<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
American Residential Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[AMERICAN RESIDENTIAL SERVICES, INC. LOGO]
AMERICAN RESIDENTIAL SERVICES, INC.
POST OAK TOWER, SUITE 725
5051 WESTHEIMER ROAD
HOUSTON, TEXAS 77056-5604
(713) 599-0100
April 27, 1998
Dear Stockholder:
The 1998 Annual Meeting of Stockholders of American Residential Services,
Inc. (the "Company") will be held on Tuesday, June 2, 1998, at 10:00 a.m.,
Houston time, at the Westin Galleria Hotel, Regal Room, 24th Floor, 5060 W.
Alabama, Houston, Texas 77056.
Details of the business to be conducted at the Annual Meeting are provided
in the enclosed Notice of Annual Meeting of Stockholders and Proxy Statement.
The Company's 1997 Annual Report to Stockholders, which is not a part of the
Proxy Statement, is also enclosed and provides information regarding the
financial results of the Company in 1997.
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting. Whether or not you plan to attend in person, please sign and
promptly return the enclosed proxy card in the accompanying prepaid return
envelope. Your shares will be voted at the Annual Meeting in accordance with
your proxy. If you sign and return your proxy card without specifying your
choices, it will be understood you wish to have your shares voted in accordance
with the recommendations of the Board of Directors.
Sincerely,
BY: /s/ THOMAS N. AMONETT
THOMAS N. AMONETT
President and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 1998
The 1998 Annual Meeting of Stockholders of American Residential Services,
Inc., a Delaware corporation (the "Company"), will be held at 10:00 a.m.,
Houston time, on June 2, 1998 at the Westin Galleria Hotel, Regal Room, 24th
Floor, 5060 W. Alabama, Houston, Texas 77056, for the following purposes:
1. To elect four Class II directors of the Company to hold office
until the third succeeding annual meeting of stockholders after their
election (the 2001 Annual Meeting) or until their respective successors
have been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year 1998; and
3. To transact such other business as may be properly brought before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 10, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. Only stockholders of
record at the close of business on that date will be entitled to notice of and
to vote at the meeting and any adjournment thereof.
By Order of the Board of Directors,
/s/ JOHN D. HELD
JOHN D. HELD
Secretary
Houston, Texas
April 27, 1998
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO ATTEND THE ANNUAL MEETING OR TO
VOTE IN PERSON, BUT WILL ENSURE YOUR REPRESENTATION IF YOU DO NOT ATTEND. IF YOU
HAVE SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED IN MORE THAN
ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL. IF SO, PLEASE
SIGN AND RETURN EACH OF THE PROXY CARDS YOU RECEIVE SO THAT ALL YOUR SHARES MAY
BE VOTED. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL
MEETING.
<PAGE> 4
AMERICAN RESIDENTIAL SERVICES, INC.
POST OAK TOWER, SUITE 725
5051 WESTHEIMER ROAD
HOUSTON, TEXAS 77056-5604
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed to
holders of Common Stock of American Residential Services, Inc. (the "Company"),
beginning on or about April 27, 1998, in connection with the solicitation of
proxies by the Board of Directors of the Company for its 1998 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on June 2, 1998 at the time and
place and for the purposes set forth in the accompanying notice. Shares can be
voted at the meeting only if the owner is represented by proxy or is present.
The Board of Directors is soliciting proxies to give all stockholders an
opportunity to vote and to meet the legal requirements respecting the number of
shares that must be represented in order to hold the meeting. The presence at
the meeting, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company is necessary for this purpose.
When a proxy card is returned properly signed, the shares it represents
will be voted in accordance with the choices it specifies. If a proxy card is
signed and returned without specifying choices, the shares it represents will be
voted as recommended by the Board of Directors. Abstentions and broker
"non-votes" are voted neither "for" nor "against" any proposal to be voted on at
the Annual Meeting, but are counted as "present" in the determination of a
quorum. A stockholder giving a proxy may revoke it at any time before it is
voted at the meeting by executing a later-dated proxy, by voting by ballot at
the meeting or by filing a written revocation with the Corporate Secretary of
the Company, at the address shown above.
If there are not sufficient shares represented in person or by proxy at the
meeting to constitute a quorum, the meeting may be adjourned from time to time,
without notice other than by announcement at the meeting adjourned (unless the
adjournment is for more than 30 days or a new record date is fixed), to permit
further solicitation of proxies by the Company. Proxies given pursuant to this
solicitation and not revoked will be voted at any postponement or adjournment of
the Annual Meeting in the manner set forth above.
At the close of business on April 10, 1998, the record date for determining
stockholders eligible to vote at the Annual Meeting, the Company had outstanding
and entitled to vote 15,384,400 shares of Common Stock, each of which is
entitled to one vote.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitations by mail, employees of the Company may solicit
proxies in person or by facsimile transmission or telephone. The Company also
has retained ChaseMellon Shareholder Services, L.L.C. to assist in the
solicitation of proxies at an estimated cost of $5,000, plus reimbursement of
reasonable out-of-pocket expenses. The Company will reimburse brokers, banks and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxies and proxy material to the beneficial owners of Common Stock.
The Company's 1997 Annual Report to Stockholders, including consolidated
financial statements, is being furnished simultaneously with this Proxy
Statement and mailed to all stockholders of record as of the close of business
on April 10, 1998. This report does not constitute a part of the proxy
solicitation material.
ELECTION OF DIRECTORS
PROPOSAL 1: THE BOARD OF DIRECTORS OF THE COMPANY URGES YOU TO VOTE FOR THE
NOMINEES FOR CLASS II DIRECTOR DESCRIBED BELOW. PROXIES WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. NOMINEES FOR CLASS II DIRECTOR
WILL BE ELECTED BY A PLURALITY OF VOTES.
The Company's Restated Certificate of Incorporation provides for the
classification of directors into three classes. The term of office of the Class
I directors expires at the Company's 2000 Annual Meeting of Stockholders, the
term of office of the Class II directors expires at this Annual Meeting and the
term of office
2
<PAGE> 5
of the Class III directors expires at the Company's 1999 Annual Meeting of
Stockholders. Four Class II director nominees are proposed to be elected at this
Annual Meeting to serve for a three-year term to last until the 2001 Annual
Meeting of Stockholders or until their successors are duly elected and have been
qualified. Mr. Hale and Mr. Lehmann were initially appointed to the Board of
Directors pursuant to a funding agreement between the Company and Equus II
Incorporated ("Equus II"), which terminated pursuant to its terms in September
1996 on completion of the Company's initial public offering (the "IPO").
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Class II -- Terms Expiring at the 2001 Annual Meeting
Howard S. Hoover, Jr., age 59, has been Chairman of the Board since
November 1995. From 1970 until 1991, Mr. Hoover was employed by Browning-Ferris
Industries, Inc. ("BFI"), a waste services company, and served during his tenure
as a director and in various management capacities as a member of the Senior
Management Committee, Senior Vice President, General Counsel and Secretary. From
1992 until 1995, Mr. Hoover was engaged in various business development and
consulting activities.
Frank N. Menditch, age 46, has been a Senior Vice President of the Company
since September 1997 and Director of Operations of the Company's commercial
operations since January 1998. He has also served as a director of the Company
since September 1996. Mr. Menditch served as Regional Vice President --
Northeast of the Company from June 1997 to January 1998 and Director of the
Company's northeast operations from November 1996 to June 1997. He was President
of General Heating & Air Conditioning Company, Inc., a subsidiary of the
Company, from 1983 to 1997. Mr. Menditch is a past president of the National
Capitol Chapter of the Air Conditioning Contractors of America ("ACCA") and of
the Metro Washington Heat Pump Association.
Robert J. Cruikshank, age 67, has been a director of the Company since
September 1996. He is primarily engaged in managing his personal investments in
Houston. Prior to his retirement in 1993, he was a Senior Partner in the
accounting firm of Deloitte & Touche LLP. Mr. Cruikshank currently serves as a
director of Houston Industries Incorporated ("HII"), MAXXAM Inc., Kaiser
Aluminum Corporation, Compass Bank-Houston, Texas Biotechnology Corporation and
Weingarten Realty Investors.
Randall B. Hale, age 35, has been a director of the Company since September
1996. He has been a Vice President of Equus Capital Management Corporation
("ECMC") and Equus II since 1992 and a director of ECMC since February 1996.
ECMC is the investment advisor for Equus II, a closed-end investment fund. See
"Security Ownership of Certain Beneficial Owners and Management." Mr. Hale
currently serves as an officer or director of several private businesses and is
a director and Chairman of the Board of Brazos Sportswear, Inc. From 1985 to
1992, he was employed by the accounting firm of Arthur Andersen LLP. Mr. Hale is
a Certified Public Accountant.
DIRECTORS WITH TERMS EXPIRING IN 1999 AND 2000
Class III -- Terms Expiring at the 1999 Annual Meeting
Gorden H. Timmons, age 48, has served as Chief Operating Officer and a
director of the Company since September 1996. He founded Atlas Services, Inc., a
subsidiary of the Company, in 1976 and served as its President until September
1996. Mr. Timmons was a founder of the Charleston Chapter of ACCA and is a past
president of that Chapter.
William P. McCaughey, age 39, has been a director of the Company since
November 1995. He has been a Managing Director of Consolidation Experts LP, a
consolidator of highly fragmented businesses, since November 1997. Prior
thereto, Mr. McCaughey served the Company as Executive Vice President and Chief
Financial Officer from October 1996 to January 1997 and as Executive Vice
President -- Planning and Development from November 1995 until October 1996.
From 1992 to 1995, Mr. McCaughey was Treasurer of American Ecology Corporation,
a waste services company. From 1991 to 1992, he was President of Environmental
Financial Services, Inc., an environmental research and consulting firm. He
served as Vice President and Corporate Treasurer of Republic Waste Industries,
Inc., a waste services company, from 1990 to
3
<PAGE> 6
1991 and, prior thereto, was employed by BFI in several financial positions from
1982 to 1990. Mr. McCaughey is a Chartered Financial Analyst.
Nolan Lehmann, age 53, has been a director of the Company since September
1996. He has been the President and a director of ECMC since its formation in
1983 and of Equus II since its formation in 1991 (see "Security Ownership of
Certain Beneficial Owners and Management"). Prior thereto, Mr. Lehmann was
employed by Service Corporation International, where he held various positions,
including Vice President -- Regional Manager and Vice President -- Corporate
Development. Mr. Lehmann currently serves as a director of a number of public
and private companies, including Allied Waste Industries, Inc., Brazos
Sportswear, Inc., Drypers Corporation and Garden Ridge Corporation.
Don D. Sykora, age 67, has been a director since September 1996. He is
currently President of Don D. Sykora Investments and a consultant to HII, a
utility holding company. He served as President and Chief Operating Officer of
HII from 1993 until his retirement in 1995. From 1990 to 1993, Mr. Sykora was
President and Chief Operating Officer of HII's principal operating subsidiary,
Houston Lighting & Power Company. Mr. Sykora currently serves as a director of
Powell Industries, Inc., Pool Oilfield Services, Inc. and TransTexas Gas Corp.
Class I -- Terms Expiring at the 2000 Annual Meeting
Elliot Sokolow, age 55, has been a Senior Vice President of the Company and
Director of Operations of the Company's residential operations since January
1998 and a director of the Company since September 1996. Mr. Sokolow served as
Assistant to the Chairman of the Company from June 1997 to January 1998 and as
Director of the Company's southeast operations from November 1996 to June 1997.
He was a founder of Florida Heating & Air Conditioning, Inc., a subsidiary of
the Company, in 1970 and served as its President from 1977 until June 1997. Mr.
Sokolow served as national president of ACCA in 1992 and 1993.
Thomas N. Amonett, age 54, has been President and Chief Executive Officer
of the Company since October 1997 and a director of the Company since September
1996. Mr. Amonett served as President and Chief Executive Officer of Weatherford
Enterra, Inc., a diversified international energy service and manufacturing
company, from July 1996 until May 1997. From 1992 to 1996, he served as Chairman
of the Board and President of Reunion Industries, Inc., a company engaged in
plastics manufacturing and other activities. Prior thereto, he was Of Counsel
with the law firm of Fulbright & Jaworski, LLP from 1986 to 1992. He was
President and a director of Houston Oil Fields Company from 1982 to 1986. Mr.
Amonett also currently serves as a director of ITEQ, Inc., HomeUSA, Inc.,
PetroCorp Incorporated, Reunion Industries, Inc. and Weatherford Enterra, Inc.
BOARD ORGANIZATION AND MEETINGS
During 1997, the Board of Directors held six meetings and acted three times
by unanimous written consent. Each member of the Board of Directors attended at
least 75% of all meetings of the Board of Directors and its committees of which
he was a member.
The Board of Directors has five standing committees:
Audit Committee. The Audit Committee recommends the independent public
accountants to be selected by the Board of Directors for stockholder
approval each year and acts on behalf of the Board of Directors in
reviewing with the independent public accountants, the chief financial and
chief accounting officer and other corporate officers various matters
relating to the adequacy of the Company's accounting policies and
procedures and financial controls and the scope of the annual audits by the
independent public accountants. The Audit Committee consists of Mr.
Cruikshank, who serves as Chairman, and Messrs. Hale and Sykora. Mr. Sykora
was appointed to the Audit Committee in October 1997 to replace Mr.
Amonett, who resigned from the Audit Committee in connection with his
appointment as President and Chief Executive Officer of the Company. During
1997, the Audit Committee held three meetings.
Compensation Committee. The Compensation Committee is authorized to
establish the general compensation policy for the officers and directors of
the Company and annually reviews and establishes
4
<PAGE> 7
officers' salaries and participation in benefit plans, prepares reports
required by the Securities and Exchange Commission (the "SEC") and approves
the directors' compensation. The Compensation Committee consists of Mr.
Lehmann, who serves as Chairman, and Mr. Sykora. Mr. Amonett was also a
member of the Compensation Committee until his appointment as President and
Chief Executive Officer of the Company in October 1997. During 1997, the
Compensation Committee held seven meetings and acted two times by unanimous
written consent.
Executive Committee. The Executive Committee may exercise all powers
of the Board of Directors and exists primarily to deal with issues and
transactions that require approval between regular meetings of the entire
Board. The Executive Committee consists of Mr. Amonett, who serves as
Chairman, and Messrs. Hoover, Timmons and Sykora. The Company's former
President and Chief Executive Officer, C. Clifford Wright, Jr.,was a member
of the Executive Committee until he resigned as an officer and director of
the Company in October 1997. During 1997, the Executive Committee held four
meetings and acted one time by unanimous written consent.
Nominating Committee. The Nominating Committee reviews the size and
composition of the Board of Directors, designates new directors by classes
and makes recommendations with respect to nominations for the election of
directors. The Nominating Committee consists of Messrs. Hoover, McCaughey
and Cruikshank. Mr. Wright was also a member of the Nominating Committee
until his resignation. The Nominating Committee did not meet in 1997, but
acted once by unanimous written consent. The Nominating Committee will
consider nominees proposed by stockholders, if such proposals are submitted
in writing in accordance with the Bylaws of the Company to the Corporate
Secretary at the address of the Company's corporate offices.
Industry Relations Committee. The Industry Relations Committee acts on
behalf of the Company in developing and overseeing the Company's role in
industry affairs and consists of Mr. Sokolow, who serves as Chairman, and
Messrs. Hoover and Menditch. During 1997, it held one meeting.
DIRECTORS' REMUNERATION
The Company currently pays each director who is not a Company employee (a
"Nonemployee Director") a fee of $1,500 for each Board meeting attended and
$1,000 for each Board committee meeting attended (except for committee meetings
held on the same day as Board meetings). It does not pay any additional
compensation to its employees for serving as directors, but will reimburse all
directors for out-of-pocket expenses they incur in connection with attending
meetings of the Board or Board committees or otherwise in their capacity as
directors.
Each Nonemployee Director is also automatically granted options to purchase
up to 5,000 shares of Common Stock pursuant to the Company's 1996 Incentive Plan
(the "1996 Incentive Plan") on the first business day of the month following the
date on which each annual meeting of the Company's stockholders is held. These
options (i) have a ten-year term, (ii) have an exercise price per share equal to
the fair market value of a share of Common Stock on the date of grant and (iii)
become exercisable in 33 1/3% annual increments beginning on the first
anniversary of the date of grant. Accordingly, on July 1, 1997, each Nonemployee
Director was granted options to purchase up to 5,000 shares of Common Stock with
an exercise price of $22.8125 per share.
The Company paid Mr. McCaughey $1,895 in 1997 in connection with a
short-term consulting project for the Company.
5
<PAGE> 8
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL 2: THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND URGES YOU
TO VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS TO EXAMINE THE COMPANY'S FINANCIAL
STATEMENTS FOR THE YEAR 1998. PROXIES WILL BE SO VOTED UNLESS THE STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES. PROPOSAL 2 WILL BE ADOPTED IF THE VOTES CAST
IN FAVOR EXCEED THE VOTES CAST OPPOSING THIS PROPOSAL.
On the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as independent public accountants to examine the
Company's financial statements for the year 1998. Arthur Andersen LLP has served
as the Company's independent public accountants since the Company's formation in
1995. Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement, if they so
desire, and to respond to appropriate questions from those attending the
meeting.
OTHER BUSINESS
The Company's management is not aware of any matters, other than as
indicated above, that will be presented for action at the meeting. If any other
matters properly come before the meeting, the persons appointed as proxies in
the accompanying proxy will vote on such matters according to their best
judgment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of April 10, 1998, the "beneficial
ownership" (as defined by the SEC) of the Common Stock of (i) each person known
to the Company to beneficially own more than 5% of its outstanding shares of
Common Stock, (ii) each of the Company's directors, (iii) the executive officers
of the Company named in the Summary Compensation Table and (iv) all current
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
ICM Asset Management, Inc.(2)............................... 1,558,100 10.1%
601 W. Main Avenue, Suite 600
Spokane, Washington 99201
Equus II Incorporated(3).................................... 1,225,000 7.9%
2929 Allen Parkway, Suite 2500
Houston, Texas 77019
J. P. Morgan & Co. Incorporated(4).......................... 998,886 6.5%
60 Wall Street
New York, New York 10260
Gorden H. Timmons(5)........................................ 896,210 5.8%
Wellington Management Company, LLP(6)....................... 796,400 5.2%
75 State Street
Boston, Massachusetts 02109
C. Clifford Wright, Jr...................................... 430,765 2.8%
5051 Westheimer Road, 18th Floor
Houston, Texas 77056
William P. McCaughey........................................ 320,757 2.1%
Howard S. Hoover, Jr........................................ 305,193 2.0%
Elliot Sokolow.............................................. 290,735 1.9%
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Frank N. Menditch........................................... 247,836 1.6%
John D. Held................................................ 81,710 *
Thomas N. Amonett........................................... 36,009 *
Nolan Lehmann............................................... 7,334 *
Robert J. Cruikshank........................................ 5,334 *
Randall B. Hale............................................. 4,334 *
Don D. Sykora............................................... 4,334 *
All executive officers and directors as a group (14
persons)(1)(5)............................................ 2,251,386 14.1%
</TABLE>
- ---------------
* Less than 1%
(1) The shares beneficially owned include shares issuable upon exercise of
outstanding options that are exercisable within 60 days of April 10, 1998 as
follows: Mr. Timmons -- 65,960 shares; Mr. Wright -- 230,622 shares; Mr.
McCaughey -- 120,000 shares; Mr. Hoover -- 154,440 shares; Mr. Sokolow --
21,960 shares; Mr. Menditch -- 23,520 shares; Mr. Held -- 76,300 shares; Mr.
Amonett -- 34,009 shares; Mr. Lehmann -- 3,334 shares; Mr.
Cruikshank -- 3,334 shares; Mr. Hale -- 3,334 shares; Mr. Sykora -- 3,334
shares and all current executive officers and directors as a
group -- 553,815 shares. Shares held by executive officers through the
Company's 401(k) plan are reflected as of December 31, 1997, and additional
shares may have accumulated since that date.
(2) Based on an Amendment to Schedule 13G dated April 7, 1998. ICM Asset
Management, Inc. is a registered investment adviser and holds such shares on
behalf of its investment advisory clients. The Amendment to Schedule 13G
indicates that the reporting person has sole voting power with respect to
948,000 shares and sole dispositive power with respect to all 1,558,100
shares.
(3) Based on a Schedule 13D dated March 9, 1998. That Schedule 13D indicates
that the 1,225,000 shares reported as beneficially owned include 100,000
shares obtainable on exercise of a warrant exercisable at $15.00 per share.
The Schedule 13D indicates that the reporting person has sole voting power
and sole dispositive power with respect to all 1,225,000 shares. Nolan
Lehmann, a director of the Company, is the President and a director of Equus
II and Randall B. Hale, a director of the Company, is a Vice President of
Equus II, and thus each may be deemed to be the beneficial owner of the
shares held by Equus II. Mr. Lehmann and Mr. Hale each disclaim beneficial
ownership of all those shares.
(4) Based on a Schedule 13G dated December 31, 1997. That Schedule 13G discloses
that J.P. Morgan & Co. Incorporated and certain of its subsidiaries are the
beneficial owners of such shares, including 215,686 shares that the
reporting person has the right to acquire. The Schedule 13G indicates that
the reporting person has sole voting power as to 848,786 shares and sole
dispositive power as to all 998,886 shares.
(5) Includes shares held by a trust of which Mr. Timmons is the trustee and
shares held by a trust of which Mr. Timmons' spouse is the trustee. Mr.
Timmons may be deemed the beneficial owner of the shares held by these two
trusts.
(6) Based on a Schedule 13G dated January 20, 1998. Wellington Management
Company, LLP is a registered investment adviser and holds such shares on
behalf of its investment advisory clients. The Schedule 13G indicates that
the reporting person has shared voting power with respect to 566,400 shares
and shared dispositive power with respect to all 796,400 shares.
Except as otherwise indicated, the address of each person listed in the
above table is c/o American Residential Services, Inc., Post Oak Tower, Suite
725, 5051 Westheimer Road, Houston, Texas 77056-5604. All persons listed have
sole voting and investment power with respect to their shares unless otherwise
indicated.
7
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth information regarding aggregate cash
compensation, restricted stock and stock option awards and other compensation
earned by the Company's current Chief Executive Officer, its former Chief
Executive Officer and its four other most highly compensated executive officers
for services rendered to the Company during 1996 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL ------------------------
COMPENSATION RESTRICTED SHARES
--------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett(3)......... 1997 -- -- -- 280,675 --
President and Chief 1996 -- -- -- -- --
Executive Officer
C. Clifford Wright, Jr.(4)... 1997 $208,333 $86,301 -- 106,864 $1,173,253(4)
Former President and Chief 1996 $175,000 $28,770 -- 200,000 $ 1,240
Executive Officer
Gorden H. Timmons............ 1997 $215,000 $83,733 -- 42,800 $ 2,748
Chief Operating Officer 1996 $ 56,540(5) $27,910 -- 150,000 $ 354
Howard S. Hoover, Jr......... 1997 $175,000 $78,904 -- 31,400 $ 1,116
Chairman of the Board 1996 $160,000 $26,970 -- 150,000 $ 498
John D. Held................. 1997 $150,000 $58,679 -- 27,800 $ 1,661
Senior Vice President, 1996 $ 99,230(6) $100,220(7) -- 75,000 $ 685
General Counsel and
Secretary
Frank N. Menditch............ 1997 $165,000 -- -- 26,500 $ 2,273
Senior Vice President 1996 $ 39,452(8) -- -- 50,000 $ 375
</TABLE>
- ---------------
(1) Except as stated in Note (7) below, represents aggregate cash bonus awards
relating to Company performance in 1996, which were paid in one quarterly
installment in 1996 and three quarterly installments in 1997. The Company
did not pay any bonuses to executive officers in 1997 relating to individual
or Company performance for 1997.
(2) In addition to the amounts described in Note (4) with respect to Mr. Wright,
represents: (i) matching contributions by the Company under the Company's
401(k) plan during 1997 for the executive officers named in the above table
in the amounts of $2,430 for Mr. Wright, $2,056 for Mr. Timmons, $643 for
Mr. Hoover, $1,313 for Mr. Held and $1,515 for Mr. Menditch and (ii) the
dollar value of insurance coverage provided to the named executive officers
by the Company under the Company's executive life insurance program during
1997 in the amounts of $823 for Mr. Wright, $692 for Mr. Timmons, $473 for
Mr. Hoover, $348 for Mr. Held and $758 for Mr. Menditch.
(3) On October 31, 1997, the Board of Directors appointed Mr. Amonett as
President and Chief Executive Officer to replace Mr. Wright, who had
resigned. Mr. Amonett received options to purchase up to 250,000 shares of
Common Stock at an exercise price of $14.75 per share, which become
exercisable in annual increments of 20% beginning one year from the grant
date and expire on October 31, 2007. In lieu of a portion of his salary, Mr.
Amonett received additional options to purchase up to 30,675 shares of
Common Stock at an exercise price of $14.75 per share, which become
exercisable in full on June 1, 1998 and expire on October 31, 2002. See
"Report of Compensation Committee on Executive Compensation -- 1997 Chief
Executive Officer Pay." The information reflected in the table above does
not include director's fees paid to Mr. Amonett in 1996 and 1997, options to
purchase up to 10,000 shares of Common Stock, granted on September 27, 1996,
or options to purchase up to 5,000 shares of Common Stock, granted on July
1, 1997, in each case while Mr. Amonett was a Nonemployee Director of the
Company. See "Directors' Remuneration."
8
<PAGE> 11
(4) Effective October 31, 1997, Mr. Wright resigned as President and Chief
Executive Officer and as a director of the Company. In connection with the
settlement of the Company's obligations to Mr. Wright under his employment
agreement, the Company will pay Mr. Wright $330,000 per annum until October
31, 2000, plus $5,000 per month until October 31, 2000 as reimbursement in
lieu of an office, certain administrative services and other items to which
Mr. Wright would otherwise be entitled under his employment agreement. In
addition, Mr. Wright received non-qualified options to purchase up to 69,364
shares of Common Stock at an exercise price of $24.00 per share (162.7% of
the fair market value of the Common Stock on the date of grant). These
options have a three-year life and become exercisable as to 33 1/3% of the
shares subject thereto on April 30, 1998 and an additional 33 1/3% annually
thereafter. The Company granted these options in lieu of any 1997 bonus that
otherwise might have been payable to Mr. Wright.
(5) Salary earned in 1996 from the date of commencement of Mr. Timmons'
employment with the Company in September 1996.
(6) Salary earned in 1996 from the date of commencement of Mr. Held's employment
with the Company in March 1996.
(7) Of this amount, $80,000 represents 5,333 shares of Common Stock awarded to
Mr. Held under an incentive plan when the IPO closed, valued at the initial
IPO price to the public ($15 per share).
(8) Salary earned in 1996 from the date of commencement of Mr. Menditch's
employment with the Company in September 1996.
OPTION GRANTS
The following table sets forth information regarding the options granted
during 1997 to the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE
PERCENT AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
OF SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -----------------------
NAME GRANTED IN 1997 PRICE DATE 5% 10%
---- ---------- ---------- -------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett............ 5,000(2) .33% $ 22.813 July 1, 2007 $ 71,735 $ 181,790
30,675(3) 2.05% $ 14.750 October 31, 2002 $ 125,005 $ 276,229
250,000(4) 16.74% $ 14.750 October 31, 2007 $2,319,049 $5,876,925
C. Clifford Wright, Jr. ..... 37,500(5) 2.51% $ 21.625 June 3, 2007 $ 509,994 $1,292,426
69,364(6) 4.64% $ 24.000 October 31, 2000 $ 459,936 $1,016,338
Gorden H. Timmons............ 29,800(5) 2.00% $ 21.625 June 3, 2007 $ 405,275 $1,027,047
13,000(7) .87% $ 13.469 November 13, 2007 $ 110,118 $ 279,060
Howard S. Hoover, Jr. ....... 22,200(5) 1.49% $ 21.625 June 3, 2007 $ 301,917 $ 765,116
9,200(7) .62% $ 13.469 November 13, 2007 $ 77,929 $ 197,488
John D. Held................. 19,000(5) 1.27% $ 21.625 June 3, 2007 $ 258,397 $ 654,829
8,800(7) .59% $ 13.469 November 13, 2007 $ 74,541 $ 188,902
Frank N. Menditch............ 17,600(5) 1.18% $ 21.625 June 3, 2007 $ 239,357 $ 606,578
8,900(7) .60% $ 13.469 November 13, 2007 $ 75,388 $ 191,048
</TABLE>
- ---------------
(1) Calculated on the basis of the indicated rate of appreciation in the value
of the Common Stock, compounded annually from the fair market value on the
grant date, from the grant date to the end of the option term.
(2) These options were granted to Mr. Amonett on July 1, 1997 as a Nonemployee
Director prior to his appointment as an officer of the Company. They become
exercisable in annual increments of 33 1/3% of the total number of shares
subject thereto beginning July 1, 1998 and become fully exercisable on July
1, 2000.
(3) These options were granted on October 31, 1997 and become fully exercisable
on June 1, 1998.
9
<PAGE> 12
(4) These options were granted on October 31, 1997, become exercisable in annual
increments of 20% of the total number of shares subject thereto beginning
October 31, 1998 and become fully exercisable on October 31, 2002.
(5) These options were granted on June 3, 1997, become exercisable in annual
increments of 20% of the total number of shares subject thereto beginning
June 3, 1998 and become fully exercisable on June 3, 2002.
(6) These options were granted October 31, 1997 in connection with Mr. Wright's
resignation as an officer of the Company. They become exercisable in annual
increments of 33 1/3% of the total number of shares subject thereto
beginning April 30, 1998 and become fully exercisable on April 30, 2000.
(7) These options were granted on November 13, 1997, become exercisable in
annual increments of 20% of the total number of shares subject thereto
beginning November 13, 1998 and become fully exercisable on November 13,
2002.
AGGREGATE OPTION EXERCISES AND HOLDINGS AND YEAR-END VALUES
The following table presents information regarding options exercised during
1997 and options outstanding at December 31, 1997 for each of the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS HELD
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett......... -- -- 3,334 292,341 $ 834 $142,004
C. Clifford Wright, Jr.... -- -- 100,000 206,864 $725,000 $725,000
Gorden H. Timmons......... -- -- 60,000 132,800 $ 15,000 $ 45,653
Howard S. Hoover, Jr...... -- -- 75,000 106,400 $543,750 $560,135
John D. Held.............. 2,500 $35,845 35,000 65,300 $197,750 $227,548
Frank N. Menditch......... -- -- 20,000 56,500 $ 5,000 $ 23,351
</TABLE>
- ---------------
(1) Value is calculated on the basis of the market value of the Company's Common
Stock at the time of exercise, less the exercise price, multiplied by the
number of shares underlying the options exercised.
(2) The closing price for the Common Stock as listed on the New York Stock
Exchange on December 31, 1997 was $15.25. Value is calculated on the basis
of the difference between the option exercise price and $15.25, multiplied
by the number of shares of Common Stock underlying the options.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Amonett, Hoover,
Timmons, Held and Menditch. Each of these agreements (i) provides for an annual
minimum base salary, (ii) entitles the employee to participate in all the
Company's compensation plans (as defined) in which executive officers of the
Company participate and (iii) has a continuous three-year term subject to the
right of either party to terminate the employee's employment at any time. If the
employee's employment is terminated by the Company without cause (as defined) or
by the employee with good reason (as defined), the employee will be entitled,
during each of the years in the three-year period beginning on the termination
date, to (i) periodic payments equal to his average annual cash compensation (as
defined) from the Company, including bonuses, if any, during the two years (or
such shorter period of employment) preceding the termination date and (ii)
continued participation in all the Company's compensation plans (other than the
granting of new awards under an incentive plan or any other performance-based
plan). Except in the case of a termination for cause, any stock options
previously granted to the employee under an incentive plan that have not been
exercised and are outstanding as of the time immediately prior to the date of
his termination will remain outstanding (and continue to become exercisable
pursuant to their respective terms) until exercised or the expiration of their
term, whichever is earlier. If a change of control (as defined) of the Company
occurs, the employee may terminate his employment at any time during the 365-day
period following that event and receive a lump sum payment equal to three times
his highest annual base salary under the agreement (plus such amounts as may
10
<PAGE> 13
be necessary to hold the employee harmless from the consequences of any
resulting excise or other similar purpose tax relating to "parachute payments"
under the Internal Revenue Code of 1986, as amended). Each employment agreement
contains a covenant limiting competition with the Company for a period of one
year following termination of employment.
The Company also had an employment agreement with terms substantially the
same as those described above with Mr. Wright. In settlement of the Company's
obligations to Mr. Wright under that agreement, the Company will pay him
$330,000 per annum until October 31, 2000. In addition, the Company will
reimburse Mr. Wright $5,000 per month until October 31, 2000 in lieu of
providing him an office, certain administrative services and other items to
which he would otherwise be entitled under his employment agreement.
The Company also has employment agreements with other executive officers of
the Company.
PERFORMANCE GRAPH
The following graph compares the percentage change in the market value of
the Company's Common Stock to the cumulative total stockholder return (change in
stock price plus reinvested dividends) of the Standard & Poor's 500 Stock Index
("S&P 500 Index") and the MG Industry Group 059 -- Plumbing, Heating and Air
Conditioning index published by Media General Financial Services, Inc. (the
"Industry Index") for the period from September 25, 1996, the date immediately
following the date of the IPO, to December 31, 1997, assuming the investment of
$100 on September 25, 1996 and the reinvestment of all dividends since that date
to December 31, 1997. In addition, the graph includes a comparison for the same
period to the peer group index the Company used in its 1997 proxy statement (the
"1997 Peer Group Index"). The three peer issuers comprising the 1997 Peer Group
Index were Chemed Corporation, Service Experts, Inc. and Watsco, Inc. The
Company selected the Industry Index for comparison purposes in this Proxy
Statement because the Company believes that this index provides a more
representative basis for comparison to the Company's Common Stock performance.
<TABLE>
<CAPTION>
American
Measurement Period Residential S&P 500 Industry 1997 Peer
(Fiscal Year Covered) Services, Inc. Index Index Group Index
<S> <C> <C> <C> <C>
9/25/96 100.00 100.00 100.00 100.00
9/30/96 106.25 100.00 100.00 103.37
12/31/96 150.69 108.34 113.29 121.75
3/31/97 106.25 111.24 108.92 111.69
6/30/97 129.17 130.66 119.87 116.83
9/30/97 97.22 140.45 131.23 131.61
12/31/97 86.81 144.48 127.56 128.05
</TABLE>
- ---------------
Source: Media General Financial Services, Inc.
11
<PAGE> 14
The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The total
return on investment for the period shown for the Company, the S&P 500 Index,
the Industry Index and the 1997 Peer Group Index is based on the stock price or
composite index at September 25, 1996.
The performance graph appearing above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and shall not be deemed filed under either of such Acts except
to the extent that the Company specifically incorporates this information by
reference.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors is responsible for
establishing a general compensation policy for officers and employees of the
Company, preparing any reports that may be required relating to officer
compensation and approving any increases in directors' fees. Between January 1,
1997 and October 31, 1997, the Compensation Committee consisted of Thomas
Amonett, Nolan Lehmann and Don Sykora, none of whom were employed by the Company
during that period. Mr. Amonett resigned from the Compensation Committee on
October 31, 1997 following his election as Chief Executive Officer of the
Company. Since October 31, 1997, the Compensation Committee has consisted of Mr.
Lehmann and Mr. Sykora.
The Company's executive compensation program has been designed to assist
the Company in attracting, motivating and retaining the executive talent
necessary for the Company to maximize its return to stockholders. To this end,
this program provides competitive compensation levels and incentive pay levels
that vary based on corporate, business unit (for business unit positions) and
individual performance.
The Company's compensation program for executives consists of three key
elements:
a base salary,
a performance-based annual bonus, and
periodic grants of stock options.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the Company
to meet the requirements of the highly competitive environment in which the
Company operates while ensuring that executive officers are compensated in a way
that advances both the short-term and long-term interests of stockholders. Under
this approach, compensation for these officers involves a high proportion of pay
that is "at risk" through the annual bonus and stock options. The annual bonus
payable for 1998 will depend entirely on the Company's financial performance in
1998.
BASE SALARY
Base salaries for the Company's executive officers, as well as changes in
such salaries, are based upon recommendations by the Company's Chief Executive
Officer, taking into account such factors as competitive industry salaries, a
subjective assessment of the nature of the position, and the contribution and
experience of the officer. Performance for base salary purposes is assessed on a
qualitative, rather than a quantitative, basis. No specific performance formula
or weighting of factors is used in determining base salary levels.
ANNUAL BONUS
1997 Award Program. For the year ended December 31, 1997, the Compensation
Committee had approved an award program under the Company's 1996 Incentive Plan
("1996 Incentive Plan") for certain executive officers whose target awards were
based on the Company's 1997 earnings per share and 1997
12
<PAGE> 15
revenues. The Company exceeded its 1997 revenue target, but missed its 1997
earnings per share target. As a result, the Compensation Committee determined to
pay no awards under the 1997 award program.
1998 Award Program. For the year ending December 31, 1998, the Compensation
Committee approved an award program (the "1998 Award Program") under the 1996
Incentive Plan. This program provides that 100% of awards will be based on a
1998 earnings per share target for the Company. Under the 1998 Award Program,
target award opportunities vary by individual position and are expressed as a
percentage of 1998 base salary ranging from 10% to 100%, with the potential to
earn up to two times such amount if the Company's 1998 earnings per share target
is exceeded. Thirty-nine employees, including all the Company's executive
officers, are eligible to participate in the 1998 Award Program. The amount a
particular executive may earn will depend on the individual's position,
responsibility and ability to impact the Company's financial success. At the
discretion of the Compensation Committee, up to 50% of each award may be paid in
Common Stock, valued at fair market value on the date of finalization of the
award.
STOCK OPTIONS
In 1997, the Company adopted an incentive plan for employees other than
executive officers and directors (collectively with the 1996 Incentive Plan, the
"Incentive Plans"). The objectives of the Incentive Plans are to (i) attract and
retain the services of key employees, qualified independent directors and
qualified consultants and other independent contractors and (ii) encourage the
sense of proprietorship in and stimulate the active interest of those persons in
the development and financial success of the Company by making awards designed
to provide participants in the Incentive Plans with a proprietary interest in
the growth and performance of the Company.
Stock options align the interests of employees and stockholders by
providing value to option holders through stock price appreciation only. In
1997, the Company granted a total of 1,493,589 options under the Incentive
Plans, primarily to officers and other key employees. In all cases, the exercise
price of the options was equivalent to or greater than the fair market value of
the Common Stock at the time of those grants.
The Compensation Committee expects that it will make future stock option
awards periodically at its discretion based on recommendations of the Chief
Executive Officer. Stock option grant sizes, in general, will be evaluated by
regularly assessing competitive market practices and the overall performance of
the Company. This posture with regard to stock options is intended to focus
management's efforts on maximizing stockholder returns. However, the number of
options granted to a particular participant is also based on the Company's
historical financial success, its future business plans and the individual's
position and level of responsibility within the Company. These factors are
assessed subjectively and are not weighted.
1997 CHIEF EXECUTIVE OFFICER PAY
As described above, the Compensation Committee considers several factors in
developing an executive compensation package. For the Chief Executive Officer,
these factors include competitive market pay practices, performance level,
experience, contributions toward achievement of strategic goals and the overall
financial and operations success of the Company. Specific actions taken by the
Compensation Committee regarding the Chief Executive Officer's compensation in
1997 are summarized below.
Base Salary
Thomas Amonett was appointed by the Board of Directors as Chief Executive
Officer of the Company on October 31, 1997 to replace the Company's former Chief
Executive Officer, who had resigned. Mr. Amonett entered into an employment
agreement with the Company, which was substantially similar to the employment
agreement of the Company's prior Chief Executive Officer. Mr. Amonett's annual
base salary rate for 1997 was $250,000, the same annual base salary rate of the
Company's former Chief Executive Officer. Mr. Amonett did not receive any cash
compensation in 1997 as described under the following section "-- Stock
Options." For 1998, Mr. Amonett's base salary rate remained unchanged.
13
<PAGE> 16
Stock Options
On October 31, 1997, the Board of Directors of the Company awarded Mr.
Amonett 250,000 non-qualified stock options under the 1996 Incentive Plan with
an exercise price of $14.75 per share, the fair market value of the Common Stock
on the date of grant. These options become exercisable in annual increments of
20%, beginning October 31, 1998, and have a ten-year term. On the same date, the
Board of Directors also awarded Mr. Amonett 30,675 non-qualified stock options
under the 1996 Incentive Plan with an exercise price of $14.75 per share, all of
which become exercisable on June 1, 1998 and which have a five-year term. These
five-year term stock options were granted in recognition that Mr. Amonett
elected to forego the cash portion of his $250,000 base salary from October 31,
1997, his initial date of employment, until June 1, 1998.
1998 Award Program
In 1998, the Chief Executive Officer will participate in the 1998 Award
Program described earlier in this report. If the 1998 Award Program target is
met, Mr. Amonett will be entitled to an award equal to 80% of his 1998 base
salary, which may increase up to a maximum of 160% of his 1998 base salary if
the target is exceeded.
This report shall not be deemed incorporated by reference by any general
statement incorporating this Proxy Statement by reference into any filing under
the Securities Act or the Exchange Act and shall not be deemed filed under
either of such statutes except to the extent that the Company specifically
incorporates this information by reference.
This report is furnished by the Compensation Committee of the Board of
Directors.
Nolan Lehmann (Chairman)
Don D. Sykora
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 31, 1997, the Compensation Committee of the Board of
Directors consisted of Messrs. Amonett, Lehmann and Sykora. On October 31, 1997,
upon his appointment as President and Chief Executive Officer of the Company,
Mr. Amonett resigned as Chairman of the Compensation Committee. Mr. Lehmann was
appointed Chairman of the Compensation Committee to fill the unexpired term left
by Mr. Amonett.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997, American Residential Services of South Carolina, Inc. ("ARS-SC"),
a subsidiary of the Company, leased certain office and warehouse space under
five leases from a partnership in which Gorden H. Timmons owns a 90% equity
interest. Of these five leases, one was terminated in June 1997 and a second was
terminated in August 1997. ARS-SC also leases office/warehouse space from a
partnership in which Mr. Timmons and members of his immediate family owned a
majority equity interest through October 1997, but which they subsequently sold
in October 1997 to an unrelated third party. The expiration dates of the six
leases range from month-to-month to 2006. Aggregate annual 1997 rentals under
the six leases totaled $125,260.
In March 1998, the Company sold an office and warehouse property owned by
ARS-SC in Charleston, South Carolina to a company in which Mr. Timmons owns a
50% equity interest. The sales price was $1,755,000, which was paid in full at
the closing. Immediately after the sale, ARS-SC leased the property from Mr.
Timmons' company under a triple-net seven-year lease, effective April 1, 1998.
The annual rent to be paid by ARS-SC under that lease is $155,625 and is not
subject to increase during the seven-year term of the lease.
The sale of the property and the terms of the lease were reviewed and
approved by the Company's Board of Directors in March 1998 (with Mr. Timmons
abstaining from voting). In making its determination to
14
<PAGE> 17
approve the sale and lease transactions, the Board of Directors reviewed the
reports of an independent real estate appraisal firm engaged by the Company,
which showed that the sales price was slightly higher than the appraised fair
market value of the property, net of commissions, and the annual lease rental
amount was slightly lower than the fair market rental value of the property.
General Heating & Air Conditioning Company, Inc., a subsidiary of the
Company, leases office and warehouse space under four leases from a limited
partnership owned by Frank N. Menditch, his brothers and trusts for the benefit
of their children. Aggregate annual 1997 rentals under the leases, which expire
in 2005, totaled $511,000 and will increase a minimum of 4% each year.
American Residential Services of Florida, Inc., a subsidiary of the
Company, leases its principal office and warehouse space from a limited
partnership in which Elliot Sokolow owns an 80% interest. The annual 1997 rental
under the lease, which expires in May 2005, was $248,000 and will increase 5%
each year.
The Company believes the rentals provided under the leases described above
are fair market rentals.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of a registered class of
the Company's equity securities to file with the SEC and the New York Stock
Exchange initial reports of ownership, reports of changes in ownership and
annual reports of ownership of Common Stock and other equity securities of the
Company. Such directors, officers and stockholders are also required to furnish
the Company with copies of all such filed reports.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1997, the Company believes that all Section 16(a) reporting requirements related
to the Company's directors and executive officers were timely fulfilled during
1997, except that Harry O. Nicodemus, IV inadvertently failed to report on a
Form 5 a 1997 stock option grant for 25,000 shares of Common Stock. Such grant
was subsequently reported on a Form 4.
REPORT ON FORM 10-K
The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1997 with the SEC on March 31, 1998. A COPY OF THAT REPORT,
INCLUDING ANY FINANCIAL STATEMENTS AND SCHEDULES AND A LIST DESCRIBING ANY
EXHIBITS NOT CONTAINED THEREIN, MAY BE OBTAINED WITHOUT CHARGE BY ANY
STOCKHOLDER OF THE COMPANY. WRITTEN REQUESTS FOR COPIES OF THE REPORT SHOULD BE
DIRECTED TO INVESTOR RELATIONS, AMERICAN RESIDENTIAL SERVICES, INC., POST OAK
TOWER, SUITE 725, 5051 WESTHEIMER ROAD, HOUSTON, TEXAS 77056-5604.
SUBMISSION OF STOCKHOLDER PROPOSALS AND ADVANCE NOTICE PROCEDURES
Under the Company's Bylaws, no business may be brought before an annual
meeting except as specified in the notice of the meeting (which includes
stockholder proposals that the Company is required to set forth in its proxy
statement under Exchange Act Rule 14a-8) or as otherwise brought before the
meeting by or at the direction of the Board of Directors or by a stockholder
entitled to vote who has delivered notice to the Company (containing certain
information specified in the Bylaws) generally not less than 90 days prior to
the first anniversary of the preceding year's annual meeting. These requirements
are separate and apart from and in addition to the SEC's requirements with which
a stockholder must comply to have a stockholder proposal included in the
Company's proxy statement under Rule 14a-8. A copy of the full text of the Bylaw
provisions discussed above may be obtained by writing to American Residential
Services, Inc., Attn: Corporate Secretary, Post Oak Tower, Suite 725, 5051
Westheimer Road, Houston, Texas 77056-5604.
Proposals stockholders intend to have included in the Company's proxy
statement for the 1999 Annual Meeting of Stockholders should be sent to American
Residential Services, Inc., Attn: Corporate Secretary, Post Oak Tower, Suite
725, 5051 Westheimer Road, Houston, Texas 77056-5604, and must be received by
the Company at that address by December 28, 1998.
15
<PAGE> 18
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AMERICAN RESIDENTIAL SERVICES, INC.
The undersigned hereby appoints Thomas N. Amonett, Howard
S. Hoover, Jr. and John D. Held, and each of them, as proxies, with
full power of substitution and resubstitution in each, and hereby
authorizes them to represent and vote, as designated on the other side
of this Proxy, all the shares of common stock of American Residential
| Services, Inc. standing in the name of the undersigned, with all powers
| that the undersigned would possess if present in person at the Annual
| Meeting of Stockholders of the Company to be held June 2, 1998 or any
| adjournment or postponement thereof. In their discretion, the proxies
| may vote upon such other business as may properly come before the
meeting.
(Continued, and to be marked, dated and signed, on the other side)
* FOLD AND DETACH HERE *
<PAGE> 19
AMERICAN RESIDENTIAL SERVICES, INC. Please mark X
your votes as
indicated in
this example
This Proxy, if properly executed, will be voted as specified below by the
stockholder. If no direction is given, this Proxy will be voted FOR Proposal 1
and Proposal 2.
The Board of Directors
recommends a vote
FOR Proposal 1 and 2
PROPOSAL 1-Election of Class II Directors
FOR all nominees, WITHHELD
except as FOR ALL
indicated below
Nominees:
Howard S. Hoover, Jr.
Frank N. Menditch
Robert J. Cruikshank
Randall B. Hale
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
WITHHELD FOR:
- --------------------------------------------------------------------------
PROPOSAL 2-Ratification of Appointment of Independent Public Accountants.
FOR AGAINST ABSTAIN
Date , 1998
-----------------------------
-------
| ----------------------------------------
| (Signature)
|
----------------------------------------
(Signature)
NOTE: Please sign name as it appears on
this Proxy. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee,
guardian or other similar capacity,
please give full title as such. If a
corporation, please print full
corporation name and have authorized
officer sign and indicate title. If a
partnership, please print partnership
name and have authorized person sign
and indicate title. The person or entity
signing above hereby revokes all proxies
heretofore given by such person or
entity to vote at such meeting or any
adjournment or postponement thereof.
* FOLD AND DETACH HERE *
