<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1997
REGISTRATION NO. 333-31815
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
AMERICAN RESIDENTIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE 1711 76-0484996
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
POST OAK TOWER, SUITE 725
5051 WESTHEIMER ROAD
HOUSTON, TEXAS 77056-5604
(713) 599-0100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
JOHN D. HELD, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
AMERICAN RESIDENTIAL SERVICES, INC.
POST OAK TOWER, SUITE 725
5051 WESTHEIMER ROAD
HOUSTON, TEXAS 77056-5604
(713) 599-0100
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
Copy to:
JAMES L. LEADER, ESQ.
BAKER & BOTTS, L.L.P.
ONE SHELL PLAZA
HOUSTON, TEXAS 77002-4995
(713) 229-1234
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
Prospectus which is a part of this Registration Statement relates to 143,923
shares of Common Stock and associated rights to purchase preferred stock of the
Registrant covered by Registration No. 333-18623 (including all amendments
thereto) previously filed by the Registrant on Form S-4 in addition to the
10,000,000 shares of Common Stock and associated rights and $100,000,000 of
Convertible Subordinated Debt Securities registered hereby.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
[AMERICAN RESIDENTIAL SERVICES, INC. LOGO]
AMERICAN RESIDENTIAL SERVICES, INC.
COMMON STOCK
CONVERTIBLE SUBORDINATED DEBT SECURITIES
---------------------
American Residential Services, Inc. ("ARS" and, collectively with its
subsidiaries, the "Company") may offer and issue the 10,143,923 shares of its
common stock, $.001 par value per share (the "Common Stock"), and $100,000,000
aggregate principal amount of convertible subordinated debt securities (the
"Convertible Debt Securities") covered by this Prospectus in business
combination transactions (each, an "Acquisition") involving its acquisition,
directly or indirectly, of businesses or other operating assets. It anticipates
these Acquisitions will consist principally of businesses that provide (i)
maintenance, repair and replacement services for heating, ventilating and air
conditioning, plumbing, electrical, indoor air quality and other systems in
homes and commercial buildings and (ii) new installation services of those
systems in homes and small commercial facilities under construction. ARS expects
that (i) the terms of these Acquisitions will be determined by direct
negotiations with the owners or controlling persons of the businesses or assets
to be acquired, (ii) the shares of Common Stock issued will be valued at prices
reasonably related to market prices prevailing either at the time an acquisition
agreement is executed or at or about the time of delivery of the shares and
(iii) the Convertible Debt Securities issued will be valued at prices reasonably
related to their principal amount. It does not expect to pay any underwriting
discounts or commissions, but may pay finder's fees from time to time with
respect to specific Acquisitions. Any person receiving any such fees may be
deemed to be an underwriter within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). ARS will pay all expenses of this offering.
The Convertible Debt Securities will be convertible into Common Stock at
any time on or after their Convertibility Commencement Date (as defined herein)
and at or before maturity, unless previously redeemed, at their Initial
Conversion Price (as defined herein) as the applicable prospectus supplement or
supplements (each, a "Prospectus Supplement") and pricing supplement or
supplements (each, a "Pricing Supplement") hereto will specify, subject to
adjustment in certain events.
The Convertible Debt Securities will be (i) unsecured obligations of ARS,
(ii) subordinate to all present and future Senior Indebtedness (as defined in
the Indenture described herein or any applicable supplement to that Indenture or
Prospectus Supplement relating to one or more series of Convertible Debt
Securities) of ARS and (iii) effectively subordinated to all indebtedness and
other liabilities of subsidiaries of ARS.
As of December 5, 1997, 15,321,322 shares of Common Stock were issued and
outstanding. The Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "ARS." On December 5, 1997, the last reported sales
price of the Common Stock on the NYSE was $13.875 per share.
Persons receiving shares of the Common Stock or any Convertible Debt
Securities offered hereby may be contractually required to hold some portions of
those shares or Convertible Debt Securities for periods of up to two years. In
addition, pursuant to the provisions of Rule 145 under the Securities Act, the
volume limitations and certain other requirements of Rule 144 under the
Securities Act will apply to resales of those shares or Convertible Debt
Securities by affiliates of the businesses the Company acquires for a period of
one year from the date of acquisition of shares of Common Stock or the
Convertible Debt Securities, as applicable (or such shorter period as the
Securities and Exchange Commission (the "SEC") may prescribe).
SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
RISK FACTORS THAT SHOULD BE CONSIDERED BEFORE ACQUIRING THE SECURITIES OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is December , 1997.
<PAGE> 3
PROSPECTUS SUMMARY
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE ON REQUEST FROM JOHN
D. HELD, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY OF ARS, POST OAK
TOWER, SUITE 725, 5051 WESTHEIMER ROAD, HOUSTON, TEXAS 77056-5604; TELEPHONE:
(713) 599-0100. SEE "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
THE COMPANY
ARS was founded in October 1995 to create the leading national provider of
(i) comprehensive maintenance, repair and replacement services for heating,
ventilating and air conditioning ("HVAC"), plumbing, electrical, indoor air
quality and other systems and major home appliances in homes and small
commercial buildings (collectively, "residential maintenance services") and (ii)
new installations of those systems in homes and small commercial facilities
under construction ("new residential installation services" and, together with
residential maintenance services, "residential services"). ARS also intends,
through its subsidiary, American Mechanical Services, to become a leading
national provider of comprehensive maintenance, repair, replacement,
reconfiguration and monitoring services for HVAC, plumbing and electrical
systems and controls in existing large commercial, industrial and institutional
facilities such as office buildings, health care facilities, educational
facilities and retail centers (collectively, "commercial maintenance services").
To achieve these goals, the Company is conducting an aggressive acquisition
program and has implemented a national operating strategy designed to increase
internal growth and capitalize on cost efficiencies. Today, the Company is the
largest publicly held company in the United States engaged principally in
providing residential services and has acquired a number of businesses providing
commercial maintenance services.
The principal executive offices of ARS are located at Post Oak Tower, Suite
725, 5051 Westheimer Road, Houston, Texas 77056-5604, and its phone number at
that address is (713) 599-0100.
RECENT DEVELOPMENTS
Since September 30, 1997 and through December 5, 1997, the Company has
acquired eight additional businesses for aggregate consideration of $5.7 million
in cash and 115,553 shares of ARS Common Stock, bringing the total number of
businesses acquired by the Company since September 30, 1996 to 80. The
businesses acquired since September 30, 1997 will be recorded as purchase
transactions and had aggregate unaudited annualized revenues of $19.5 million in
1996.
Effective November 1, 1997, the ARS Board of Directors appointed Thomas N.
Amonett as President and Chief Executive Officer of ARS. He succeeded C.
Clifford Wright, Jr., who resigned. Mr. Amonett, 54, recently completed service
as the interim President and Chief Executive Officer of Weatherford Enterra,
Inc., and continues to serve as a director of that Houston-based company with a
tenure of more than 23 years. Previously, Mr. Amonett was Chairman, President
and Chief Executive Officer of Houston-based Reunion Resources Company and
continues to serve as a director of its successor, Reunion Industries, Inc.,
based in Stamford, Connecticut. In addition to his other business activities,
Mr. Amonett was previously a partner of the Houston law firm of Fulbright &
Jaworski and is a graduate of Vanderbilt University and Vanderbilt University
School of Law.
2
<PAGE> 4
RISK FACTORS
Prospective investors in the securities offered hereby should carefully
consider the following factors, as well as the other information contained in
this Prospectus. This Prospectus contains certain forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements as a result of any number of factors, including the
risk factors set forth below and elsewhere in this Prospectus.
LIMITED COMBINED OPERATING HISTORY
ARS, incorporated in Delaware in October 1995, conducted no operations
prior to the closing on September 27, 1996 of its initial public offering of
Common Stock (the "IPO") and its acquisition of seven residential services
businesses (together with the common parent of two of those businesses, the
"Founding Companies"). Since then and through December 5, 1997, the Company has
acquired an additional 80 businesses (collectively with the Founding Companies,
the "Acquired Businesses"). The Acquired Businesses operated as separate,
independent businesses prior to their acquisition by the Company. The success of
the Company will depend, in part, on the extent to which the Company is able to
centralize its accounting and other administrative functions, eliminate the
unnecessary duplication of other functions and otherwise integrate the Acquired
Businesses and such additional businesses as it may acquire in the future into a
cohesive, efficient enterprise. No assurance can be given the Company's
management will be able to manage the combined entity effectively or implement
fully the Company's acquisition or national operating strategies.
RISKS RELATED TO ACQUISITION STRATEGY
The Company's acquisition strategy presents risks that include the
possibility of the adverse effect on existing operations of the Company from the
diversion of management's attention and resources to acquisitions, the possible
loss of acquired customer bases and key personnel, including service personnel,
and the contingent and latent risks associated with the past operations of and
other unanticipated problems arising in the acquired businesses. The success of
the Company's acquisition strategy will depend on the extent to which it is able
to acquire, successfully absorb and profitably manage additional businesses, and
no assurance can be given the Company's strategy will succeed or that the
Company's business and financial performance will not be materially adversely
affected thereby. In this connection, competition for acquisition candidates
could cause the cost of acquiring businesses to increase materially.
Acquisitions accounted for as purchases may result in substantial annual noncash
charges for goodwill and other intangible assets in the Company's statements of
operations, while material acquisitions accounted for as pooling-of-interests
transactions will require restatements of the Company's historical financial
statements to include the results of the acquired businesses, which could
negatively or positively impact those financial statements.
FACTORS AFFECTING INTERNAL GROWTH
The factors affecting the Company's ability to generate internal growth
include the extent to which it is able to expand the range of services it
offers, grow existing customer bases through the development and implementation
of cost-effective advertising and other marketing programs and reduce operating
and overhead costs of acquired businesses. Factors affecting the ability of the
Company to expand services include the extent to which it is able to attract and
retain qualified operational management and service and installation personnel
in new areas of operation and leverage its relationships with existing customers
to provide them services they currently obtain from others.
COMPETITION
The markets for residential services and commercial maintenance services
are highly competitive and are served principally by small, owner-operated
private companies, some of which may have lower overhead cost structures, and
may be able to provide their services at lower rates, than the Company. The
Company believes (i) the residential services and commercial maintenance
services sectors of its industry are subject to rapid consolidation, (ii)
currently only a few other public companies are focused on providing residential
services in some of the service lines provided by the Company and (iii) only a
small number of public companies are
3
<PAGE> 5
engaged primarily in commercial maintenance services in the service lines on
which the Company intends to focus. Certain HVAC original equipment
manufacturers provide commercial maintenance services as a complement to their
manufacturing and distribution businesses, and other companies, including
unregulated affiliates of electric and gas public utilities, are entering the
industry. Certain of the Company's competitors may have greater financial
resources than the Company to finance acquisition and internal growth
opportunities and may be willing to pay higher prices than the Company for the
same opportunities. Consequently, the Company may encounter significant
competition in its efforts to achieve its growth objectives.
SEASONALITY AND FLUCTUATIONS IN OPERATING RESULTS
The Company's residential services operations are subject to different
seasonal variations in the different lines of service. Except for certain areas
of the southern United States, the demand for new residential installations is
lower in the winter months because new construction activity is lower as a
result of colder weather (although the Company expects that such reduction in
demand may be partially offset by increases in the demand for commercial
replacement services generally experienced in the winter months). Demand for
residential HVAC services is generally higher in the second and third quarters.
Accordingly, the Company expects its revenues and operating results generally
will be lower in its first and fourth quarters. In addition to the effects of
seasonality, the Company's quarterly results may fluctuate as a result of a
number of other factors, including the timing of acquisitions and the cyclical
nature of the homebuilding industry, which will influence the levels of housing
starts from time to time in the markets in which the Company engages in new
residential installation services and affect the Company's ability to maintain
or increase revenues from those services. Accordingly, quarterly comparisons of
the Company's revenues and operating results should not be relied on as an
indication of future performance, and the results of any quarterly period may
not be indicative of results to be expected for a full year.
DEPENDENCE ON KEY PERSONNEL
The Company's operations depend on the efforts of its executive officers
and the senior management of its principal operating subsidiaries, and the
Company likely will depend on the senior management of any significant
businesses it acquires in the future. The business or prospects of the Company
could be affected adversely if any of these persons does not continue in his or
her management role after joining the Company and the Company is unable to
attract and retain qualified replacements. The success of the Company's growth
strategy and current operations will depend on the extent to which the Company
is able to retain, recruit and train qualified service and installation
personnel who meet the Company's standards of conduct and service to its
customers.
SUBORDINATION OF CONVERTIBLE DEBT SECURITIES; HOLDING COMPANY STRUCTURE
The Convertible Debt Securities are subordinate in right of payment to all
current and future Senior Indebtedness of ARS. Unless a Prospectus Supplement
provides otherwise for one or more series of Convertible Debt Securities, Senior
Indebtedness includes all secured indebtedness of ARS for money borrowed. As of
September 30, 1997, the aggregate amount of Senior Indebtedness to which the
Convertible Debt Securities would have been subordinated was approximately $59.0
million, and the estimated aggregate amount of indebtedness and other balance
sheet liabilities of ARS's subsidiaries to which the Convertible Debt Securities
would have been effectively subordinated was approximately $45.0 million. The
Indenture under which ARS will issue the Convertible Debt Securities (the
"Indenture") will not, unless provided otherwise by a supplement thereto
relating to one or more series of Convertible Debt Securities, limit the amount
of additional indebtedness, including Senior Indebtedness, which ARS can create,
incur, assume or guarantee. By reason of the subordination of the Convertible
Debt Securities, if any insolvency, bankruptcy, liquidation, reorganization,
dissolution or winding up of the business of ARS occurs, the assets of ARS will
be available to pay the amounts due on the Convertible Debt Securities only
after all Senior Indebtedness has been paid in full.
ARS, as a holding company whose principal assets are the shares of capital
stock of its subsidiaries, does not generate any operating revenues of its own.
Consequently, it depends on dividends, advances and payments from its
subsidiaries to fund its activities and meet its cash needs, including its debt
service requirements. The
4
<PAGE> 6
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Convertible Debt
Securities or to make funds available therefor. Their ability to pay dividends
or make other payments or advances to ARS will depend on their operating results
and will be subject to various business considerations and to applicable state
laws. In addition, holders of the Convertible Debt Securities are effectively
subordinated to the claims of creditors of ARS's subsidiaries to the extent of
the assets of those subsidiaries. If any insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
ARS occurs, creditors of that subsidiary generally will have the right to be
paid in full before any distribution is made to ARS or the holders of the
Convertible Debt Securities. See "Description of the Convertible Debt
Securities."
Substantially all the subsidiaries of ARS have guaranteed the payment of
its obligations under the Company's $100 million revolving credit facility (the
"Credit Facility"), and the stock of those subsidiaries has been pledged by ARS
or their immediate parent corporations as collateral securing those obligations.
LIMITATIONS ON REPURCHASE OF CONVERTIBLE DEBT SECURITIES IF A REPURCHASE EVENT
OCCURS
If a Repurchase Event, which consists of either a Change in Control or a
Termination of Trading (each as defined herein), occurs, each holder of
Convertible Debt Securities and each holder of the $55.0 million aggregate
principal amount of 7 1/4% Convertible Subordinated Notes due 2004 of ARS (the
"7 1/4% Notes") presently outstanding will have the right, at his option, to
require ARS to repurchase all or a portion of his Convertible Debt Securities or
7 1/4% Notes, as the case may be, at a purchase price equal to 100% of the
principal amount thereof plus accrued interest to the repurchase date. ARS's
ability to repurchase Convertible Debt Securities and 7 1/4% Notes following a
Repurchase Event (i) may be limited by the terms of the Senior Indebtedness and
the subordination provisions of the Indenture and any applicable supplement to
the Indenture and (ii) will depend on the availability of sufficient funds and
compliance with applicable securities laws. Accordingly, no assurance can be
given ARS will repurchase any Convertible Debt Securities following a Repurchase
Event. The term "Repurchase Event" is limited to certain specified transactions
and may not include other events, such as a highly leveraged business
combination or reorganization not involving a Repurchase Event, that might
adversely affect the financial condition of ARS or result in a downgrade of the
credit rating (if any) of the Convertible Debt Securities. See "Description of
the Convertible Debt Securities."
LIMITED MARKET FOR THE CONVERTIBLE DEBT SECURITIES
No market currently exists for any series of the Convertible Debt
Securities, and no assurance can be given (i) a market will develop for any
series of the Convertible Debt Securities, (ii) as to the liquidity or
sustainability of any market that may develop or (iii) as to the ability of
holders to sell their Convertible Debt Securities at any price. Future trading
prices of the Convertible Debt Securities will depend on many factors,
including, among others, prevailing interest rates, the Company's operating
results, the price of the Common Stock and the market for similar securities.
POSSIBLE VOLATILITY OF COMMON STOCK PRICE
The market price of the Common Stock may be subject to significant
fluctuations from time to time in response to numerous factors, including
variations in the reported financial results of the Company and changing
conditions in the economy in general or in the Company's industry in particular.
In addition, the stock markets experience significant price and volume
volatility from time to time, which may affect the market price of the Common
Stock for reasons unrelated to the Company's performance at that time.
POTENTIAL ADVERSE EFFECTS OF AUTHORIZED PREFERRED STOCK ON COMMON STOCK
The Restated Certificate of Incorporation of ARS (the "Charter") authorizes
ARS to issue, without stockholder approval, one or more classes or series of
preferred stock having such preferences, powers and relative, participating,
optional and other rights (including preferences over the Common Stock
respecting
5
<PAGE> 7
dividends and distributions) as the Board of Directors of ARS (the "Board of
Directors") may determine. See "Description of Capital Stock."
POTENTIAL ANTI-TAKEOVER EFFECTS
ARS has a stockholder rights plan in effect. This plan and provisions of
the Charter and Bylaws of ARS and the Delaware General Corporation Law (the
"DGCL") (under which ARS is organized) may delay, discourage, inhibit, prevent
or render more difficult an attempt to obtain control of the Company by means of
a tender offer, business combination, proxy contest or otherwise. These
provisions include the authorization of "blank check" preferred stock,
classification of the Board of Directors, a prohibition of stockholder action by
written consent and DGCL restrictions on business combinations with certain
interested parties. In addition, a "Change of Control" (as defined in the Credit
Facility) constitutes an event of default under the Credit Facility. If a Change
in Control (as defined in both the Indenture and the 7 1/4% Notes indenture)
occurs, each holder of Convertible Debt Securities or 7 1/4% Notes will have the
right, at the holder's option, to require ARS to repurchase all or a portion of
such holder's Convertible Debt Securities or 7 1/4% Notes, as applicable, at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest to the repurchase date. These provisions of the Credit Facility, the
Indenture and the 7 1/4% Notes indenture could impede or prevent a change of
control or depress the price of the Common Stock. See "Description of Capital
Stock."
PRICE RANGE OF COMMON STOCK
The Common Stock trades on the NYSE under the symbol "ARS." The following
table sets forth the high and low sale prices for the Common Stock (based on the
NYSE Composite Transactions Reporting System) for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1996:
Third quarter (September 25 to September 30).............. $19.6250 $16.5000
Fourth quarter............................................ 27.1250 16.6250
1997:
First quarter............................................. 28.5000 19.1250
Second quarter............................................ 24.5000 17.5000
Third quarter............................................. 25.3750 15.3750
Fourth quarter (through December 5)....................... 18.8125 12.0000
</TABLE>
The closing price of the Common Stock on the NYSE (as reported on the
Composite Transactions Reporting System) on December 5, 1997 was $13.875. As of
December 5, 1997, there were approximately 220 holders of record of Common
Stock, as shown on the records of the transfer agent and registrar for the
Common Stock. The number of record holders does not bear any relationship to the
number of beneficial owners of the Common Stock.
DIVIDEND POLICY
ARS has not paid or declared any dividends since the completion of the IPO
and currently intends to retain earnings to finance the expansion of its
business. Any future dividends will be at the discretion of the Board of
Directors after taking into account various factors, including, among others,
the Company's financial condition and performance, cash needs and expansion
plans, the income tax laws then in effect, the requirements of Delaware law and
the restrictions the Credit Facility imposes and the Company's future credit
facilities or debt instruments may impose. The Credit Facility prohibits the
payment of dividends (except for dividends payable in Common Stock and certain
preferred stock).
6
<PAGE> 8
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
For financial reporting purposes, Atlas Services, Inc. ("Atlas"), one of
the Founding Companies, is presented as the acquiror in all the acquisitions by
ARS through September 30, 1996, the effective date of the acquisition by ARS of
the Founding Companies. During the twelve months ended September 30, 1997, the
Company acquired 72 businesses, 23 of which were accounted for under the
pooling-of-interests method of accounting (the "Pooled Businesses"). In the
fourth quarter of 1997 (through December 5), the Company acquired eight
additional businesses. The Company's historical financial statements
incorporated by reference in this Prospectus for periods ended on or before
September 30, 1996 are the consolidated historical financial statements of Atlas
retroactively restated for 15 of the Pooled Businesses (the "Restated
Businesses"). The eight remaining Pooled Businesses are not significant to prior
historical periods, and their results and the results of the other 49 businesses
acquired through September 30, 1997 have been included in the consolidated
results of the Company beginning on their respective dates of acquisition. As
used in this discussion, the "Company" means (i) Atlas plus the Restated
Businesses prior to September 30, 1996 and (ii) ARS and its consolidated
subsidiaries on that date and thereafter. The summary financial information
below should be read in conjunction with the consolidated financial statements
and notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION(1):
HISTORICAL:
Revenues...................................... $51,268 $55,525 $81,125 $97,686 $150,330 $85,145 $272,781
Gross profit.................................. 13,542 13,811 19,938 25,304 41,270 23,362 78,269
Selling, general and administrative
expenses(2)................................. 12,440 12,236 16,992 19,914 37,632 22,173 56,051
Income from operations........................ 1,101 1,574 2,946 5,390 3,638 1,189 22,218
Interest income and other, net................ 203 316 611 209 609 291 823
Interest expense(2)........................... (381) (353) (355) (356) (5,479) (4,572) (4,955)
Net income (loss)............................. $ 689 $ 1,226 $ 1,916 $ 3,155 $ (3,035) $(4,349) $ 10,248
======= ======= ======= ======= ======== ======= ========
Net income (loss) per share................... $ .17 $ .30 $ .47 $ .77 $ (.48) $ (1.06) $ .71
======= ======= ======= ======= ======== ======= ========
Shares used in computing net income (loss) per
share....................................... 4,085 4,085 4,085 4,085 6,277 4,085 14,457
======= ======= ======= ======= ======== ======= ========
Ratio of earnings to fixed charges(3)......... 2.93x 4.31x 6.82x 9.56x -- -- 4.54x
======= ======= ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
PRO FORMA COMBINED, AS ADJUSTED(4)(5):
Revenues.................................................. $461,164 $352,498
Gross profit.............................................. 146,628 107,041
Selling, general and administrative expenses(6)........... 105,858 77,248
Goodwill amortization(7).................................. 4,600 815
Income from operations.................................... 36,170 28,978
Interest income and other expenses, net................... 1,313 1,007
Interest expense.......................................... (8,957) (6,759)
Net income................................................ $ 16,258 $ 13,087
======== ========
Net income per share...................................... $ 1.07 $ .83
======== ========
Shares used in computing pro forma net income per
share(8)................................................ 15,133 15,709
======== ========
Ratio of earnings to fixed charges(3)..................... 3.73x 4.25x
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30, 1997
------------------------------------------------ ---------------------------
1992 1993 1994 1995 1996 HISTORICAL AS ADJUSTED(5)
------- ------- ------- ------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION(9):
Working capital..................... $ 1,362 $ 1,864 $ 2,249 $ 1,284 $ 19,175 $ 35,502 $ 36,920
Total assets........................ 14,475 16,682 21,854 25,243 211,624 317,388 328,075
Total debt, including current
portion........................... 4,528 4,823 4,882 4,557 56,063 116,533 122,268
Stockholders' equity................ 3,379 3,346 4,029 5,479 116,251 147,664 149,865
</TABLE>
(Footnotes on following page)
7
<PAGE> 9
- ---------------
(1) The selected historical statement of operations information presented for
each year in the three-year period ended December 31, 1996 has been derived
from the audited consolidated financial statements of the Company
incorporated by reference in this Prospectus. The remaining selected
historical statement of operations information presented has been derived
from unaudited financial statements of the Company, which have been prepared
on the same basis as the audited financial statements and, in the opinion of
the Company, reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of that information.
(2) For the year ended December 31, 1996 and the nine months ended September 30,
1996, includes non-recurring compensation expense of $3,356 (included in
selling, general and administrative expenses) and financing fees of $4,818
(included in interest expense) related to the purchase of the common parent
of two Founding Companies.
(3) For purposes of calculating this ratio, "earnings" consist of earnings
before fixed charges and income tax, while "fixed charges" consist of
interest expense and one-third of rental expense, which the Company
estimates to be representative of the interest factor therein. As a result
of the operating losses for the year ended December 31, 1996 and for the
nine months ended September 30, 1996, earnings did not cover fixed charges
for those periods by $4,280 and $1,669, respectively.
(4) The selected unaudited pro forma combined statement of operations
information presented above gives effect to the acquisitions of all Acquired
Businesses through December 5, 1997, the IPO and the issuance and sale of
the 7 1/4% Notes by ARS and the application of the proceeds from that sale
by ARS, in each case as if those transactions had occurred on January 1 of
each period presented.
(5) The pro forma combined financial statement information presented (i) is not
necessarily indicative of the results the Company would have obtained had
certain events actually occurred when assumed or of the Company's future
results, (ii) is based (in the case of certain purchases) on preliminary
estimates of fair value, available information and certain assumptions
management deems appropriate and (iii) should be read in conjunction with
the other financial statements and notes thereto incorporated by reference
herein.
(6) Gives effect to reductions in salary and benefits to former owners of
certain Acquired Businesses, the distribution of certain assets to and the
costs of certain leases assumed by former owners of certain Acquired
Businesses and the effects of certain other non-recurring expenses.
(7) Reflects amortization of the goodwill recorded as a result of the
acquisitions of the Acquired Businesses over a 40-year period.
(8) Assumes all shares issued for the acquisitions of Acquired Businesses had
been outstanding throughout the periods presented.
(9) The historical selected balance sheet information presented has been derived
from (i) for September 30, 1997, the unaudited consolidated financial
statements of the Company incorporated by reference in this Prospectus, (ii)
for December 31, 1995 and 1996, the audited consolidated financial
statements of the Company incorporated by reference in this Prospectus and
(iii) for December 31, 1992, 1993 and 1994, the unaudited financial
statements of the Company, which have been prepared on the same basis as the
audited financial statements and, in the opinion of the Company, reflect all
adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of that information. The as adjusted selected balance
sheet information presented reflects information derived from the unaudited
consolidated financial statements of the Company as of September 30, 1997,
incorporated by reference in this Prospectus, as adjusted, on a pro forma
combined basis, to give effect to the acquisitions of all Acquired
Businesses acquired during the fourth quarter of 1997 (through December 5).
8
<PAGE> 10
DESCRIPTION OF THE CONVERTIBLE DEBT SECURITIES
The Convertible Debt Securities offered hereby (the "Convertible
Securities") will be issued under an Indenture dated as of July 31, 1997 (the
"Indenture") between ARS and U.S. Trust Company of Texas, N.A., as trustee (the
"Trustee"). The following description of the Convertible Securities summarizes
certain general terms and provisions of the Convertible Securities to which any
Prospectus Supplement (including any Pricing Supplement) may relate (the
"Offered Convertible Securities"). The particular terms of the Offered
Convertible Securities and the extent to which the general terms and provisions
of the Indenture will apply will be described in a Prospectus Supplement
relating to the Offered Convertible Securities. The terms of the Offered
Convertible Securities also will include those made a part of the Indenture by
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
statements under this caption relating to the Convertible Securities and the
Indenture are summaries only, do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms, and the Trust
Indenture Act. Certain terms defined in the Indenture are capitalized herein.
The Indenture is an exhibit to the registration statement on Form S-4, as
amended, of which this Prospectus is a part (the "Acquisition Shelf Registration
Statement") and is incorporated herein by this reference.
GENERAL
The Indenture will provide that Convertible Securities may be issued from
time to time thereunder in one or more series, each in such aggregate principal
amount as ARS may authorize from time to time. All Convertible Securities of one
series need not be issued at the same time and, unless otherwise provided in a
Prospectus Supplement with respect to any series, that series may be reopened,
without the consent of the Holders of the Convertible Securities of that series,
for issuance of additional Convertible Securities of that series. The Indenture
will not limit either (i) the aggregate principal amount of Convertible
Securities which can be issued thereunder or (ii) the amount of other
indebtedness or liabilities, secured or unsecured, which ARS or its subsidiaries
may incur.
Unless otherwise indicated in a Prospectus Supplement with respect to one
or more series, the Convertible Securities will not benefit from any covenant or
other provision that would provide protection to Holders of the Convertible
Securities against any sudden and dramatic decline in credit quality of the
Company resulting from any takeover or highly leveraged transaction, including a
recapitalization or similar restructuring, except as described below under
"-- Certain Rights To Require Repurchase of Convertible Securities."
The Convertible Securities are unsecured obligations of ARS.
Unless otherwise indicated in a Prospectus Supplement with respect to one
or more series, principal of, and any premium or interest on, the Convertible
Securities will be payable at the office of the Trustee in New York, New York,
and the Convertible Securities may be surrendered for registration of transfer,
exchange or conversion at that office. ARS may, at its option, pay any interest
on the Convertible Securities by check mailed to the address of each person
entitled thereto as it appears in the applicable Securities Register for the
Convertible Securities on the Regular Record Date for that interest payment.
No service charge will be made for any registration of transfer or exchange
of the Convertible Securities, but ARS may require payment of a sum sufficient
to cover any tax or other governmental charge and any other expenses (including
the fees and expenses of the Trustee) payable in connection therewith. If a
Prospectus Supplement provides for the redemption of a series of Convertible
Securities, ARS will not be required (i) to issue, register the transfer of or
exchange any of those Convertible Securities during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption and ending at the close of business on the day of that mailing or
(ii) to register the transfer of or exchange any of those Convertible Securities
selected for redemption in whole or in part, except the unredeemed portion of
those Convertible Securities being redeemed in part.
9
<PAGE> 11
All monies paid by ARS to the Trustee or any Paying Agent, or held by ARS,
in trust for the payment of principal of and any premium and interest on any
Convertible Security which remain unclaimed for two years after that principal,
premium or interest becomes due and payable may be repaid to ARS or released
from trust, as the case may be. Thereafter, the Holder of that Convertible
Security may, as an unsecured general creditor, look only to ARS for payment
thereof.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Convertible Securities: (i) the title and aggregate principal amount
of the Offered Convertible Securities; (ii) the date or dates, or the method for
determining the date or dates, the Offered Convertible Securities will be issued
(each an "Original Issue Date") and the date or dates on which the Offered
Convertible Securities will mature; (iii) the rate or rates (which may be fixed
or variable) per annum, if any, at which the Offered Convertible Securities will
bear interest or the method of determining such rate or rates; (iv) the date or
dates from which that interest, if any, will accrue and the date or dates on
which that interest, if any, will be payable; (v) the terms for redemption or
early payment, if any, including any mandatory or optional sinking fund or
analogous provision; (vi) the date or dates (each, a Convertibility Commencement
Date) on which the Offered Convertible Securities first become convertible into
Common Stock and their Initial Conversion Price; (vii) whether the Offered
Convertible Securities will be issued in fully registered form or bearer form or
any combination thereof; (viii) whether the Offered Convertible Securities will
be issued in the form of one or more global securities and whether those global
securities are to be issuable in temporary global form or permanent global form;
(ix) if other than U.S. dollars, the currency, currencies or currency unit or
units in which the Offered Convertible Securities will be denominated and in
which the principal of, and premium and interest, if any, on, the Offered
Convertible Securities will be payable; (x) whether the Senior Indebtedness to
which the Offered Convertible Securities will be subordinated by the Indenture
will be as defined in the Indenture or as defined in the Prospectus Supplement;
(xi) whether, and the terms and conditions on which, ARS or a Holder may elect
that, or the other circumstances under which, payment of principal of, or
premium or interest, if any, on the Offered Convertible Securities is to be made
in a currency or currencies or currency unit or units other than that in which
the Offered Convertible Securities are denominated; and (xii) any other specific
terms of the Offered Convertible Securities. Reference is also made to the
Prospectus Supplement for information with respect to any additional covenants
that may be included in the terms of the Offered Convertible Securities.
The Convertible Securities may be issued as Original Issue Discount
Securities. An Original Issue Discount Security is a Security issued at a price
lower than the amount payable on the Stated Maturity thereof and which provides
that on redemption or acceleration of the maturity thereof an amount less than
the amount payable on the Stated Maturity thereof and determined in accordance
with the terms of the Convertible Security will become due and payable.
CONVERSION RIGHTS
Each Convertible Security will be convertible into Common Stock, at the
option of its Holder, at any time on or after its Convertibility Commencement
Date and prior to its redemption (if redeemable) or final maturity, initially at
its Initial Conversion Price per share, subject to adjustment as described
below. The right to convert Convertible Securities that the applicable
Prospectus Supplement provides are subject to redemption will, with respect to
those Convertible Securities that have been called for redemption, terminate at
the close of business on the second business day preceding the Redemption Date
therefor unless ARS defaults in making the payment due on that redemption.
The applicable Prospectus Supplement will set forth, or describe the method
for determining, the first date on which a Convertible Security may be converted
into Common Stock (the "Convertibility Commencement Date"). In the case of
Convertible Securities to be issued as purchase consideration in any acquisition
for which installment-sale treatment is sought for federal income tax purposes,
their Convertibility Commencement Date will be the first day following the first
anniversary of the closing of the acquisition, unless the Prospectus Supplement
provides otherwise. The applicable Prospectus Supplement also will set forth, or
describe the method for determining, the initial conversion price of each
Convertible Security on the
10
<PAGE> 12
assumption that the Convertible Security is convertible at any time following
its Original Issue Date (or the Original Issue Date of its earliest Predecessor
Security) (the "Initial Conversion Price").
The conversion price of each Convertible Security will be subject to
adjustment as and when any of the following events occurs after its Original
Issue Date (or the Original Issue Date of any of its Predecessor Securities):
(i) the subdivision, combination or reclassification of outstanding shares of
Common Stock; (ii) the payment of a dividend or distribution on the Common Stock
exclusively in Common Stock or any other class of capital stock of ARS which
includes Common Stock; (iii) the issuance of rights or warrants to all holders
of Common Stock entitling them to acquire shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the then Current
Market Price; (iv) the distribution to all holders of Common Stock of shares of
capital stock of ARS other than Common Stock, evidences of indebtedness of ARS,
cash or assets (including securities, but excluding (a) dividends or
distributions paid exclusively in cash, (b) dividends or distributions provided
for in clause (ii) above and (c) rights and warrants provided for in clause
(iii) above); (v) a distribution consisting exclusively of cash (excluding any
cash distributions referred to in clause (iv) above) to all holders of Common
Stock in an aggregate amount that, together with (a) all other cash
distributions (excluding any cash distributions referred to in clause (iv)
above) made within the 12 months preceding the record date for that distribution
and (b) any cash and the fair market value of other consideration paid in
respect of any tender offer subject to the provisions of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), made by ARS or a subsidiary of ARS
for Common Stock consummated within the 12 months preceding that distribution,
exceeds the greater of (1) 12.5% of ARS's market capitalization (being at any
time the product of the then Current Market Price times the number of shares of
Common Stock then outstanding) on that record date and (2) the Company's
consolidated retained earnings on that record date (determined without giving
effect to that distribution); and (vi) the consummation of a tender offer made
by ARS or any subsidiary of ARS for Common Stock which involves an aggregate
consideration that, together with (a) any cash and other consideration payable
in respect of any tender offer made by ARS or a subsidiary of ARS for Common
Stock consummated within the 12 months preceding the last time on which tenders
of Common Stock may be made pursuant to the current tender offer (the
"Expiration Time") and (b) the aggregate amount of all cash distributions
(excluding any cash distributions referred to in clause (iv) above) to all
holders of Common Stock within the 12 months preceding the consummation of that
tender offer, exceeds the greater of (1) 12.5% of ARS's market capitalization
immediately prior to that Expiration Time (determined using all then tendered
shares) and (2) the Company's consolidated retained earnings at the Expiration
Time (determined without giving effect to the purchase of tendered shares). No
adjustment of any conversion price will be required to be made until cumulative
adjustments amount to at least 1.0% of that conversion price, as last adjusted.
Any adjustment that would otherwise be required to be made will be carried
forward and taken into account in any subsequent adjustment.
ARS will be permitted to reduce the conversion price of any Convertible
Security as it considers to be advisable in order that any event treated for
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the holders of Common Stock or, if that is not possible, to diminish
any income taxes that are otherwise payable because of that event. In the case
of any consolidation or merger of ARS with or into any other corporation (other
than one in which no change is made in the outstanding Common Stock), or the
sale or transfer of all or substantially all the properties and assets of ARS,
the Holder of any Convertible Security then Outstanding will, with certain
exceptions, have the right thereafter to convert that Convertible Security only
into the kind and amount of securities, cash and other property receivable on
that consolidation, merger, sale or transfer by a holder of the number of shares
of Common Stock into which that Convertible Security might have been converted
immediately prior to that consolidation, merger, sale or transfer; and
adjustments will be provided for events subsequent thereto which are as nearly
equivalent as practical to the conversion price adjustments described above.
ARS will not issue fractional shares of Common Stock on conversion of any
Convertible Security, but, in lieu thereof, will pay a cash adjustment based on
the Closing Price at the close of business on the day of conversion. If any
Convertible Security is surrendered for conversion during the period from the
close of business on any Regular Record Date therefor through and including the
next succeeding Interest Payment
11
<PAGE> 13
Date therefor (except any such Convertible Security called for redemption on a
Redemption Date, or repurchasable on a Repurchase Date occurring within such
period), that Convertible Security when surrendered for conversion must be
accompanied by payment in New York Clearing House funds, or other funds
acceptable to ARS, of an amount equal to the interest thereon which the
registered Holder on that Regular Record Date is to receive. Except as described
in the preceding sentence, ARS will not pay any interest on converted
Convertible Securities with respect to any Interest Payment Date subsequent to
the date of conversion. No other payment or adjustment for interest or dividends
will be made on conversion of any Convertible Security.
SUBORDINATION
The payment of the principal of and any premium or interest on the
Convertible Securities and any other payment obligations of ARS in respect of
the Convertible Securities (including any obligation to repurchase the
Convertible Securities) are, to the extent set forth in the Indenture,
subordinated in right of payment to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness, whether outstanding on the date of the
Indenture or thereafter incurred. If there is a payment or distribution of
assets to creditors on any liquidation, dissolution, winding up, receivership,
reorganization, assignment for the benefit of creditors, marshaling of assets
and liabilities or any bankruptcy, insolvency or similar case or proceeding of
ARS, the holders of all Senior Indebtedness will be entitled to receive payment
in full in cash or cash equivalents of all Obligations due or to become due in
respect of that Senior Indebtedness (including interest after the commencement
of any such case or proceeding, notwithstanding that ARS may be excused as a
result of such case or proceeding from the obligation to pay all or any part of
the interest otherwise payable in respect of any Senior Indebtedness) before the
Holders of the Convertible Securities will be entitled to receive any payment in
respect of the principal of or any premium or interest on the Convertible
Securities, and until all Obligations with respect to the Senior Indebtedness
are paid in full in cash or cash equivalents, any distribution to which the
Holders of the Convertible Securities would be entitled must be made to the
holders of the Senior Indebtedness. ARS also may not make any payment (whether
by redemption, purchase, retirement, defeasance or otherwise) on or in respect
of the Convertible Securities if (i) a default in the payment of the principal
of or any premium or interest on any Designated Senior Indebtedness (a "Payment
Default") occurs or (ii) any other default occurs and is continuing with respect
to any Designated Senior Indebtedness which permits holders of Designated Senior
Indebtedness as to which that default relates to accelerate its maturity (a
"Nonpayment Default") and the Trustee receives notice of that default (a
"Payment Blockage Notice") from (a) if that Nonpayment Default shall have
occurred under the Credit Facility or any other secured debt facility with banks
or other lenders which provides revolving credit loans, term loans, receivables
financing (including through the sale of receivables) or letters of credit (each
an "Other Debt Facility"), the representative of the Credit Facility or that
Other Debt Facility, as the case may be, or (b) if that Nonpayment Default shall
have occurred with respect to any other issue of Designated Senior Indebtedness,
the holders, or a representative of the holders, of at least 20% of that
Designated Senior Indebtedness. The payments on or in respect of the Convertible
Securities shall be resumed (i) in the case of a Payment Default respecting
Designated Senior Indebtedness, on the date on which that default is cured or
waived, and (ii) in the case of a Nonpayment Default respecting Designated
Senior Indebtedness, the earliest of (a) the date on which that Nonpayment
Default is cured or waived, (b) the date the applicable Payment Blockage Notice
is retracted by written notice to the Trustee from a representative of the
holders of the Designated Senior Indebtedness which have given that Payment
Blockage Notice and (c) 179 days after the date on which the applicable Payment
Blockage Notice is received by the Trustee, unless any Payment Default has
occurred and is continuing or an Event of Default of the type referred to in
clause (vii) of the first sentence under "-- Events of Default" has occurred. No
new period of payment blockage may be commenced unless and until 360 days have
elapsed since the date of commencement of the payment blockage period resulting
from the immediately prior Payment Blockage Notice, and no Nonpayment Default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice.
If the Maturity of any Convertible Securities is accelerated because of an
Event of Default with respect thereto, (i) the Indenture requires ARS to
promptly notify holders of Designated Senior Indebtedness of that
12
<PAGE> 14
event and (ii) the Holders of those Convertible Securities will, to the extent
permitted by law, be prohibited for a period of 180 days thereafter from making
any bankruptcy filing with respect to ARS or, to the extent permitted by law,
from filing suit to enforce their rights under the Indenture.
Unless a Prospectus Supplement provides otherwise for one or more series of
Convertible Securities, the Indenture's definition of "Senior Indebtedness" will
apply to the Convertible Securities. The Indenture will define "Senior
Indebtedness" as the principal of and premium, if any, and interest on and other
Obligations in respect of (i) all secured indebtedness of ARS for money borrowed
(including any secured indebtedness under the Credit Facility and any successor
thereto and any secured indebtedness under all Other Debt Facilities), whether
outstanding on the date of execution of the Indenture or thereafter created,
incurred or assumed, and (ii) any amendments, renewals, extensions,
modifications, refinancings and refundings of any of the foregoing. For purposes
of this definition, "indebtedness for money borrowed" when used with respect to
ARS means (i) any obligation of, or any obligation guaranteed by, ARS for the
repayment of borrowed money (including fees, penalties and other obligations in
respect thereof), whether or not evidenced by bonds, debentures, notes or other
written instruments, (ii) any deferred payment obligation of, or any such
obligation guaranteed by, ARS for the payment of the purchase price of property
or assets evidenced by a note or similar instrument and (iii) any obligation of,
or any such obligation guaranteed by, ARS for the payment of rent or other
amounts under a lease of property or assets, which obligation is required to be
classified and accounted for as a capitalized lease on the balance sheet of ARS
under generally accepted accounting principles. As used in the Indenture: (i)
"Obligations" in respect of the Senior Indebtedness include any principal,
interest, premiums, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any such indebtedness; and
(ii) "Designated Senior Indebtedness" means (a) Obligations under the Credit
Facility and all secured Other Debt Facilities and (b) any other Senior
Indebtedness the principal amount of which is $25.0 million or more and that has
been designated by ARS as "Designated Senior Indebtedness." The Prospectus
Supplement relating to any series of Convertible Securities may provide that the
"Senior Indebtedness" to which the Convertible Securities of that series will be
subordinated by the Indenture will include all indebtedness of ARS for money
borrowed, whether secured or unsecured, except any such indebtedness that, by
the terms of the instrument or instruments by which it was created or incurred,
expressly provides that it (i) is junior in right of payment to those
Convertible Securities or (ii) ranks pari passu in right of payment with those
Convertible Securities.
The Convertible Securities will be obligations exclusively of ARS. ARS
currently conducts its operations through its subsidiaries, which are separate
and distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due in respect of the Convertible Securities or to make any
funds available therefor, whether by dividends, loans or other payments. The
ability of any subsidiary of ARS to loan or advance funds or pay dividends to
ARS (i) may be subject to contractual or statutory restrictions, (ii) will be
contingent on the subsidiary's earnings and cash flows and (iii) will be subject
to various business considerations.
The Convertible Securities will be effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of subsidiaries of ARS. Any right of ARS to receive assets of
any of its subsidiaries on the liquidation or reorganization of that subsidiary
(and any consequent right of the Holders of the Convertible Securities to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that ARS is itself recognized
as a creditor of that subsidiary, in which case the claims of ARS would still be
subordinated to any security in the assets of that subsidiary and any
indebtedness of that subsidiary senior to that held by ARS.
The Indenture does not limit or prohibit the incurrence of (i) Senior
Indebtedness or (ii) indebtedness, liabilities or other commitments by ARS or
its subsidiaries. As of September 30, 1997, the aggregate amount of Senior
Indebtedness to which the Convertible Securities would have been subordinated
was approximately $59.0 million, and the estimated aggregate amount of
indebtedness and other balance sheet liabilities of ARS's subsidiaries to which
the Convertible Securities would have been effectively subordinated was
approximately $45.0 million. Also at that date, ARS had outstanding $55.0
million aggregate principal amount of 7 1/4% Notes. By their terms, the 7 1/4%
Notes will be subordinated in right of payment to the Convertible Securities
except to the extent that a Prospectus Supplement otherwise provides in the case
of one
13
<PAGE> 15
or more series of Convertible Securities. ARS expects to incur Senior
Indebtedness from time to time in the future, including Senior Indebtedness
under the Credit Facility.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that ARS will not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person in one transaction or a series of
related transactions, or permit any single Person to consolidate with or merge
into ARS, unless (i) if applicable, the Person formed by such consolidation or
into which ARS is merged or the Person or corporation which acquires the
properties and assets of the Company substantially as an entirety is a
corporation, limited liability company, partnership or trust organized and
validly existing under the laws of the United States or any state thereof or the
District of Columbia and expressly assumes payment of the principal of and any
premium and interest on the Convertible Securities and the performance or
observance of each obligation of ARS under the Indenture, (ii) immediately after
giving effect to such transaction, no Event of Default will have occurred and be
continuing, (iii) such consolidation, merger, conveyance, transfer or lease does
not adversely affect the validity or enforceability of the Convertible
Securities and (iv) ARS has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease complies with the provisions of the Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF CONVERTIBLE SECURITIES
If any Repurchase Event (as defined below) occurs on or prior to Maturity
of any Affected Convertible Security (as defined below), each Holder of Affected
Convertible Securities will have the right, at the Holder's option, to require
ARS to repurchase all or any part of the Holder's Affected Convertible
Securities on the date (the "Repurchase Date") that is 30 days after the date
ARS gives notice of the Repurchase Event as described below at a price (the
"Repurchase Price") equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date. On or prior to the
Repurchase Date, ARS is required to deposit with the Trustee or a Paying Agent
an amount of money sufficient to pay the Repurchase Price of the Affected
Convertible Securities to be repurchased on the Repurchase Date.
Failure by ARS (i) to provide timely notice of a Repurchase Event to
Holders of Affected Convertible Securities, as provided for below, or (ii) to
repurchase the Affected Convertible Securities when required will result in an
Event of Default under the Indenture whether or not that repurchase is permitted
by the subordination provisions of the Indenture.
On or before the 15th day after a Repurchase Event occurs, ARS will be
obligated to mail to the Holders of all Affected Convertible Securities a notice
of that occurrence which states the event constituting the Repurchase Event and
the date thereof, the Repurchase Date, the date by which the repurchase right
must be exercised, the Repurchase Price and the procedures the Holder must
follow to exercise its repurchase right. To exercise this right, a Holder must
deliver to ARS or its designated agent and to the Trustee, on or before the
close of business on the Repurchase Date, written notice of the Holder's
exercise of that right, together (in the case of written notice to the Trustee)
with the certificates evidencing the Affected Convertible Securities to be
repurchased, duly endorsed for transfer to ARS. Any such notice will be
irrevocable.
A "Repurchase Event" will be the occurrence of a Change in Control or a
Termination of Trading. A "Change in Control" will occur when: (i) all or
substantially all the assets of the Company or of the Company and its
subsidiaries, taken as a whole, are sold in one transaction or any series of
related transactions as an entirety to any Person or related group of Persons;
(ii) any consolidation or merger of ARS occurs (a) in which ARS is not the
continuing or surviving corporation (other than a consolidation or merger with a
wholly owned subsidiary of ARS in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed into or exchanged for
the same consideration) or (b) pursuant to which the Common Stock would be
converted into cash, securities or other property, in each case other than a
consolidation or merger of ARS in which the holders of the Common Stock
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the total voting power of all classes of capital stock
entitled to vote generally in the election of directors of the continuing or
surviving corporation
14
<PAGE> 16
immediately after such consolidation or merger in substantially the same
proportion as their ownership of Common Stock immediately before such
transaction; (iii) any Person, or any Persons acting together that would
constitute a "group" for purposes of Section 13(d) of the Exchange Act, together
with any affiliates thereof, shall beneficially own (as defined in Exchange Act
Rule 13d-3) at least 50% of the total voting power of all classes of capital
stock of ARS entitled to vote generally in the election of directors of ARS;
(iv) at any time during any consecutive two-year period, individuals who at the
beginning of that period constituted the Board of Directors of ARS (the "Board")
(together with any new directors whose election by the Board or whose nomination
for election by the stockholders of ARS was approved by a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning of
that period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board then in
office; or (v) ARS is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
A "Termination of Trading" will occur if the Common Stock (or other common
stock into which the Convertible Securities are then convertible) is neither
listed for trading on a national securities exchange in the United States nor
approved for trading on an established automated over-the-counter trading market
in the United States.
If a Repurchase Event occurs, the then Outstanding Convertible Securities
will be the "Affected Convertible Securities" whose Holders will have the
repurchase right described above.
The right of Holders to require ARS to repurchase Affected Convertible
Securities if a Repurchase Event occurs could create an Event of Default under
Senior Indebtedness, as a result of which any repurchase could, absent a waiver
of the repurchase right, be blocked by the subordination provisions of the
Indenture. See " -- Subordination." Failure by ARS to repurchase the Affected
Convertible Securities when required will result in an Event of Default with
respect to the Affected Convertible Securities whether or not the repurchase is
permitted by those subordination provisions. The ability of ARS to pay cash to
the Holders of Affected Convertible Securities on a repurchase may be limited by
certain financial covenants contained in Senior Indebtedness.
If a Repurchase Event occurs and Holders exercise their rights to require
ARS to repurchase Affected Convertible Securities, ARS intends to comply with
applicable tender offer rules under the Exchange Act, including Rules 13e-4 and
14e-1, as then in effect, with respect to any repurchase.
The foregoing provisions (i) may not afford Holders protection in the event
of highly leveraged or other transactions involving ARS which may adversely
affect Holders and (ii) may discourage open market purchases of the Common Stock
or a non-negotiated tender or exchange offer for such stock and, accordingly,
may limit a stockholder's ability to realize a premium over the market price of
the Common Stock in connection with any such transaction.
EVENTS OF DEFAULT
Unless otherwise provided by a Prospectus Supplement with respect to any
series of the Convertible Securities, the following are Events of Default under
the Indenture with respect to that series: (i) default in the payment of
principal of or any premium on any Convertible Security when due (even if that
payment is prohibited by the subordination provisions of the Indenture); (ii)
default in the payment of any interest on any Convertible Security of that
series when due, which default continues for 30 days (even if that payment is
prohibited by the subordination provisions of the Indenture); (iii) failure to
provide timely notice of a Repurchase Event to Holders of Affected Convertible
Securities of that series as required by the Indenture; (iv) default in the
payment of the Repurchase Price in respect of any Affected Convertible Security
of that series on the Repurchase Date therefor (even if that payment is
prohibited by the subordination provisions of the Indenture); (v) default in the
performance or breach of any other covenant or warranty of ARS in the Indenture
(other than a covenant included in the Indenture for one or more series of
Convertible Securities other than Convertible Securities of that series) which
continues for 60 days after written notice as provided in the Indenture; (vi)
default under one or more bonds, debentures, notes or other evidences of
indebtedness for money borrowed by ARS or any of its consolidated subsidiaries
or under one or more mortgages, indentures or instruments under which there may
be issued or by which there may be secured or evidenced any indebtedness
15
<PAGE> 17
for money borrowed by ARS or any of its consolidated subsidiaries, whether that
indebtedness now exists or is hereafter created, which default individually or
in the aggregate constitutes a failure to pay the principal of indebtedness in
excess of $10 million when due and payable after the expiration of any
applicable grace period with respect thereto or results in indebtedness in
excess of $10 million becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without that
indebtedness having been discharged, or that acceleration having been rescinded
or annulled, within a period of 30 days after there shall have been given to ARS
by the Trustee or to ARS and the Trustee by Holders of at least 25% in aggregate
principal amount of the Outstanding Convertible Securities a written notice
specifying such default and requiring ARS to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or annulled; (vii) certain
events in bankruptcy or reorganization of or similar events respecting ARS or
any of its Significant Subsidiaries; and (viii) any other Event of Default as
the applicable Prospectus Supplement may specify with respect to the Convertible
Securities of that series.
If an Event of Default with respect to any Outstanding series of
Convertible Securities occurs and is continuing, the Trustee or Holders of not
less than 25% in aggregate principal amount of the Outstanding Convertible
Securities of that series (if the Event of Default is one of the types described
in clause (i), (ii) or (viii) above) or at least 25% in aggregate principal
amount of all Outstanding Convertible Securities (if the Event of Default is of
any other type) may declare the principal of and any premium and interest on all
the Outstanding Convertible Securities of the applicable series (or of all
Outstanding Convertible Securities, as the case may be) to be due and payable
immediately, but if a majority in principal amount of Holders of Outstanding
Convertible Securities of the applicable series (or of all Outstanding
Convertible Securities, as the case may be) waive any past default (except the
nonpayment of any premium or interest on or principal of any Convertible
Security and subject to certain other limitations), then such default will cease
to exist and any Event of Default arising therefrom will be deemed cured for
every purpose of the Indenture; but no such waiver will extend to any subsequent
or other default. If an Event of Default occurs and is continuing as a result of
an event of bankruptcy or reorganization of ARS or any of its Significant
Subsidiaries, the principal of and any premium and accrued and unpaid interest
on all Outstanding Convertible Securities will automatically become due and
payable without any declaration or other act on the part of the Trustee or any
Holder of any Convertible Securities. ARS is required to furnish to the Trustee
annually a statement as to the performance by ARS of certain of its obligations
under the Indenture and as to any default in that performance. The Indenture
provides that the Trustee may withhold notice to Holders of the Convertible
Securities of any series of any continuing default (except in the case of a
default in payment of the principal of or any premium or interest on those
Convertible Securities), if the Trustee considers it in the interest of those
Holders to do so.
MODIFICATIONS AND AMENDMENTS
ARS and the Trustee may modify or amend the Indenture without the consent
of Holders to: (i) set forth the terms of the Convertible Securities of any
series, including for purposes of that series any change in the definition of
Senior Indebtedness; (ii) evidence the succession of another Person to ARS and
the assumption by any such successor of the covenants of ARS in the Indenture
and the Convertible Securities; (iii) for the benefit of the Holders of
Convertible Securities of any or all series, add to the covenants of ARS, add an
additional Event of Default or surrender any right or power conferred upon ARS;
(iv) secure the Convertible Securities; (v) make provision with respect to the
conversion rights of Holders in the event of a consolidation, merger or sale of
assets involving ARS, as required by the Indenture; (vi) evidence and provide
for the acceptance of appointment by a successor Trustee or successor Trustees
with respect to the Convertible Securities; or (vii) cure any ambiguity in or
omission from, or, correct or supplement any provision in, the Indenture or the
Convertible Securities which may be defective or inconsistent with any other
provision or make any other provisions with respect to matters or questions
arising under the Indenture which shall not be inconsistent with the provisions
of the Indenture; provided, however, that no such modification or amendment
described in this clause (vii) may adversely affect the interest of Holders of
Securities of any series in any material respect.
16
<PAGE> 18
ARS and the Trustee may modify or amend the Indenture with the consent of
the Holders of a majority in principal amount of the Outstanding Convertible
Securities affected thereby; provided, that no such amendment or modification
may, without the consent of each Outstanding Convertible Security affected
thereby, (i) change the stated maturity date of the principal of, or any
installment of principal or interest on, any Convertible Security or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
on the redemption thereof, or change the coin or currency in which any
Convertible Security or any premium or interest thereon is payable, or impair
the right to institute suit for the enforcement of any payment on or with
respect to any Convertible Security, (ii) reduce the percentage in principal
amount of the Outstanding Convertible Securities the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of the applicable
Indenture or certain defaults thereunder and their consequences or (iii) modify
any of the provisions of the Indenture relating to the subordination of the
Outstanding Convertible Securities in a manner adverse to the Holders thereof.
SATISFACTION AND DISCHARGE
ARS may discharge its obligations under the Indenture while Convertible
Securities remain Outstanding, subject to certain conditions, if (i) all
Outstanding Convertible Securities have become due and payable or will become
due and payable at their scheduled maturity within one year or (ii) all
Outstanding Convertible Securities are scheduled for redemption within one year,
and in either case ARS has deposited with the Trustee an amount in cash
sufficient (without any consideration of any investment of that cash) to pay and
discharge all Outstanding Convertible Securities on the date of their scheduled
maturity or the scheduled date of redemption.
MEETINGS OF HOLDERS
The Indenture contains provisions for convening meetings of the Holders of
Convertible Securities of any series. A meeting may be called at any time by the
Trustee or, on request, by ARS or the holders of at least 10% in principal
amount of the Outstanding Convertible Securities of any series, in any such case
on notice given as provided in the Indenture. Except for any consent that must
be given by the Holder of each Outstanding Convertible Security affected
thereby, as described above under "-- Modifications and Amendments," any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Convertible Securities of that series;
provided, however, that, except for any consent that must be given by the Holder
of each Outstanding Convertible Security affected thereby, as described above
under "-- Modifications and Amendments," any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the Holders of a specified
percentage, which is less than a majority in principal amount of the Outstanding
Convertible Securities of a series, may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in principal amount of the Outstanding
Convertible Securities of that series. Subject to the proviso set forth above,
any resolution passed or decision taken at any meeting of Holders of Convertible
Securities of that series duly held in accordance with the Indenture will be
binding on all Holders of Convertible Securities of that series. The quorum at
any meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Convertible Securities of a series.
FORM, DENOMINATION AND REGISTRATION
Unless the applicable Prospectus Supplement provides otherwise, the
Convertible Securities will be issued in fully registered form, without coupons,
in denominations of $1,000 and any integral multiples thereof.
GOVERNING LAW
The Indenture and the Convertible Securities will be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to that state's conflicts of laws principles.
17
<PAGE> 19
INFORMATION CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions,
except that, if it acquires any conflicting interest (as defined), it must
eliminate that conflict or resign.
ARS and its subsidiaries may maintain deposit accounts and conduct other
banking transactions with the Trustee in the ordinary course of business. The
Trustee also acts as the trustee under the 7 1/4% Notes indenture.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of ARS consists of 50,000,000 shares of Common
Stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par
value $.001 per share (the "Preferred Stock"). At December 5, 1997, 15,321,322
shares of Common Stock were issued and outstanding and no shares of Preferred
Stock had been issued. The following summary is qualified in its entirety by
reference to the Charter, which is an exhibit to the Acquisition Shelf
Registration Statement.
COMMON STOCK
The Common Stock possesses ordinary voting rights for the election of
directors and in respect of other corporate matters, and each share has one
vote. The Common Stock affords no cumulative voting rights, and the holders of a
majority of the shares voting for the election of directors can elect all the
directors if they so choose. The Common Stock carries no preemptive rights and
is not convertible, redeemable, assessable or entitled to the benefits of any
sinking fund. Holders of Common Stock are entitled to dividends in such amounts
and at such times as the Board may declare out of funds legally available
therefor.
PREFERRED STOCK
The Board may direct ARS to issue Preferred Stock from time to time.
Subject to certain Charter provisions and applicable law, it may, without any
action by holders of the Common Stock, (i) adopt resolutions to issue the shares
in one or more classes or series, (ii) fix the number of shares and change the
number of shares constituting any series and (iii) provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, including dividend rights and rates, redemption terms and prices,
repurchase obligations, conversion rights and liquidation preferences of the
shares constituting any class or series.
The Board could cause ARS to issue shares of, or rights to purchase,
Preferred Stock, the terms of which might (i) discourage an unsolicited proposal
to acquire the Company, (ii) facilitate a particular business combination
involving the Company or (iii) adversely affect the voting power of holders of
the Common Stock. Any such action could discourage a transaction that some or a
majority of the stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over its then market
price.
STOCKHOLDER RIGHTS PLAN
Each share of Common Stock offered hereby includes one right ("Right") to
purchase from ARS a unit consisting of one one-hundredth of a share (a
"Fractional Share") of Series A Junior Participating Preferred Stock, par value
$.001 per share (the "Series A Preferred Stock"), at a purchase price of $40.00
per Fractional Share, subject to adjustment in certain events (the "Purchase
Price"). The following summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
between ARS and a Rights Agent (the "Rights Agreement"), the form of which is an
exhibit to the Acquisition Shelf Registration Statement.
18
<PAGE> 20
The Rights currently are attached to all certificates representing shares
of Common Stock now outstanding or hereafter issued, including the shares of
Common Stock into which the Notes are convertible. No separate certificates for
the Rights ("Rights Certificates") have been or will be distributed, except as
described below. The Rights will separate from the Common Stock and a
"Distribution Date" will, with certain exceptions, occur upon the earlier of (i)
10 days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the date of the announcement being the "Stock Acquisition Date")
or (ii) 10 business days following the commencement of a tender offer or
exchange offer that would result in a person's becoming an Acquiring Person. In
certain circumstances the Distribution Date may be deferred by the Board of
Directors. Certain inadvertent acquisitions will not result in a person's
becoming an Acquiring Person if the person promptly divests itself of sufficient
Common Stock. Until the Distribution Date, (a) the Rights will be evidenced by
the Common Stock certificates and will be transferred with and only with those
certificates, (b) Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any certificate for Common Stock also will constitute the transfer
of the Rights associated with the stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 30, 2006, unless earlier redeemed or exchanged
by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise determined by the Board of Directors, no other
shares of Common Stock issued after the Distribution Date will be issued with
Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the independent members
of the Board of Directors determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, on exercise of that
Right, a number of shares of Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a Current Market Price (as
defined in the Rights Agreement) equal to two times the exercise price of the
Right. Notwithstanding the foregoing, following the occurrence of any Triggering
Event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person (or by
certain related parties) will be null and void in the circumstances set forth in
the Rights Agreement. Rights are not exercisable following the occurrence of any
Flip-In Event until such time as the Rights are no longer redeemable by the
Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer) or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter have the right
to receive, on exercise of such Right, a number of shares of common stock of the
acquiring company having a Current Market Price equal to two times the exercise
price of the Right. Flip-In Events and Flip-Over Events are collectively
referred to as "Triggering Events."
The Purchase Price payable, and the number of Fractional Shares of Series A
Preferred Stock or other securities or property issuable, on exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) if holders of the Series
A Preferred Stock are granted certain rights or warrants to subscribe for Series
A Preferred Stock or certain convertible securities at less than the current
market price of the Series A Preferred Stock or (iii) on the distribution to
holders of the Series A Preferred Stock of
19
<PAGE> 21
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Series A Preferred Stock that are not integral
multiples of a Fractional Share are required to be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Series A
Preferred Stock on the last trading date prior to the date of exercise. Pursuant
to the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, on any exercise of Rights, a number of
Rights be exercised so that only whole shares of Series A Preferred Stock will
be issued.
At any time until 10 days following the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, payable, at the option of
the Company, in cash, shares of the Common Stock or such other consideration as
the Board of Directors of the Company may determine. Immediately upon the
effectiveness of the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding, the Company may, at its option, exchange the Rights (other than
Rights owned by an Acquiring Person or an affiliate or an associate of an
Acquiring Person, which will have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, and/or other equity securities
deemed to have the same value as one share of Common Stock, per Right, subject
to adjustment.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors as long as the Rights are
redeemable. The matter, the provisions of the Rights Agreement other than the
redemption price may be amended by the Board of Directors only in order to cure
any ambiguity, defect or inconsistency, to make changes that do not materially
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption shall be made at such time as the Rights are not
redeemable. Until a Right is exercised, the holder thereof, as such, will have
no rights to vote or to receive dividends or any other rights as a stockholder
of the Company.
The Rights will have certain anti-takeover effects. They will cause
substantial dilution to any person or group that attempts to acquire the Company
without the approval of the Company's Board of Directors. As a result, the
overall effect of the Rights may be to render more difficult or discourage any
attempt to acquire the Company, even if such acquisition may be favorable to the
interests of the Company's stockholders. Because the Board of Directors can
redeem the Rights or approve a Permitted Offer, the Rights should not interfere
with a merger or other business combination approved by the Board. The Rights
are being issued to protect the Company's stockholders from coercive or abusive
takeover tactics and to afford the Company's Board of Directors more negotiating
leverage in dealing with prospective acquirors.
STATUTORY BUSINESS COMBINATION PROVISION
ARS is a Delaware corporation and is subject to Section 203 of the DGCL. In
general, Section 203 prevents an "interested stockholder" (defined generally as
a person owning 15% or more of a corporation's outstanding voting stock) from
engaging in a "business combination"(as defined) with a Delaware corporation for
three years following the date such person became an interested stockholder
unless: (i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine
20
<PAGE> 22
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) following the transaction in which such
person became an interested stockholder, the business combination was approved
by the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
OTHER MATTERS
Delaware law authorizes Delaware corporations to limit or eliminate the
personal liability of their directors to them and their stockholders for
monetary damages for breach of a director's fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Delaware law,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their duty
of care. Delaware law enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Charter limits the
liability of directors of ARS to ARS or its stockholders to the fullest extent
permitted by Delaware law. Specifically, no member of the Board will be
personally liable for monetary damages for breach of the member's fiduciary duty
as a director, except for liability (i) for any breach of the member's duty of
loyalty to ARS or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL or (iv) for any transaction from which the
member derived an improper personal benefit. This Charter provision could have
the effect of reducing the likelihood of derivative litigation against directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care. The Bylaws of ARS (the
"Bylaws") provide indemnification to its officers and directors and certain
other persons with respect to certain matters, and ARS has entered into
agreements with each of its directors and executive officers providing for
indemnification with respect to certain matters.
The Charter provides that stockholders may act only at an annual or special
meeting of stockholders and may not act by written consent. The Bylaws provide
that only the Chairman of the Board, the President or a majority of the Board
may call a special meeting of stockholders.
The Charter provides that the Board will consist of three classes of
directors serving for staggered terms. This Charter provision could prevent a
party who acquires control of a majority of the outstanding voting stock of ARS
from obtaining control of the Board until the second annual stockholders meeting
following the date that party obtains that control.
The Charter provides that the number of directors will be as determined by
the Board from time to time, but will not be less than three. It also provides
that directors may be removed only for cause, and then only by the affirmative
vote of the holders of at least a majority of all outstanding voting stock
entitled to vote. This provision, in conjunction with the Charter provisions
authorizing the Board of Directors to fill vacant directorships, will prevent
stockholders from removing incumbent directors without cause and filling the
resulting vacancies with their own nominees.
STOCKHOLDER PROPOSALS
The Bylaws contain advance-notice and other procedural requirements that
apply to stockholder nominations of persons for election to the Board at any
annual or special meeting of stockholders and to
21
<PAGE> 23
stockholder proposals that any other action be taken at any annual meeting. In
the case of any annual meeting, a stockholder proposing to nominate a person for
election to the Board or proposing that any other action be taken must give the
Secretary of ARS written notice of the proposal not less than 90 days before the
anniversary date of the immediately preceding annual meeting (subject to certain
exceptions if the pending annual meeting date differs by more than specified
periods from that anniversary date). If a special meeting is called for the
election of directors, a stockholder proposing to nominate a person for that
election must give the Secretary of ARS written notice of the proposal no later
than the close of business on the 10th day following the first to occur of (i)
the day on which notice of the date of the special meeting was mailed to
stockholders or (ii) the day public disclosure of the date of the special
meeting was made. The Bylaws prescribe the specific information any advance
written stockholder notice must contain. The foregoing summary is qualified in
its entirety by reference to the Bylaws, which are an exhibit to the Acquisition
Shelf Registration Statement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discusses the material United States federal income tax
consequences under generally applicable current law of the acquisition,
ownership, conversion and disposition of Convertible Securities and Common Stock
acquired from ARS, in connection with the direct and indirect acquisition of
businesses, properties or securities in a business combination transaction (a
"Business Combination Transaction") and the acquisition, ownership, conversion
and disposition of Common Stock which was acquired on the conversion of one or
more Convertible Securities acquired from ARS in a Business Combination
Transaction by persons who hold those Convertible Securities and any such Common
Stock as capital assets. It does not, however, discuss the effect of (i) special
rules, such as those which apply to tax-exempt organizations, insurance
companies, financial institutions, persons who hold the Convertible Securities
or Common Stock in connection with a straddle or dealers, (ii) rules that may
permit (a) gain realized on the receipt of Convertible Securities in exchange
for property which is transferred to ARS in a Business Combination Transaction
to be reported on the installment method or (b) the receipt of Convertible
Securities or Common Stock in a Business Combination Transaction without the
recognition of gain or loss or (iii) any foreign, state or local tax law.
Accordingly, each person who is considering the acquisition of Convertible
Securities or Common Stock in a Business Combination Transaction pursuant to
this Prospectus is advised to consult his or her own tax advisor regarding the
matters discussed herein in light of his or her particular circumstances and the
application of state, local and foreign tax laws.
The following statements are based upon the Internal Revenue Code of 1986,
as amended (the "Code"), existing regulations thereunder and the current
judicial and administrative interpretations thereof.
OWNERSHIP BY U.S. PERSONS
The following applies to a person who is a citizen or resident of the
United States (a "U.S. Holder"), a corporation or partnership created or
organized in the United States or any state thereof or an estate or trust the
income of which is includible in income for United States federal income tax
purposes regardless of its source.
Interest on Convertible Securities. The portion of any stated interest on a
Convertible Security which is qualified stated interest will be taxable as
ordinary income at the time that interest is paid or accrued in accordance with
the U.S. Holder's method of accounting for United States federal income tax
purposes. The portion of the stated interest on a Convertible Security which is
not qualified stated interest and, in certain circumstances, a portion of the
stated principal on a Convertible Security will be classified as original issue
discount. Any such original issue discount will be included in income at times
which generally precede the payment of that original issue discount. The effect
of the foregoing principles on a particular Convertible Security will depend, in
part, on the terms of the Convertible Security. A person who is considering the
acquisition of a Convertible Security in a Business Combination Transaction
pursuant to this Prospectus
22
<PAGE> 24
should consult with his or her tax advisor regarding the amount of any such
original issue discount with respect to that Convertible Security and the effect
thereof on such person.
Conversion of Convertible Securities. A U.S. Holder who does not use the
installment method to report income on the receipt of a Convertible Security in
a Business Combination Transaction will generally not recognize gain or loss on
the conversion of that Convertible Security into Common Stock except that he or
she will recognize a capital gain or loss as a result of the receipt of cash in
lieu of a fractional share equal to the amount of cash reduced by the basis of
the portion of the Convertible Security in respect of which that cash was paid.
The basis of the Common Stock that is received on the conversion will be the
adjusted basis of the converted Convertible Security at the time of conversion
increased by any gain that is recognized, decreased by any loss that is
recognized and decreased by any cash that is received. The holding period of
that Common Stock will include the holding period of the converted Convertible
Security.
Rev. Rul. 72-264 provides that (i) a U.S. Holder who uses the installment
method to report income on the receipt of a Convertible Security (any such
Convertible Security is referred to herein as an "Installment Method Convertible
Security") in a Business Combination Transaction will recognize gain or loss on
the conversion of that Installment Method Convertible Security into Common Stock
and (ii) the amount of that gain or loss will be the amount of cash received in
lieu of a fractional share increased by the fair market value of the Common
Stock received reduced by the basis (as defined in Section 453B(b) of the Code)
of that Convertible Security. Any gain or loss which is so recognized will be
considered to result from the sale or exchange of the property in exchange for
which the Installment Method Convertible Security was received.
Constructive Dividend. A distribution to holders of Common Stock may cause
a deemed distribution (which will be a dividend to the extent of the current or
accumulated earnings and profits of ARS) to the holders of Convertible
Securities if the conversion price or conversion ratio of the Convertible
Securities is adjusted to reflect that distribution.
Sale or Exchange of Convertible Securities or Common Stock. Gain or loss
will be recognized on the sale or exchange of Convertible Securities or of
Common Stock in an amount equal to the difference between (i) the amount of cash
and the fair market value of any other property received by the U.S. Holder
(excluding, in the case of Convertible Securities, any amount representing
accrued, but theretofore unrecognized, interest, which will be taxable as such)
and (ii) the Holder's adjusted basis in the property sold or exchanged. If the
Convertible Security is an Installment Method Convertible Security, then any
gain or loss that is recognized on the sale or exchange thereof will be
considered to result from the sale or exchange of the property in exchange for
which the Installment Method Convertible Security was received. If the
Convertible Security is not an Installment Method Convertible Security, then any
such gain (other than gain characterized as interest under the market discount
rules) or loss with respect to that Convertible Security will be a capital gain
or loss and will be a long-term capital gain or loss if the holding period of
that Convertible Security is more than one year. Gain or loss that is recognized
on the sale or exchange of Common Stock will be a capital gain or loss and will
be a long-term capital gain or loss if the holding period of the Common Stock is
more than one year.
Dividends on Common Stock. Distributions on the Common Stock will be
dividends to the extent of the current or accumulated earnings and profits of
ARS, then a nontaxable return of capital reducing the holder's adjusted basis in
the Common Stock until such adjusted basis is reduced to zero and finally an
amount received in exchange for the Common Stock. Dividends paid to domestic
corporations may qualify for the dividends received deduction subject to the
limiting provisions that apply thereto.
OWNERSHIP BY NON-U.S. HOLDERS
The following applies to a person who is not a U.S. Holder (a "Non-U.S.
Holder") and to the income received thereby, such as interest, dividends and
gain or loss on disposition, with respect to Convertible Securities and Common
Stock which is not effectively connected with the conduct by the Non-U.S. Holder
of a trade or business within the United States. Any such items of income
generally will be subject to the United States federal income tax that applies
to U.S. Holders generally, and, in the case of such a Non-U.S. Holder that is a
foreign corporation, those items also will be subject to the branch profits tax.
23
<PAGE> 25
Interest on Convertible Securities. Interest paid on Convertible Securities
to a Non-U.S. Holder will not be subject to United States federal income tax or
to withholding in respect thereof if: (i) the beneficial owner (or if certain
requirements are satisfied, a member of a class of financial institutions)
certifies, under penalties of perjury, that the beneficial owner is not a U.S.
Holder and provides the beneficial owner's name and address; (ii) the Non-U.S.
Holder does not own actually or constructively 10% or more of the total voting
power of all classes of stock of ARS entitled to vote (Common Stock into which a
Convertible Security can be converted is constructively owned for these
purposes); (iii) the Non-U.S. Holder is not a controlled foreign corporation
with respect to which ARS is a "related person" within the meaning of Section
864(d)(4) of the Code; and (iv) the Non-U.S. Holder is not a bank holding the
Convertible Securities as a result of an extension of credit made pursuant to a
loan agreement entered into in the ordinary course of its trade or business.
Accrued market discount on a Convertible Security is not treated for these
purposes as interest income.
If the foregoing conditions are not satisfied, then the interest generally
will be subject to United States federal income tax withholding at a rate of 30%
(or any lower rate provided by any applicable treaty).
Sale or Exchange of Convertible Securities or Common Stock; Conversion of
Convertible Securities. A Non-U.S. Holder generally will not be subject to
United States federal income tax on gain recognized on the sale or exchange of
Convertible Securities or Common Stock or on the conversion of a Convertible
Security unless (i) the Holder is an individual who is present in the United
States for 183 or more days in the taxable year and certain other conditions are
satisfied or (ii) ARS is (as is not expected) a "United States real property
holding corporation," as defined in Section 897 of the Code, and certain
exceptions do not apply. Notwithstanding the foregoing, if any Convertible
Security is received in exchange for property used in the conduct of a trade or
business within the United States and the gain that was realized on the receipt
of that Convertible Security was reported on the installment method, then any
gain that is realized on the collection, conversion, sale, exchange or other
disposition of that Convertible Security may be subject to United States income
tax as though the Non-U.S. Holder were a citizen or resident of the United
States.
Dividends on Common Stock. Any distribution on Common Stock to a Non-U.S.
Holder will be subject to United States federal income tax withholding at a rate
of 30% (or any lower rate provided by any applicable treaty).
Estate Tax. An individual Non-U.S. Holder of a Convertible Security will
not be required to include the value of that Convertible Security in his gross
estate for United States federal estate tax purposes, provided that the Holder
did not at the time of death actually or constructively own 10% or more of the
combined voting power of all classes of stock of ARS and, at the time of the
Holder's death, payments of interest on that Convertible Security would not have
been effectively connected with the conduct by the Holder of a trade or business
in the United States. An individual Non-U.S. Holder who is treated as the owner
of, or has made certain lifetime transfers of, an interest in the Common Stock
will be required to include the value thereof in his gross estate for United
States federal estate tax purposes (and may be subject to United States federal
estate tax with respect thereto), unless otherwise provided by an applicable
estate tax treaty.
BACKUP WITHHOLDING; INFORMATION REPORTING
A noncorporate U.S. Holder holding Convertible Securities or Common Stock
(and any Non-U.S. Holder failing to provide a certificate that it is not a U.S.
Holder) will be subject to backup withholding at the rate of 31% with respect to
interest paid on the Convertible Securities, dividends paid on Common Stock and
the proceeds of any sale, exchange or redemption thereof if the payee fails to
furnish a taxpayer identification number and in certain other circumstances. Any
amounts so withheld will be allowed as a refund or a credit against the Holder's
United States federal income tax liability, provided that certain information is
furnished to the Internal Revenue Service.
Information reporting will be required with respect to a payment of
proceeds from the sale or exchange of Convertible Securities or Common Stock
through a foreign office of a broker that is a United States person or of
certain foreign brokers unless the broker has documentary evidence in its files
that the owner is a Non-U.S. Holder and the broker has no actual knowledge to
the contrary.
24
<PAGE> 26
The Internal Revenue Service has proposed regulations that, if issued as
final regulations, would require certain Non-U.S. Holders to provide additional
information in order to establish an exemption from, or reduce the rate of,
withholding tax or backup withholding tax and in particular would require that
foreign partnerships and partners of a foreign partnership provide certain
information and comply with certain certification requirements not required
under existing law. Such proposed regulations are proposed to be effective
generally for payments made after December 31, 1997. It is not possible to
predict whether, or in what form, the proposed regulations ultimately will be
adopted.
PLAN OF DISTRIBUTION
This Prospectus covers the offer and sale of up to 10,143,923 shares of
Common Stock and $100,000,000 aggregate principal amount of Convertible Debt
Securities which ARS may issue from time to time in connection with future
direct and indirect acquisitions of other businesses, properties or securities
in business combination transactions.
ARS expects that the (i) terms on which it may issue the shares of Common
Stock and Convertible Debt Securities covered hereby will be determined by
direct negotiations with the owners or controlling persons of the businesses or
assets to be acquired, (ii) the shares of Common Stock issued will be valued at
prices reasonably related to market prices prevailing either at the time an
acquisition agreement is executed or at or about the time of delivery of shares
and (iii) the Convertible Debt Securities issued will be valued at prices
reasonably related to their principal amount.
EXPERTS
The audited financial statements incorporated by reference in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
AVAILABLE INFORMATION
ARS is subject to the reporting requirements of the Exchange Act, and, in
accordance therewith, files reports, proxy statements and other information with
the SEC. These reports, proxy statements and other information, once filed, may
be inspected, without charge, at the public reference facilities of the SEC at
its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and its regional offices at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of all or any portion of
these documents can be obtained at prescribed rates from the Public Reference
Section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The SEC maintains an Internet web site
that contains such reports, proxy statements and other information regarding
issuers (including ARS) that file electronically with the SEC. The address of
that site is http://www.sec.gov.
ARS has filed the Acquisition Shelf Registration Statement on Form S-4
under the Securities Act with the SEC with respect to this offering. This
Prospectus, filed as a part of the Acquisition Shelf Registration Statement,
does not contain all the information set forth therein, or the exhibits and
schedules thereto, in accordance with the rules and regulations of the SEC, and
reference hereby is made to that omitted information. The statements made in
this Prospectus concerning documents filed or incorporated by reference as
exhibits to the Acquisition Shelf Registration Statement accurately describe the
material provisions of those documents and are qualified in their entirety by
reference to those exhibits for complete statements of their provisions. The
Acquisition Shelf Registration Statement and the exhibits and schedules thereto
may be inspected and copied at the principal office of the SEC in Washington,
D.C., as described above, and are also available at the SEC's Internet web site
described above.
25
<PAGE> 27
Proxy statements, reports and other information concerning the Company that
are filed under the Exchange Act also can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by ARS with the SEC are hereby
incorporated by reference in this Prospectus (Exchange Act File No. 1-11849):
1. Annual Report on Form 10-K for the year ended December 31, 1996;
2. Quarterly Reports on Form 10-Q for the quarterly periods ended March 31,
1997, June 30, 1997 and September 30, 1997;
3. Current Report on Form 8-K dated March 4, 1997;
4. Current Report on Form 8-K dated December 8, 1997;
5. The description of the Common Stock contained in the Registration
Statement on Form 8-A filed June 19, 1996; and
6. The description of the Rights to Purchase Series A Junior Participating
Preferred Stock contained in the Registration Statement on Form 8-A
filed June 27, 1996.
All reports and documents subsequently filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act by ARS prior to the termination of the
offering contemplated hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from their respective dates of
filing. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes that statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
ARS hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of that
person, a copy of any or all of the documents incorporated by reference herein,
other than exhibits to those documents (unless those exhibits are specifically
incorporated by reference into those documents). Requests should be directed to
John D. Held, Senior Vice President, General Counsel and Secretary, at the
principal executive offices of ARS located at Post Oak Tower, Suite 725, 5051
Westheimer Road, Houston, Texas 77056; telephone (713) 599-0100.
26
<PAGE> 28
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH
OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 2
Risk Factors.......................... 3
Price Range of Common Stock........... 6
Dividend Policy....................... 6
Selected Financial Information........ 7
Description of the Convertible Debt
Securities.......................... 9
Description of Capital Stock.......... 18
Certain United States Federal Income
Tax Consequences.................... 22
Plan of Distribution.................. 25
Experts............................... 25
Available Information................. 25
Incorporation of Certain Information
by Reference........................ 26
</TABLE>
================================================================================
================================================================================
[AMERICAN RESIDENTIAL SERVICES, INC. LOGO]
AMERICAN RESIDENTIAL
SERVICES, INC.
Common Stock
Convertible Subordinated
Debt Securities
-----------------
PROSPECTUS
-----------------
December , 1997
================================================================================
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be
II-1
<PAGE> 30
determined that he is not entitled to be indemnified by the corporation as
authorized in Section 145. Such expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Certificate of Incorporation
The Restated Certificate of Incorporation of the Company provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
personal liability described above, shall be limited to the fullest extent
permitted by the amended DGCL. Further, any repeal or modification of such
provision of the Restated Certificate of Incorporation by the stockholders of
the Company shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.
Bylaws
The Bylaws of the Company provide that the Company will indemnify and hold
harmless any director or officer of the Company to the fullest extent permitted
by applicable law, as in effect as of the date of the adoption of the Bylaws or
to such greater extent as applicable law may thereafter permit, from and against
all losses, liabilities, claims, damages, judgments, penalties, fines, amounts
paid in settlement and expenses (including attorneys' fees) whatsoever arising
out of any event or occurrence related to the fact that such person is or was a
director or officer of the Company and further provide that the Company may, but
is not required to, indemnify and hold harmless any employee or agent of the
Company or a director, officer, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise who
is or was serving in such capacity at the written request of the Company;
provided, however, that the Company is only required to indemnify persons
serving as directors, officers, employees or agents of the Company for the
expenses incurred in a proceeding if such person is a party to and is
successful, on the merits or otherwise, in such proceeding, or if unsuccessful
in the proceeding, but successful as to a matter in such proceeding, the
expenses attributable to such matter and provided further that the Company may,
but is not required to, indemnify such persons who are serving as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise at the written request of the
Company for the expenses incurred in a proceeding if such person is a party to
and is successful, on the merits or otherwise, in such proceeding. The Bylaws
further provide that, in the event of any threatened, or
II-2
<PAGE> 31
pending action, suit or proceeding in which any of the persons referred to above
is a party or is involved and that may give rise to a right of indemnification
under the Bylaws, following written request by such person, the Company will
promptly pay to such person amounts to cover expenses reasonably incurred by
such person in such proceeding in advance of its final disposition upon the
receipt by the Company of (i) a written undertaking executed by or on behalf of
such person providing that such person will repay the advance if it is
ultimately determined that such person is not entitled to be indemnified by the
Company as provided in the Bylaws and (ii) satisfactory evidence as to the
amount of such expenses.
Indemnification Agreements
The Company has entered into Indemnification Agreements with each of its
directors and executive officers. The Indemnification Agreements generally are
to the same effect as the Bylaw provisions described above.
Insurance
The Company maintains liability insurance for the benefit of its directors
and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*2.1 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which American Residential Services, Inc. ("ARS")
and Climatic Corporation of Vero Beach are parties (Form
S-1, Reg. No. 333-06195, Ex. 2.1).
*2.2 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.2).
*2.3 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Atlas Services, Inc. are parties
(Form S-1, Reg. No. 333-06195, Ex. 2.3).
*2.4 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and DIAL ONE Meridian and Hoosier, Inc.
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.4).
*2.5 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Bullseye Air Conditioning, Inc. are
parties (Form S-1, Reg. No. 333-06195, Ex. 2.5).
*2.6 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Duct, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.6).
*2.7 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Service, Inc. are parties (Form S-1, Reg.
No. 333-06195, Ex. 2.7).
*2.8 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and General Heating Engineering
Company, Inc. are parties (Form S-1, Reg. No. 333-06195,
Ex. 2.8).
*2.9 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Enterprises Holding Company ("EHC")
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.9).
*2.10 -- Form of Uniform Provisions for the Acquisition of
Founding Companies (Form S-1, Reg. No. 333-06195, Ex.
2.10).
*2.11 -- Agreement and Plan of Reorganization dated as of December
11, 1996 to which ARS and Metro Heating and Air
Conditioning, Inc. are parties (Form S-4, Reg. No.
333-18623, Ex. 2.11).
*3.1 -- Restated Certificate of Incorporation of ARS (Form S-1,
Reg. No. 333-06195, Ex. 3.1).
*3.2 -- Bylaws of ARS (Form S-1, Reg. No. 333-06195, Ex. 3.2).
*3.3 -- Certificate of Designation of Series A Junior
Participating Preferred Stock (Form S-1, Reg. No.
333-06195, Ex. 3.3).
*4.1 -- Form of Certificate representing Common Stock (Form S-1,
Reg. No. 333-06195, Ex. 4.1).
</TABLE>
II-3
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*4.2 -- Rights Agreement of ARS, including form of Rights
Certificate as Exhibit B thereto (Form S-8, Reg. No.
333-13299, Ex. 4.4).
*4.3 -- Registration Rights Agreement among ARS and the
stockholders listed on the signature pages thereto (Form
S-1, Reg. No. 333-06195, Ex. 4.3).
*4.4 -- Stock Registration Agreement dated as of March 6, 1996
between ARS and Equus II Incorporated (Form S-1, Reg. No.
333-06195, Ex. 4.4).
*4.5 -- Stock Piggyback Registration Agreement dated as of March
19, 1996 between EHC and NationsBank of Texas, N.A.
("NationsBank") (Form S-1, Reg. No. 333-06195, Ex. 4.5).
*4.6 -- Revolving Loan Agreement dated March 3, 1997 among ARS,
NationsBank and the other parties designated therein
(Form 10-K for 1996, File No. 1-11849, Ex. 4.6).
*4.7 -- First Amendment to Revolving Loan Agreement dated March
24, 1997, among ARS, NationsBank and the other parties
designated therein (Form 10-K for 1996, File No. 1-11849,
Ex. 4.7).
*4.8 -- Indenture dated as of April 1, 1997 from ARS to U.S.
Trust Company of Texas, N.A., as Trustee (Form S-4, Reg.
No. 333-18623, Ex. 4.8).
*4.9 -- Registration Rights Agreement dated as of April 1, 1997
between ARS and Smith Barney Inc., Goldman, Sachs & Co.
and Montgomery Securities (Form S-4, Reg. No. 333-18623,
Ex. 4.9).
+4.10 -- Form of Indenture from ARS to U.S. Trust Company of
Texas, N.A., as Trustee relating to the Convertible Debt
Securities.
ARS and certain of its subsidiaries are parties to certain
debt instruments under which the total amount of
securities authorized does not exceed 10% of the total
assets of ARS and its subsidiaries on a consolidated
basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, ARS agrees to furnish a copy of such
instruments to the Commission upon request.
+5.1 -- Opinion of John D. Held, Esq.
*10.1 -- ARS 1996 Incentive Plan, (Form S-1, Reg. No. 333-06195,
Ex. 10.1).
*10.2 -- Employment Agreement dated as of November 1, 1995 between
ARS and Howard S. Hoover, Jr., as amended (Form S-1, Reg.
No. 333-06195, Ex. 10.2).
*10.3 -- Employment Agreement dated as of November 1, 1995 between
ARS and C. Clifford Wright, Jr., as amended (Form S-1,
Reg. No. 333-06195, Ex. 10.3).
*10.4 -- Amended and Restated Employment Agreement dated as of
April 1, 1997 between ARS and Harry O. Nicodemus, IV
(Form S-4, Reg. No. 333-18623, Ex. 4.9).
*10.5 -- Employment Agreement dated as of March 6, 1996 between
ARS and John D. Held, as amended (Form S-1, Reg. No.
333-06195, Ex. 10.5).
*10.6 -- Employment Agreement dated as of March 6, 1996 between
ARS and A. Jefferson Walker III (Form S-1, Reg. No.
333-06195, Ex. 10.6).
*10.7 -- Employment Agreement dated as of April 15, 1996 between
ARS and Michael Mamaux (Form S-1, Reg. No. 333-06195, Ex.
10.7).
*10.8 -- Employment Agreement dated as of June 13, 1996 between
ARS and Elliot Sokolow (Form S-1, Reg. No. 333-06195, Ex.
10.8).
*10.9 -- Employment Agreement dated as of June 13, 1996 between
ARS and Gorden H. Timmons (Form S-1, Reg. No. 333-06195,
Ex. 10.10).
*10.10 -- Employment Agreement dated as of June 13, 1996 between
ARS and Frank N. Menditch (Form S-1, Reg. No. 333-06195,
Ex. 10.12).
*10.11 -- Employment Agreement dated as of November 1, 1996 between
ARS and Ronald R. McCann (Form S-1, Reg. No. 333-27785,
Ex. 10.12)
*10.12 -- Employment Agreement dated as of November 18, 1996
between ARS and Joseph B. Lechtanski (Form S-1, Reg. No.
333-27785, Ex. 10.13)
*10.13 -- Form of Indemnification Agreement between ARS and each of
its directors and officers (Form S-1, Reg. No. 333-06195,
Ex. 10.15).
*10.14 -- Executive Supplemental Disability Plan of ARS (Form S-1,
Reg. No. 333-06195, Ex. 10.16).
</TABLE>
II-4
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*10.15 -- Executive Supplemental Life Insurance Plan of ARS (Form
S-1, Reg. No. 333-06195, Ex. 10.17).
*10.16 -- ARS Deferred Compensation Plan (Form S-1, Reg. No.
333-06195, Ex. 10.18).
10.17 -- Employment Agreement dated as of November 1, 1997 between
ARS and Thomas N. Amonett.
21.1 -- List of Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP (Houston, Texas).
+23.2 -- Consent of John D. Held, Esq. (contained in Exhibit 5.1).
+24.1 -- Power of Attorney
+25.1 -- Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939 of U.S. Trust
Company of Texas, N.A., as Trustee under Exhibit 4.10.
</TABLE>
- ---------------
* Incorporated by reference.
+ Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b), if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
II-5
<PAGE> 34
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(6) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(7) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on November 30, 1997.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ THOMAS N. AMONETT
----------------------------------
Thomas N. Amonett
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on November 30,
1997 in the capacities indicated.
<TABLE>
<C> <S>
/s/ THOMAS N. AMONETT President, Chief Executive Officer
- ----------------------------------------------------- and Director (Principal Executive
Thomas N. Amonett Officer)
/s/ HARRY O. NICODEMUS, IV Senior Vice President, Chief
- ----------------------------------------------------- Financial Officer and Chief
Harry O. Nicodemus, IV Accounting Officer
/s/ HOWARD S. HOOVER, JR. Chairman of the Board
- -----------------------------------------------------
Howard S. Hoover, Jr.
/s/ GORDEN H. TIMMONS Chief Operating Officer and
- ----------------------------------------------------- Director
Gorden H. Timmons
/s/ DON D. SYKORA Director
- -----------------------------------------------------
Don D. Sykora
/s/ ELLIOT SOKOLOW Assistant to the Chairman and
- ----------------------------------------------------- Director
Elliot Sokolow
/s/ ROBERT J. CRUIKSHANK Director
- -----------------------------------------------------
Robert J. Cruikshank
/s/ RANDALL B. HALE Director
- -----------------------------------------------------
Randall B. Hale
/s/ NOLAN LEHMANN Director
- -----------------------------------------------------
Nolan Lehmann
/s/ WILLIAM P. MCCAUGHEY Director
- -----------------------------------------------------
William P. McCaughey
/s/ FRANK N. MENDITCH Senior Vice President and Director
- -----------------------------------------------------
Frank N. Menditch
</TABLE>
II-7
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ -----------
<S> <C>
*2.1 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which American Residential Services, Inc. ("ARS")
and Climatic Corporation of Vero Beach are parties (Form
S-1, Reg. No. 333-06195, Ex. 2.1).
*2.2 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning, Inc. are parties (Form S-1, Reg. No. 333-
06195, Ex. 2.2).
*2.3 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Atlas Services, Inc. are parties
(Form S-1, Reg. No. 333-06195, Ex. 2.3).
*2.4 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and DIAL ONE Meridian and Hoosier, Inc.
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.4).
*2.5 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Bullseye Air Conditioning, Inc. are
parties (Form S-1, Reg. No. 333-06195, Ex. 2.5).
*2.6 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Duct, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.6).
*2.7 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Service, Inc. are parties (Form S-1, Reg.
No. 333-06195, Ex. 2.7).
*2.8 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and General Heating Engineering
Company, Inc. are parties (Form S-1, Reg. No. 333-06195,
Ex. 2.8).
*2.9 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Enterprises Holding Company ("EHC")
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.9).
*2.10 -- Form of Uniform Provisions for the Acquisition of
Founding Companies (Form S-1, Reg. No. 333-06195, Ex.
2.10).
*2.11 -- Agreement and Plan of Reorganization dated as of December
11, 1996 to which ARS and Metro Heating and Air
Conditioning, Inc. are parties (Form S-4, Reg. No.
333-18623, Ex. 2.11).
*3.1 -- Restated Certificate of Incorporation of ARS (Form S-1,
Reg. No. 333-06195, Ex. 3.1).
*3.2 -- Bylaws of ARS (Form S-1, Reg. No. 333-06195, Ex. 3.2).
*3.3 -- Certificate of Designation of Series A Junior
Participating Preferred Stock (Form S-1, Reg. No.
333-06195, Ex. 3.3).
*4.1 -- Form of Certificate representing Common Stock (Form S-1,
Reg. No. 333-06195, Ex. 4.1).
*4.2 -- Rights Agreement of ARS, including form of Rights
Certificate as Exhibit B thereto (Form S-8, Reg. No.
333-13299, Ex. 4.4).
*4.3 -- Registration Rights Agreement among ARS and the
stockholders listed on the signature pages thereto (Form
S-1, Reg. No. 333-06195, Ex. 4.3).
*4.4 -- Stock Registration Agreement dated as of March 6, 1996
between ARS and Equus II Incorporated (Form S-1, Reg. No.
333-06195, Ex. 4.4).
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ -----------
<S> <C>
*4.5 -- Stock Piggyback Registration Agreement dated as of March
19, 1996 between EHC and NationsBank of Texas, N.A.
("NationsBank") (Form S-1, Reg. No. 333-06195, Ex. 4.5).
*4.6 -- Revolving Loan Agreement dated March 3, 1997 among ARS,
NationsBank and the other parties designated therein
(Form 10-K for 1996, File No. 1-11849, Ex. 4.6).
*4.7 -- First Amendment to Revolving Loan Agreement dated March
24, 1997, among ARS, NationsBank and the other parties
designated therein (Form 10-K for 1996, File No. 1-11849,
Ex. 4.7).
*4.8 -- Indenture dated as of April 1, 1997 from ARS to U.S.
Trust Company of Texas, N.A., as Trustee (Form S-4, Reg.
No. 333-18623, Ex. 4.8).
*4.9 -- Registration Rights Agreement dated as of April 1, 1997
between ARS and Smith Barney Inc., Goldman, Sachs & Co.
and Montgomery Securities (Form S-4, Reg. No. 333-18623,
Ex. 4.9).
+4.10 -- Form of Indenture from ARS to U.S. Trust Company of
Texas, N.A., as Trustee relating to the Convertible Debt
Securities.
ARS and certain of its subsidiaries are parties to certain
debt instruments under which the total amount of
securities authorized does not exceed 10% of the total
assets of ARS and its subsidiaries on a consolidated
basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, ARS agrees to furnish a copy of such
instruments to the Commission upon request.
+5.1 -- Opinion of John D. Held, Esq.
*10.1 -- ARS 1996 Incentive Plan, (Form S-1, Reg. No. 333-06195,
Ex. 10.1).
*10.2 -- Employment Agreement dated as of November 1, 1995 between
ARS and Howard S. Hoover, Jr., as amended (Form S-1, Reg.
No. 333-06195, Ex. 10.2).
*10.3 -- Employment Agreement dated as of November 1, 1995 between
ARS and C. Clifford Wright, Jr., as amended (Form S-1,
Reg. No. 333-06195, Ex. 10.3).
*10.4 -- Amended and Restated Employment Agreement dated as of
April 1, 1997 between ARS and Harry O. Nicodemus, IV
(Form S-4, Reg. No. 333-18623, Ex. 4.9).
*10.5 -- Employment Agreement dated as of March 6, 1996 between
ARS and John D. Held, as amended (Form S-1, Reg. No.
333-06195, Ex. 10.5).
*10.6 -- Employment Agreement dated as of March 6, 1996 between
ARS and A. Jefferson Walker III (Form S-1, Reg. No.
333-06195, Ex. 10.6).
*10.7 -- Employment Agreement dated as of April 15, 1996 between
ARS and Michael Mamaux (Form S-1, Reg. No. 333-06195, Ex.
10.7).
*10.8 -- Employment Agreement dated as of June 13, 1996 between
ARS and Elliot Sokolow (Form S-1, Reg. No. 333-06195, Ex.
10.8).
*10.9 -- Employment Agreement dated as of June 13, 1996 between
ARS and Gorden H. Timmons (Form S-1, Reg. No. 333-06195,
Ex. 10.10).
*10.10 -- Employment Agreement dated as of June 13, 1996 between
ARS and Frank N. Menditch (Form S-1, Reg. No. 333-06195,
Ex. 10.12).
*10.11 -- Employment Agreement dated as of November 1, 1996 between
ARS and Ronald R. McCann (Form S-1, Reg. No. 333-27785,
Ex. 10.12)
*10.12 -- Employment Agreement dated as of November 18, 1996
between ARS and Joseph B. Lechtanski (Form S-1, Reg. No.
333-27785, Ex. 10.13)
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ -----------
<S> <C>
*10.13 -- Form of Indemnification Agreement between ARS and each of
its directors and officers (Form S-1, Reg. No. 333-06195,
Ex. 10.15).
*10.14 -- Executive Supplemental Disability Plan of ARS (Form S-1,
Reg. No. 333-06195, Ex. 10.16).
*10.15 -- Executive Supplemental Life Insurance Plan of ARS (Form
S-1, Reg. No. 333-06195, Ex. 10.17).
*10.16 -- ARS Deferred Compensation Plan (Form S-1, Reg. No.
333-06195, Ex. 10.18).
10.17 -- Employment Agreement dated as of November 1, 1997 between
ARS and Thomas N. Amonett.
21.1 -- List of Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP (Houston, Texas).
+23.2 -- Consent of John D. Held, Esq. (contained in Exhibit 5.1).
+24.1 -- Power of Attorney
+25.1 -- Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939 of U.S. Trust
Company of Texas, N.A., as Trustee under Exhibit 4.10.
</TABLE>
- ---------------
* Incorporated by reference.
+ Previously filed.
<PAGE> 1
EXHIBIT 10.17
Thomas N. Amonett
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is entered into
and effective as of November 1, 1997 (the "Effective Date") by and between
AMERICAN RESIDENTIAL SERVICES, INC., a Delaware corporation (the "Company"),
and THOMAS N. AMONETT (the "Employee").
RECITALS
In entering into this Agreement, the Company desires to
provide the Employee with substantial incentives to serve the Company as a
senior executive performing at the highest levels of leadership and
stewardship, without distraction or concern over minimum compensation, benefits
or tenure, to manage the Company's growth and development and maximize the
returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the
mutual provisions contained herein, and for other good and valuable
consideration, the parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms
have the meanings assigned to them below:
"Acquiring Person" means any Person who or which, together
with all Affiliates and Associates of such Person, is or are the
Beneficial Owner of twenty-five percent (25%) or more of the shares of
Common Stock then outstanding, but does not include any Exempt Person;
provided, however, that a Person shall not be or become an Acquiring
Person if such Person, together with its Affiliates and Associates,
shall become the Beneficial Owner of twenty-five percent (25%) or more
of the shares of Common Stock then outstanding solely as a result of a
reduction in the number of shares of Common Stock outstanding due to
the repurchase of Common Stock by the Company, unless and until such
time as such Person or any Affiliate or Associate of such Person shall
purchase or otherwise become the Beneficial Owner of additional shares
of Common Stock constituting one percent (1%) or more of the then
outstanding shares of Common Stock or any other Person (or Persons)
who is (or collectively are) the Beneficial Owner of shares of Common
Stock constituting one percent (1%) or more of the then outstanding
shares of Common Stock shall become an Affiliate or Associate of such
Person, unless, in either such case, such Person, together with all
Affiliates and Associates of such Person, is not then the Beneficial
Owner of twenty-five percent (25%) or more of the shares of Common
Stock then outstanding.
1
<PAGE> 2
"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (a) the Part-time
Employment Effective Date or (b) the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange Act Rule
12b-2.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the sum of the salary and bonus earned by the Employee during that
Compensation Year, including all amounts deferred at the election of the
Employee pursuant to a Compensation Plan intended to qualify as a plan under
Section 401(k) of the Code or otherwise. If salary or bonus is paid in whole
or in part in property other than cash (such as Common Stock) the amount so
paid shall be the fair market value thereof on the date of payment; provided,
however, that, for purposes of this definition, the Base Salary the Employee is
deemed to earn during the No-salary Period will be the amount the Company would
have paid in cash pursuant to Section 4(A) were his Base Salary to have begun
accruing on the Effective Date.
"Associate" means, with reference to any Person, (a) any corporation,
firm, partnership, association, unincorporated organization or other entity
(other than the Company or a subsidiary of the Company) of which that Person is
an officer or general partner (or officer or general partner of a general
partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of
any class of its equity securities, (b) any trust or other estate in which that
Person has a substantial beneficial interest or for or of which that Person
serves as trustee or in a similar fiduciary capacity and (c) any relative or
spouse of that Person, or any relative of that spouse, who has the same home as
that Person.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (a) the Annual Cash
Compensation earned by the Employee in each of the two (2) Compensation Years
next preceding that date or, if less than two (2) Compensation Years have
occurred prior to that date and since the Effective Date, (b) the Annual Cash
Compensation in each whole Compensation Year, if any, and, restated on an
annualized basis, the Annual Cash Compensation in each partial Compensation
Year (up to a maximum of two (2) partial Compensation Years) next preceding the
Part-time Employment Effective Date.
"Base Salary" means: (a) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(A); and (b) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by the
Company to the Employee pursuant to Section 5(E).
A specified Person is deemed the "Beneficial Owner" of, and is deemed
to "beneficially own," any securities:
2
<PAGE> 3
(a) of which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, is the "beneficial
owner" (as determined pursuant to Exchange Act Rule 13d-3) or
otherwise has the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (a) as a result of an agreement, arrangement or
understanding to vote that security if that agreement, arrangement or
understanding: (1) arises solely from a revocable proxy or consent
given in response to a public (that is, not including a solicitation
exempted by Exchange Act Rule 14a-2(b)(2)) proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act; and (2) is not then reportable by such
Person on Exchange Act Schedule 13D (or any comparable or successor
report);
(b) which that Person or any of that Person's Affiliates
or Associates, directly or indirectly, has the right or obligation to
acquire (whether that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or on the exercise of conversion rights,
exchange rights, other rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities tendered pursuant to a
tender or exchange offer made by that Person or any of that Person's
Affiliates or Associates until those tendered securities are accepted
for purchase or exchange; or
(c) which are beneficially owned, directly or indirectly,
by (1) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's Affiliates
or Associates has any agreement, arrangement or understanding (whether
or not in writing) for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy or consent as described in the
proviso to subparagraph (a) of this definition) or disposing of any
voting securities of the Company or (2) any group (as that term is
used in Exchange Act Rule 13d-5(b)) of which that specified Person is
a member;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of that acquisition. For purposes
of this Agreement, "voting" a security shall include voting, granting a proxy,
acting by consent, making a request or demand relating to corporate action
(including, without limitation, calling a stockholder meeting) or otherwise
giving an authorization (within the meaning of Section 14(a) of the Exchange
Act) in respect of such security.
3
<PAGE> 4
"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the
Employee's Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's
Employment means: (a) the Employee's final conviction of a felony
crime that enriched the Employee at the expense of the Company; or (b)
the Employee's deliberate and intentional continuing failure to
substantially perform his duties and responsibilities hereunder
(except by reason of the Employee's incapacity due to physical or
mental illness or injury) for a period of forty-five (45) days after
the Required Board Majority has delivered to the Employee a written
demand for substantial performance hereunder which specifically
identifies the bases for the Required Board Majority's determination
that the Employee has not substantially performed his duties and
responsibilities hereunder (such period being the "Grace Period");
provided, that for purposes of this clause (b), the Company shall not
have Cause to terminate the Employee's Employment unless (1) at a
meeting of the Board called and held following the Grace Period in the
city in which the Company's principal executive offices are located of
which the Employee was given not less than ten (10) days' prior
written notice and at which the Employee was afforded the opportunity
to be represented by counsel, appear and be heard, the Required Board
Majority shall adopt a written resolution which (A) sets forth the
Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity due to physical or
mental illness or injury) continued past the Grace Period and (B)
specifically identifies the bases for that determination and (2) the
Company, at the written direction of the Required Board Majority,
shall deliver to the Employee a Notice of Termination for Cause to
which a copy of that resolution, certified as being true and correct
by the secretary or any assistant secretary of the Company, is
attached. Cause of the type referred to in clause (a) of the
preceding sentence is a "Type I Cause," while Cause of the type
referred to in clause (b) of the preceding sentence is a "Type II
Cause." For purposes of determining whether a Type II Cause has
occurred, no act or failure to act on the part of the Employee shall
be considered "deliberate and intentional" unless it is taken or
omitted to be taken by the Employee in bad faith or without a
reasonable belief that the Employee's act or omission was in the best
interests of the Company.
"Change of Control" means the occurrence of any of the
following events that occurs after the Effective Date: (a) any Person
becomes an Acquiring Person; (b) at any time the then Continuing
Directors cease to constitute a majority of the members of the Board;
(c) a merger of the Company with or into, or a sale by the Company of
its properties and assets substantially as an entirety to, another
Person occurs and, immediately after that occurrence, any Person,
other than an Exempt Person, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of
twenty-five percent (25%) or more of the total voting power of the
then outstanding Voting Shares of the Person surviving that
transaction
4
<PAGE> 5
(in the case or a merger or consolidation) or the Person acquiring
those properties and assets substantially as an entirety.
"Change of Control Payment" means at any time the amount equal
to three (3) times the Employee's then highest Base Salary during the
term of this Agreement.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock of the Company.
"Company" means (a) American Residential Services, Inc., a
Delaware corporation, and (b) any Person that assumes the obligations
of "the Company" hereunder, by operation of law, pursuant to Section
9(D)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by
the Company or any subsidiary of the Company, or to which the Company
or any subsidiary of the Company contributes, on behalf of any
Executive Officer or any member of the family of any Executive
Officer, (a) including (i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee benefit plan" (as
defined in Section 3(3) of ERISA), (ii) any other retirement and
savings plan, including any supplemental benefit arrangement relating
to any plan intended to be qualified under Section 401(a) of the Code
or whose benefits are limited by the Code or ERISA, (iii) any
"employee welfare plan" (as defined in Section 3(1) of ERISA), (iv)
any arrangement, plan, policy, practice or program providing for
severance pay, deferred compensation or insurance benefit, (v) any
Incentive Plan and (vi) any arrangement, plan, policy, practice or
program (A) authorizing and providing for the payment or reimbursement
of expenses attributable to first-class air travel and first-class
hotel occupancy while on travel or (B) providing for the payment of
business luncheon and country club dues, long-distance charges, mobile
phone monthly air time or other recurring monthly charges or any other
fringe benefit, allowance or accommodation of employment, but (b)
excluding any compensation arrangement, plan, policy, practice or
program to the extent it provides for annual base salary.
"Compensation Committee" means the committee of the Board to
which the Board has delegated duties respecting the compensation of
Executive Officers and the administration of Incentive Plans, if any,
intended to qualify for the Exchange Act Rule 16b-3 exemption.
"Compensation Year" means any calendar year.
"Confidential Information" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other
confidential, nonpublic and/or proprietary information of that Person,
including information derived from reports, investigations,
5
<PAGE> 6
research, work in progress, codes, marketing and sale programs, customer lists,
records of customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any governmental authority and all other
confidential, nonpublic concepts, methods of doing business, ideas, materials
or information prepared or performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers--All Items Index for Houston, Texas (or any substantially similar
index published for the same area), as published by the United States
Department of Labor, Bureau of Labor Statistics (or its successor) for that
period.
"Continuing Director" means at any time any individual who then (a) is
a member of the Board and was a member of the Board as of the Effective Date or
whose nomination for his first election, or that first election, to the Board
following that date was recommended or approved by a majority of the then
Continuing Directors (acting separately or as a part of any action taken by the
Board or any committee thereof) and (b) is not an Acquiring Person, an
Affiliate or Associate of an Acquiring Person or a nominee or representative of
an Acquiring Person or of any such Affiliate or Associate.
"Disability" of the Employee means the Employee has been determined
(which determination shall be final and binding on all Persons, absent manifest
error), as a result of a physical or mental illness or personal injury he has
incurred (including illness or injury resulting from any substance abuse), by a
Qualified Physician (who may be the doctor treating or otherwise acting as the
Employee's doctor in connection with the illness or injury in question)
selected by the Employee with the consent of the Company, or by the Company
with the consent of the Employee (which consent shall not be unreasonably
withheld in either case), to be unable to perform, at the time of that
determination and, in all reasonable medical likelihood, indefinitely
thereafter, the normal duties then most recently assigned, under and in
accordance with the terms hereof, to the Employee while on Active Status;
provided that, the determination whether the Employee has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians, (a) one (1) of
whom shall be selected by the Employee, (b) one (1) of whom shall be selected
by the Company and (c) the remaining one (1) of whom shall be selected by the
Qualified Physicians selected by the Employee and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Employee and the Company, if: (1)(A)
the Company has reasonably withheld its consent to the Qualified Physician, if
any, selected by the Employee or (B) the Employee has reasonably withheld his
consent to the Qualified Physician, if any, selected by the Company and (2)
the Qualified Physicians selected by the Employee and the Company disagree as
to whether the Employee has incurred a Disability. For purposes of this
definition, if the Employee is unable by reason of illness or injury to give an
informed consent to the performance of the treatment
6
<PAGE> 7
of that illness or injury, a Qualified Physician selected by any Person who is
authorized by applicable law to give that consent will be deemed to have been
selected by the Employee.
"Effective Date" means November 1, 1997.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Employment" means the salaried employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means any of the chairman of the board, the chief
executive officer, the chief operating officer, the chief financial officer,
the president, any executive or senior vice president or the general counsel of
the Company.
"Exempt Person" means (a) (1) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of the
Company and (2) any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or
any subsidiary of the Company and (b) the Employee, any Affiliate or Associate
of the Employee or any group (as that term is used in Exchange Act Rule
13d-5(b)) of which the Employee or any Affiliate or Associate of the Employee
is a member.
"Good Reason" for the Employee's termination of his Employment means:
(a) any violation hereof in any material respect by the Company; (b) either (1)
a failure of the Company to continue in effect any Compensation Plan in which
the Employee was participating or (2) the taking of any action by the Company
which would adversely affect the Employee's participation in or materially
reduce the Employee's benefits under, any such Compensation Plan, unless (A) in
the case of either subclause (1) or (2) of this clause, there is substituted a
comparable Compensation Plan that is at least economically equivalent, in terms
of the benefit offered to the Employee, to the Compensation Plan being ended or
in which the Employee's participation is being adversely affected or the
Employee's benefits are being materially reduced or (B) in the case of that
subclause (1), the failure, or in the case of that subclause (2), the taking of
action, adversely affects Executive Officers generally; or (c) the assignment
to the Employee of duties inconsistent in any material respect with the
Employee's then current positions (including status, offices, titles and
reporting requirements), authority, duties or responsibilities or any other
action by the Company which results in a material diminution in those
positions, authority, duties or responsibilities.
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or any
subsidiary of the
7
<PAGE> 8
Company, or to which the Company or any subsidiary of the Company contributes,
on behalf of any Executive Officer and which provides for incentive, bonus or
other performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and restricted
stock plan, but excluding any plan intended to qualify as a plan under any one
or more of Sections 401(a), 401(k) or 423 of the Code.
"Nonterminating Party" means the Employee or the Company, as the case
may be, to which the Terminating Party delivers a Notice of Termination.
"No-salary Period" has the meaning ascribed to that term in Section
4(A).
"Notice of Termination" to or from the Employee means a written
notice that: (a) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Employee's Employment, and if the Termination Date is other than the date of
receipt of the notice, (b) sets forth that Termination Date.
"Outside Director" means at any time a member of the Board at that
time who is not then an employee of the Company or any subsidiary of the
Company.
"Part-time Employment Effective Date" means, (a) if the Company elects
pursuant to any applicable provision hereof to terminate the Employee's
Employment other than for Cause or (b) if the Employee elects pursuant to the
applicable provision hereof to terminate his Employment for Good Reason or by
reason of his Disability, the date the Nonterminating Party receives the
Terminating Party's Notice of Termination.
"Part-time Employment Period" means the period of time which begins on
the Part-time Employment Effective Date and ends on the first to occur of (a)
the third (3rd) anniversary of that Part-time Employment Effective Date, (b)
the termination by the Company of the Employee's Employment for Type I Cause or
(c) the death or Retirement of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company, joint venture, estate, trust, union or employee
organization or governmental authority.
"Qualified Physician" means, in the case of any determination whether
the Employee has sustained a Disability, a physician (a) holding an M.D. degree
from a medical school located in the United States and having a national
reputation in the United States as a leading medical school, (b) specializing
and board-certified in the treatment of the injury or illness that has or may
have caused that Disability, (c) licensed to practice that speciality in the
State of Texas or the state in which the Employee then is domiciled and (d)
having admission privileges to one or more private hospitals located in the
Texas Medical Center in Houston,
8
<PAGE> 9
Texas or in a hospital of comparable reputation in the state in which the
Employee then is domiciled.
"Required Board Majority" means at any time a majority of the members
of the Board at that time which includes at least a majority of the Outside
Directors at that time.
"Retirement" of the Employee means the Employee terminates his
Employment on or after the date he has attained age 65.
"Securities Act" means the Securities Act of 1933.
"Special Option" has the meaning ascribed to that term in Section
4(A).
"Terminating Party" means the Employee or the Company, as the case may
be, who or which terminates the Employee's Employment by means of a Notice of
Termination.
"Termination Date" means: (a) if the Employee's Employment is
terminated by reason of the Employee's death or Retirement, the date of that
death or Retirement; (b) if the Employee's Employment is terminated by reason
of the Employee's giving a Notice of Termination following a Change of Control
pursuant to Section 5(B)(i)(b), the first date on which the Company pays to the
Employee in full the amounts owed to the Employee pursuant to Section
5(B)(iii); (c) if the Employee's Employment is terminated by reason of the
Employee's giving a Notice of Termination without Good Reason and other than
for Disability pursuant to Section 5(B)(i)(c), the elapse of the thirtieth
(30th) day after the Company receives that notice; (d) if the Employee's
Employment is terminated by the Company at any time for Type I Cause or, prior
to the Part-time Employment Effective Date, at any time for Type II Cause, the
date the Employee receives the Company's Notice of Termination for Cause; and
(e) if the Employee's Employment is terminated for any other reason, at the
expiration of the Part-time Employment Period.
"Type I Cause" means Cause of the type referred to in clause (a) of
the definition of Cause herein.
"Type II Cause" means Cause of the type referred to in clause (b) of
the definition of Cause herein.
"Voting Shares" means: (a) in the case of any corporation, stock of
that corporation of the class or classes having general voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors; and (b) in the case of any other entity, equity interests of the
class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
9
<PAGE> 10
B. Other Definitional Provisions. (i) Except as otherwise
specified herein, all references herein to any statute defined or referred to
herein, including the Code, ERISA and the Exchange Act, shall be deemed
references to that statute or any successor statute, as the same may have been
or may be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes each other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set
forth, and beginning as of the Effective Date, the Company will employ the
Employee as its Chief Executive Officer (the most senior Executive Officer) and
the Employee will serve in the Company's employ in that position. The Employee
shall perform such duties, and have such powers, authority, functions, duties
and responsibilities for the Company and corporations affiliated with the
Company as are commensurate and consistent with his employment as the Company's
Chief Executive Officer. The Employee also shall have such additional powers,
authority, functions, duties and responsibilities as may be assigned to him by
the Board; provided that, without the Employee's written consent, such
additional powers, authority, functions, duties and responsibilities shall not
be inconsistent or interfere with, or detract from, those herein vested in, or
otherwise then being performed for the Company by, the Employee.
B. The Employee shall not, at any time during his Employment,
engage in any other activities unless those activities do not interfere
materially with the Employee's duties and responsibilities for the Company at
that time, except that the Employee shall be entitled, subject to the
provisions of Section 7, (a) to continue with such activities as the Employee
has carried on prior to the Effective Date, including making and managing his
personal investments and participating in other business or civic activities
and (b) to serve on corporate or other business, civic or charitable boards or
committees and trade association or similar boards or committees.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the term of the Employee's
Employment shall be for a continually renewing term of three (3) years
commencing on the Effective Date and
10
<PAGE> 11
renewing each day thereafter for an additional day without any further action
by either the Company or the Employee, it being the intention of the parties
that there shall be continuously a remaining term of three (3) years' duration
of the Employee's Employment until an event has occurred as described in, or
one of the parties shall have made an appropriate election pursuant to, the
provisions of Section 5. When the Termination Date shall have occurred and the
Company shall have paid to the Employee all the applicable amounts Section 5
provides the Company shall pay as a result of the termination of the Employee's
Employment, including all amounts accruing during the Part-time Employment
Period, if any, this Agreement will terminate and have no further force or
effect, except that Sections 4(C), 8, 9, 10 and 11 shall survive that
termination indefinitely and Section 7 shall survive for the period of time
provided for therein.
4. COMPENSATION
A. Base Salary. A Base Salary shall be payable to the
Employee by the Company as a guaranteed minimum annual amount hereunder for
each Compensation Year during the period from the Effective Date to the first
to occur of the Part-time Employment Effective Date or the Termination Date .
That Base Salary shall be payable in the intervals consistent with the
Company's normal payroll schedules (but in no event less infrequently than
semi-monthly), shall be payable initially at the annual rate of $250,000 and
shall be increased (but not decreased or adjusted other than as provided in
Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the same percentage increase (if any) in the CPI for
the twelve (12) month period immediately preceding such anniversary;
(ii) on the first and each subsequent anniversary of the
Effective Date, by such additional amount as shall be determined in the
sole discretion of the Compensation Committee, but only in such form
and to such extent as the Compensation Committee may from time to time
approve, as evidenced by the written minutes or records of the
Compensation Committee and its written notices of such determinations
or approvals to the Employee; and
(iii) if the Employee relocates from a state without a
personal income tax at the time of his relocation to a state having a
personal income tax, or if the Employee resides in a state without a
personal income tax on the date hereof which subsequently adopts a
personal income tax, then, in either case, the Base Salary in effect at
the time of such relocation or adoption, as applicable, shall
immediately be increased by the amount equal to the Base Salary
immediately prior to this increase multiplied by seventy percent (70%)
of the highest personal income tax rate of such state; for example, if
the Employee relocates from a state without a personal income tax to a
state having a personal income tax and the highest rate of that tax is
six percent (6%) when the Base Salary is $250,000, then the Base Salary
will be increased by $10,500 (computed at 70% x 6% x $250,000);
11
<PAGE> 12
In addition, the Employee shall receive as payment for his service in the
period beginning on the Effective Date and ending on the date that is the first
to occur of (a) May 31, 1998 or (b) the Termination Date (the "No-salary
Period"), the Company hereby grants to the Employee effective as of October 31,
1997 a nonqualified stock option to purchase from the Company 30,675 shares of
Common Stock at an exercise price of $14.75 per share (the "Special Option").
The Special Option will become exercisable with respect to all the shares of
Common Stock subject thereto on June 1, 1998 and thereafter will remain
exercisable during the five-year period ending at the close of business on
October 31, 2002, when the Special Option, to the extent not then or
theretofore exercised, will expire. The Special Option will be deemed an Option
granted pursuant to the 1996 Incentive Plan of American Residential Services,
Inc. (the "1996 Plan") and, except as provided in Section 5(G), will be subject
to all the provisions of the 1996 Plan which apply to Options (as defined in
the 1996 Plan). Effective as of the Part-time Employment Effective Date, the
Base Salary theretofore in effect shall be adjusted as provided in Section
5(E).
B. Other Compensation. In order to induce the Employee to enter
into Employment with the Company, the Company hereby grants to the Employee
effective as of October 31, 1997 a nonqualified stock option to purchase from
the Company 250,000 shares of Common Stock at an exercise price of $14.75 per
share (the "Hiring Option"). The Hiring Option will become exercisable with
respect to twenty percent (20%) of the shares of Common Stock subject thereto
on each of the first five (5) anniversaries of the Effective Date and will
expire at the close of business on the tenth (10th) anniversary of the
Effective Date to the extent not then or theretofore exercised. The Hiring
Option will be deemed an Option granted pursuant to the 1996 Plan and, except
as provided in Section 5(G), will be subject to all the provisions of the 1996
Plan which apply to Options (as defined in the 1996 Plan). The Employee shall
be entitled to participate in all Compensation Plans from time to time in
effect while he remains on Active Status, regardless of whether the Employee is
an Executive Officer. All awards to the Employee under all Incentive Plans
shall take into account the Employee's positions with and duties and
responsibilities to the Company and its subsidiaries. For purposes of each
Compensation Plan pursuant to which compensation or other benefits are
determined in whole or in part by reference to a participant's base salary, the
Base Salary earned by the Employee for his service during the No-salary Period
will be deemed to be the amount the Company would have paid in cash pursuant to
Section 4(A) were his Base Salary to have begun accruing on the Effective Date,
and the grant of the Special Option will be disregarded; provided, however,
that if the Employee, by reason of having received the Special Option in lieu
of his Base Salary for his service during the No-salary Period, either is
ineligible to participate in any Compensation Plan or receives a reduction in
the compensation or other benefits he otherwise would receive pursuant to any
Compensation Plan, the Company will determine the aggregate value of all such
compensation and other benefits so lost by the Employee and credit that
aggregate value as deferred compensation to the Employee effective as of July
1, 1998 in a deferred compensation account the Company will establish for the
Employee.
C. Tax Indemnity. Should any of the payments of Base Salary,
other incentive or supplemental compensation, benefits, allowances, awards,
payments, reimbursements or other
12
<PAGE> 13
perquisites, or any other payment in the nature of compensation, singly, in any
combination or in the aggregate, that are provided for hereunder to be paid to
or for the benefit of the Employee be determined or alleged to be subject to an
excise or similar purpose tax pursuant to Section 4999 of the Code, or any
successor or other comparable federal, state or local tax law by reason of
being a "parachute payment" (within the meaning of Section 280G of the Code),
the Company shall pay to the Employee such additional compensation as is
necessary (after taking into account all federal, state and local taxes payable
by the Employee as a result of the receipt of such additional compensation) to
place the Employee in the same after-tax position (including federal, state and
local taxes) he would have been in had no such excise or similar purpose tax
(or interest or penalties thereon) been paid or incurred. The Company hereby
agrees to pay such additional compensation within the earlier to occur of (i)
five (5) business days after the Employee notifies the Company that the
Employee intends to file a tax return taking the position that such excise or
similar purpose tax is due and payable in reliance on a written opinion of the
Employee's tax counsel (such tax counsel to be chosen solely by the Employee)
that it is more likely than not that such excise tax is due and payable or (ii)
twenty-four (24) hours of any notice of or action by the Company that it
intends to take the position that such excise tax is due and payable. The
costs of obtaining the tax counsel opinion referred to in clause (i) of the
preceding sentence shall be borne by the Company, and as long as such tax
counsel was chosen by the Employee in good faith, the conclusions reached in
such opinion shall not be challenged or disputed by the Company. If the
Employee intends to make any payment with respect to any such excise or similar
purpose tax as a result of an adjustment to the Employee's tax liability by any
federal, state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Employee within five (5) business days after the Employee notifies the Company
of his intention to make such payment. Without limiting the obligation of the
Company hereunder, the Employee agrees, in the event the Employee makes any
payment pursuant to the preceding sentence, to negotiate with the Company in
good faith with respect to procedures reasonably requested by the Company which
would afford the Company the ability to contest the imposition of such excise
or similar purpose tax; provided, however, that the Employee will not be
required to afford the Company any right to contest the applicability of any
such excise or similar purpose tax to the extent that the Employee reasonably
determines (based upon the opinion of his tax counsel) that such contest is
inconsistent with the overall tax interests of the Employee.
5. TERMINATION, PART-TIME EMPLOYMENT PERIOD, DISABILITY AND DEATH
A. Termination of Employment by the Company. (i) The
Company shall be entitled, if acting at the direction of the Required Board
Majority, to terminate the Employee's Employment (a) at any time for Type I
Cause or (b) at any time prior to the Part-time Employment Effective Date for
Type II Cause or for any Business Reason. If the Employee is neither a member
of the Board nor an Executive Officer, the Company shall be entitled, if acting
at the direction of the chief executive officer of the Company, to terminate
the Employee's Employment at any time prior to the Part-time Employment Date
for any Business Reason. The Company's termination of the Employee's
Employment for Cause will be effective on the date the Company delivers a
Notice of
13
<PAGE> 14
Termination for Cause to the Employee pursuant to this Section
5(A)(i)(together, in the case of a termination for Type II Cause, with the
certified resolution referred to in clause (b) of the definition herein of
Cause), while the Company's termination of the Employee's Employment for a
Business Reason will be effective on the third (3rd) anniversary of the date
the Company delivers a Notice of Termination for a Business Reason to the
Employee pursuant to this Section 5(A)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five (5) business
days thereafter, shall pay the Employee his Base Salary to and including the
Termination Date and the amount of all compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon), in each case
to the extent not theretofore paid, and, when that payment is made, the Company
shall, notwithstanding Section 3, have no further or other obligations
hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as set forth in Section
5(E).
B. Termination of Employment by the Employee. (i) The Employee
shall be entitled to terminate his Employment (a) for a Good Reason at any time
within one hundred eighty (180) days after the facts or circumstances
constituting that Good Reason first exist and are known to the Employee, (b) by
reason of a Change of Control at any time within three hundred sixty-five (365)
days after that Change of Control occurs (provided, however, that the Employee
shall not be entitled to terminate his Employment by reason of that Change of
Control if it occurs (1) during the thirty (30) day period following the
Company's receipt of the Employee's Notice of Termination without Good Reason
and other than for Disability pursuant to this Section 5(B)(i), (2) after (A)
the receipt by the Nonterminating Party of the Terminating Party's Notice of
Termination pursuant to Section 5(C) or (B) the Employee's receipt of the
Company's Notice of Termination for a Business Reason (other than in connection
with that Change of Control) pursuant to Section 5(A) or (3) more than three
hundred sixty-five (365) days after the Company's receipt of the Employee's
Notice of Termination for Good Reason pursuant to this Section 5(B)(i)) or (c)
without Good Reason and other than for Disability at any time. The Employee's
termination of his Employment for Good Reason will be effective on the third
(3rd) anniversary of the date the Employee delivers a Notice of Termination for
Good Reason to the Company pursuant to this Section 5(B)(i). The Employee's
termination of his Employment by reason of a Change of Control will be
effective on the first date on which the Change of Control Payment shall have
been paid in full to the Employee. The Employee's termination of his
Employment without Good Reason and other than for Disability will be effective
on the thirtieth (30th) day following the Employee's delivery of a Notice of
Termination without Good Reason and other than for Disability pursuant to this
Section 5(B)(i).
(ii) If the Employee terminates his Employment for Good Reason,
the respective rights and obligations of the Company and the Employee during
the Part-time Employment Period will be as set forth in Section 5(E ).
14
<PAGE> 15
(iii) If the Employee terminates his Employment by reason of a
Change of Control, the Company shall pay to the Employee in a cash lump sum
within five (5) business days after the date the Company receives the
Employee's Notice of Termination by reason of that Change of Control the amount
equal to the sum of (a) the portion of the Base Salary to and including the
Termination Date which has not yet been paid, (b) all compensation previously
deferred by the Employee (together with any accrued interest and earnings
thereon), (c) any accrued but unpaid vacation pay and (d) the Change of Control
Payment.
(iv) If the Employee terminates his Employment without Good Reason
and other than for Disability, the Company shall pay to the Employee, in a
cash lump sum within five (5) business days after the Termination Date, the
amount equal to the sum of (a) the portion of the Base Salary to and including
the Termination Date which has not yet been paid, (b) all compensation
previously deferred by the Employee (together with any accrued interest and
earnings thereon) which has not yet been paid, (c) any accrued but unpaid
vacation pay and (d) the amount equal to fifty percent (50%) of the Base Salary
being paid for the Compensation Year in which the Company receives the
Employee's Notice of Termination without Good Reason and other than for
Disability; provided, however, that if the Employee terminates his Employment
without Good Reason and other than for Disability within six (6) months of the
theretofore scheduled final day of the Part-time Employment Period, the amount
payable pursuant to clause (d) of this sentence shall be the amount determined
pursuant to that clause multiplied by a fraction the numerator of which is the
number of days from and excluding the date the Company receives the Notice of
Termination to and including that final day and the denominator of which is one
hundred eighty-two (182). For purposes of this Section 5(B)(iv), if the
anniversary of the Effective Date in the Compensation Year in which the Company
receives the Notice of Termination without Good Reason and other than for
Disability has not occurred on or prior to the date of that receipt, the Base
Salary for that Compensation Year will be calculated on the assumption that no
increase in the amount thereof would be made effective as of that anniversary
pursuant to Section 4(A) or 5(E)(i), as applicable.
C. Termination by Reason of Disability. If the Employee incurs
any Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the third (3rd) anniversary of
the date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(C). If the Employee's Employment
is terminated by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as set forth in Section 5(E).
D. Termination of Employment by Death. The Employee's Employment
shall terminate automatically at the time of his death. If the Employee's
Employment is terminated by reason of the Employee's death, the Company shall
pay to the Person the Employee has designated in a written notice delivered to
the Company as his beneficiary entitled to such payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within thirty (30) days
after the Termination Date, the amount equal to the sum of (i) the portion of
the Base Salary through the end of the month in which the Termination Date
occurs which has not yet been paid, (ii) all
15
<PAGE> 16
compensation previously deferred by the Employee (together with any accrued
interest or earnings thereon) which has not yet been paid, (iii) any accrued
but unpaid vacation pay (if the Employee dies while on Active Status) and (iv)
(a) if the Employee dies while on Active Status, the product of (1) the Base
Salary being paid for the Compensation Year in which he dies multiplied by (2)
three (3) or (b) if the Employee dies during the Part-time Employment Period,
the product of (1) one-twelfth (1/12th) of the Base Salary being paid for the
Compensation Year in which the Employee dies multiplied by (2) the number of
whole and partial calendar months in the period beginning with the first
calendar month after the calendar month in which he dies and ending with the
last calendar month in which the Termination Date would have occurred if the
Employee's Employment were to have continued to the end of the Part-time
Employment Period. For purposes of this Section 5(D), if the anniversary of
the Effective Date in the Compensation Year in which the Employee dies has not
occurred on or before the Termination Date, the Base Salary for that
Compensation Year will be calculated on the assumption that no increase in the
amount thereof would be made effective as of that anniversary pursuant to
Section 4(A) or 5(E)(i), as applicable.
E. Employee's Rights During the Part-time Employment
Period. (i) The Company shall pay the Employee a Base Salary, in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than semi-monthly) from the Part-time Employment
Effective Date to and including the Termination Date in the amounts determined
from time to time as follows: Effective as of the Part-time Employment
Effective Date, the Base Salary payable by the Company to the Employee for the
period from and including that date to and excluding the third (3rd)
anniversary of that date shall be as follows:
(a) if the Part-time Employment Effective Date occurs as
a result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason pursuant to Section 5(A) or a Notice
of Termination for Good Reason pursuant to Section 5(B)(i), the amount
equal to the Average Annual Cash Compensation of the Employee
determined as of the Part-time Employment Effective Date; and (b) if
the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability pursuant to Section 5(C), the amount equal to the amount by
which (1) seventy-five percent (75%) of the Average Annual Cash
Compensation of the Employee determined as of the Part-time Employment
Effective Date exceeds (2) the aggregate amount of periodic payments
the Employee receives during the twelve (12) months beginning on that
date under Compensation Plans then in effect and providing for the
payment to the Employee solely as a result or on account of
disability; and
(b) on the first and each subsequent anniversary of the
Part-time Employment Effective Date, the Base Salary payable pursuant
to this Section 5(E) shall be increased (but not decreased) by the
same percentage increase (if any) in the CPI for the twelve (12) month
period immediately preceding that anniversary.
(ii) (a) The Employee shall continue to participate in all
Compensation Plans from time to time in effect during the Part-time Employment
Period, provided, however, that: (1) the
16
<PAGE> 17
Employee shall not be entitled to receive any new award or grant under any
Incentive Plan, and any such new award or grant shall be at the sole discretion
of the Compensation Committee or the Board, as applicable, with respect to that
Incentive Plan; and (2) if (A) the terms of any such plan preclude the
Employee's continued participation therein or (B) his continued participation
in any such plan would or reasonably could be expected to disqualify that plan
under the Code, the Employee shall not be entitled to participate in that plan,
but the Company instead shall provide the Employee with the after-tax
equivalent of the benefits that would have been provided to the Employee were
he a participant in that plan.
(b) For purposes of determining eligibility (including
years of service) for retirement benefits payable under any Compensation Plan,
the Employee shall be deemed to have retired at the Termination Date.
(iii) Subject to the provisions of Section 7, the Employee
shall not be (A) prevented from accepting other employment or engaging in (and
devoting substantially all his time to) other business activities or (B)
required to perform any regular duties for the Company (except to provide such
services consistent with the Employee's educational background, experience and
prior positions with the Company as may be acceptable to the Employee) or to
seek or accept additional employment with any other Person. If the Employee,
at his discretion, shall accept any such additional employment or engage in any
such other business activity there shall be no offset, reduction or effect upon
any rights, benefits or payments to which the Employee is entitled pursuant to
this Agreement. Furthermore, the Employee shall have no obligation to account
for, remit, rebate or pay over to the Company any compensation or other amounts
earned or derived in connection with such additional employment or business
activity. The Employee shall, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and at such places as may be reasonably requested by the Company and which
shall be reasonably satisfactory to the Employee and consistent with the
Employee's regular duties and responsibilities in the course of his then new
occupation or other employment, if any.
(iv) Unless and until the Employee shall have sustained a
Disability, the Company shall continue to provide the Employee with either the
same or, at the Company's election, at a different location within thirty-five
(35) miles of the Employee's principal residence, in any case reasonably
acceptable to the Employee, alternate but comparable office space, furnishings,
facilities, reserved parking, supplies, services, equipment, secretarial and
administrative assistance that are in each case at least commensurate with the
size and quality of that which were provided to the Employee during the
Compensation Year immediately preceding the Part-time Employment Effective Date
pursuant to Section 6(C), but in no event less than are being furnished or
provided on the date hereof. The Company and Employee may mutually agree upon
an equivalent monthly cash allowance in lieu of the Employee being provided all
or any part of these items.
(v) The Employee shall remain entitled to the benefits of
Section 4(C).
17
<PAGE> 18
F. Return of Property. On termination of the Employee's
Employment, however brought about, the Employee (or his representatives) shall
promptly deliver and return to the Company all the Company's property that is
in the possession or under the control of the Employee.
G. Stock Options. Notwithstanding any provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment for Cause, all stock options previously granted to the
Employee under Incentive Plans that have not been exercised and are outstanding
as of the time immediately prior to the Termination Date (other than the
Special Option) shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding (and continue to become exercisable pursuant
to their respective terms) until exercised or the expiration of their term,
whichever is earlier; and (ii) in the case of a termination of the Employee's
Employment for Cause, all stock options previously granted to the Employee
under Incentive Plans that have not been exercised and are outstanding as of
the time immediately prior to the Termination Date (other than the Special
Option) shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding and continue to be exercisable until
exercised or the date that is ten (10) days after the Termination Date,
whichever is earlier; and (iii) in the case of a termination of the Employee's
Employment for any reason, including Cause, the Special Option, if then
outstanding and unexercised in whole or in part, shall, notwithstanding any
contrary provision of any applicable Incentive Plan, remain outstanding (and
continue to become or remain exercisable in accordance with the terms) until
exercised or the expiration of its term, whichever is earlier. No stock option
previously granted to the Employee under any Incentive Plan shall,
notwithstanding any contrary provision of that Incentive Plan, expire or fail
to become exercisable or, if exercisable, cease to be exercisable by reason of
either (i) the occurrence of the Employee's Part- time Employment Effective
Date or (ii) the Employee's service during the Employee's Part-time Employment
Period being less than full-time.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be
entitled to not less than four (4) weeks of annual vacation and all legal
holidays during which times his applicable compensation shall be paid in full.
B. Business Expenses. The Employee is authorized to
incur, and will be entitled to receive prompt reimbursement for, all reasonable
expenses incurred by the Employee in performing his duties and carrying out his
responsibilities hereunder, including business meal, entertainment and travel
expenses, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company
shall either pay directly or promptly reimburse the Employee for such expenses
not more than twenty (20) days after the submission to the Company by the
Employee from time to time of an itemized accounting of such expenditures for
which direct payment or reimbursement is sought. Unpaid reimbursements after
such twenty (20) day period shall accrue interest in accordance with Section
9(K).
18
<PAGE> 19
C. Support. While on Active Status, the Employee shall
be provided by the Company with office space, furnishings, and facilities,
reserved parking, secretarial and administrative assistance, supplies and other
support equipment (including a computer, facsimile machine and photocopier).
D. No Forced Relocation. The Employee shall not be
required to move his principal place of residence from the Houston, Texas area
or to perform regular duties that could reasonably be expected to require
either such move against his wish or to spend amounts of time each week outside
the Houston, Texas area which are unreasonable in relation to the duties and
responsibilities of the Employee hereunder, and the Company agrees that, if it
requests the Employee to make such a move and the Employee declines that
request, (i) that declination shall not constitute any basis for a
determination that Type II Cause exists and (ii) no animosity or prejudice will
be held against Employee.
7. COVENANT NOT TO COMPETE
A. The Employee recognizes that in each of the highly
competitive businesses in which the Company is engaged, personal contact is of
primary importance in securing new customers and in retaining the accounts and
goodwill of present customers and protecting the business of the Company. The
Employee, therefore, agrees that during the term of his Employment and for a
period of one (1) year after the Termination Date, he will not, within fifty
(50) miles of the geographic location in which the he has devoted substantial
attention at such location to the material business interests of the Company:
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in
any other capacity whatsoever, for any purpose that would be competitive with
the business of the Company.
B. If the provisions of this Section 7 are violated in
any material respect, the Company shall be entitled, upon application to any
court of proper jurisdiction, to a temporary restraining order or preliminary
injunction (without the necessity of posting any bond with respect thereto) to
restrain and enjoin the Employee from that violation. If the provisions of
this Section 7 should ever be deemed to exceed the time, geographic or
occupational limitations permitted by the applicable law, the Employee and the
Company agree that such provisions shall be and are hereby reformed to the
maximum time, geographic or occupational limitations permitted by the
applicable law.
8. CONFIDENTIAL INFORMATION
A. The Employee acknowledges that he has had and will
continue to have access to various Confidential Information. The Employee
agrees, therefore, that he will not at any time, either while employed by the
Company or afterwards, knowingly make any independent use of, or
19
<PAGE> 20
knowingly disclose to any other person (except as authorized by the Company)
any Confidential Information. Confidential Information shall not include (i)
information that becomes known to the public generally through no fault of the
Employee, (ii) information required to be disclosed by law or legal process or
the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), the Employee
shall, if possible, give prior written notice thereof to the Company and
provide the Company with the opportunity to contest such disclosure, or (iii)
the Employee reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the Employee. In the event of a breach
or threatened breach by the Employee of the provisions of this Section 8(A)
with respect to any Confidential Information, the Company shall be entitled to
a temporary restraining order and a preliminary and permanent injunction
(without the necessity of posting any bond in connection therewith) restraining
the Employee from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting the Company from
pursuing any other available remedy for that breach or threatened breach,
including the recovery of damages.
B. The Employee shall disclose promptly to the Company
any and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by the
Employee solely or jointly with any other Person or Persons during the period
of his Employment and which pertain primarily to the material business
activities of the Company, and the Employee hereby assigns and agrees to assign
all his interests therein to the Company or to its nominee; whenever requested
to do so by the Company, the Employee shall execute any and all applications,
assignments or other instruments which the Company shall deem necessary to
apply for and obtain Letters of Patent of the United States or any foreign
country or to otherwise protect the Company's interest therein. These
obligations shall (i) continue beyond the Termination Date with respect to
inventions, improvements, and valuable discoveries, whether patentable or not,
conceived, made or acquired by the Employee during the period of his Employment
and (ii) be binding upon the Employee's assigns, executors, administrators and
other legal representatives.
9. GENERAL PROVISIONS
A. Severability. If any one or more of the provisions
of this Agreement shall, for any reason, be held or found by final judgment of
a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, (i) such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement, (ii) this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein (except that this clause (ii) shall not prohibit any
modification allowed under Section 7(B)) and (iii) if the effect of a holding
or finding that any such provision is invalid, illegal or unenforceable is to
modify to the Employee's detriment, reduce or eliminate any compensation,
reimbursement, payment, allowance or other benefit to the Employee intended by
the Company and Employee in entering into this Agreement, the Company shall,
within thirty (30) days after the date of such finding or holding, negotiate
and expeditiously enter into an agreement with the Employee which contains
alternative provisions (reasonably acceptable to the Employee) that will
restore to the Employee (to the extent
20
<PAGE> 21
lawfully permissible) substantially the same economic, substantive and income
tax benefits and legal rights the Employee would have enjoyed had such
provision been upheld as legal, valid and enforceable.
B. Nonexclusivity of Rights. Nothing herein shall
prevent or limit the Employee's continuing or future participation in any
Compensation Plan or, subject to Section 9(N), limit or otherwise affect such
rights as the Employee may have under any other contract or agreement with the
Company. Vested benefits and other amounts to which the Employee is or becomes
entitled to receive under any Compensation Plan on or after the Termination
Date shall be payable in accordance with that Compensation Plan, except as
expressly modified hereby.
C. Full Settlement. The Company's obligations to make
the payments provided for in, and otherwise to perform its undertakings in,
this Agreement shall not be affected by any right of set-off, counterclaim,
recoupment, defense or other action, claim or right the Company may have
against the Employee or others. In no event shall the Employee be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any provision hereof, and those amounts
shall not be reduced, regardless of whether the Employee obtains other
employment or becomes self-employed.
D. Successors. (i) This Agreement is personal to the
Employee and, without the prior written consent of the Company, is not
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit and be enforceable by
the Employee's legal representatives acting in their capacities as such
pursuant to applicable law.
(ii) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. If the Employee is
not an Executive Officer, but is an officer of a subsidiary of the Company, the
Company shall be entitled to assign all its obligations hereunder to that
subsidiary and treat the Employee as an employee of that subsidiary for all
purposes, but the Company shall remain liable for the full, timely performance
of all the obligations so assigned as if the assignment had not been made.
(iii) The Company shall require any successor (direct or
indirect and whether by purchase, merger, consolidation, share exchange or
otherwise) to the business, properties and assets of the Company substantially
as an entirety expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required to
perform it had no such succession taken place.
E. Amendments; Waivers. This Agreement may not be
amended or modified except by a written agreement executed and delivered by the
parties hereto or their respective successors or legal representatives acting
in their capacities as such pursuant to applicable law.
F. Notices. All notices and other communications under
this Agreement shall be in writing and shall be given by hand delivery or by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the appropriate Person at the address of such Person set
21
<PAGE> 22
forth below (or at such other address as such Person may designate by written
notice to each other party in accordance herewith):
(a) if to the Employee, addressed as follows:
Thomas N. Amonett
3609 West Clay
Houston, Texas 77019
; and
(b) if to the Company, addressed as follows:
American Residential Services, Inc.
Post Oak Tower, Suite 725
5051 Westheimer
Houston, Texas 77056-5604
Attn: Corporate Secretary
G. No Waiver. The failure of the Company or the
Employee to insist on strict compliance with any provision of, or to assert any
right under, this Agreement (including the right of the Employee to terminate
his Employment for Good Reason or by reason of a Change of Control pursuant to
Section 5(B) (i)) shall not be deemed a waiver of that provision or of any
other provision of or right under this Agreement.
H. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT
REFERENCE TO ANY PRINCIPLES OF CONFLICTS OF LAWS.
I. Jurisdiction and Venue. The Company irrevocably
consents with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of
the Employee's rights hereunder to service of process in the State of Texas and
hereby waives any right to contest or oppose receipt of such service of
process. The Company irrevocably (i) agrees that any such action, suit or
other legal proceeding may be brought in the courts of such state or in the
courts of the United States sitting in such state, (ii) consents to the
jurisdiction of each such court in any such action, suit or other legal
proceeding and (iii) waives any objection it may have to the laying of venue of
any such action, suit or other legal proceeding in any of such courts.
J. Headings. The headings of Sections and subsections
hereof are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.
22
<PAGE> 23
K. Interest. If any amounts required to be paid or
reimbursed to the Employee hereunder are not so paid or reimbursed at the times
provided herein (including amounts required to be paid by the Company pursuant
to Sections 6 and 10, those amounts shall accrue interest compounded daily at
the annual percentage rate which is three percentage points (3%) above the
interest rate announced by Texas Commerce Bank National Association, Houston,
Texas (or its successor), from time to time, as its Base Rate (or prime lending
rate), from the date those amounts were required to have been paid or
reimbursed to the Employee until those amounts are finally and fully paid or
reimbursed; provided, however, that in no event shall the amount of interest
contracted for, charged or received hereunder exceed the maximum non-usurious
amount of interest allowed by applicable law.
L. Publicity. The Company agrees with the Employee
that, except to the extent required by law or legal process (including the
Exchange Act and the Securities Act), it will not make or publish, without the
prior written consent of the Employee, any written or oral statement concerning
the terms of the Employee's employment relationship with the Company and will
not, if a Notice of Termination is given by either the Company or the Employee
for any reason, publish or cause to be published any statement concerning the
Employee, including his work-related performance or the reasons or basis for
the giving of that Notice of Termination.
M. Tax Withholding. Notwithstanding any other provision
hereof, the Company may withhold from amounts payable hereunder all Federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
N. Entire Agreement. The Company and the Employee agree
that this Agreement supersedes all prior written and oral agreements between
them with respect to the Employment of the Employee by the Company.
10. INTENDED BENEFITS TO EMPLOYEE; PAYMENT OF EXPENSES; RESOLUTION OF
DISPUTES
A. Intended Benefits; Payment of Expenses. In entering
into this Agreement the Company intends that the Employee receive without
reduction or delay all the intended benefits of this Agreement and that those
benefits, and the terms and conditions hereof, be construed in a manner most
favorable to the Employee; the Company, therefore, agrees that it will strive
expeditiously and in good faith to construe and resolve in the Employee's favor
and to his benefit any ambiguities or uncertainties that may be created by the
express language hereof. If, however, at any time during the term hereof or
afterwards: (i) there should exist a dispute or conflict between the Employee
and the Company or another Person as to the validity, interpretation or
application of any term or condition hereof, or as to the Employee's
entitlement to any benefit intended to be bestowed hereby, which is not
resolved to the satisfaction of the Employee, (ii) the Employee must (A) defend
the validity of this Agreement, (B) contest any determination by the Company
concerning the amounts payable (or reimbursable) by the Company to the Employee
or (C) determine in any tax year of the Employee the tax consequences to the
Employee of any amounts payable (or
23
<PAGE> 24
reimbursable) under Section 4(C) or 4(B)(iii), or (iii) the Employee must
prepare responses to an Internal Revenue Service ("IRS") audit of, or otherwise
defend, his personal income tax return for any year the subject of any such
audit, or an adverse determination, administrative proceedings or civil
litigation arising therefrom that is occasioned by or related to an audit by
the IRS of the Company's income tax returns, then the Company hereby
unconditionally agrees: (a) on written demand of the Company by the Employee,
to provide sums sufficient to advance and pay on a current basis (either by
paying directly or by reimbursing the Employee) not less than thirty (30) days
after a written request therefor is submitted by the Employee, the Employee's
out of pocket costs and expenses (including attorney's fees, expenses of
investigation, travel, lodging, copying, delivery services and disbursements
for the fees and expenses of experts, etc.) incurred by the Employee in
connection with any such matter; (b) the Employee shall be entitled, upon
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (c) the company's obligations under this Section 10(A) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
B. Resolution of Disputes. If a dispute of any type
referred to in Section 10(A) arises between the Company and the Employee and
they fail to resolve that dispute by direct negotiation, the Company and the
Employee agree that the next step taken to resolve that dispute, prior to
either party initiating any litigation to resolve that dispute (not including
any litigation that may be required to enforce the Employee's rights to the
payment or advancement of expenses and legal fees on a current basis pursuant
to Section 10(A)) shall be to submit the dispute to an agreed Alternative
Dispute Resolution ("ADR") process, to which process the parties shall strive
diligently in good faith to agree within ten (10) business days after either
party has given written notice to the other party that it is unable to concur
in the other party's final proposed negotiated resolution of the dispute. If
the Company and the Employee are unable to agree in writing to an acceptable
ADR process within that ten (10) business day period, then the parties shall
submit to a mandatory ADR process by making joint application to the then Chief
United States Federal District Judge in the Southern District of Texas for the
selection of an ADR process for the parties. The parties shall diligently in
good faith participate in the ADR process chosen by that judge. If the parties
are unable to resolve their dispute after diligent good faith participation in
the ADR process, then either party shall be free to initiate such litigation as
that party deems appropriate under the circumstances. Under no circumstances
shall the Employee be obligated to pay for the cost of any ADR process or to
pay or reimburse the Company for any attorneys' fees, costs or other expenses
incurred by the Company in connection with any process undertaken by the
Employee to resolve disputes under this Agreement. As used in this Section
10, the term "Employee" includes, if the Employee has died or become
incompetent as a matter of applicable law, the Employee's legal representative
acting in his capacity as such under applicable law.
11. INDEMNIFICATION
The Employee shall be indemnified by the Company to the
maximum extent permitted by the law of Delaware, the state of the Company's
incorporation, and the law of the state
24
<PAGE> 25
of incorporation of any subsidiary of the Company of which the Employee is a
director or an officer or employee, as the same may be in effect from time to
time.
25
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year indicated above.
AMERICAN RESIDENTIAL SERVICES, INC.
By:
--------------------------------
Howard S. Hoover, Jr.
Chairman of the Board
EMPLOYEE
------------------------------------
THOMAS N. AMONETT
Employee's Permanent Address:
3609 West Clay
Houston, Texas 77019
26
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF AMERICAN RESIDENTIAL SERVICES, INC.
(as of December 1, 1997)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMPANY STATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Air Control Heating and Air Conditioning, Inc. California
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services Company, LLC Delaware
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Arizona, Inc. (d/b/a Arizona Air Arizona
Mechanix; PRESCO; Phoenix Refrigeration and Energy Services
Corp.; AMSCO)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of California, Inc. (d/b/a Charter California
Mechanical Systems)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Colorado, Inc. (d/b/a Continental Colorado
Mechanical Systems; Trautman & Shreve Service, Inc.;
Colorado Chiller Maintenance, Inc.; Mile Hi Mechanical)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Houston, Inc. (d/b/a Enterprise Delaware
Commercial-Industrial Mechanical, Inc.; American Mechanical
Services; Commercial Control & Services)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Indiana, Inc. (d/b/a American Indiana
Mechanical Services)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Texas, Inc. (d/b/a Texas Mechanical Delaware
Systems; American Mechanical Services)
- -------------------------------------------------------------------------------------------------------------------
AMS American Mechanical Services of Maryland, Inc. (d/b/a Murray Maryland
Service Company; EMD Mechanical Specialists; Quality
Control Service Company; H.R.E.)
- -------------------------------------------------------------------------------------------------------------------
American Mechanical Services of Sacramento, Inc. (d/b/a Engineered California
Air Systems; American Mechanical Services)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Colorado, Inc. (d/b/a Snake 'N' Rooter; Colorado
Belcon Mechanical, Inc.)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Florida, Inc. (d/b/a Florida Heating & Air Florida
Conditioning, Inc.; De Moss Air Conditioning Services,
Inc.; Alvarez Taylor Plumbing & Air Conditioning; Jim's Air
Conditioning; Busby Heating and Cooling; Climatic
Corporation of Vero Beach; Sasso Air Conditioning; Ted's
Plumbing; Bradley Air Conditioning; Bass Plumbing; Larry
Teague & Son's Plumbing; Sun Country Cooling)
- -------------------------------------------------------------------------------------------------------------------
Larry Teague & Sons Plumbing, Inc. Florida
- -------------------------------------------------------------------------------------------------------------------
Leon's Air Conditioning, Inc. Florida
- -------------------------------------------------------------------------------------------------------------------
Sasso Air Conditioning, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
Ted's Plumbing, Inc. Florida
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Georgia, Inc. (d/b/a Sundance Plumbing Georgia
Corporation)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Illinois, Inc. (d/b/a Ross Heating & Illinois
Cooling Inc.; Kranz Mechanical Corporation; Kranz Heating &
Cooling, Inc.; Anderson Heating & Cooling Company)
- -------------------------------------------------------------------------------------------------------------------
Illinois Heating & Air Conditioning, Inc. Illinois
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Indiana, Inc. (d/b/a Dial One Meridian & Indiana
Hoosier, Inc.; Barclay-Holland, Inc.)
- -------------------------------------------------------------------------------------------------------------------
Barclay-Holland, Inc. Indiana
- -------------------------------------------------------------------------------------------------------------------
Korte Electric, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
USA Heating & Air Conditioning, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
SUBSIDIARIES OF AMERICAN RESIDENTIAL SERVICES, INC.
(as of December 1, 1997)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMPANY STATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
American Residential Services of Maryland, Inc. (d/b/a WachtNorwood) Maryland
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Michigan, Inc. (d/b/a Energy Concepts, Michigan
Inc.; Andy's Statewide Heating & Cooling; Adex Heating & Cooling,
Inc.; Quality Air of Holland, Inc.)
- -------------------------------------------------------------------------------------------------------------------
Manne Electric Co. Michigan
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Nebraska, Inc. (d/b/a Aksarben Heating & Nebraska
Air Conditioning)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Nevada, Inc. (d/b/a Cool Valley Air; Air Nevada
West Air Conditioning-Heating; Racee Air Conditioning &
Heating Company; Economy Air Conditioning; Lang; Southtown)
- -------------------------------------------------------------------------------------------------------------------
Cool Valley Air, Inc. Nevada
- -------------------------------------------------------------------------------------------------------------------
A.K. Chadwell Discount Plumbing Nevada
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of North Carolina, Inc. (d/b/a Metro Heating & North Carolina
Air Conditioning; Burrage Enterprises; Wood & Son Heating &
Air Conditioning; Moore Air Conditioning; Electro-Temp,
Inc.; Central Comfort, Inc.)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Pennsylvania, Inc. (d/b/a Automatic Pennsylvania
Controls Service)
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of South Carolina, Inc. (d/b/a Atlas Services, South Carolina
Inc.; Dean Heating & Air Conditioning)
- -------------------------------------------------------------------------------------------------------------------
Doc Plumbing, Inc. South Carolina
- -------------------------------------------------------------------------------------------------------------------
Kirby Heating & Air, Inc. South Carolina
- -------------------------------------------------------------------------------------------------------------------
R. F. Masters, Inc. South Carolina
- -------------------------------------------------------------------------------------------------------------------
Rooter Express Service, Inc South Carolina
- -------------------------------------------------------------------------------------------------------------------
American Residential Services of Virginia, Inc. (d/b/a Keenan Heating & Virginia
Cooling)
- -------------------------------------------------------------------------------------------------------------------
Apple Plumbing & Heating, Inc. Colorado
- -------------------------------------------------------------------------------------------------------------------
ARS American Residential Services of Arizona, Inc. (d/b/a Russett Service Arizona
Corporation; Temp-Rite Engineering)
- -------------------------------------------------------------------------------------------------------------------
ARS American Residential Services of California, Inc. (d/b/a Southcoast California
Heating and Air Conditioning, Inc.; Torrey Pines Plumbing;
Arrow Air Conditioning Company; Condor Service Company;
Anderson Air Conditioning)
- -------------------------------------------------------------------------------------------------------------------
A. K. Landan, Inc. (d/b/a Allied Plumbing-Heating-Air Conditioning) California
- -------------------------------------------------------------------------------------------------------------------
Coast Plumbing, Inc. California
- -------------------------------------------------------------------------------------------------------------------
Tri-Pacific Heating, Inc. California
- -------------------------------------------------------------------------------------------------------------------
ARS American Residential Services of Oklahoma, Inc. (d/b/a Advanced AirCo & Oklahoma
Heating, Inc.)
- -------------------------------------------------------------------------------------------------------------------
ARS American Residential Services of Texas, Inc. (d/b/a Crown Services; Delaware
McCannics)
- -------------------------------------------------------------------------------------------------------------------
Service Enterprise Holdings, LLC Texas
- -------------------------------------------------------------------------------------------------------------------
Adcot, Inc. (d/b/a A-ABC Appliances) Texas
- -------------------------------------------------------------------------------------------------------------------
West Houston Services, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
ARS Energy Services Company Delaware
- -------------------------------------------------------------------------------------------------------------------
ARS Residential Holding Company Delaware
- ------------------------------------------------------------------------------------------------------------------
ARS Residential Management Company Delaware
- -------------------------------------------------------------------------------------------------------------------
Cape Fear Heating & Air Conditioning of Wilmington, Inc. (d/b/a American North Carolina
Residential Services)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
SUBSIDIARIES OF AMERICAN RESIDENTIAL SERVICES, INC.
(as of December 1, 1997)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMPANY STATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
General Heating & Air Conditioning Company, Inc. (d/b/a Fireplace Delaware
Wholesalers, Inc.)
- -------------------------------------------------------------------------------------------------------------------
Godby Brothers, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
Hession Plumbing Company, Inc. Indiana
- -------------------------------------------------------------------------------------------------------------------
J & G Holding Corporation Georgia
- -------------------------------------------------------------------------------------------------------------------
Keenan Mechanical Services, Inc. Virginia
- -------------------------------------------------------------------------------------------------------------------
Maio Marketing, Inc. Delaware
- -------------------------------------------------------------------------------------------------------------------
Maio Marketing Systems, Inc. California
- -------------------------------------------------------------------------------------------------------------------
Maio Plumbing, Heating & Air, Inc. California
- -------------------------------------------------------------------------------------------------------------------
Pro-Formance, Inc. (d/b/a Pro-Heating) California
- -------------------------------------------------------------------------------------------------------------------
Westernair Manufacturer Service, Inc. Nevada
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our reports included in American Residential Services, Inc.'s
("ARS") Annual Report on Form 10-K for the year ended December 31, 1996, and
ARS' Current Report on Form 8-K dated December 8, 1997, (and to all references
to our firm) included in or made a part of ARS' Post-Effective Amendment No. 1
to Form S-4 (No. 333-31815).
ARTHUR ANDERSEN LLP
Houston, Texas
December 8, 1997
