilities properly
addressed with postage prepaid or if sent by overnight courier
for next day delivery properly addressed with postage prepaid, on
the day after deposit with such courier. All notices to a party will
be sent to the addresses set forth below or to such other address
or person as such party may designate by notice to each other
party hereunder:
To DRLP: Daka, Inc.
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
Attn: Charles Redepenning,
Senior Vice President
and General Counsel
Facsimile No.: (508) 774-8765
With a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: Ettore Santucci, P.C.
Facsimile No.: (617) 523-1231
To ServiceMaster: ServiceMaster Management Services L.P.
One ServiceMaster Way
Downers Grove, IL 60515
Attn.: Brian D. Oxley
Facsimile No.: (708) 271-5797
With a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Robert H. Kinderman, Esq.
Facsimile No.: (312) 861-2200
Any notice given hereunder may be given on behalf of
any party by his counsel or other authorized representatives.
10.6 Entire Agreement. This Agreement, including
the Schedules and Exhibits referred to herein and the other
writings specifically identified herein or contemplated hereby,
is complete, reflects the entire agreement of the parties with
respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings; no
promises, representations, understandings, warranties and
agreements have been made by any of the parties hereto except as
referred to herein or in such Schedules and Exhibits or in such
other writings, and all inducements to the making of this
Agreement relied upon by either party hereto have been expressed
herein or in such Schedules or Exhibits or in such other
writings. Every page of this Agreement in the form delivered by
Daka to ServiceMaster has been initialed by Michael A. Woodhouse,
Senior Vice President and Chief Financial Officer of Daka. Every
page of this Agreement in the form delivered by ServiceMaster to
Daka has been initialed by Alan D. Sutherland, Senior Vice President
and Chief Financial Officer of ServiceMaster.
<PAGE>
10.7 Assignability; Binding Effect. This Agreement
shall only be assignable by DRLP to a corporation or partnership
controlling, controlled by or under common control with DRLP
upon written notice to ServiceMaster; provided, however, that no
such assignment shall release DRLP from its obligations or
liabilities hereunder. This Agreement may not be assigned by
ServiceMaster without the prior written consent of DRLP. This
Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective
successors, and permitted assigns.
10.8 Captions and Gender. The captions in this
Agreement are for convenience only and shall not affect the
construction or interpretation of any term or provision hereof.
The use in this Agreement of the masculine pronoun in reference
to a party hereto shall be deemed to include the feminine or
neuter pronoun, as the context may require.
10.9 Execution in Counterparts. For the convenience
of the parties and to facilitate execution, this Agreement may
be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and
the same document.
10.10 Amendments. This Agreement may not be amended
or modified, nor may compliance with any condition or covenant
set forth herein be waived, except by a writing duly and validly
executed by each party hereto, or in the case of a waiver, the
party waiving compliance.
10.11 Arbitration. Except as provided in Section
1.8 and Section 10.3 of this Agreement, the parties agree that
any dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be finally settled
by arbitration conducted expeditiously in accordance with
Arbitration Rules and Procedures of J.A.M.S./ENDISPUTE as in
effect from time to time, which arbitration proceeding shall be
conducted in Boston, Massachusetts. Judgment upon the award
entered by arbitrators may be entered by any court having
jurisdiction thereof. Each party shall bear its own expenses
with respect to such proceeding.
10.12 Specific Performance. ServiceMaster
acknowledges that the Business is of a special, unique, and
extraordinary character, and that any breach of this Agreement
by ServiceMaster could not be compensated for by damages.
Accordingly, if ServiceMaster shall breach its obligations under
this Agreement, DRLP shall be entitled, in addition to any other
remedies that it may have, to enforcement of this Agreement by a
decree of specific performance or injunctive relief requiring
ServiceMaster to fulfill its obligations under this Agreement.
<PAGE>
10.13 Compensation for Late Payment or
Performance.
(a) Interest. In the event any amount owed
under this Agreement, other than the DRLP Payoff Obligation,
shall not be paid when due, interest shall accrue on the amount
owed from the time it shall become due until it shall be paid at
the lower of (i) a rate 400 basis points in excess of the Prime
Rate or (ii) the highest rate of interest allowed by applicable
law. All accrued interest shall compound monthly as of the end
of each calendar month. The person which shall owe any past due
amount under this Agreement, other than the DRLP Payoff
Obligation, shall also be obligated to pay all interest which
shall accrue on such amount under the terms of this Section
10.13. Accrued interest shall be due for immediate payment. In
the event that the amount of any obligation owed under any
provision in this Agreement shall be in dispute or for any other
reason not be determined as of the time payment of such amount
would otherwise be due under this Agreement, then (i) interest
shall begin to accrue under this paragraph from the earliest
time (the "Accrual Initiation Time") payment of such obligation
would have been due if the amount thereof had been known and
agreed at the time this Agreement was originally executed and
such payment shall be deemed for purposes of this paragraph to
have become "due" at the Accrual Initiation Time and (ii) the
party owing such obligation shall be obligated to pay each
portion of such obligation at the earliest time at or after the
Accrual Initiation Time at which the amount of such portion
shall be known and not subject to dispute (and such portion
shall always include the minimum amount the parties agree to be
owed), and (iii) interest accrued on any particular portion of
the obligation shall become due for payment when such portion
shall become payable under clause (ii). Without limiting by
implication the generality of the preceding provision, in the event
any Late Imposed Adjustment shall become payable by ServiceMaster under
Section 1.8(k), then interest shall accrue under this Section
10.13 from August 7, 1995 on the amount of such adjustment and
shall be payable by ServiceMaster at the time such adjustment
shall be made.
(b) Collection Costs. In the event any party shall
fail to pay any amount owed under this Agreement, including the
DRLP Payoff Obligation, or to perform any other obligation owed
by such party (the "Defaulting Party") under this Agreement, the
party to whom such amount or obligation shall be owed (the
"Other Party") shall be entitled to collect from the Defaulting
Party all expenses (including reasonable attorneys' fees) which
the Other Party shall reasonably incur to obtain advice as to
what to do about such failure and to evaluate courses of action,
collect such amount, enforce such obligation or obtain
compensation due the Other Party by reason of the Defaulting
Party's failure to pay such amount or perform such obligations
when due.
10.14 Severability. In case any one or more of the
provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement, and a
suitable and equitable provision shall be substituted for the
invalid, illegal or unenforceable provision in order to carry
out, so far as may be valid, legal or enforceable, the intent
and purpose of such provision.
10.15 No Third-Party Beneficiaries. This
Agreement is intended solely for the benefit of the parties
hereto. Neither this Agreement or any of the relationships or
transactions contemplated hereby shall be deemed to create or
enlarge any rights in any parties not a party hereto, under any
theory of third-party beneficiary or otherwise.
* * * * *
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused
this Agreement to be executed as of the date set forth above by
their duly authorized representatives.
DAKA RESTAURANTS, L.P.
By: DAKA, INC.
Its: General Partner
By:
----------------------------
Name:
Title:
SERVICEMASTER MANAGEMENT SERVICES L.P.
By: SERVICEMASTER MANAGEMENT CORPORATION
Its: Managing General Partner
By:
-----------------------------
Name:
Title:
With respect only to Sections 6 and 10.3 hereof:
DAKA INTERNATIONAL, INC.
By:______________________________
Name:
Title:
LIMITED PARTNERSHIP AGREEMENT
of
DAKA RESTAURANTS, L.P.
As of February 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I GENERAL PROVISIONS 1
1.01 Formation of the Partnership 1
1.02 Name of the Partnership 1
1.03 Purpose of the Partnership 2
1.04 Referral of Business Opportunities 2
1.05 Place of Business of the Partnership 3
1.06 Duration of the Partnership 3
1.07 Partners' Names and Addresses 3
1.08 Liability of the General Partner 3
1.09 Title to Partnership Property 4
ARTICLE II TRANSFER OF ASSETS 4
2.01 Cash Investment by Daka 4
2.02 Transfer of Business by ServiceMaster 4
2.03 Limitation on Certain Transfers by the Partnership 4
ARTICLE III BOOKS, RECORDS AND BANK ACCOUNTS 5
3.01 Books 5
3.02 Fiscal Year and Accounting Principles 5
3.03 Reports 6
3.04 Bank Accounts 6
ARTICLE IV CAPITAL CONTRIBUTIONS; TAX MATTERS 7
4.01 Capital Contributions and Advances 7
4.02 Capital Accounts 7
4.03 Percentage Interests 8
4.04 Allocation of Profit and Losses 8
4.05 Section 704(c) Items 9
ARTICLE V CASH DISTRIBUTIONS 9
5.01 Ordinary Distributions 9
5.02 Special Distribution 9
<PAGE>
ARTICLE VI MANAGEMENT AND CERTAIN RIGHTS AND
OBLIGATIONS OF THE PARTNERS 10
6.01 Power and Authority of the General Partner 10
6.02 Services of General Partner 11
6.03 Compensation of General Partner 11
6.04 Reliance 13
6.05 Additional Capital Requirements 13
6.06 Liability of the Partners; Indemnification 13
6.07 Confidentiality 14
6.08 Rights and Obligations With Respect To Opportunities 16
ARTICLE VII [INTENTIONALLY OMITTED] 15
ARTICLE VIII TRANSFER OF PARTNERSHIP INTERESTS 15
8.01 Limitation on Transfers of Partnership Interests 16
8.02 General Partner Interest 17
8.03 Put/Call Agreement 17
ARTICLE IX DISSOLUTION AND TERMINATION 18
9.01 Events of Dissolution 18
9.02 Distributions Upon Liquidation 18
9.03 Survival of Obligations 19
ARTICLE X MISCELLANEOUS 19
10.01 Fees and Expenses 19
10.02 Law Governing 19
10.03 Arbitration 19
10.04 Notices 19
10.05 Entire Agreement 19
10.06 Binding Effect; Non-Assignment 20
10.07 Publicity. [Intentionally Omitted] 20
10.08 Counterparts 20
10.09 Severability 20
10.10 Partition 20
10.11 Waivers and Amendments 20
10.12 Captions 20
10.13 Gender, Etc 21
10.14 Creditors 21
10.15 No Third-Party Beneficiaries 21
<PAGE>
DAKA RESTAURANTS, L.P.
Limited Partnership Agreement
THIS LIMITED PARTNERSHIP AGREEMENT ("Agreement"),
dated as of February 8, 1995 is entered into by and between
Daka, Inc., a Massachusetts corporation ("Daka"), and
ServiceMaster Management Services L.P., a Delaware limited
partnership ("ServiceMaster") (Daka and ServiceMaster are
sometimes referred to herein collectively as the "Partners" and
each individually as a "Partner"), with respect to the formation
and operation of a limited partnership to be named "Daka
Restaurants, L.P." (the "Partnership").
WHEREAS, in connection with the execution of this
Agreement by ServiceMaster, ServiceMaster is transferring
certain assets (the "Subject Assets") to the Partnership,
pursuant to that certain Business Transfer Agreement of even
date herewith (the "Business Transfer Agreement") by and among
the Partnership and ServiceMaster;
WHEREAS, Daka and ServiceMaster desire to form the
Partnership to own and operate the business comprised of the
Subject Assets and, subject to the limitations set forth in
Article VI hereof, to own, operate, acquire and develop the
business of (i) providing contract food service management, (ii)
manufacturing, fabricating, selling and installing fixtures and
equipment used in the food service industry and (iii) providing
construction management services in the food service industry
and otherwise transact, carry on or engage in any lawful
business in which a limited partnership formed pursuant to the
Delaware Revised Uniform Limited Partnership Act may engage;
WHEREAS, in furtherance of the purpose of this
Agreement, Daka is willing to contribute cash to the Partnership
as provided herein;
NOW THEREFORE, in consideration of the foregoing and
of the mutual covenants set forth below, the parties hereby
agree as follows:
ARTICLE I
GENERAL PROVISIONS
1.01 Formation of the Partnership. The Partnership
is hereby formed as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act (the "Uniform Act") with
Daka as the general partner thereof (Daka, in its capacity as
general partner, or such other general partner as may be named
hereunder, the "General Partner").
1.02 Name of the Partnership. The name of the
Partnership shall be "Daka Restaurants, L.P.," or such other
name as the General Partner may from time to time determine.
The General Partner shall cause to be filed on behalf of the
Partnership such partnership or assumed or fictitious name
certificate or certificates as may from time to time be required
by law. The Partnership may do business under such names as the
General Partner may select.
1.03 Purpose of the Partnership. The purpose of the
Partnership shall be to transact, carry on or otherwise engage
in any business that a limited partnership formed pursuant to
the Uniform Act may transact, carry on or in which such a
limited partnership may otherwise engage including, without
limitation:
(a) to own, acquire, develop and operate dining
operations at and the provision of contract food service
management to colleges, universities, schools, academies,
correctional facilities and other businesses;
(b) to own, acquire, develop and operate the
business of manufacturing, fabricating, selling and installing
fixtures and equipment used in the food service industry;
(c) to own, acquire, develop and operate the
business of providing construction management services in the
food service industry; and
(d) to make and perform all contracts and engage in
all activities and transactions necessary or advisable to carry
out the foregoing purposes, including, without limitation,
purchasing, selling, pledging, transferring, conveying and
exercising all rights, privileges and incidents of ownership or
possession with respect to any and all Partnership property.
1.04 Referral of Business Opportunities.
ServiceMaster acknowledges and agrees that it is the intention
of the Partnership to pursue opportunities referred to it by
ServiceMaster to expand its contract food service management
business and related businesses (each, an "Opportunity"). If,
in the course of its business, ServiceMaster intends to bid for
or make a proposal (a "Proposal") relating to the provision of
goods or services to any party (whether or not an affiliate of
ServiceMaster) any one or more component of which constitutes an
Opportunity, ServiceMaster will, if appropriate, inform the
Partnership of such Opportunity, it being understood by all
parties that ServiceMaster shall not be obligated to refer any
Opportunity to the Partnership whether within the Partnership's
line of business or not, shall not be restricted from providing
third parties with opportunities to bid on Opportunities or from
bidding on or otherwise pursuing Opportunities directly or
through affiliates and shall have no liability to the
Partnership or to Daka if it promotes any provider of services
similar to those provided by the Partnership and Daka other than
the Partnership or Daka, except in each case to the extent
otherwise provided by Section 3.2 of the Business Transfer
Agreement. If the Partnership elects to pursue an Opportunity
which ServiceMaster elects to refer to it, ServiceMaster and the
Partnership shall co-operate in the pursuit of such Opportunity.
If the Partnership elects not to exercise its option to pursue
the Opportunity, ServiceMaster may pursue such Opportunity
itself or offer such Opportunity to other persons or entities,
as the case may be. In the event that ServiceMaster offers an
Opportunity to the Partnership and the Partnership acquires such
Opportunity, the Partnership and ServiceMaster shall negotiate
in good faith with respect to a fair and equitable allocation of
any sales commission or referral fee relating to a bid or
proposal covering an Opportunity as well as goods or services
outside the Partnership's line of business and the Partnership
shall reimburse ServiceMaster in an amount equal to that portion
of the sales commission or referral fees, allocable solely to
the Opportunity, but shall have no obligation to reimburse
ServiceMaster for any commission or referral fee in excess of
such allocable portion. ServiceMaster further acknowledges and
agrees that Daka and its affiliates shall not be obligated to
refer any business opportunity to the Partnership, whether
within the Partnership's line of business or not, shall not be
restricted from providing third parties with any such business
opportunities or from bidding on or otherwise pursuing such
business opportunities directly or through affiliates and shall
have no liability to the Partnership or to ServiceMaster if it
promotes any provider of services similar to those provided by
the Partnership or ServiceMaster other than the Partnership or
ServiceMaster.
1.05 Place of Business of the Partnership. The
principal place of business of the Partnership shall be located
at One Corporate Place, 55 Ferncroft Road, Danvers,
Massachusetts 01923-4001. The General Partner may, at any time
and from time to time, change the location of the Partnership's
principal place of business and may establish such additional
place or places of business of the Partnership as it may from
time to time determine.
1.06 Duration of the Partnership. The Partnership
shall commence on the date hereof and shall continue until
terminated in accordance with Article IX hereof.
1.07 Partners' Names and Addresses.
The names and business addresses of the Partners are
as follows:
Daka, Inc.
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923-4001
Attn: Charles W. Redepenning, Jr.
Senior Vice President and General Counsel
ServiceMaster Management Services L.P.
One ServiceMaster Way
Downers Grove, IL 60515
Attn: Brian D. Oxley
President and Chief Operating Officer
1.08 Liability of the General Partner. The General
Partner shall have such liability for the repayment,
satisfaction and discharge of the debts, liabilities and
obligations of the Partnership as is provided by the Uniform Act
of the general partner of a limited partnership.
<PAGE>
1.09 Title to Partnership Property. All property
owned by the Partnership, whether real or personal, tangible or
intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually, shall have any ownership
of such property. The Partnership may hold any of its assets in
its own name or in the name of its nominee, which nominee may be
one or more individuals, partnerships, trusts or other entities.
ARTICLE II
TRANSFER OF ASSETS
2.01 Cash Investment by Daka. Subject to the
provisions of this Agreement, Daka hereby assigns, transfers and
conveys to the Partnership the amount of $10,085,439 in
immediately available funds and the Partnership hereby conveys
to Daka an 80.01% General Partner Interest in the Partnership.
2.02 Transfer of Business by ServiceMaster. In
connection with the execution and delivery of this Agreement,
ServiceMaster is transferring and conveying to the Partnership
the Subject Assets pursuant to the Business Transfer Agreement
and pursuant to the Business Transfer Agreement the Partnership
hereby conveys to ServiceMaster of a 19.99% Limited Partner
Interest in the Partnership.
2.03 Limitation on Certain Transfers by the
Partnership. Without the consent of ServiceMaster, the
Partnership shall not assign, convey or otherwise transfer to
any other person any of the Subject Assets or any Opportunity
(or asset resulting from the pursuit of an Opportunity).
Notwithstanding the foregoing, the Partnership shall be
permitted to grant a security interest in, collaterally assign
or grant a mortgage on its property and assets in favor of The
Chase Manhattan Bank, N.A., as agent, pursuant to that certain
Amended and Restated Credit Agreement dated as of April 29,
1994, as amended, or any other agreement or instrument relating
to indebtedness refinancing, refunding or otherwise replacing
any indebtedness thereunder, subject to Section 6.1 hereof.
Daka hereby agrees that, other than in its capacity as General
Partner and for the benefit of the Partnership, without the
prior written consent of ServiceMaster it will not and it will
cause its affiliates not to, directly or indirectly, make bids
or proposals or any contract for the maintenance of or conduct
dining operations or the provision of contract foodservice
management services to any of the customers identified on
Schedule 1.1(d) to the Business Transfer Agreement or to any
other customer with whom DRLP shall enter into a contract after
the date hereof.
<PAGE>
ARTICLE III
BOOKS, RECORDS AND BANK ACCOUNTS
3.01 Books and Records. In addition to and
separate from the books and records required to be maintained by
Article IV, the General Partner shall keep just and true books
of account with respect to the operations of the Partnership in
accordance with generally accepted accounting principles
consistently applied ("GAAP") and shall close and balance such
books at the end of each fiscal year of the Partnership. Such
books shall be maintained at the principal place of business and
the local office of the Partnership, or at such other place as
the General Partner shall determine, and all Partners, and their
duly authorized representatives, shall at all reasonable times
have access to such books.
3.02 Fiscal Year and Accounting Principles.
(a) The fiscal year of the Partnership shall
be the twelve fiscal periods ending on the Saturday closest to
June 30 of each calendar year unless otherwise required by the
Internal Revenue Code of 1986, as amended (the "Code").
(b) In maintaining the books and records required
by Section 3.01, the General Partner shall apply the following
principles for determining its results from operations:
(i) Revenues and gross profits with respect to
each location where the Partnership maintains dining operations
or provides contract food services (a "Contract Site") shall be
determined in accordance with GAAP and shall reflect all costs
and benefits of providing the services, including insurance
costs, employee benefit costs and purchasing related rebates.
(ii) Daka shall bear the cost of providing to the
Partnership services such as accounting (but specifically
excluding auditing services), management personnel above the
level of foodservice director/general manager (but specifically
excluding personnel the cost of which is charged to or allocated
among profit and loss statements of one or more specific
Contract Sites in accordance with ServiceMaster's current
practices), marketing and bid preparation, in-house legal
services and other expense items commonly referred to as
corporate overhead to the extent that such items are not
directly attributable to operations at Contract Sites in
exchange for the management fee set forth in Section 6.03(a) of
this Agreement. No such items of overhead will be charged by
Daka to or reimbursed to Daka by the Partnership except for
services provided by Daka, such as facilities design, marketing
or similar services, to the extent directly related to a
specific Contract Site.
<PAGE>
(iii) Goodwill recorded on the Partnership's
opening balance sheet in accordance with GAAP shall be amortized
using a useful life consistent with the goodwill amortization
policies and amortization period currently used by DAKA
International, Inc., a Delaware corporation and the parent
company of Daka ("DAKA International"), for external reporting
of its consolidated financial results of operations.
(iv) In accordance with Section 6.03(b) of this
Agreement, the Partnership shall bear the cost of all
third-party professional services and out-of-pocket expenses
incurred in the operation of the Partnership, including, without
limitation, legal and audit fees, costs and expenses, amounts
payable to third party contractors and reasonable travel
expenses of management personnel of DAKA International allocable
to the provision of services to the Partnership.
3.03 Reports.
(a) As soon as practicable after the end of each of the fiscal periods
of each fiscal year, the General Partner shall cause to be prepared
and sent to each Partner a statement showing the results of operations
during such fiscal period and for the year to date (including all
changes in each Partner's capital account) and a balance sheet
for the Partnership.
(b) Within 120 days after the end of each fiscal year the General Partner
shall cause to be prepared and sent to each Partner a statement of the
amount which would be payable for ServiceMaster's Partnership Interest
if the put granted by the Put and Call Agreement between ServiceMaster
and DAKA International had been exercised as of such year end.
(c) Within 120 days after the end of each fiscal year, the
General Partner shall cause to be prepared and
sent to each Partner a financial report of the Partnership,
including an audited balance sheet and a profit and loss
statement, a statement of the changes in each Partner's capital
account during that fiscal year in such detail as shall be
reasonably requested by either Partner, together with the report
of the Partnership's independent certified public accountants
with respect thereto; provided, however, that if Daka and
ServiceMaster waive the requirement for audited financial
statements of the Partnership for any fiscal year, this Section
3.03 shall be satisfied through the delivery by the General
Partner of unaudited financial statements accompanied by a
letter of the Partnership's independent certified public
accountants stating that the financial statements of the
Partnership for the fiscal year then ended were prepared in
accordance with the provisions of this Article III and (except
to the extent this Article III or, in the case of paragraph (b)
of this Section 3.03, the Put and Call Agreement otherwise requires)
in accordance with GAAP.
(d) All financial statements required by paragraphs (a) (b) and (c)
of this Section 3.03 shall be prepared in accordance with the provisions
of this Article III and (except to the extent this Article III otherwise
requires) in accordance with GAAP.
(e) In addition, within 75 days after the end of each
fiscal year, the General Partner shall furnish to each Partner
such information as may be needed to enable each Partner to file
its Federal income tax return, any required state income tax
return and any other reporting or filing requirements imposed by
any governmental agency or authority. The cost of all such
reporting shall be paid by the Partnership as a Partnership
expense. Any Partner may, at any time, upon reasonable notice,
at such Partner's own expense, cause an audit of the
Partnership's books to be made by a certified public accountant
of its own selection.
3.04 Bank Accounts. The General Partner shall be
responsible for causing one or more accounts to be maintained in
a bank (or banks) which is a member of the Federal Deposit
Insurance Corporation, which accounts shall be used for the
payment of the expenditures incurred by the Partnership, and in
which shall be deposited any and all cash receipts. All
deposits and funds not needed in the operation of the business
of the Partnership may be invested in savings accounts at
savings and loan institutions, reputable money market accounts,
United States government securities and such short-term high
quality liquid debt securities as the General Partner shall
determine. All such amounts shall be and remain the property of
the Partnership, and shall be received, held and disbursed by
the General Partner for the purposes specified in this
Agreement. There shall not be deposited in any of said accounts
any funds other than funds belonging to the Partnership.
<PAGE>
ARTICLE IV
CAPITAL CONTRIBUTIONS; TAX MATTERS
4.01 Capital Contributions and Advances.
(a) Pursuant to the Business Transfer Agreement,
DAKA International is guaranteeing (the "DAKA Guaranty") the
Partnership's obligation to pay to ServiceMaster the DRLP Payoff
Obligation. In addition, Daka agrees to provide from time to
time, as advances to the Partnership, cash necessary to fund the
Partnership's working capital needs related to the conduct of
the business operations of the Partnership. Any amount which
DAKA International pays pursuant to the DAKA Guaranty, whether
paid directly to ServiceMaster or paid to the Partnership to
enable it to pay the DRLP Payoff Obligation in whole or in part,
and all advances made by Daka to the Partnership are referred to
herein as "Advances" and shall be repaid by the Partnership to
Daka from the first available funds after payment in full of the
DRLP Payoff Obligation, but before any distributions to the
Partners pursuant to Article V hereof, provided that no interest
shall accrue on any Advances.
(b) No interest shall accrue on any contributions
to the capital of the Partnership, and no Partner shall have the
right to withdraw or to be repaid any capital contributed by it
or to receive any other payment in respect of its interest in
the Partnership, including, without limitation, as a result of
the withdrawal of such Partner from the Partnership, except as
specifically provided in this Agreement.
4.02 Capital Accounts. A separate capital account
(each, a "Capital Account") shall be maintained for each Partner
in accordance with the rules of Treasury Regulations Section
1.704-1(b)(2)(iv), and this Section 4.02 shall be interpreted
and applied in a manner consistent therewith. Whenever the
Partnership would be permitted to adjust the Capital Accounts of
the Partners pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(f) to reflect revaluations of Partnership
property, the Partnership shall so adjust the Capital Accounts
of the Partners. In the event that the Capital Accounts of the
Partners are adjusted pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(f) to reflect revaluations of Partnership
property, (i) the Capital Accounts of the Partners shall be
adjusted in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization and gain or loss, as computed for book purposes,
with respect to such property and (ii) the Partners'
distributive shares of depreciation, depletion, amortization and
gain or loss, as computed for tax purposes, with respect to such
property shall be determined so as to take account of the
variation between the adjusted tax basis and book value of such
property in the same manner as under Code Section 704(c). In
the event that Code Section 704(c) applies to Partnership
property, the Capital Accounts of the Partners shall be adjusted
in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization and gain and loss, as computed for book purposes,
with respect to such property. In applying clause (ii) of the
second preceding sentence and all of the preceding sentence, the
provisions of Section 4.05 shall apply. The Capital Accounts
shall be maintained for the sole purpose of allocating items of
income, gain, loss and deduction among the Partners and shall
have no effect on the amount of any distributions to any
Partners in liquidation or otherwise. The amount of all
distributions to the Partners shall be determined pursuant to
Article V. Notwithstanding any provision contained herein to
the contrary, no Partner shall be required to restore any
negative balance in its Capital Account.
<PAGE>
4.03 Percentage Interests. For purposes of this
Agreement, the "Percentage Interest" of each Partner is the
percentage set forth opposite that Partner's name below, except
as such percentage may be changed pursuant to Section 8.01
hereof:
Partner Percentage Interest
Daka 80.01%
ServiceMaster 19.99%
The interest of Daka in the Partnership shall be
entirely as the General Partner. The interest of ServiceMaster
shall be entirely as a limited partner.
4.04 Allocation of Profit and Losses. All items of
Partnership income, gain, loss, and deduction as determined for
book purposes shall be allocated among the Partners, and shall
be credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv),
so as to ensure to the maximum extent possible (i) that such
allocations satisfy the economic effect equivalence test of
Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (by allocating
items that can have economic effect in such a manner that the
balance of each Partner's Capital Account at the end of any
taxable year (increased by such Partner's "share of partnership
minimum gain" as defined in Treasury Regulations Section
1.704-2) would be positive in the amount of cash that such
Partner would receive (or would be negative in the amount of
cash that such Partner would be required to contribute to the
Partnership) if the Partnership sold all of its property for an
amount of cash equal to the book value (as determined pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)) of such
property (reduced, but not below zero, by the amount of
nonrecourse debt to which such property is subject) and all of
the cash of the Partnership remaining after payment of all
liabilities (other than nonrecourse liabilities) of the
Partnership were distributed in liquidation immediately
following the end of such taxable year pursuant to Article V)
and (ii) that all allocations of items that cannot have economic
effect (including credits and nonrecourse deductions) are
allocated to the Partners in accordance with the Partners'
interests in the Partnership, which, unless otherwise required
by Code Section 704(b) and the Treasury Regulations promulgated
thereunder, shall be their Percentage Interests for the taxable
year.
<PAGE>
4.05 Section 704(c) Items. Except to the extent
otherwise required by the Code, Treasury Regulation Section
1.704-3 shall apply to all tax allocations governed by Code
Section 704(c) and all "reverse section 704(c) allocations." As
soon as practicable after the formation of the Partnership and
in any event not later than June 30, 1995, ServiceMaster shall
select one of the three specified methods for such allocations
provided in the applicable Treasury Regulations under the Code.
ARTICLE V
CASH DISTRIBUTIONS
5.01 Ordinary Distributions.
(a) The General Partner shall in its discretion
determine the timing and amount of distributions to the Partners
of cash available after (i) paying all Partnership expenses,
including the Management Fee (as defined in Section 6.03(a)
hereof) and any reimbursement of the General Partner for costs
or expenses reimbursable pursuant to Section 6.03(b) hereof,
(ii) paying the full amount of the DRLP Payoff Obligation, (iii)
repaying the full amount of any outstanding Advances and (iv)
setting aside such reserves for working capital, contingent
liabilities, investment in or replacements of capital assets or
other permissible Partnership expenditures as determined by the
General Partner to be necessary to meet the current or
anticipated future needs of the Partnership; provided, however,
that no repayment of Advances or cash distributions pursuant to
this Article V may be made by the Partnership until and unless
the full DRLP Payoff Obligation has been paid in full.
(b) Any distributions of cash available as
described in clause (a) above shall be made in the following
order of priority:
(i) First, to the repayment of any unpaid Advances
made pursuant to Section 4.01 and any Additional Capital
Contributions made by a Partner in accordance with Section 6.05
hereof (as such term is defined herein); and
(ii) Thereafter, to the Partners in proportion to
their Percentage Interests.
(c) Without limiting the generality of the foregoing provisions, cash
generated by the Partnership shall not be kept or concentrated in a
central cash management account used to collect cash for other Daka
affiliates unless ServiceMaster shall consent to such arrangement and
unless the Partnership shall be compensated for the time value of the
money on terms reasonably satisfactory to ServiceMaster.
<PAGE>
ARTICLE VI
MANAGEMENT AND CERTAIN RIGHTS AND OBLIGATIONS
OF THE PARTNERS
6.01 Power and Authority of the General Partner.
(a) The General Partner shall be solely
responsible for the management of the Partnership business and
shall have all power and authority necessary or convenient for
the administration and operation of the business and affairs of
the Partnership, which power and authority shall include,
without implied limitation, the power and authority on behalf of
the Partnership and at the Partnership's expense to:
(i) Acquire Property. Acquire real and personal
property, and interests therein, on behalf of the Partnership;
(ii) Deal in Partnership Assets. Deal in and with
the assets of the Partnership, including without limitation,
selling, leasing, developing, constructing, improving,
rehabilitating, operating, maintaining, mortgaging, encumbering,
pledging, creating security interests in, creating easements in
and conveying all or any part of any real or personal property
of the Partnership;
(iii) Contracts. Enter into contracts in
connection with the conduct of the business of the Partnership;
(iv) Handle Claims. Subject to the provisions of Section 8
of the Business Transfer Agreement, bring, defend, compromise,
collect, pay, adjust, arbitrate or otherwise take any action
with respect to any claim available to or against the
Partnership;
(v) Pay Expenses. Pay Partnership expenses
properly incurred in the administration and operation of the
business and affairs of the Partnership;
(vi) Borrow Money. Borrow money from Daka or DAKA
International and borrow money, issue evidences of indebtedness
and grant security interests in assets of the Partnership with
respect to purchase money debt or capitalized leases relating to
the financing of the Partnership's fixed assets;
(vii) Guaranties and Liens. Cause the Partnership
to (x) guaranty senior indebtedness for money borrowed from
banks or other financial institutions of Daka or DAKA
International or any subsidiary thereof and the performance of
obligations related to such indebtedness or (y) grant security
interests in and/or mortgage assets of the Partnership with
respect to such indebtedness to the extent required by such
banks or financial institutions;
<PAGE>
(viii) Hire Others. Employ, engage, hire or
otherwise secure the services of such individuals or entities as
may be necessary or advisable for the proper operation of the
business of the Partnership subject to the limitations set forth
in Section 3.02(b)(ii);
(ix) Prepare and Record Documents. Prepare,
execute, acknowledge by appropriate signature and file, record,
publish and deliver all instruments or documents necessary or
convenient to effectuate any actions of the Partnership; and
(x) Other Action. Take any other action incident
to any of the above clauses or permitted or required of general
partners under the Uniform Act subject to the limitations set
forth in clause (b) below.
(b) Notwithstanding the provisions of clause (a)
above, the General Partner shall not have the power and
authority to do any of the following without the prior written
consent of ServiceMaster:
(i) Certain Borrowings. Except as permitted by
Section 6.01(a)(vi), borrow money from any person other than
Daka or DAKA International;
(ii) Security for Advances. Until and unless the
DRLP Payoff Obligation has been paid in full, grant security
interests in assets of the Partnership with respect to Advances;
(iii) Scope of Partnership Business. Cause the
Partnership to engage in any business other than (x) owning the
Subject Assets and operating the business transferred to the
Partnership by ServiceMaster pursuant to the Business Transfer
Agreement (which includes submitting bids and proposals to
existing customers and their affiliates) or (y) pursuing
Opportunities and owning and operating assets or businesses
resulting from such pursuit;
(iv) Loans. Cause the Partnership to lend funds
to any Partner or any other person.
6.02 Services of General Partner. The General
Partner shall (a) provide the services described in Section
3.02(b)(ii) and make management decisions for the Partnership,
(b) engage accountants, attorneys and other professionals for
the provision of accounting, legal and other services to the
Partnership, and (c) maintain the books and records of the
Partnership required by Article III and Article IV.
<PAGE>
6.03 Compensation of General Partner.
(a) In consideration of the services to be
provided by the General Partner to the Partnership pursuant to
Section 6.02, the Partnership will make a guaranteed payment to
the General Partner of a monthly management fee (the "Management
Fee"), calculated in accordance with the provisions of this
Section 6.03, payable in advance on the first business day of
each month. During the period from February 8, 1995 to
January 31, 1995, the Management Fee for each month shall equal
three and one-half percent (3.5%) of the Managed Volume (as
defined below) budgeted for such month. During the period from and
including February 1, 1996 to January 31, 1997, the Management Fee for
each month shall equal three and one-quarter percent (3.25%) of
the Managed Volume budgeted for such period. On and at all times
after February 1, 1997, the monthly Management Fee for each month
shall equal three percent (3%) of the Managed Volume for such month
as set forth on the budget of the Partnership for such month. The
Management Fee payable on the first day of each month shall be based
upon the budgeted Managed Volume for that month as reasonably determined
by the General Partner. In the event that Managed Volume for any month is
greater than (or is less than) the amount budgeted therefor, the
Partnership (or the General Partner, as appropriate) shall, not
more than 30 days after the end of each such month, reconcile
and adjust such monthly Management Fee to the actual Managed
Volume for such month. "Managed Volume" shall mean the total
revenues, determined in accordance with GAAP of the Partnership
from the business of the Partnership, including without
limitation from any and all contracts, arrangements or other
agreements relating to any activity of the Partnership (it being
understood that, regardless of GAAP, for those contract food
service accounts operated on a management fee basis, the amount
of total revenues shall be calculated as if such account had
been operated on a profit and loss basis), plus any subsidy paid
to the Partnership or payable by any party under any such
contract, arrangement or agreement other than the Partnership).
<PAGE>
(b) The Partnership shall reimburse the General
Partner (to the extent not directly paid by the Partnership) for
all third party and out-of-pocket expenses incurred by the
General Partner in connection with the operation of the
Partnership, including, without limitation, legal and audit
fees, costs and expenses, amounts payable to third-party
contractors, and reasonable travel expenses of management
personnel of DAKA International allocable to the provision of
services to the Partnership.
(c) Each of the Partnership and the General Partner
shall reimburse the other, as appropriate, for all costs and
expenses (including, without limitation, cash compensation and
fringe benefits) relating to employees, temporary employees and
other personnel employed in positions having job descriptions or
titles subordinate to that of "District Manager" (or an
equivalent position) of the General Partner in the event that
any one or more employee of the General Partner or the
Partnership is temporarily assigned to work for the other.
(d) Any and all goods and services supplied by the General Partner or
any of its affiliates to the Partnership shall be supplied at cost and
the allocation of costs to the Partnership shall not be less favorable
to the Partnership than the allocations employed to allocate costs to
the General Partner and its affiliates, provided that (i) this provision
shall not cover services to be provided in exchange for the Management Fee
(because the agreed price for those services is the Management Fee) and
(ii) this provision does not authorize charging the Partnership for overhead
or other items which are not to be charged to the Partnership pursuant to
Section 3.02 (b)(ii) or other express provisions of this Agreement.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
ability of the General Partner or any of its affiliates to enter into
purchasing and other supply or procurement agreements or arrangements with
third party vendors on a group basis for the benefit of multiple entities
including the Partnership and this Section 6.03(d) shall not require that
goods or services provided to the Partnership under any such agreement or
arrangement be supplied on terms different from those applicable to Daka
or any of its affiliates covered by such agreement or arrangement.
6.04 Reliance. Persons dealing with the Partnership
shall be entitled to rely on a copy of any resolution or other
action taken by the General Partner, certified by the Secretary,
any Assistant Secretary or any officer thereof, as conclusive
evidence of such action and of the authority of the officer
referred to in such resolution or other action to bind the
Partnership to the extent set forth therein.
6.05 Additional Capital Requirements.
(a) If at any time the General Partner
determines that expenditures exceed receipts (in which event a
"shortfall" shall be deemed to exist), the General Partner shall
give each Partner written notice of the amount of such
shortfall. Any Partner may decline to contribute its share of
such shortfall without breaching its obligations to the other
Partners or the Partnership except that Daka shall be required
to make cash advances to the Partnership in accordance with the
requirements of Section 4.01(a). The additional capital
contributed by any Partner pursuant to this Section 6.05 is
referred to herein as an "Additional Capital Contribution."
(b) Any notice delivered to any Partner in the
Partnership relating to any Additional Capital Contribution
shall be in the form of a written notice specifying the
aggregate dollar amount and a date (which shall be the same date
for all Partners) on which such Additional Capital Contribution
shall be due. Such notice shall be deemed sufficiently given if
personally delivered, transmitted by facsimile, or sent postage
prepaid by overnight courier or registered or certified mail,
return receipt requested to the address of such Partner
designated in writing to the Partnership by such Partner.
<PAGE>
(c) The failure by any Partner to make any
Additional Capital Contribution under this Section 6.05 shall
not decrease that Partner's Percentage Interest in the
Partnership, and conversely, any Additional Capital Contribution
made by any Partner under this Section 6.05 shall not increase
that Partner's Percentage Interest in the Partnership.
6.06 Liability of the Partners; Indemnification.
(a) The Partners and their respective
affiliates shall not have any liability to the Partnership or to
any other Partner for any loss suffered by the Partnership which
arises out of any action or inaction of such Partner undertaken
in carrying out its responsibilities hereunder if such Partner,
in good faith, determined that such course of conduct was in the
best interests of the Partnership and such course of conduct did
not constitute (a) gross negligence or wilful misconduct on the
part of such Partner, (b) a breach of a material provision of
this Agreement or (c) a violation of the Uniform Act.
(b) The parties hereto hereby acknowledge and agree
that both the General Partner and any subsidiary or affiliate of
the General Partner and (without limitation of ServiceMaster's
obligations under Section 3.2 of the Business Transfer
Agreement) ServiceMaster and any subsidiary or affiliate of
ServiceMaster may engage independently or with others in other
business ventures of every nature and description, including,
without limitation, the sale of goods and the provision of
services of the kind and nature sold or provided by the
Partnership. Nothing in this Agreement shall be deemed to
prohibit the General Partner or any subsidiary or affiliate of
the General Partner or (without limitation of ServiceMaster's
obligations under Section 3.2 of the Business Transfer
Agreement) ServiceMaster and any subsidiary or affiliate of
ServiceMaster from dealing or otherwise engaging in any such
business ventures or from conducting business with persons or
entities transacting business with the Partnership. Neither the
Partnership nor any Partner shall have any right by virtue of
this Agreement or the partnership relationship created hereby in
or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures,
even if competitive with the business of the Partnership, shall
not be deemed wrongful or improper.
<PAGE>
(c) Each of the Partners and their respective
officers, directors, employees, agents, representatives and
affiliates (collectively, the "Indemnitees") shall be
indemnified by the Partnership against any and all claims,
losses, judgments, liabilities, damages, costs, expenses
(including attorney's fees) and amounts paid in settlement
(collectively, "Damages") sustained by them as a result of any
action or inaction of such Partner undertaken in carrying out
its responsibilities as a Partner, provided that the same (i)
were not the result of gross negligence or wilful misconduct on
the part of such Partner, (ii) did not entail a breach of a
material provision of this Agreement or (iii) did not constitute
a violation of the Uniform Act. Any Damages incurred by an
Indemnitee shall be paid by the Partnership or reimbursed to the
Indemnitee paying such Damages on a current basis, provided that
such Indemnitee furnishes the Partnership with a written
undertaking to repay all such amounts in the event it is finally
determined that such Indemnitee was not entitled to be
indemnified with respect to such claim. Any indemnity of the
Partnership under this Section 6.06(b) shall be paid from, and
only to the extent of, Partnership assets, and no Partner shall
have any personal liability on account thereof.
6.07 Confidentiality.
(a) Except as required in the performance of
its duties to the Partnership, ServiceMaster (including the
directors, officers, employees, agents and shareholders thereof)
shall not, during the term of this Agreement or at any time
thereafter, directly or indirectly, publish, use, disclose, or
make available to any person, firm, partnership, association,
corporation or other entity, whether or not a competitor of the
Partnership or Daka, other than ServiceMaster's attorneys,
accountants and financial advisors as reasonably necessary to
advise them on legal, accounting, tax or other business aspects
of this Agreement, any confidential information concerning the
assets, business or affairs of the Partnership or Daka,
including, without limitation, any trade secrets, sources of
supply, costs, pricing practices, customer lists, financial
data, employee information or information as to the
Partnership's or Daka's organizational structure, except for
such information as comes into the public domain through any
means other than by the action of ServiceMaster or except as
required by law, provided that the requirements of this
paragraph shall not prohibit ServiceMaster from making such
disclosures as ServiceMaster reasonably deems necessary to
comply with the disclosure requirements imposed by applicable
securities laws, to prepare its financial statements or to
prosecute or defend against any claim.
(b) Except as required in the performance of its
duties to the Partnership, Daka (including the directors,
officers, employees, agents and shareholders thereof) shall not,
during the term of this Agreement or at any time thereafter,
directly or indirectly, publish, use, disclose, or make
available to any person, firm, partnership, association,
corporation or other entity, whether or not a competitor of the
Partnership, other than Daka's attorneys, accountants and
financial advisors as reasonably necessary to advise Daka on
legal, accounting, tax or other business aspects of this
Agreement, any confidential information concerning the assets,
business, or affairs of the Partnership or the terms of this
Agreement, except for such information as comes into the public
domain through any means other than by the action of Daka or
except as required by law, provided that the requirements of
this paragraph shall not prohibit Daka or any of its affiliates
from making such disclosures as Daka reasonably deems necessary
to comply with the disclosure requirements imposed by applicable
securities laws, to prepare its financial statements or to
prosecute or defend against any claim.
6.08 Rights and Obligations With Respect To
Opportunities. In clarification of the rights and obligations
of the parties under Section 1.04 hereof, the parties hereby
agree that (i) ServiceMaster shall have no liability to the
General Partner or the Partnership in the event that
ServiceMaster elects not to inform the Partnership with respect
to (or otherwise fail to provide the Partnership with) any
particular Opportunity and (ii) the General Partner shall have
no liability to the Partnership or ServiceMaster in the event
that the General Partner elects not to cause the Partnership to
pursue any Opportunity presented to it by ServiceMaster.
<PAGE>
ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
8.01 Limitation on Transfers of Partnership
Interests.
(a) The interests of ServiceMaster in the
Partnership (the "Limited Partnership Interest") may not be
sold, transferred, assigned or otherwise conveyed, in whole or
in part, including without limitation any transfer pursuant to
any liquidation, dissolution, merger or similar transaction
involving such Partner (a "Transfer"), except (i) to a successor
or a person controlling, controlled by or under common control
with ServiceMaster, (ii) pursuant to that certain Put and Call
Agreement of even date herewith (the "Put/Call Agreement") by and
between ServiceMaster and DAKA International, Inc. or (iii) as part
of the sale of all or substantially all the assets or equity of the
business unit which holds the Limited Partnership Right, so long as
such unit holds significant assets other than the Limited Partnership
Interest, upon the execution by ServiceMaster of a written assignment,
the execution by the transferee of this Agreement and the written
assumption by the transferee of the obligations of ServiceMaster
hereunder; provided, however, that any such Transfer shall not be
permitted if the Partnership delivers to ServiceMaster an opinion of
counsel that such Transfer will result in the Partnership being
classified as an association or otherwise taxable as a corporation
for United States Federal income tax purposes. In the event of any
such Transfer, the transferee shall become a substituted Limited Partner
hereunder. ServiceMaster shall notify the General Partner of a proposed
Transfer hereunder not less than 30 days prior to the proposed consummation
of the Transfer and shall provide to the General Partner such information
concerning the proposed Transfer and the proposed transferee as the
General Partner shall reasonably request.
(b) No Transfer shall be binding upon the Partnership until the
General Partner has received an executed copy of such assignment
in form and substance satisfactory to the General Partner. The
Partnership and the Partners shall be entitled to treat the record
owner of any Limited Partnership Interest as the absolute owner
thereof in all respects and shall incur no liability for distributions
of cash or other property made in good faith to such owner until such
time as a written assignment of such interest has been received by
the General Partner.
<PAGE>
8.02 General Partner Interest. The interest of the
General Partner shall not be assignable; provided, however, that
(i) ServiceMaster acknowledges that Daka has agreed to, and will
as soon as practicable after the date hereof, pledge its
interest in the Partnership to banks and/or their agents in
connection with borrowed money indebtedness of Daka, DAKA
International or any subsidiary thereof and that upon a default
with respect to such indebtedness, such banks will have all the
rights and remedies of a secured creditor and all rights and
powers of Daka with respect to the pledged interest to the
extent provided in the agreement evidencing such indebtedness or
pledge and the Uniform Act and (ii) after the DRLP Payoff
Obligation has been paid in full, such interest may be Transferred
(A) to a person controlling, controlled by or under
common control with Daka or (B) as part of the sale of all or
substantially all the assets or equity of the General Partner or a
division or business unit which engages in the food service business
upon the execution by the General Partner of a written assignment,
the execution by the transferee of this Agreement and the written
assumption by the transferee of the obligations of the General Partner
hereunder; provided, however, that any such Transfer shall not be
permitted if ServiceMaster delivers to the General Partner an opinion
of counsel that such Transfer will result in the Partnership being
classified as an association or otherwise taxable as a corporation
for United States Federal income tax purposes. In the event of any such
Transfer, the transferee shall become the General Partner hereunder and
the Partnership shall cause the execution of any necessary papers including,
without limitation, an amendment to the Certificate of Limited
Partnership to record the substitution of the transferee as
General Partner. The General Partner shall notify ServiceMaster of a
proposed Transfer hereunder not less than 30 days prior to the
consummation of the Transfer and shall provide to ServiceMaster
such information concerning the proposed Transfer and the proposed
transferee as ServiceMaster shall reasonably request. Notwithstanding the
foregoing, DAKA shall be permitted to grant a security interest
in or collaterally assign the Call Right and its interest in
this Agreement in favor of The Chase Manhattan Bank, N.A.,
pursuant to that certain Amended and Restated Credit Agreement
dated as of April 29, 1994, as amended, or any other agreement
or instrument relating to indebtedness refinancing, refunding or
otherwise replacing any indebtedness thereunder.
8.03 Put/Call Agreement. Each of the General
Partner and ServiceMaster hereby acknowledge that in connection
with the transactions contemplated by this Agreement, DAKA
International and ServiceMaster have executed and delivered the
Put/Call Agreement substantially in the form of Exhibit A hereto.
<PAGE>
ARTICLE IX
DISSOLUTION AND TERMINATION
9.01 Events of Dissolution.
(a) The Partnership shall be dissolved upon the
earliest to occur of:
(i) February 10, 2005;
(ii) on a date jointly designated by the Partners;
(iii) upon the occurrence of any dissolution
event specified in the Uniform Act; or
(iv) upon the sale or other disposition of all or
substantially all of the Partnership's assets.
(b) Dissolution of the Partnership shall be
effective on the day on which the event occurs giving rise to
the dissolution, but the Partnership shall not terminate until
any doing business certificates regarding the Partnership shall
have been canceled and the assets of the Partnership shall have
been distributed as provided herein. Notwithstanding the
dissolution of the Partnership, prior to the termination of the
Partnership, as aforesaid, the business of the Partnership and
the affairs of the Partners, as such, shall continue to be
governed by this Agreement. Upon dissolution, the General
Partner or, if there be none, a liquidator appointed by the
Partners shall liquidate the assets of the Partnership, apply
and distribute the proceeds thereof as contemplated by this
Agreement and cause the cancellation of the Partnership's doing
business certificates.
9.02 Distributions Upon Liquidation.
(a) After payment of all unpaid Partnership
expenses, including the Management Fee (as defined in Section
6.03(a) hereof) and any reimbursement of the General Partner for
costs or expenses reimbursable pursuant to Section 6.03(b)
hereof, and of liabilities owing to creditors (including the
DRLP Payoff Obligation and Advances), the General Partner or the
liquidator shall set up such reserves as it deems reasonably
necessary for any contingent or unforeseen liabilities or
obligations of the Partnership. Said reserves may be paid over
by the General Partner or liquidator to a bank, to be held in
escrow for the purpose of paying any such contingent or
unforeseen liabilities or obligations and, at the expiration of
such period as the General Partner or liquidator may deem
advisable, such reserves shall be distributed to the Partners or
their assigns in the manner set forth in Section 9.02(b) below.
<PAGE>
(b) After paying liabilities and providing for
reserves as provided in Section 9.02(a), the General Partner or
liquidator shall cause the remaining net assets of the
Partnership to be distributed to and among the Partners in the
manner set forth in Section 5.01 hereof. In the event that,
upon dissolution, any part of such net assets consists of notes
or accounts receivable or other noncash assets, the General
Partner or liquidator may take whatever steps it deems
appropriate to convert such assets into cash or into any other
form which would facilitate the distribution thereof. If any
assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market
value net of any liabilities.
9.03 Survival of Obligations. Except as otherwise
provided in this Agreement, no dissolution of the Partnership
shall relieve, release or discharge any Partner or any of its
successors, assigns, heirs or legal representatives, from any
previous breach or default of, or any obligation previously
incurred or accrued under, any provision of this Agreement, and
any and all such liabilities, claims, demands or causes of
action arising from any such breaches, defaults and obligations
shall survive such dissolution and termination.
<PAGE>
ARTICLE X
MISCELLANEOUS
10.01 Fees and Expenses. Each Partner will bear
its own expenses in connection with the negotiation and
execution of this Agreement, the Business Transfer Agreement and
the Put/Call Agreement.
10.02 Law Governing. This Agreement shall be
construed under and governed by the laws of the State of
Delaware, excluding conflicts of laws provisions.
10.03 Arbitration. The parties agree that any
dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be finally settled
by arbitration conducted expeditiously in accordance with the
Arbitration Rules and Procedures of J.A.M.S./ENDISPUTE as in
effect from time to time, which arbitration proceeding shall be
conducted in Boston, Massachusetts. Judgment upon the award
entered by the arbitrator(s) may be entered by any court having
jurisdiction thereof. Each party shall bear its own expenses
with respect to such proceeding.
10.04 Notices. All notices, requests, demands and
other communications hereunder shall be deemed to have been duly
given if delivered, or mailed by certified or registered mail,
return receipt requested to any Partner at the address set forth
in Section 1.07 hereof or to such other address of which any
Partner may notify the other Partners as provided above.
10.05 Entire Agreement. This Agreement, including
the Exhibits referred to herein, is complete; and all promises,
representations, understandings, warranties and agreements with
reference to the subject matter hereof, and all inducements to
the making of this Agreement relied upon by all the parties
hereto, have been expressed herein or in said Exhibits.
10.06 Binding Effect; Non-Assignment. This
Agreement shall be binding upon, and shall be enforceable by and
inure to the benefit of, the Partners and their respective
successors and assigns; provided, however, that this Agreement
may not be assigned by any Partner without the prior written
consent of the other Partners, except as otherwise expressly
provided herein.
10.07 Publicity. [Intentionally Omitted].
10.08 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original and all of which shall constitute one agreement. Every page
of this Agreement in the form delivered by Daka to ServiceMaster has
been initialed by Michael A. Woodhouse, Senior Vice President and Chief
Financial Officer of Daka. Every page of this Agreement in the form
delivered by ServiceMaster to Daka has been initialed by Alan D. Sutherland,
Senior Vice President and Chief Financial Officer of ServiceMaster.
10.09 Severability. In case any one or more of the
provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement, and a
suitable and equitable provision shall be substituted for the
invalid, illegal or unenforceable provision in order to carry
out, so far as may be valid, legal or enforceable, the intent
and purpose of such provision.
10.10 Partition. The Partners hereby agree that no
Partner nor any successor-in-interest to any Partner shall have
the right while this Agreement remains in effect to have the
property of the Partnership partitioned, or to file a complaint
or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on
behalf of himself, his successors, representatives, heirs, and
assigns, hereby waives any such right. It is the intention of
the Partners that during the term of this Agreement, the rights
of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement,
and that the right of any Partner or successor-in-interest to
assign, transfer, sell or otherwise dispose of his interest in
the Partnership's properties shall be subject to the limitations
and restrictions of this Agreement.
<PAGE>
10.11 Waivers and Amendments. The failure of any
Partner to insist upon strict performance of a covenant
hereunder or of any obligation hereunder, irrespective of the
length of time for which such failure continues, shall not be a
waiver of such Partner's right to demand strict compliance in
the future. No consent or waiver, express or implied, to or of
any breach or default in the performance of any obligation
hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any
other obligation hereunder. This Agreement may be amended only
by a writing executed by all Partners.
10.12 Captions. Titles or captions of Articles or
Sections contained in this Agreement are inserted only as a
matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
10.13 Gender, Etc. In the case of all terms used in
this Agreement, the singular shall include the plural and the
masculine gender shall include the feminine and neuter, and vice
versa, as the context requires.
10.14 Creditors. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any
creditor of any Partner or of the Partnership other than a
Partner who is a creditor of the Partnership pursuant to the
terms of this Agreement.
10.15 No Third-Party Beneficiaries. This Agreement
is intended solely for the benefit of the parties hereto.
Neither this Agreement or any of the relationships or
transactions contemplated hereby shall be deemed to create or
enlarge any rights in any parties not a party hereto, under any
theory of third-party beneficiary or otherwise.
<PAGE>
IN WITNESS WHEREOF the Partners have executed this
Agreement as a document under seal as of the 8th day of
February, 1995.
DAKA, INC.
By:
----------------------------
Name:
Title:
SERVICEMASTER MANAGEMENT SERVICES L.P.
By: SERVICEMASTER MANAGEMENT
CORPORATION
Its: Managing General Partner
By:
------------------------------
Name:
Title:
PUT AND CALL AGREEMENT
by and between
DAKA INTERNATIONAL, INC.
and
SERVICEMASTER MANAGEMENT SERVICES L.P.
February 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - PUT AND CALL RIGHTS 1
Section 1.01 Definitions 1
Section 1.02 Grant of Put Right 1
Section 1.03. Grant of Call Right 2
Section 1.04. Consideration 3
Section 1.05. Representations and Warranties of ServiceMaster 5
Section 1.06. Representations and Warranties of DAKA 5
Section 1.07. Conditions 6
Section 1.08. Covenants of ServiceMaster 7
Section 1.09. Covenants of DAKA 7
ARTICLE II - MISCELLANEOUS 8
Section 2.01. Law Governing 8
Section 2.02. Notices 8
Section 2.03. Prior Agreements Superseded 9
Section 2.04. Assignability 9
Section 2.05. Captions and Gender 9
Section 2.06. Execution in Counterparts 10
Section 2.07. Amendments; Waivers 10
Section 2.08. [Intentionally Omitted] 10
Section 2.09 Arbitration 10
<PAGE>
PUT AND CALL AGREEMENT
THIS PUT AND CALL AGREEMENT ("Agreement"), dated
February 8, 1995 is entered into by and between ServiceMaster
Management Services L.P., a Delaware limited partnership
("ServiceMaster"), and DAKA International, Inc., a Delaware
corporation ("DAKA").
WHEREAS, as of the date hereof, Daka, Inc., a
Massachusetts corporation and a wholly-owned subsidiary of DAKA
(the "General Partner"), and ServiceMaster have formed Daka
Restaurants, L.P., a Delaware limited partnership (the
"Partnership"), pursuant to a Limited Partnership Agreement of
even date herewith (the "Partnership Agreement"); and
WHEREAS, in connection with the formation of the
Partnership and the execution of a certain Business Transfer
Agreement of even date herewith (the "Business Transfer
Agreement") whereby ServiceMaster agreed to transfer certain
assets to the Partnership, ServiceMaster has required that DAKA
execute this Agreement whereby ServiceMaster, subject to the
terms and conditions hereof, will have the right to require DAKA
to purchase ServiceMaster's interest in the Partnership (the
"Limited Partnership Interest") and DAKA has required that
ServiceMaster execute this Agreement whereby DAKA, subject to
the terms and conditions hereof will have the right to require
ServiceMaster to sell its interest in the Partnership to DAKA.
NOW THEREFORE, in consideration of the foregoing and
of the mutual covenants set forth below, the parties hereby
agree as follows:
ARTICLE I
PUT AND CALL RIGHTS
Section 1.01 Definitions. Unless otherwise provided
herein, all capitalized terms used herein and not otherwise
defined shall have the respective meanings ascribed thereto in
the Partnership Agreement.
Section 1.02 Grant of Put Right.
(a) From and after the Closing Date to and
including the date which is the tenth (10th) anniversary of
the Closing Date, ServiceMaster shall have the right (the "Put
Right") to require DAKA to purchase all, but not less than all,
of the Limited Partnership Interest then held by ServiceMaster
upon the terms and conditions set forth herein:
(i) The Put Right shall be exercised pursuant to a
written notice (the "Put Notice") delivered to DAKA and the
General Partner by ServiceMaster stating that ServiceMaster is
exercising its right to put all, but not less than all, of its
Limited Partnership Interest to DAKA; the date of the Put Notice
is referred to herein as the "Put Exercise Date;"
<PAGE>
(ii) ServiceMaster shall not have the right, with
respect to any Limited Partnership Interest put to DAKA, to
receive any distribution paid on or after the Put Exercise Date
until the date on which the Put Right is consummated;
(iii) The Put Right may not be assigned to any
party by ServiceMaster except a party controlling, controlled by
or under common control with ServiceMaster without the express
written consent to such assignment by DAKA; provided that
ServiceMaster may, without the consent of DAKA, assign the Put
Right as part of the sale of all or substantially all the assets
or equity of the business unit which holds the Put Right, so long as
such unit holds significant assets other than the Limited Partnership
Interest;
(iv) The closing of the Put Right shall take
place five (5) business days after all of the conditions to
DAKA's obligation to purchase from ServiceMaster its Limited
Partnership Interest set forth in Section 1.07 have been
satisfied or waived in writing or on such other date as may be
mutually agreed by the parties (the "Put Consummation Date").
Section 1.03. Grant of Call Right.
(a) From and after the date which is the fifth
(5th) anniversary of the Closing Date to and including the date
which is the tenth (10th) anniversary of the Closing Date, DAKA
shall have the right (the "Call Right") to require ServiceMaster
to sell all, but not less than all, of the Limited Partnership
Interest then held by ServiceMaster to DAKA upon the terms and
conditions set forth herein:
(i) The Call Right shall be exercised pursuant to
a written notice (the "Call Notice") delivered to ServiceMaster
by DAKA stating that DAKA is exercising its right to call all,
but not less than all, of ServiceMaster's Limited Partnership
Interest; the date of the Call Notice is referred to herein as
the "Call Exercise Date;"
(ii) ServiceMaster shall not have the right, with
respect to the Limited Partnership Interest called by DAKA, to
receive any distribution paid on or after the Call Exercise Date
until the date on which the Call Right is consummated;
(iii) The Call Right may not be assigned to any
party by DAKA except a party controlling, controlled by or under
common control with DAKA without the express written consent to
such assignment by ServiceMaster; provided that DAKA may,
without the consent of ServiceMaster, assign the Call Right to
any successor to substantially all of its business by merger,
consolidation or otherwise, who agrees to be bound hereby, or as
part of the sale of all or substantially all the assets or
equity of Daka, Inc. or a division or business unit which
engages in the food service business. Notwithstanding the
foregoing, DAKA shall be permitted to grant a security interest
in or collaterally assign the Call Right and its interest in
this Agreement in favor of The Chase Manhattan Bank, N.A.,
pursuant to that certain Amended and Restated Credit Agreement
dated as of April 29, 1994, as amended, or any other agreement
or instrument relating to indebtedness refinancing, refunding or
otherwise replacing any indebtedness thereunder.
<PAGE>
(iv) The closing of the Call Right shall take
place five (5) business days after all of the conditions to
DAKA's obligation to purchase from ServiceMaster its Limited
Partnership Interest set forth in Section 1.07 have been
satisfied or waived in writing or on such other date as may be
mutually agreed by the parties (the "Call Consummation Date").
Section 1.04. Consideration
(a) If the Put Right is exercised, subject to the
conditions set forth in Section 1.07 hereof, the consideration
to be paid to ServiceMaster in exchange for all of the Limited
Partnership Interest held by ServiceMaster shall be equal to
100% of the Base Price (as defined below) and shall be payable
by DAKA as provided in Section 1.04(c).
(b) If the Call Right is exercised, subject to the
conditions set forth in Section 1.07 hereof, the consideration
to be paid to ServiceMaster in exchange for all of the Limited
Partnership Interest held by ServiceMaster shall be equal to
120% of the Base Price and shall be payable by DAKA as provided
in Section 1.04(c).
(c) The consideration payable by DAKA set forth in
Section 1.04(a), if the Put Right is exercised, or in Section
1.04(b), if the Call Right is exercised, shall be paid in cash;
provided, however, that if the total amount of the consideration
to be paid by DAKA exceeds $3,000,000, then DAKA shall have the
right to pay any portion of such consideration in excess of
$3,000,000 by delivering to ServiceMaster on the Applicable
Consummation Date (as defined below) a promissory note of DAKA
in an equal principal amount due and payable in full six months
after the Applicable Consummation Date (the "Maturity Date"),
which note shall bear interest until the Maturity Date at an
annual rate equal to the Prime Rate (as defined below) from time
to time in effect, and, if any portion of principal remains
unpaid after the Maturity Date, at an annual rate equal to the
Applicable Interest Percentage (as defined below) from time to
time in effect. Such promissory note shall be in form and
substance reasonably acceptable to ServiceMaster.
<PAGE>
(d) "Applicable Consummation Date" shall mean, as
the context requires, the Put Consummation Date in the case of
exercise by ServiceMaster of the Put Right or the Call
Consummation Date in the case of exercise by DAKA of the Call
Right.
(e) "Applicable Exercise Date" shall mean, as the
context requires, the Put Exercise Date in the case of exercise
by ServiceMaster of the Put Right or the Call Exercise Date in
the case of exercise by DAKA of the Call Right.
(f) "Applicable Interest Percentage" shall mean the
Prime Rate plus 400 basis points.
(g) The "Base Price" at the Determination Time (as defined below)
shall be equal to:
the sum of (i) $2.6 million, plus (ii) all Additional Capital
Contributions made by ServiceMaster pursuant to Section 6.05 of
the Partnership Agreement at or prior to the Determination Time;
plus (iii) all items of income and gain allocated to ServiceMaster's
capital account as maintained in accordance with Article III of the
Partnership Agreement up to the Determination Time; plus (iv) the
amount by which the charges to ServiceMaster's capital account to
and including the Determination Time shall exceed the amount that would
have been charged to that account if all of the Accounts Receivable
(as defined in the Business Transfer Agreement) transferred to the
Partnership by ServiceMaster pursuant to the Business Transfer Agreement
had been collected in full and if no reserve had been established by
the Partnership with respect to any of those Accounts Receivable;
plus (v) any amount which shall have been charged to ServiceMaster;s
capital account which would not have been so charged if the guarantees
and security interests permitted by clause (vii) of Section 6.01(a)
of the Partnership Agreement had never been granted;
minus
the sum of (i) all items of loss and deduction allocated to ServiceMaster's
capital account as maintained in accordance with Article III of the
Partnership Agreement up to the Determination Time; plus all distributions
made by the Partnership to ServiceMaster pursuant to Article V of the
Partnership Agreement to and including the Determination Time.
The Base Price shall be determined as of the end of the calendar month
closest (whether preceding or following) the Applicable Exercise Date
(the "Determination Time"), provided, however, that if any indebtedness
guaranteed by or secured by assets of the Partnership as permitted by
clause (vii) of Section 6.01(a) of the Partnership Agreement ("Subject Debt")
is accelerated, then DAKA shall give notice to ServiceMaster of such
acceleration (a "Subject Debt Acceleration") and if ServiceMaster
exercises the Put Right or DAKA exercises the Call Right within 30 days
after the date of the Subject Debt Acceleration, ServiceMaster shall
have the right, exercisable within 10 days after the Applicable Exercise
Date, to elect to have the Base Price determined as of the end of the last
calendar month occurring prior to the Subject Debt Acceleration
(in which case the Base Price shall be reduced by the amount of all
distributions which ServiceMaster shall have received from the Partnership
after that month end).
(h) "Prime Rate" shall mean the lower of (i) the rate of interest
reported in The Wall Street Journal (Eastern Edition) as the
"Prime Rate" in its general guide to money rates and described
as the base rate on corporate loans at large U.S. money center
commercial banks on the relevant date or (ii) the highest rate
permitted by applicable law.
Section 1.05. Representations and Warranties of
ServiceMaster. ServiceMaster hereby represents and warrants to
DAKA as of the Closing Date, as of the Applicable Exercise Date
and as of the Applicable Consummation Date as follows:
(a) ServiceMaster owns beneficially and of record
all of its Limited Partnership Interest free and clear of any
and all liens, claims, options, charges, encumbrances, rights or
restrictions of any nature other than those arising under the
terms of the applicable partnership agreement or the conduct of
the Partnership's business (herein "Claims"). Upon delivery to
DAKA of instruments of transfer and of any certificates
representing ServiceMaster's Limited Partnership Interest duly
endorsed in blank for transfer or with powers attached duly
executed in blank, against delivery of the consideration
therefor as provided herein, good and marketable title thereto
shall be transferred to DAKA, free and clear of any and all
Claims.
<PAGE>
(b) ServiceMaster has full power and authority to
enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. This Agreement and each
agreement, document and instrument to be executed and delivered
by ServiceMaster pursuant to or as contemplated by this
Agreement constitute, or when executed and delivered by
ServiceMaster will constitute, valid and binding obligations of
ServiceMaster enforceable in accordance with their respective
terms.
Section 1.06. Representations and Warranties of
DAKA. DAKA hereby represents and warrants to DAKA as of the
Closing Date, as of the Applicable Exercise Date and as of the
Applicable Consummation Date as follows:
(a) DAKA has full power and authority to enter into
this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of DAKA pursuant to or as
contemplated by this Agreement and to carry out the transactions
contemplated hereby and thereby. This Agreement and each
agreement, document and instrument to be executed and delivered
by DAKA pursuant to or as contemplated by this Agreement
constitute, or when executed and delivered by DAKA will
constitute, valid and binding obligations of DAKA enforceable in
accordance with their respective terms. The execution, delivery
and performance by DAKA of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate the certificate of
incorporation or by-laws of DAKA or any laws, rules or
regulations of the United States or any state or other
jurisdiction applicable to DAKA; and
(ii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or
credit agreement or any other agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award
to which DAKA is a party or by which the property of DAKA is
bound or affected.
Section 1.07. Conditions.
(a) Any provision set forth herein to the contrary
notwithstanding, the parties hereby acknowledge and agree that
DAKA shall have no obligation to purchase from ServiceMaster its
Limited Partnership Interest and ServiceMaster shall have no
obligation to sell to DAKA (i.e. the Applicable Consummation
Date shall not occur) until the following conditions have been
satisfied or waived in writing:
<PAGE>
(i) DAKA, ServiceMaster and the Partnership have
made all filings required by the Hart-Scott-Rodino Anti-Trust
Improvement Act of 1976, as amended (the "HSR Act") and all
applicable time limitations under the HSR Act shall have expired
or have been earlier terminated.
(ii) No injunction shall have been issued by any
court enjoining or prohibiting the complete consummation of the
Put Right or the Call Right, as the case may be.
(b) If the conditions set forth in Section 1.07(a)
above cannot be satisfied within 180 days after the Applicable
Exercise Date, then either party, shall have
the right to (i) rescind the exercise of the Put Right or the
Call Right, as the case may be, and thereafter (A) ServiceMaster shall
have all rights with respect to the Partnership which
ServiceMaster had immediately prior to such exercise as if the
Put or Call had never been exercised (including the right to its
proportionate share of all distributions and allocations prior
to such rescission regardless of the provisions of Sections
1.02(a)(ii) or 1.03(a)(ii) hereof) and (B) ServiceMaster and
DAKA, as applicable, shall have the right to exercise the Put
Right or the Call Right, as applicable, again in accordance with
Section 1.02 and 1.03, respectively or (ii) after February 10,
2000, elect to cause the Partnership to liquidate in accordance
with Article IX of the Partnership Agreement. In addition to any other
rights ServiceMaster may have, in the event DAKA shall for any reason
not pay the full amount owed to ServiceMaster by reason of the exercise
of the Put Right or the Call Right on or before the 45th day after the
Applicable Consummation Date, then (i) ServiceMaster shall have the right
to rescind such exercise with the effect specified in the preceding sentence;
(ii) in the case of an exercise of the Call Right, DAKA shall not have
the right to exercise the Call Right again for a period of six (6) months
from such Call Consummation Date, unless such Call Consummation Date occurred
twelve (12) months or less before the last day on which the Call Right can
be is exercised pursuant to Section 1.02(a), in which case this clause (ii)
shall be inoperative and (iii) on or after February 10, 2000. ServiceMaster
shall have the right to elect to cause the Partnership to liquidate.
Section 1.08. Covenants of ServiceMaster.
ServiceMaster hereby covenants and agrees with DAKA as follows:
(a) ServiceMaster shall execute such documents as
DAKA or the General Partner may reasonably require in connection
with the consummation of the Put Right or the Call Right
provided ServiceMaster shall not be required to assume any
liability or obligation not required by this Agreement.
(b) If the Put Right or the Call Right is
exercised, ServiceMaster shall use its best efforts to cause all
conditions set forth in Section 1.07 to be satisfied.
ServiceMaster shall provide to DAKA any and all information and
all such other assistance as DAKA may reasonably request
necessary for DAKA, the General Partner and the Partnership to
comply with any and all notice, reporting or filing requirements
under the HSR Act in connection with the exercise of the Put
Right or the Call Right, as the case may be. If required under
the HSR Act, ServiceMaster will file complete and accurate
notification and report forms pursuant to the HSR Act in
connection with the consummation of the Put Right or the Call
Right as soon as practicable after DAKA's request and shall file
on a timely basis such additional information and documentary
materials as may be requested pursuant to the HSR Act.
ServiceMaster shall promptly inform DAKA of any inquiries or
communications from or to any governmental agency with respect
to the HSR Act and provide copies of any written communications
received from any such agency.
(c) If DAKA elects in accordance with Section
1.07(b)(ii) hereof to cause the Partnership to liquidate,
ServiceMaster shall consent to such liquidation pursuant to
Section 9.01(a)(ii) of the Partnership Agreement.
<PAGE>
(d) Except as expressly provided in this Agreement,
ServiceMaster shall not be required to assume any obligations or
liabilities or make any payments.
(e) ServiceMaster shall keep all information provided by DAKA
pursuant to Section 1.09(d) confidential and will not publish, use,
disclose or make available to any person, firm, partnership, association
corporation or other entity, other than ServiceMaster's attorney's
accountants and financial advisors as reasonably necessary to advise
ServiceMaster on legal, accounting, tax matters relating to
ServiceMaster's Put Right hereunder except for such information as
comes into the public domain through any means other than by the
action of ServiceMaster or as required by law.
Section 1.09. Covenants of DAKA. DAKA hereby
agrees and covenants with ServiceMaster as follows:
(a) If the Put Right or the Call Right is
exercised, DAKA shall use its best efforts to cause all
conditions set forth in Section 1.07 to be satisfied, to comply
with all applicable laws and regulations in connection with the
consummation of the Put Right or the Call Right, and to obtain
or cause to be obtained prior to the Closing Date all necessary
consents and approvals, including without limitation under the
HSR Act, as promptly as practicable after the Applicable
Exercise Date and will request early termination of the waiting
period under the HSR Act. As soon as practicable after the Put
Exercise Date, DAKA will file and, if necessary, will cause the
Partnership to file complete and accurate notification and
report forms pursuant to the HSR Act in connection with the
consummation of the Put Right. DAKA will file and, if
necessary, will cause the Partnership to file complete and
accurate notification and report forms pursuant to the HSR Act
in connection with the consummation of the Call Right in advance
of the Call Exercise Date and will use its best efforts to
obtain clearance under the HSR Act not later than five (5)
business days after the Call Exercise Date. DAKA shall promptly
inform ServiceMaster of any inquiries or communications from or
to any governmental agency with respect to the HSR Act and
provide copies of any written communications received from any
such agency.
(b) If ServiceMaster elects in accordance with
Section 1.07(b)(ii) hereof to cause the Partnership to
liquidate, DAKA shall consent to such liquidation pursuant to
Section 9.01(a)(ii) of the Partnership Agreement.
(c) If ServiceMaster exercises the Put Right or
DAKA exercises the Call Right, DAKA agrees to indemnify and hold
ServiceMaster harmless from and against any liability to the
Partnership for the return to the Partnership of any part of
capital contributed by ServiceMaster to the Partnership as a
result of the Partnership's insolvency, provided, however, that
DAKA's obligation to so indemnify ServiceMaster shall be limited
to the aggregate amount of distributions that ServiceMaster
would have received after the Applicable Exercise Date but for
the operation of Section 1.02(a)(ii) or Section 1.03(a)(ii)
hereof.
(d) DAKA will provide to ServiceMaster such reasonable
information as ServiceMaster may reasonably request from time
to time concerning DAKA's complicance with the covenants of
the Subject Debt, unless prohibited by the terms of the Subject
Debt; provided that DAKA will not be required by this Section 1.09(d)
to test covenant compliance or provide covenant compliance information
more frequently than required by the Subject Debt.
<PAGE>
ARTICLE II
MISCELLANEOUS
Section 2.01. Law Governing. This Agreement
shall be construed under and governed by the internal laws, and
not the law of conflicts, of the State of Delaware.
Section 2.02. Notices. Any notice, request, demand
or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been given (i) if
delivered or sent by registered or certified mail upon the
sooner of the expiration of three days after deposit in United
States post office facilities properly addressed with postage
prepaid or acknowledgment of receipt, (ii) if sent by reputable
overnight courier service upon the sooner of the second business
day after delivery to the courier or acknowledgement of receipt
or (iii) if hand delivered in person upon acknowledgement of
receipt, as follows:
To ServiceMaster: ServiceMaster Management
Services L.P.
One ServiceMaster Way
Downers Grove, IL 60515
Attn.: Brian D. Oxley
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Robert H. Kinderman, Esq.
To DAKA: DAKA International, Inc.
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923-4001
Attn.: Charles W. Redepenning, Jr.,
Senior Vice President and General Counsel
with a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109-2881
Attn: Ettore Santucci, P.C.
or to such other address of which any party may
notify the other parties as provided above.
Section 2.03. Prior Agreements Superseded. This
Agreement supersedes all prior understandings and agreements
among the parties relating to the subject matter hereof.
Section 2.04. Assignability. This Agreement shall
not be assignable by either party without the prior written
consent of the other party, except as provided in Section 1.02
or 1.03. This Agreement shall be binding upon and enforceable
by, and shall insure to the benefit of, the parties hereto and
their respective successors and permitted assigns, and no
others. Notwithstanding the foregoing, nothing in this
Agreement is intended to give any person not named herein the
benefit of any legal or equitable right, remedy or claim under
this Agreement, except as expressly provided herein.
Section 2.05. Captions and Gender. The Captions in
this Agreement are for convenience only and shall not affect the
construction or interpretation of any term or provision hereof.
The use in this Agreement of the masculine pronoun in reference
to a party hereto shall be deemed to include the feminine or
neuter pronoun, as the context may require.
<PAGE>
Section 2.06. Execution in Counterparts. For the
convenience of the parties and to facilitate execution, this
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall
constitute one and the same document.
Every page of this Agreement in the form delivered by DAKA to ServiceMaster
has been initialed by Michael A. Woodhouse, Senior Vice President and Chief
Financial Officer of DAKA. Every page of this Agreement in the form
delivered by ServiceMaster to DAKA has been initialed by Alan D. Sutherland,
Senior Vice President and Chief Financial Officer of ServiceMaster.
Section 2.07. Amendments; Waivers. This Agreement
may not be amended or modified except by a writing duly and
validly executed by each of DAKA and ServiceMaster. Any party
hereto may waive any covenant or condition intended for its
benefit in its discretion, but delay on the party of any party
in exercising any right, power or privilege hereunder shall not
operate as a waiver thereof, nor shall any waiver on the part of
any party of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such
right, power or privilege.
Section 2.08. [Intentionally Omitted].
Section 2.09 Arbitration. The parties agree that
any dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be finally settled
by arbitration conducted expeditiously in accordance with the
Arbitration Rules and Procedures of J.A.M.S./ENDISPUTE as in
effect from time to time, which arbitration proceeding shall be
conducted in Boston, Massachusetts. Judgment upon the award
entered by the arbitrator(s) may be entered by any court having
jurisdiction thereof. Each party shall bear its own expenses
with respect to such proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
or caused this Agreement to be executed as of the date set forth
above.
SERVICEMASTER MANAGEMENT SERVICES L.P.
By: SERVICEMASTER MANAGEMENT CORPORATION
Its Managing General Partner
By: __________________________________
Name:
Title:
DAKA INTERNATIONAL, INC.
By: ___________________________________
Name:
Title:
