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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT TO FORM 8-K FILED ON NOVEMBER 25, 1998
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 25, 1998
AMERICAN RESIDENTIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11849 76-0484996
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
POST OAK TOWER
5051 WESTHEIMER, SUITE 725
HOUSTON, TEXAS 77056-5604
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (713) 599-0100
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
This Form 8-K is an amendment to the Form 8-K filed with the
Securities and Exchange Commission on November 25, 1998, via EDGAR. This
Amendment supplements and conforms Items 7(a) and 7(b) of the November 25, 1998
Form 8-K Statements as denoted below.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The financial statements of T.A. Beach Corp., which this item
requires, are attached as Exhibit 99.1 to this Form 8-K and as an amendment to
that Form 8-K filed on November 25, 1998.
(b) PRO FORMA FINANCIAL INFORMATION.
The provision for pro forma financial information of the Company,
which this item requires, is made by attachment of the Pro Forma Combined
Balance Sheet as of September 30, 1998, Exhibit 99.2 hereto, the Pro Forma
Combined Statements of Operations for the year ended December 31, 1997, Exhibit
99.3 hereto, the Pro Forma Combined Statement of Operation for the Nine Months
Ended September 30, 1998, Exhibit 99.4 hereto, and the Notes to Pro Forma
Financial Information, Exhibit 99.5 hereto, respectively, to this Form 8-K and
as an amendment to that Form 8-K filed on November 25, 1998.
(c) EXHIBITS.
Effective as of January 1, 1999, the by-laws of the Company were
amended and restated. The amended and restated bylaws are attached hereto as
Exhibit 3.1.
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EXHIBITS
3.1 Amended and Restated Bylaws of American Residential Services, Inc.,
effective as of January 1, 1999
99.1 Financial statements of T.A. Beach Corp., dated as of November 13, 1998
99.2 Pro Forma Combined September 30, 1998 Balance Sheets (unaudited)
99.3 Pro Forma Combined Statement of Operation for the Year Ended
December 31, 1997
99.4 Pro Forma Combined Statement of Operation for the Nine Months Ended
September 30, 1998
99.5 ARS Notes to Pro Forma Financial Statements
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ Harry O. Nicodemus, IV
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Name: Harry O. Nicodemus, IV
Title: Senior Vice President and
Chief Financial Officer
Date: February 8, 1999
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EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
AMERICAN RESIDENTIAL SERVICES, INC.
ADOPTED JANUARY 1, 1999
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AMENDED & RESTATED BYLAWS
OF
AMERICAN RESIDENTIAL SERVICES, INC.
Table of Contents
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ARTICLE I
OFFICES
1.1 Registered Office............................................................. -1-
1.2 Other Offices................................................................. -1-
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings............................................................. -1-
2.2 Annual Meeting................................................................ -1-
2.3 Special Meetings.............................................................. -2-
2.4 Notice of Meeting............................................................. -2-
2.5 Registered Holders of Shares; Closing of Share Transfer Records; and Record
Date..................................................................... -2-
2.6 Quorum of Stockholders; Adjournment........................................... -3-
2.7 Voting by Stockholders........................................................ -3-
2.8 Business to be Conducted...................................................... -4-
2.9 Proxies....................................................................... -5-
2.10 Approval or Ratification of Acts or Contracts by Stockholders................. -5-
ARTICLE III
DIRECTORS
3.1 Powers, Number, Classification and Tenure..................................... -6-
3.2 Qualifications................................................................ -6-
3.3 Nomination of Directors....................................................... -6-
3.4 Place of Meeting; Order of Business........................................... -8-
3.5 Regular Meetings.............................................................. -8-
3.6 Special Meetings.............................................................. -8-
3.7 Attendance at and Notice of Meetings.......................................... -8-
3.8 Quorum of and Action by Directors............................................. -8-
3.9 Board and Committee Action Without a Meeting.................................. -8-
3.10 Board and Committee Telephone Meetings........................................ -9-
3.11 Compensation.................................................................. -9-
3.12 Removal....................................................................... -9-
3.13 Committees of the Board of Directors.......................................... -9-
</TABLE>
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ARTICLE IV
OFFICERS
4.1 Designation................................................... -12-
4.2 Chairman of the Board of Directors............................ -13-
4.3 President..................................................... -13-
4.4 Chief Operating Officer....................................... -13-
4.5 Vice President................................................ -13-
4.6 Secretary..................................................... -14-
4.7 Treasurer..................................................... -14-
4.8 Controller.................................................... -14-
4.9 Assistant Secretaries......................................... -15-
4.10 Assistant Treasurers.......................................... -15-
4.11 Assistant Controllers......................................... -15-
4.12 Other Officers................................................ -15-
4.13 Vacancies..................................................... -15-
4.14 Removal....................................................... -15-
4.15 Action with Respect to Securities of Other Corporations....... -16-
ARTICLE V
CAPITAL STOCK
5.1 Certificates for Shares....................................... -16-
5.2 Transfer of Shares............................................ -16-
5.3 Ownership of Shares........................................... -16-
5.4 Regulations Regarding Certificates............................ -17-
5.5 Lost or Destroyed Certificates................................ -17-
ARTICLE VI
INDEMNIFICATION
6.1 General....................................................... -17-
6.2 Expenses...................................................... -17-
6.3 Advances...................................................... -18-
6.4 Request for Indemnification................................... -18-
6.5 Nonexclusivity of Rights...................................... -18-
6.6 Insurance and Subrogation..................................... -18-
6.7 Severability.................................................. -19-
6.8 Certain Actions Where Indemnification Is Not Provided......... -19-
6.9 Definitions................................................... -19-
6.10 Notices....................................................... -20-
6.11 Contractual Rights............................................ -20-
</TABLE>
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Bylaw Amendments............................................. -20-
7.2 Books and Records............................................ -21-
7.3 Notices; Waiver of Notice.................................... -21-
7.4 Resignations................................................. -21-
7.5 Seal......................................................... -21-
7.6 Fiscal Year.................................................. -21-
7.7 Facsimile Signatures......................................... -21-
7.8 Reliance upon Books, Reports and Records..................... -22-
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
AMERICAN RESIDENTIAL SERVICES, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of American Residential Services,
Inc. (the "Corporation") required by the General Corporation Law of the
State of Delaware or any successor statute (the "DGCL"), to be maintained
in the State of Delaware, shall be the registered office named in the
Certificate of Incorporation of the Corporation, as it may be amended or
restated in accordance with the DGCL from time to time (the "Certificate of
Incorporation"), or such other office as may be designated from time to
time by the Board of Directors of the Corporation (the "Board of Directors"
or the "Board") in the manner provided by applicable law. Should the
Corporation maintain a principal office within the State of Delaware such
registered office need not be identical to such principal office of the
Corporation.
1.2 Other Offices. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
determine from time to time or as the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at such place
within or without the State of Delaware as may be designated by the Board
of Directors or the officer calling the meeting, or, in the absence of such
designation, at the registered office of the Corporation in the State of
Delaware.
2.2 Annual Meeting. An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire or to fill vacancies and for
the transaction of such other business as may properly come before the
meeting, shall be held on such date and at such time as the Board of
Directors shall fix and set forth in the notice of the meeting, which date
shall be within thirteen months subsequent to the last annual meeting of
stockholders. At the annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the annual
meeting as set forth in Section 2.8 hereof. Failure to hold the annual
meeting at the designated time shall not work a dissolution of the
Corporation.
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2.3 Special Meetings. Special meetings of the stockholders may be called at
any time by the Chairman of the Board, the President or a majority of the
Board of Directors. Upon written request of any person or persons who have
duly called a special meeting, it shall be the duty of the Secretary of the
Corporation to fix the date of the meeting to be held not less than ten nor
more than 60 days after the receipt of the request and to give due notice
thereof. If the Secretary shall neglect or refuse to fix the date of the
meeting and give notice thereof, the person or persons calling the meeting
may do so.
2.4 Notice of Meeting. Written or printed notice of all meetings stating the
place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than ten nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, President or Secretary of the Corporation, to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to
be delivered to a stockholder when deposited in the United States mail
addressed to such stockholder at such stockholder's address as it appears
on the stock transfer records of the Corporation, with postage thereon
prepaid.
2.5 Registered Holders of Shares; Closing of Share Transfer Records; and Record
Date.
(a) Registered Holders as Owners. Unless otherwise provided under
Delaware law, the Corporation may regard the person in whose name any
shares issued by the Corporation are registered in the stock transfer
records of the Corporation at any particular time (including, without
limitation, as of a record date fixed pursuant to paragraph (b) of
this Section 2.5) as the owner of those shares at that time for
purposes of voting those shares, receiving distributions thereon or
notices in respect thereof, transferring those shares, exercising
rights of dissent with respect to those shares, entering into
agreements with respect to those shares, or giving proxies with
respect to those shares; and neither the Corporation nor any of its
officers, directors, employees or agents shall be liable for regarding
that person as the owner of those shares at that time for those
purposes, regardless of whether that person possesses a certificate
for those shares.
(b) Record Date. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive a distribution by the Corporation
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, or in order
to make a determination of stockholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date
for any such determination of stockholders, such date in any case to
be not more than 60 days and, in the case of a meeting of
stockholders, not less than ten days, prior to the date on which the
particular action requiring such determination of stockholders is to
be taken. The Board of Directors shall not close the books of the
Corporation against transfers of shares during the whole or any part
of such period.
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If the Board of Directors does not fix a record date for any meeting of the
stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on
the day next preceding the day on which notice is given, or, if in
accordance with Section 7.3 of these Amended and Restated Bylaws (these
"Bylaws") notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
2.6 Quorum of Stockholders; Adjournment. Unless otherwise provided in the
Certificate of Incorporation, a majority of the outstanding shares of
capital stock of the Corporation entitled to vote, present in person or
represented by proxy, shall constitute a quorum at any meeting of the
stockholders, and the stockholders present at any duly convened meeting may
continue to do business until adjournment notwithstanding any withdrawal
from the meeting of holders of shares counted in determining the existence
of a quorum. Unless otherwise provided in the Certificate of Incorporation
or these Bylaws, any meeting of the stockholders may be adjourned from time
to time by the chairman of the meeting or the holders of a majority of the
issued and outstanding stock, present in person or represented by proxy,
whether or not a quorum is present, without notice other than by
announcement at the meeting at which such adjournment is taken, and at any
such adjourned meeting at which a quorum shall be present any action may be
taken that could have been taken at the meeting originally called; provided
that if the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting.
2.7 Voting by Stockholders.
(a) Voting on Matters Other than the Election of Directors. With respect
to any matters as to which no other voting requirement is specified by
the DGCL, the Certificate of Incorporation or these Bylaws, the
affirmative vote required for stockholder action shall be that of a
majority of the shares present in person or represented by proxy at
the meeting (as counted for purposes of determining the existence of a
quorum at the meeting). In the case of a matter submitted for a vote
of the stockholders as to which a stockholder approval requirement is
applicable under the stockholder approval policy of any stock exchange
or quotation system on which the capital stock of the Corporation is
traded or quoted, the requirements under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any provision of the
Internal Revenue Code, in each case for which no higher voting
requirement is specified by the DGCL, the Certificate of Incorporation
or these Bylaws, the vote required for approval shall be the requisite
vote specified in such stockholder approval policy, the Exchange Act
or Internal Revenue Code provision, as the case may be (or the highest
such requirement if more than one is applicable). For the approval of
the appointment of independent public accountants (if submitted for a
vote of the stockholders), the vote required for approval shall be a
majority of the votes cast on the matter.
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(b) Voting in the Election of Directors. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws in accordance with the
DGCL, directors shall be elected by a plurality of the votes cast by
the holders of outstanding shares of capital stock of the Corporation
entitled to vote in the election of directors at a meeting of
stockholders at which a quorum is present.
(c) Other. The Board of Directors, in its discretion, or the Chairman of
the Board (if any), or in his absence the President, presiding at a
meeting of stockholders of the Corporation, in his discretion, may
require that any votes cast at such meeting shall be cast by written
ballot.
2.8 Business to be Conducted.
(a) At an annual meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have
been brought before the annual meeting (i) by or at the direction of
the Board of Directors or (ii) by any stockholder of the Corporation
who is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this Section 2.8, who shall be
entitled to vote at such meeting and who complies with the
requirements of this Section 2.8 and as shall otherwise be proper
subjects for stockholder action and shall be properly introduced at
the meeting. For a proposal to be properly brought before an annual
meeting by a stockholder, in addition to any other applicable
requirements, the stockholder must have given timely advance notice
thereof in writing to the Secretary of the Corporation. To be timely,
a stockholder's notice must be delivered to, or mailed and received
at, the principal executive offices of the Corporation not later than
the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that with respect to the annual
meeting of stockholders to be held in 1997 or in the event that the
date of the annual meeting is more than 30 days before or more than 60
days after such anniversary date, notice by the stockholder to be
timely must be so delivered not later than the close of business on
the later of the 90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such
meeting is first made by the Corporation. Any such stockholder's
notice to the Secretary of the Corporation shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i)
a description of the proposal desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and
any other stockholders known by such stockholder to be supporting such
proposal, (iii) the class and number of shares of the Corporation's
stock which are beneficially owned by the stockholder on the date of
such notice, (iv) any financial interest of the stockholder in such
proposal and (v) a representation that the stockholder intends to
appear in person or by proxy at the meeting to bring the proposed
business before the annual meeting. The presiding officer of the
annual meeting shall determine whether the requirements of this
paragraph (a) have been
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met with respect to any stockholder proposal. If the presiding officer
determines that a stockholder proposal was not made in accordance with
the terms of this paragraph (a), he shall so declare at the meeting
and any such proposal shall not be acted upon at the meeting. At a
special meeting of stockholders, only such business shall be acted
upon as shall have been set forth in the notice relating to the
meeting required by Section 2.4 hereof or as shall constitute matters
incident to the conduct of the meeting as the presiding officer of the
meeting shall determine to be appropriate.
(b) Notwithstanding the foregoing provisions of this Section 2.8, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 2.8.
2.9 Proxies. Each stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for him by proxy. Proxies
for use at any meeting of stockholders shall be filed with the Secretary,
or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the secretary of the meeting who shall decide all questions
relating to the qualification of voters, the validity of the proxies, and
the acceptance or rejection of votes, unless an inspector or inspectors
shall have been appointed by the chairman of the meeting, in which event
such inspector or inspectors shall decide all such questions.
2.10 Approval or Ratification of Acts or Contracts by Stockholders. The Board
of Directors in its discretion may submit any act or contract for approval
or ratification at any annual meeting of the stockholders, or at any
special meeting of the stockholders called for the purpose of considering
any such act or contract, and any act or contract that shall be approved or
be ratified by the vote of the stockholders holding a majority of the
issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum
is present), shall be as valid and as binding upon the Corporation and upon
all the stockholders as if it has been approved or ratified by every
stockholder of the Corporation.
ARTICLE III
DIRECTORS
3.1 Powers, Number, Classification and Tenure.
(a) The powers of the Corporation shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors. The Board of
Directors shall be divided into three classes as provided in the
Certificate of Incorporation. Each director shall hold office for the
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full term for which such director is elected and until such director's
successor shall have been duly elected and qualified or until his
earlier death or resignation or removal in accordance with the
Certificate of Incorporation or these Bylaws.
(b) Within the limits specified in the Certificate of Incorporation, the
number of directors that shall constitute the whole Board of Directors
shall be fixed by, and may be increased or decreased from time to time
by, the affirmative vote of a majority of the members at any time
constituting the Board of Directors. Except as provided in the
Certificate of Incorporation of the Corporation, newly created
directorships resulting from any increase in the number of directors
and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled
by the affirmative vote of a majority of the remaining directors then
in office, even though less than a quorum of the Board of Directors.
Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected
and qualified or until his earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3.2 Qualifications. Directors need not be residents of the State of Delaware
or stockholders of the Corporation.
3.3 Nomination of Directors. Subject to such rights of the holders of one or
more outstanding series of Preferred Stock of the Corporation to elect one
or more directors in case of arrearages in the payment of dividends or
other defaults as shall be prescribed in the Certificate of Incorporation
or in the resolutions of the Board of Directors providing for the
establishment of any such series, only persons who are nominated in
accordance with the procedures set forth in this Section 3.3 shall be
eligible for election as, and to serve as, directors. Nominations of
persons for election to the Board of Directors may be made at a meeting of
the stockholders at which Directors are to be elected (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of the giving of
such stockholder's notice provided for in this Section 3.3, who shall be
entitled to vote at such meeting in the election of directors and who
complies with the requirements of this Section 3.3. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be
preceded by timely advance notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to, or
mailed and received at, the principal executive offices of the Corporation
(i) with respect to an election to be held at the annual meeting of the
stockholders of the Corporation, not later than the close of business on
the 90th day prior to the first anniversary of the preceding year's annual
meeting; provided, however, that with respect to the annual meeting of
stockholders to be held in 1997 or in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later
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of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made
by the Corporation; and (ii) with respect to an election to be held at a
special meeting of stockholders of the Corporation for the election of
directors not later than the close of business on the tenth day following
the day on which notice of the date of the special meeting was mailed to
stockholders of the Corporation as provided in Section 2.4 hereof or public
disclosure of the date of the special meeting was made, whichever first
occurs. Any such stockholder's notice to the Secretary of the Corporation
shall set forth (x) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age,
business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the number of shares of each
class of capital stock of the Corporation beneficially owned by such
person, (iv) the written consent of such person to having such person's
name placed in nomination at the meeting and to serve as a director if
elected and (v) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, pursuant to Regulation 14A under the
Exchange Act, and (y) as to the stockholder giving the notice, (i) the name
and address, as they appear on the Corporation's books, of such stockholder
and (ii) the number of shares of each class of voting stock of the
Corporation which are then beneficially owned by such stockholder. The
Chairman of the Board (if any), or in his absence the President, presiding
at the meeting of stockholders shall determine whether the requirements of
this Section 3.3 have been met with respect to any nomination or intended
nomination. If the Chairman of the Board (if any), or in his absence the
President, presiding at the meeting of the stockholders determines that any
nomination was not made in accordance with the requirements of this Section
3.3, he shall so declare at the meeting and the defective nomination shall
be disregarded. Notwithstanding the foregoing provisions of this Section
3.3, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 3.3.
3.4 Place of Meeting; Order of Business. Except as otherwise provided by law,
meetings of the Board of Directors, regular or special, may be held either
within or without the State of Delaware, at whatever place is specified by
the person or persons calling the meeting. In the absence of specific
designation, the meetings shall be held at the principal office of the
Corporation. At all meetings of the Board of Directors, business shall be
transacted in such order as shall from time to time be determined by the
Chairman of the Board (if any), or in his absence by the President, or by
resolution of the Board of Directors.
3.5 Regular Meetings. Regular meetings of the Board of Directors shall be
held, in each case, at such hour and on such day as may be fixed by
resolution of the Board of Directors, without further notice of such
meetings. The time or place of holding regular meetings of the Board of
Directors may be changed by the Chairman of the Board or the President by
giving written notice thereof as provided in Section 3.7 hereof.
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3.6 Special Meetings. Special meetings of the Board of Directors shall be held,
whenever called by the Chairman of the Board, the President or by
resolution adopted by the Board of Directors, in each case, at such hour
and on such day as may be stated in the notice of the meeting.
3.7 Attendance at and Notice of Meetings. Written notice of the time and place
of, and general nature of the business to be transacted at, all special
meetings of the Board of Directors, and written notice of any change in the
time or place of holding the regular meetings of the Board of Directors,
shall be given to each director personally or by mail or by telegraph,
telecopier or similar communication at least one day before the day of the
meeting; provided, however, that notice of any meeting need not be given to
any director if waived by him in writing, or if he shall be present at such
meeting. Participation in a meeting of the Board of Directors shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
3.8 Quorum of and Action by Directors. A majority of the directors in office
shall constitute a quorum of the Board of Directors for the transaction of
business; but a lesser number may adjourn from day to day until a quorum is
present. Except as otherwise provided by law or in these Bylaws, all
questions shall be decided by the vote of a majority of the directors
present.
3.9 Board and Committee Action Without a Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at a meeting of the Board of Directors or any
committee thereof may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be, and shall be
filed with the Secretary of the Corporation.
3.10 Board and Committee Telephone Meetings. Subject to the provisions required
or permitted by the DGCL for notice of meetings, unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of
the Board of Directors, or members of any committee designated by the Board
of Directors, may participate in and hold a meeting of such Board of
Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
this Section 3.10 shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express purpose
of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
3.11 Compensation. Directors shall receive such compensation for their
services as shall be determined by the Board of Directors.
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3.12 Removal. No director of the Corporation shall be removed from office as a
director by vote or other action of the stockholders or otherwise except
for cause, and then only by the affirmative vote of the holders of at least
a majority of the voting power of all outstanding shares of capital stock
of the Corporation generally entitled to vote in the election of directors,
voting together as a single class. Cause for removal of a director shall be
as provided by law or in the Certificate of Incorporation. Any proposal by
a stockholder to remove a director of the Corporation, in order to be
validly acted upon at any meeting, shall comply with paragraph (a) of
Section 2.8 hereof.
Notwithstanding the first paragraph of this Section 3.12, whenever
holders of outstanding shares of one or more series of Preferred Stock are
entitled to elect members of the Board of Directors pursuant to the
provisions applicable in the case of arrearages in the payment of dividends
or other defaults contained in the resolution or resolutions of the Board
of Directors providing for the establishment of any series of Preferred
Stock, any such director of the Corporation so elected may be removed in
accordance with the provision of such resolution or resolutions.
3.13 Chairman of the Board of Directors. The Board of Directors shall elect
one of its members to serve as Chairman of the Board of Directors. The
Chairman of the Board shall preside at all meetings of the stockholders and
of the Board of Directors. In the absence of the Chairman of the Board,
the President shall so preside. The Chairman of the Board shall perform
such other duties as usually appertain to the position or as may be
prescribed by the Board of Directors and may exercise such other powers as
from time to time may be assigned to him by these Bylaws or by the Board of
Directors. A person shall not be deemed to be an officer of the
Corporation solely as a result of serving as Chairman of the Board.
3.14 Committees of the Board of Directors.
(a) The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members one or
more committees (in addition to those listed below), each of which
shall be comprised of one or more of its members, and may designate
one or more of its members as alternate members of any committee, who
may, subject to any limitations by the Board of Directors, replace
absent or disqualified members at any meeting of that committee. Any
such committee, to the extent provided in such resolution or in the
Certificate of Incorporation or these Bylaws, shall have and may
exercise all of the authority of the Board of Directors to the extent
permitted by the DGCL, including, without limitation, the power and
authority to declare a dividend, to authorize the issuance of stock or
to adopt a certificate of ownership and merger pursuant to Section 253
of the DGCL. Any such committee may authorize the seal of the
Corporation to be affixed to all papers which may require it. In
addition to the above, such committee or committees shall have such
other powers and limitations of authority as may be determined from
time to time by resolution adopted by the Board of Directors.
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(b) The Board of Directors shall have the power at any time to change the
membership of any such committee and to fill vacancies in it. A
majority of the number of members of any such committee shall
constitute a quorum for the transaction of business unless a greater
number is required by a resolution adopted by the Board of Directors.
The act of the majority of the members of a committee present at any
meeting at which a quorum is present shall be the act of such
committee, unless the act of a greater number is required by a
resolution adopted by the Board of Directors. Each such committee may
elect a chairman and appoint such subcommittees and assistants as it
may deem necessary. Except as otherwise provided by the Board of
Directors, meetings of any committee shall be conducted in accordance
with Sections 3.5, 3.6, 3.7, 3.8, 3.9, 3.10 and 7.3 hereof. In the
absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any member of any such committee
elected or appointed by the Board of Directors may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of a member of a committee shall not of itself
create contract rights.
(c) Any action taken by any committee of the Board of Directors shall
promptly be recorded in the minutes and filed with the Secretary of
the Corporation.
(d) Executive Committee. There shall be an Executive Committee of the
Board of Directors, which committee shall have and may exercise all
the powers and authority of the Board of Directors between regular or
special meetings of the Board in the management of the business and
affairs of the Corporation, except to the extent limited by Delaware
law. Without limiting the generality of the foregoing, the Executive
Committee shall have the power and authority to (i) declare dividends
on any class of capital stock of the Corporation, (ii) authorize the
issuance of capital stock of the Corporation, (iii) adopt certificates
of ownership and merger pursuant to Section 253 of the DGCL and (iv)
in reference to amending the Certificate of Incorporation, to the
extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as
provided in Section 151(a) of the DGCL, fix the designations and any
of the preferences or rights of such shares relating to dividends,
redemptions, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation or fix
the number of shares of any series of stock or authorize the increase
or decrease of the shares of any series.
(e) Audit Committee. There shall be an Audit Committee of the Board of
Directors whose members shall consist solely of directors who are not
employees or affiliates
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of the Corporation and have no relationship with the Corporation that
would, in the judgment of the Board of Directors, interfere with their
exercise of independent judgment as a member of such Committee. The
Audit Committee shall have and may exercise the power and authority to
recommend to the Board of Directors the accounting firm to be selected
by the Board or to be recommended by it for stockholder approval, as
independent auditor of the financial statements of the Corporation and
its subsidiaries, and to act on behalf of the Board in meeting and
reviewing with the independent auditors, the chief accounting officer,
the chief internal auditor, if any, and the appropriate corporate
officers, matters relating to corporate financial reporting and
accounting procedures and policies, adequacy of financial, accounting
and operating controls and the scope of the respective audits of the
independent auditors and the internal auditor, if any. The Audit
Committee shall also review the results of such audits with the
respective auditors and shall report the results of those reviews to
the Board of Directors. The Audit Committee shall submit to the Board
of Directors any recommendations it may have from time to time with
respect to financial reporting and accounting practices and policies
and financial, accounting and operational controls and safeguards. The
Audit Committee may submit to the Compensation Committee any
recommendations it may have with respect to the compensation of the
chief accounting officer and the chief internal auditor, if any. The
Board of Directors shall, by resolution adopted by a majority of the
Board of Directors, designate not less than two of its qualifying
members from time to time to constitute members of the Audit
Committee.
(f) Nominating Committee. There shall be a Nominating Committee of the
Board of Directors, which committee shall have and may exercise the
power and authority to recommend to the Board of Directors prior to
each annual meeting of the stockholders of the Corporation: (a) the
appropriate size and composition of the Board of Directors; and (b)
nominees: (i) for election to the Board of Directors for whom the
Corporation should solicit proxies; (ii) to serve as proxies in
connection with the annual stockholders' meeting; and (iii) for
election to all committees of the Board of Directors other than the
Nominating Committee. The Board of Directors shall, by resolution
adopted by a majority of the Board, designate one or more of its
members from time to time to constitute members of the Nominating
Committee.
(g) Compensation Committee. There shall be a Compensation Committee of the
Board of Directors, whose members shall consist solely of directors
who are not employees or affiliates of the Corporation and have no
relationship with the Corporation that would, in the judgment of the
Board of Directors, interfere with their exercise of independent
judgment as a member of such committee. The Compensation Committee
shall have and may exercise all the power and authority to (i)
establish a general compensation policy for officers and employees of
the Corporation, including to establish and at least annually review
officers' salaries and levels of officers' participation in the
benefit plans of the Corporation, (ii) prepare any reports that may be
required by the regulations of the Securities and Exchange Commission
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or otherwise relating to officer compensation, (iii) approve any
increases in directors' fees and (iv) exercise all other powers of the
Board of Directors with respect to matters involving the compensation
of employees and the employee benefits of the Corporation as shall be
delegated by the Board of Directors to the Compensation Committee from
time to time. Without limiting the generality of the foregoing, the
Compensation Committee shall have the power and authority to authorize
the issuance of capital stock of the Corporation pursuant to any
compensation or benefit plan or arrangement adopted or entered into by
the Corporation. The Board of Directors shall, by resolution adopted
by a majority of the Board, designate two or more of its qualifying
members from time to time to constitute members of the Compensation
Committee.
(h) Industry Relations Committee. There shall be an Industry Relations
Committee of the Board of Directors, which Committee shall monitor
events in the residential services industry and report to the Board of
Directors any significant industry developments that may, in the
judgment of the members of such Committee, affect the business of the
Corporation. The Board of Directors shall, by resolution adopted by a
majority of the Board, designate one or more of its members from time
to time to constitute members of the Industry Relations Committee.
ARTICLE IV
OFFICERS
4.1 Designation. The officers of the Corporation shall consist of a President,
Chief Operating Officer, Secretary, Treasurer, Controller and such
Executive, Senior or other Vice Presidents, Assistant Secretaries,
Assistant Treasurers, Assistant Controllers and other officers as may be
elected or appointed by the Board of Directors from time to time. Any
number of offices may be held by the same person.
4.2 President. The President shall be the Chief Executive Officer of the
Corporation and shall have general supervision and control of the business,
affairs and properties of the Corporation and its general officers, and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall have the power to appoint and remove all
subordinate officers, agents and employees, except those elected or
appointed by the Board of Directors, and shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a
seal, under the seal of the Corporation, except where required or permitted
by law to be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when so
authorized by these Bylaws, the Board of Directors or the President. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these Bylaws or by
the Board of Directors. In the absence or incapacity to act of the Chairman
of the Board, the President shall serve as acting Chairman of the Board,
and when so acting,
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shall have all the powers of and be subject to the restrictions of such
office. In the absence of incapacity to act of the President, the Board of
Directors shall appoint an officer to serve as acting President, and such
officer, when so acting, shall have all the powers of and be subject to the
restrictions of such office.
4.3 Chief Operating Officer. The Chief Operating Officer, if there is one,
shall have general charge and supervision of the day to day operations of
the Corporation (subject to the direction of the President and the Board of
Directors), and, in general, shall perform such other duties as are
incident to the office of a chief operating officer of a corporation,
including those duties customarily performed by persons occupying such
office, and shall perform such other duties as, from time to time, may be
assigned to him by the Board of Directors or the President.
4.4 Vice President. The Board of Directors may appoint such Vice Presidents as
may be recommended by the President or as they deem necessary or
appropriate. Vice Presidents may be designated as Senior Vice Presidents,
Executive Vice Presidents or some other designation as the Board of
Directors deems appropriate (each a "Vice President"). Each Vice President
shall perform such duties as the Board of Directors may from time to time
prescribe and have such other powers as the President may from time to time
prescribe.
4.5 Secretary. The Secretary shall attend the meetings of the Board of
Directors and all meetings of stockholders and record the proceeding
thereat in a book or books to be kept for that purpose; the Secretary shall
also perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be
unable or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there
be no Assistant Secretary, then either the Chairman of the Board or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the
Secretary or any Assistant Secretary, if there be one, shall have authority
to affix the same to any instrument requiring it and when so affixed, it
may be attested by the signature of the Secretary or by the signature of
any such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case
may be.
4.6 Treasurer. The Treasurer, if there is one, shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipt and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall
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render to the President and the Board of Directors, at its regular meeting,
or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
4.7 Controller. The Controller, if there is one, shall maintain records of all
assets, liabilities, and transactions of the Corporation and shall be
responsible for the design, installation and maintenance of accounting and
cost control systems and procedures for the Corporation and shall perform
such other duties and have such other powers as from time to time may be
assigned to him by the Board of Directors, the Audit Committee or the
President.
4.8 Assistant Secretaries. Except as may be otherwise provided in these
Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice-President, or the Secretary,
and in the absence of the Secretary or in the event of his disability or
refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the Secretary.
4.9 Assistant Treasurers. Assistant Treasurers, if there by any, shall perform
such duties and have such powers as from time to time may be assigned to
them by the Board of Directors, the President or the Treasurer, and in the
absence of the Treasurer or in the event of his disability or refusal to
act, shall perform the duties of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Treasurer. If required by the Board of Directors, an Assistant Treasurer
shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
4.10 Assistant Controllers. Except as may be otherwise provided in these
Bylaws, Assistant Controllers, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice-President, or the Controller,
and in the absence of the Controller or in the event of his disability or
refusal to act, shall perform the duties of the Controller, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the Controller.
4.11 Other Officers. Such other officers as to the Board of Directors may
choose shall perform such duties and have such powers, subordinate to those
powers specifically delegated to certain officer in these Bylaws, as from
time to time may be assigned to them by the Board
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of Directors. The President of the Corporation shall have the power to
choose such other officers and to prescribe their respective duties and
powers, subject to control by the Board of Directors.
4.12 Vacancies. Whenever any vacancies shall occur in any office by death,
resignation, increase in the number of offices of the Corporation, or
otherwise, the same shall be filled by the Board of Directors (or the
President, in accordance with Section 4.2 of these Bylaws, subject to
control by the Board of Directors), and the officer so appointed shall hold
office until such officer's successor is elected or appointed in accordance
with these Bylaws or until his earlier death, resignation or removal.
4.13 Removal. Any officer or agent of the Corporation may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
4.14 Action with Respect to Securities of Other Corporations. Unless otherwise
directed by the Board of Directors, the President, any Vice President and
the Treasurer of the Corporation shall each have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of security holders of or with respect to any action of security
holders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which
this Corporation may possess by reason of its ownership of securities in
such other corporation.
ARTICLE V
CAPITAL STOCK
5.1 Certificates for Shares. The certificates for shares of the capital stock
of the Corporation shall be in such form as may be approved by the Board of
Directors or may be uncertificated shares. In the case of certificated
shares, the Corporation shall deliver certificates representing shares to
which stockholders are entitled. Certificates representing such
certificated shares shall be signed by the President or a Vice President
and either the Secretary or an Assistant Secretary of the Corporation, and
may bear the seal of the Corporation or a facsimile thereof. The signatures
of such officers upon a certificate may be facsimiles. The stock record
books and the blank stock certificate books shall be kept by the Secretary
of the Corporation, or at the office of such transfer agent or transfer
agents as the Board of Directors may from time to time by resolution
determine. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with
the same effect as if such person were such officer at the date of its
issuance.
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5.2 Transfer of Shares. The shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives upon
surrender and cancellation of certificates for a like number of shares.
5.3 Ownership of Shares. The Corporation shall be entitled to treat the holder
of record of any share or shares of capital stock of the Corporation as the
holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the
part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
5.4 Regulations Regarding Certificates. The Board of Directors shall have the
power and authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
5.5 Lost or Destroyed Certificates. The Board of Directors may determine the
conditions upon which a new certificate of stock may be issued in place of
a certificate which is alleged to have been lost, stolen or destroyed; and
may, in its discretion, require the owner of such certificate or his legal
representative to give bond, with sufficient surety, to indemnify the
Corporation and each transfer agent and registrar against any and all
losses or claims that may arise by reason of the issue of a new certificate
in the place of the one so lost, stolen or destroyed.
ARTICLE VI
INDEMNIFICATION
6.1 General. The Corporation shall, to the fullest extent permitted by
applicable law in effect on the date of effectiveness of these Bylaws, and
to such greater extent as applicable law may thereafter permit, indemnify
and hold harmless an Indemnitee (as this and all other capitalized words
used in this Article VI not previously defined in these Bylaws are defined
in Section 6.9 hereof) from and against any and all judgments, penalties,
fines (including excise taxes), amounts paid in settlement and, subject to
Section 6.2, Expenses whatsoever arising out of any event or occurrence
related to the fact that Indemnitee is or was a director or officer of the
Corporation. The Corporation may, but shall not be required to, indemnify
and hold harmless an Indemnitee from and against any and all judgments,
penalties, fines (including excise taxes), amounts paid in settlement and,
subject to Section 6.2, Expenses whatsoever arising out of any event or
occurrence related to the fact that Indemnitee is or was an employee or
agent of the Corporation or is or was serving in another Corporate Status
(other than as an officer or director of the Corporation).
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6.2 Expenses. If Indemnitee is, by reason of his serving as a director,
officer, employee or agent of the Corporation, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Corporation
shall indemnify him against all Expenses actually and reasonably incurred
by him or on his behalf in connection therewith. If any such Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to any Matter in such Proceeding, the Corporation shall
indemnify such Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf relating to such Matter. The termination
of any Matter in such a Proceeding by dismissal, with or without prejudice,
shall be deemed to be a successful result as to such Matter. If Indemnitee
is, by reason of any Corporate Status other than his serving as a director,
officer, employee or agent of the Corporation, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Corporation
may, but shall not be required to, indemnify him against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith. To the extent that the Indemnitee is, by reason of his Corporate
Status, a witness in any Proceeding, the Corporation may, but shall not be
required to, indemnify him against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
6.3 Advances. In the event of any threatened or pending action, suit or
proceeding in which Indemnitee is a party or is involved and that may give
rise to a right of indemnification under this Article VI, following written
request to the Corporation by Indemnitee, the Corporation shall promptly
pay to Indemnitee amounts to cover expenses reasonably incurred by
Indemnitee in such proceeding in advance of its final disposition upon the
receipt by the Corporation of (i) a written undertaking executed by or on
behalf of Indemnitee providing that Indemnitee will repay the advance if it
shall ultimately be determined pursuant to the provisions of this Article
VI or by final judgment or other final adjudication under the provisions of
any applicable law that Indemnitee is not entitled to be indemnified by the
Corporation as provided in these Bylaws and (ii) satisfactory evidence as
to the amount of such expenses.
6.4 Request for Indemnification. To request indemnification, Indemnitee shall
submit to the Secretary of the Corporation a written claim or request. Such
written claim or request shall contain sufficient information to reasonably
inform the Corporation about the nature and extent of the indemnification
or advance sought by Indemnitee. The Secretary of the Corporation shall
promptly advise the Board of Directors of such request.
6.5 Nonexclusivity of Rights. The rights of indemnification and advancement of
Expenses as provided by this Article VI shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled to under
applicable law, the Certificate of Incorporation, these Bylaws, any
agreement, a vote of stockholders or a resolution of directors of the
Corporation, or otherwise. No amendment, alteration or repeal of this
Article VI or any provision hereof shall be effective as to any Indemnitee
for acts, events and circumstances that occurred, in whole or in part,
before such amendment, alteration or repeal. The provisions of this Article
VI shall continue as to an Indemnitee whose Corporate Status has ceased for
any reason and shall inure to the benefit of his heirs, executors and
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administrators. Neither the provisions of this Article VI nor those of any
agreement to which the Corporation is a party shall be deemed to preclude
the indemnification of any person who is not specified in this Article VI
as having the right to receive indemnification or is not a party to any
such agreement, but whom the Corporation has the power or obligation to
indemnify under the provisions of the DGCL.
6.6 Insurance and Subrogation. The Corporation shall not be liable under this
Article VI to make any payment of amounts otherwise indemnifiable hereunder
if, but only to the extent that, Indemnitee has otherwise actually received
such payment under any insurance policy, contract, agreement or otherwise.
In the event of any payment hereunder, the Corporation shall be subrogated
to the extent of such payment to all the rights of recovery of Indemnitee,
who shall execute all papers required and take all action reasonably
requested by the Corporation to secure such rights, including execution of
such documents as are necessary to enable the Corporation to bring suit to
enforce such rights.
6.7 Severability. If any provision or provisions of this Article VI shall be
held to be invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby; and, to the fullest extent
possible, the provisions of this Article VI shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal
or unenforceable.
6.8 Certain Actions Where Indemnification Is Not Provided. Notwithstanding any
other provision of this Article VI, no person shall be entitled to
indemnification or advancement of Expenses under this Article VI with
respect to any Proceeding, or any Matter therein, brought or made by such
person against the Corporation.
6.9 Definitions. For purposes of this Article VI:
(a) "Corporate Status" describes the status of a person who is or was a
director, officer, employee or agent of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the
written request of the Corporation. For purposes of this Agreement,
"serving at the written request of the Corporation" includes any
service by Indemnitee which imposes duties on, or involves services
by, Indemnitee with respect to any employee benefit plan or its
participants or beneficiaries.
(b) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in a Proceeding.
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(c) "Indemnitee" includes any person who is, or is threatened to be made,
a witness in or a party to any Proceeding as described in Section 6.1
or 6.2 hereof by reason of his Corporate Status.
(d) "Matter" is a claim, a material issue or a substantial request for
relief.
(e) "Proceeding" includes any action, suit, alternate dispute resolution
mechanism, hearing or any other proceeding, whether civil, criminal,
administrative, arbitrative, investigative or mediative, any appeal in
any such action, suit, alternate dispute resolution mechanism, hearing
or other proceeding and any inquiry or investigation that could lead
to any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding, except one (i) initiated by an Indemnitee
to enforce his rights under this Article VI or (ii) pending on or
before the date of this Agreement.
6.10 Notices. Promptly after receipt by Indemnitee of notice of the
commencement of any action, suit or proceeding, Indemnitee shall, if he
anticipates or contemplates making a claim for expenses or an advance
pursuant to the terms of this Article VI, notify the Corporation of the
commencement of such action, suit or proceeding; provided, however, that
any delay in so notifying the Corporation shall not constitute a waiver or
release by Indemnitee of rights hereunder and that any omission by
Indemnitee to so notify the Corporation shall not relieve the Corporation
from any liability that it may have to Indemnitee otherwise than under this
Article VI. Any communication required or permitted to the Corporation
shall be addressed to the Secretary of the Corporation and any such
communication to Indemnitee shall be addressed to Indemnitee's address as
shown on the Corporation's records unless he specifies otherwise and shall
be personally delivered or delivered by overnight mail delivery. Any such
notice shall be effective upon receipt.
6.11 Contractual Rights. The right to be indemnified or to the advancement or
reimbursement of Expenses (i) is a contract right based upon good and
valuable consideration, pursuant to which Indemnitee may sue as if these
provisions were set forth in a separate written contract between Indemnitee
and the Corporation, (ii) is and is intended to be retroactive and shall be
available as to events occurring prior to the adoption of these provisions
and (iii) shall continue after any rescission or restrictive modification
of such provisions as to events occurring prior thereto.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Bylaw Amendments. The Board of Directors shall have the power to adopt,
amend and repeal from time to time the Bylaws of the Corporation, subject
to the right of stockholders entitled to vote with respect thereto to amend
or repeal such Bylaws as adopted or amended by the
-19-
<PAGE>
Board of Directors. Bylaws of the Corporation may be adopted, amended or
repealed by the affirmative vote of the holders of at least two-thirds of
the combined voting power of the outstanding shares of all classes of stock
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class, at any annual meeting, or at any special
meeting if notice of the proposed amendment be contained in the notice of
said special meeting, or by the Board of Directors as specified in the
preceding sentence.
7.2 Books and Records. The Corporation shall keep books and records of account
and shall keep minutes of the proceedings of its stockholders, its Board of
Directors and each committee of its Board of Directors.
7.3 Notices; Waiver of Notice. Whenever any notice is required to be given to
any stockholder, director or committee member under the provisions of the
DGCL or under the Certificate of Incorporation, as amended, or these
Bylaws, said notice shall be deemed to be sufficient if given (i) by
telegraphic, facsimile, cable or wireless transmission or (ii) by deposit
of the same in the United States mail, with postage paid thereon, addressed
to the person entitled thereto at his address as it appears on the records
of the Corporation, and such notice shall be deemed to have been given on
the day of such transmission or mailing, as the case may be.
Whenever any notice is required to be given to any stockholder,
director or committee member under the provisions of the DGCL or under the
Certificate of Incorporation, as amended, or these Bylaws, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be equivalent to the giving
of such notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the stockholders, directors, or members
of a committee of directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation or these
Bylaws.
7.4 Resignations. Any director or officer may resign at any time. Such
resignations shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt
by the President or the Secretary of the Corporation. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
7.5 Seal. The seal of the Corporation shall be in such form as the Board of
Directors may adopt.
7.6 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day
of December of each year or as otherwise provided by a resolution adopted
by the Board of Directors.
-20-
<PAGE>
7.7 Facsimile Signatures. In addition to the provisions for the use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be
used whenever and as authorized by the Board of Directors.
7.8 Reliance upon Books, Reports and Records. Each director and each member of
any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon
the books of account or reports made to the Corporation by any of its
officers, or by an independent certified public accountant, or by an
appraiser selected with reasonable care by the Board of Directors or by any
such committee, or in relying in good faith upon other records of the
Corporation.
-21-
<PAGE>
EXHIBIT 99.1
T.A. BEACH CORPORATION
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
YEARS ENDED AUGUST 31, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of income 3
Statements of retained earnings 4
Statements of cash flows 5
Notes to financial statements 6 - 13
SUPPLEMENTARY INFORMATION
Income statement detail
General and administrative expenses 14
Completed construction contracts and contract summary 15
Uncompleted construction contracts 16
Uncompleted contract status report 17
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
T.A. Beach Corporation
Rockville, Maryland
We have audited the accompanying balance sheets of T.A. Beach Corporation
as of August 31, 1998 and 1997 and the related statements of income, retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of T.A. Beach Corporation as of
August 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Gaithersburg, Maryland
November 13, 1998
<PAGE>
T.A BEACH CORPORATION
BALANCE SHEETS
August 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,122,144 $ 518,284
Short-term investments 80,244 -
Contract receivables 6,191,684 2,900,336
Other receivables 7,341 2,852
Due from officer 683 43,384
Recoverable income taxes 14,993 4,128
Costs and estimated earnings in excess
of billings on uncompleted contracts 408,413 272,302
Inventories, at lower of cost (first-in,
first-out method) or market 26,525 26,525
Deferred income taxes, current portion 64,478 42,062
Prepaid expenses 15,556 15,397
----------- -----------
Total current assets 8,932,061 3,825,270
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Office furniture 78,058 78,058
Automotive equipment 492,876 297,624
Office equipment 287,336 285,236
Tools and equipment 136,299 133,821
Leasehold improvements 158,945 156,367
----------- -----------
1,153,514 951,106
Accumulated depreciation and amortization (778,001) (725,243)
----------- -----------
375,513 225,863
----------- -----------
OTHER ASSETS
Cash surrender value of officer's life insurance 119,749 104,268
Deposits 13,806 13,806
----------- -----------
133,555 118,074
----------- -----------
Total assets $ 9,441,129 $ 4,169,207
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Liability under capital leases, current portion $ 40,700 $ 33,208
Long-term debt, current portion 306,733 -
Accounts payable 4,749,472 1,561,326
Accrued liabilities 710,872 312,529
Billings in excess of costs and estimated earnings
on uncompleted contracts 2,319,373 752,375
Estimated loss on uncompleted contracts 1,003 7,309
---------- ----------
Total current liabilities 8,128,153 2,666,747
LONG-TERM DEBT, less current maturities 154,909 365,000
DEFERRED INCOME TAXES, long-term portion 10,661 7,829
LIABILITY UNDER CAPITAL LEASES, noncurrent portion 71,838 91,514
---------- ----------
Total liabilities 8,365,561 3,131,090
---------- ----------
STOCKHOLDERS'EQUITY
Common stock no par value; authorized, issued and
outstanding 500 shares 10,000 10,000
Retained earnings 1,065,568 1,028,117
---------- ----------
Total stockholders' equity 1,075,568 1,038,117
---------- ----------
Total liabilities and stockholders' equity $9,441,129 $4,169,207
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
T.A. BEACH CORPORATION
STATEMENTS OF INCOME
Years Ended August 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Earned revenue $20,559,611 $16,623,977
Cost of earned revenue 18,613,537 15,209,863
----------- -----------
Gross profit 1,946,074 1,414,114
General and administrative expenses 1,880,398 1,337,121
----------- -----------
Operating income 65,676 76,993
Other income (expense), net, including interest
expense 1998 $59,550; 1997 $29,943 (27,406) 35,664
----------- -----------
Income before taxes on income 38,270 112,657
Income tax expense 819 38,958
----------- -----------
Net income $ 37,451 $ 73,699
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part on these statements.
<PAGE>
T.A. BEACH CORPORATION
STATEMENTS OF RETAINED EARNINGS
YEARS ENDED AUGUST 31, 1998 AND 1997
1998 1997
Balance, beginning of year $ 1,028,117 $ 954,418
Net income 37,451 73,699
----------- -----------
Balance, end of year $ 1,065,568 $ 1,028,117
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
T.A. BEACH CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended August 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 37,451 $ 73,699
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 103,771 56,862
Deferred income taxes (19,584) (4,040)
(Gain) loss on sale of fixed assets 1,496 (99)
(Increase) decrease in:
Contract receivables (3,291,348) 124,845
Other receivables (4,489) 65,237
Due from officer 42,701 (23,590)
Recoverable income taxes (10,865) 6,651
Inventories - 3,475
Prepaid expenses (159) (15,397)
Costs and estimated earnings in excess of
billings on uncompleted contracts (136,111) (234,862)
Cash surrender value of officer's life insurance (15,481) (15,784)
Increase (decrease) in:
Accounts payable 3,188,146 (1,360,831)
Retentions payable - (391,157)
Accrued liabilities 398,343 124,150
Estimated loss on uncompleted contracts (6,306) 4,358
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,566,998 (732,747)
----------- -----------
Net cash provided by (used in) operating activities 1,854,563 (2,319,230)
----------- -----------
Cash flows from investing activities:
Capital expenditures (7,160) (23,410)
Proceeds on sale of fixed assets 500 100
----------- -----------
Net cash used in investing activities (6,660) (23,310)
----------- -----------
Cash flows from financing activities:
Principal payments on capital lease obligations (38,612) (24,121)
Principle payments on notes payable (125,186) -
Purchase of short-term investments (80,245) -
----------- -----------
Net cash used in financing activities (244,043) (24,121)
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,603,860 (2,366,661)
Cash and cash equivalents, beginning of year 518,284 2,884,945
----------- -----------
Cash and cash equivalents, end of year $ 2,122,144 $ 518,284
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The accounting policies relative to the carrying value of property and
equipment and inventories are indicated in the captions on the balance
sheets.
Other significant accounting policies are as follows:
Nature of Operations
T.A. Beach Corporation is an electrical contractor with
substantially all of its revenue derived from customers located
in the Metropolitan Washington D.C. area.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue and Cost Recognition
The Company recognizes revenues from construction contracts on
the percentage-of-completion method, measured by the percentage
of cost incurred to date to estimated total cost for each
contract. That method is used because management considers total
cost to be the best available measure of progress on the
contracts. Because of the inherent uncertainties in estimating
costs, it is at least reasonably possible that the estimates used
will change within the near term. Revenue for time and material
contracts is recognized in the period the work is performed.
Contract costs include all direct material and labor costs and
those indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs, and depreciation.
General and administrative costs are charged to expense as
incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and
estimated profitability may result in revisions to costs and
income, which are recognized in the period in which the revisions
are determined. Changes in estimated job profitability resulting
from job performance, job conditions, contract penalty
provisions, claims, change orders, and settlements, are accounted
for as changes in estimates in the current period.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (continued)
Depreciation and Amortization
Property and equipment are depreciated over their estimated
useful lives of three to ten years using straight-line and
accelerated methods. Leasehold improvements are amortized over
their estimated useful lives of ten to thirty-nine years using
the straight-line method.
Income Taxes
Deferred income taxes have been provided on the differences
between the carrying values of contract receivables, accrued
liabilities, estimated loss on uncompleted contracts and property
and equipment on the financial statements and the income tax
returns.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less at the date of acquisition to be
cash equivalents.
Operating Cycle
The length of the Company's contracts varies, but is typically
less than three years. Assets and liabilities related to long-
term contracts are included in current assets and current
liabilities in the accompanying balance sheets as they will be
liquidated in the normal course of contract completion.
Leases
Leases which meet certain criteria are classified as capital
leases. Assets and liabilities under capital leases are recorded
at the lower of the present value of the minimum lease payments
or the fair value of the asset. These assets are amortized over
their estimated useful lives. Interest expense relating to the
lease liabilities is recorded to effect constant rates of
interest over the terms of leases.
Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred. Advertising expense was
$3,101 and $1,815 for the years ended December 31, 1998 and 1997,
respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 2. Short-term Investments
Short-term investments consist of tax-free mutual funds purchased
during the year ended August 31, 1998. No unrealized gain or loss has
been recorded as of August 31, 1998 because the cost of the
investments approximates market value.
Note 3. Contract Receivables
Contract receivables at August 31, 1998 and 1997 are as follows:
1998 1997
Completed contracts $ 881,548 $ 451,650
Uncompleted contracts 3,559,421 1,721,432
Retentions 1,820,715 759,254
---------- ----------
6,261,684 2,932,336
Allowance for doubtful accounts (70,000) (32,000)
---------- ----------
$6,191,684 $2,900,336
Contract receivables at August 31, 1998 and 1997 includes $962,593 and
$123,232 billed on unapproved change orders, respectively.
Note 4. Costs and Estimated Earnings on Uncompleted Contracts
The following is a summary of costs and estimated earnings on
uncompleted contracts at August 31, 1998 and 1997:
1998 1997
Costs incurred on uncompleted contracts $ 19,101,867 $ 18,966,327
Earned profits 1,627,079 1,326,335
------------ ------------
20,728,946 20,292,662
Billings to date (22,640,909) (20,780,044)
------------ ------------
$ (1,911,963) $ (487,382)
============ ============
The above is included in the accompanying balance sheets under the
following captions:
1998 1997
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 408,413 $ 272,302
Billings in excess of costs and
estimated earnings on uncompleted
contracts (2,319,373) (752,375)
Estimated loss on uncompleted contracts (1,003) (7,309)
------------ ------------
$ (1,911,963) $ (487,382)
============ ============
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 5. Long-Term Debt
Long-term debt at August 31, 1998 and 1997 consists of the following:
1998 1997
Note payable to principal stockholder,
secured by all assets of the Company
and subordinated to bonding company,
interest at 6%, interest only payments
of $3,750 per quarter, entire balance
paid on November 13, 1998 in connection
with sale of Company. See Note 14. $ 250,000 $250,000
Note payable to principal stockholder,
unsecured, subordinated to bonding
company, interest at 6%, entire balance
paid on August 31, 1998 - 115,000
Secured automobile loans, aggregate
monthly payments of $5,753,
including interest at rates ranging
from .90% to 9.50% 211,642 -
--------- --------
461,642 365,000
Current maturities (306,733) -
--------- --------
$ 154,909 $365,000
========= ========
Principal payments required under long-term debt obligations are as
follows:
1999 $ 306,733
2000 61,333
2001 58,563
2002 28,187
Later 6,826
--------
$ 461,642
========
Note 6. Operating Leases and Other Related Party Transactions
The Company leases office space owned by its principal stockholder
under an agreement expiring August 1, 2002. The Company paid rent to
its stockholder in the amount of $165,672 for both 1998 and 1997.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 6. Operating Leases and Other Related Party Transactions (continued)
The following is a schedule by years of future minimum lease payments:
Year Ending August 31,
1999 $165,672
2000 165,672
2001 165,672
2002 151,866
--------
$648,882
========
As described in Note 5, the Company owes the principal stockholder
$250,000. The Company paid interest to the principal stockholder of
$21,900 during the years ended August 31, 1998 and 1997.
The principal stockholder guarantees bank and surety lines of credit
for the Company.
Note 7. Line of Credit
The Company had an approved unsecured line of credit for $750,000 with
Crestar Bank which was closed November 12, 1998. The line of credit
was payable upon demand, bore an interest rate of prime, and was fully
guaranteed by the principal stockholder. The Company had no drawings
on the line at August 31, 1998 and 1997.
Note 8. Income Tax Matters
The components of the income tax expense for the years ended August
31, 1998 and 1997 are as follows:
1998 1997
Current:
Federal $ 15,130 $34,567
State 5,273 8,431
Deferred:
Federal (16,467) (3,537)
State (3,117) (503)
-------- -------
$ 819 $38,958
======== =======
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 9. Pension Plan
The Company maintains a Simplified Employee Pension Plan under Section
408(k) of the Internal Revenue Code. The plan covers all non-union
employees who have attained age 21 and have completed 3 years of
service. Participants are allowed voluntary tax deferred salary
reductions, and Company contributions are at the discretion of the
Board of Directors. The Company did not make any contributions to the
plan for the years ended August 31, 1998 and 1997.
Note 10. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and contract receivables. The Company places its
temporary cash investments with financial institutions. The balances
are insured by the Federal Deposit Insurance Corporation up to
$100,000 at each institution. At August 31, 1998 and 1997 the
Company's uninsured balances total $2,519,202 and $576,602,
respectively. Concentrations of credit risk with respect to contract
receivables result from the fact that the majority of the Company's
customers are located in the Washington D.C. Metropolitan area and are
construction contractors.
Note 11. Supplemental Disclosures of Cash Flows Information
1998 1997
Cash paid during the year for:
Interest $59,550 $29,943
------- -------
Income Taxes $37,980 $37,349
------- -------
The Company acquired fixed assets of $255,418 and $172,253 during the
years ended August 31, 1998 and 1997. In conjunction with these
acquisitions, long-term debt and capital lease obligations were
incurred as follows:
1998 1997
Fixed assets acquired $255,418 $172,253
Cash paid (7,160) (23,410)
-------- --------
Long-term debt and capital
lease obligations incurred $248,258 $148,843
======== ========
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 12. Capital Lease Obligations
Capitalized leased property has been included in the balance sheets
under the following categories at August 31, 1998 and 1997:
1998 1997
Automotive equipment $146,201 $119,773
Leasehold improvements 29,070 29,070
Accumulated depreciation and amortization (47,349) (17,404)
-------- --------
$127,922 $131,439
======== ========
The following is a schedule by year of future minimum lease payments
under capital leases together with the present value of net minimum
lease payments as of August 31, 1998:
Year ending August 31,
1999 $ 50,582
2000 48,564
2001 26,458
2002 3,898
--------
Total minimum lease payments 129,502
Amount representing interest (16,964)
--------
Present value of net minimum lease payments 112,538
Current portion (40,700)
--------
$ 71,838
========
Note 13. Backlog
The following schedule shows a reconciliation of backlog representing
the amount of revenue the Company expects to realize from work to be
performed on uncompleted contracts at August 31, 1998 and from
contractual agreements on which work has not yet begun.
Balance, beginning of year $ 8,377,538
Contract adjustments 3,987,886
New contracts, year ended August 31, 1998 28,155,141
------------
40,520,565
Contract revenue earned, year ended
August 31, 1998 (20,559,611)
------------
Balance, end of year $ 19,960,954
============
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 14. Subsequent Event
On November 13, 1998, the Company entered into a definitive agreement
with American Residential Services, Inc. pursuant to which all
outstanding shares of the Company's common stock were exchanged for
cash and shares of American Residential Services, Inc. stock. As part
of this agreement, the majority shareholder as of August 31, 1998
purchased a life insurance policy from the Company. The policy had a
cash surrender value of $119,749 and $104,268 as of August 31, 1998,
and 1997, respectively.
<PAGE>
SUPPLEMENTARY INFORMATION
<PAGE>
INCOME STATEMENT DETAIL
<TABLE>
<CAPTION>
Years Ended August 31,
GENERAL AND ADMINISTRATIVE EXPENSES 1998 1997
<S> <C> <C>
Union expense $ 1,046,206 $ 873,343
Office salaries 810,056 742,881
Officers' salaries 760,757 330,757
Taxes, payroll 585,038 479,928
Insurance 310,274 253,532
Rent 165,672 165,672
Auto expense 135,278 151,359
Depreciation and amortization 103,771 56,862
Bad debts 81,238 4,361
Accounting and legal 59,607 24,181
Office expense 49,343 45,799
Tools and hardware 45,711 40,639
Telephone 37,657 27,955
Warranty expense 22,000 -
Utilities 17,209 18,198
Educational expense 12,618 6,287
Dues and subscriptions 9,782 11,056
Travel 8,984 5,898
Licenses 7,520 7,131
Tool and equipment repair 6,877 8,969
Taxes, other 6,616 3,968
Penalties and fines 5,971 1,733
Paging service 3,606 3,370
Entertainment 3,491 6,572
Officer's life insurance 3,480 2,157
Postage 3,300 2,659
Advertising 3,101 1,815
Contributions 2,570 4,720
Bank charges 546 303
Miscellaneous 139 864
Overhead applied to cost of earned revenue (2,428,020) (1,945,848)
-------------- ---------------
$ 1,880,398 $ 1,337,121
============== ===============
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
<PAGE>
INCOME STATEMENT DETAIL
August 31, 1998
<TABLE>
<CAPTION>
COMPLETED CONSTRUCTION CONTRACTS
Total Year Ended August 31, 1998
------------------------------------------- ----------------------------------------
Cost of Cost of
Earned Earned Profit Earned Earned Profit
Job # Job Description Revenue Revenue (Loss) Revenue Revenue (Loss)
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1915 Census Bureau $ 7,774,274 $ 7,215,405 $ 558,869 $ 18,666 $ 39,980 $ (21,314)
1916 UMCP - Campus Rec. Center 4,274,341 4,077,286 197,055 523,621 505,087 18,534
1931 Mt. Clare Kitchen 47,047 38,272 8,775 47,047 38,272 8,775
1933 UM/Conference Rooms 89,056 61,094 27,962 89,056 61,094 27,962
3679 Mt. Vernon Hospital 1,776,196 1,606,251 169,945 156,194 148,527 7,667
3689 ARTCC 844,356 694,399 149,957 98,169 80,952 17,217
3693 Merrifield Post Office 107,974 83,502 24,472 107,974 83,502 24,472
3700 Freedom Forum - Classroom 93,879 110,832 (16,953) 18,828 15,782 3,046
3701 Freedom Forum - Penthouse 46,681 64,482 (17,801) 16,291 21,092 (4,801)
3702 Crystal Mall 4 - Lobby 35,000 34,965 35 3,365 6,041 (2,676)
3703 Crystal House One 112,193 97,104 15,089 25,595 17,042 8,553
3707 Mall 3, 5th floor 95,456 72,803 22,653 87,423 65,622 21,801
3708 PTO - CRY OB#2 55,549 45,003 10,546 53,762 43,380 10,382
3709 Mall 2, 1st floor 38,328 27,736 10,592 36,756 26,381 10,375
3710 Global Network 37,200 30,018 7,182 37,200 30,018 7,182
3711 Gateway 3 34,129 19,858 14,271 34,129 19,858 14,271
3715 Mall 3, Gateway 3 62,500 37,097 25,403 62,500 37,097 25,403
3716 CIO Renov Phase 2 32,235 25,051 7,184 32,235 25,051 7,184
3720 Cry Mall 2 42,668 35,262 7,406 42,668 35,262 7,406
3724 Patent Corp 34,420 31,657 2,763 34,420 31,657 2,763
7285 10 G Str 1,229,107 1,176,666 52,441 12,155 9,264 2,891
7288 1156 15th Street 424,721 452,243 (27,522) 25,132 23,654 1,478
7292 Madison Hotel & Office Bldg 969,440 947,972 21,468 111,897 126,650 (14,753)
7308 Medpac 51,814 47,477 4,337 51,814 47,477 4,337
7311 Winstar Antennas 25,533 20,830 4,703 25,533 20,830 4,703
7314 NDI Expansion 28,097 26,641 1,456 28,097 26,641 1,456
7319 John Shefferman, DDS 29,491 31,931 (2,440) 29,491 31,931 (2,440)
7321 DOS - Task Force 42,889 32,897 9,992 42,889 32,897 9,992
Miscellaneous small jobs 439,323 331,373 107,950 414,774 309,707 105,067
------------ ------------ ----------- ----------- ----------- ----------
$18,873,897 $17,476,107 $1,397,790 $ 2,267,681 $ 1,960,748 $ 306,933
============ ============ =========== =========== =========== ==========
CONTRACT SUMMARY
Completed Contracts $18,873,897 $17,476,107 $1,397,790 $ 2,267,681 $ 1,960,748 $ 306,933
Uncompleted Contracts 20,728,946 19,101,867 1,627,079 17,042,500 15,650,898 1,391,602
Service 1,249,430 1,001,891 247,539 1,249,430 1,001,891 247,539
------------ ------------ ----------- ----------- ----------- ----------
$40,852,273 $37,579,865 $3,272,408 $20,559,611 $18,613,537 $1,946,074
============ ============ =========== =========== =========== ==========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
15
<PAGE>
<TABLE>
<CAPTION>
INCOME STATEMENT DETAIL
August 31, 1998
UNCOMPLETED CONSTRUCTION CONTRACTS
Total Year Ended August 31, 1998
--------------------------------------------- --------------------------------------------
Cost of Cost of
Earned Earned Profit Earned Earned Profit
Job # Job Description Revenue Revenue (Loss) Revenue Revenue (Loss)
------------- ------------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1928 NIST $ 1,318,750 $ 1,284,463 $ 34,287 $ 1,318,750 $ 1,284,462 $ 34,288
1929 Parc Somerset 2,380,845 2,222,824 158,021 2,380,845 2,222,824 158,021
1939 Newlands 241,772 226,502 15,270 241,772 226,502 15,270
1941 NIH, Bldg 35 13,433 10,611 2,822 13,433 10,611 2,822
1943 NIH, Bldg 37, Lab 2A01, 03, 05 8,913 7,738 1,175 8,914 7,738 1,176
1944 NIH, Bldg 37, Stor freezer 1,139 946 193 1,139 946 193
1945 NIH, Bldg 37, Lab 2B13 6,915 5,074 1,841 6,915 5,073 1,842
1946 EDS 6,675 4,858 1,817 6,676 4,859 1,817
3688 Mt. Vernon High School 3,945,510 3,945,510 - 1,272,446 1,358,162 (85,716)
3704 Kent Street 2,841,011 2,078,788 762,223 2,335,772 1,703,886 631,886
3712 Tysons II, Bldg E 1,682,215 1,590,039 92,176 1,682,215 1,590,039 92,176
3714 DFAS 234,125 197,543 36,582 234,125 197,543 36,582
3721 Cry Mall 3, Lobby 22,559 19,908 2,651 22,558 19,907 2,651
3726 Cry Mall 2, EPA 25,787 21,567 4,220 25,787 21,567 4,220
3727 EPA, Mall 2 19,233 16,467 2,766 19,233 16,467 2,766
3728 PTO/Cry Pk 1, 8th floor 33,354 29,628 3,726 33,353 29,627 3,726
7290 Hamilton Square 1,068,097 1,030,481 37,616 986,673 952,054 34,619
7293 555 12th Street, NW 2,145,678 2,180,678 (35,000) 1,833,939 1,880,982 (47,043)
7296 Smithsonian - Discovery Center 1,073,980 1,001,486 72,494 958,999 890,893 68,106
7313 Union Square 3,574,686 3,156,678 418,008 3,574,686 3,156,678 418,008
7322 1717 Mass Ave 5,323 4,758 565 5,323 4,759 564
7323 Orioles Retail Store 36,003 29,307 6,696 36,003 29,307 6,696
7324 Charolie McBride 11,792 10,542 1,250 11,793 10,543 1,250
7326 Eagle Legal Services 31,151 25,471 5,680 31,151 25,469 5,682
------------- ------------- ------------ ------------- ------------- -----------
$ 20,728,946 $ 19,101,867 $ 1,627,079 $ 17,042,500 $ 15,650,898 $ 1,391,602
============= ============= ============ ============= ============= ===========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
<PAGE>
UNCOMPLETED CONTRACT STATUS REPORT
August 31, 1998
<TABLE>
<CAPTION>
Billings Revised
Revised To Date Estimated Estimated Estimated
Contract Including Costs Costs To Total Profit
Job# Job Description Price Retention To Date Complete Costs (Loss)
<S> <C> <C> <C> <C> <C> <C> <C>
1928 NIST $10,000,000 $ 1,440,838 $ 1,284,463 $ 8,455,537 $ 9,740,000 $ 260,000
1929 Parc Somerset 4,520,000 2,364,087 2,222,824 1,997,176 4,220,000 300,000
1939 Newlands 1,900,000 230,400 226,502 1,553,498 1,780,000 120,000
1941 NIH, Bldg 35 23,800 8,449 10,611 8,189 18,800 5,000
1943 NIH, Bldg 37, Lab 2A01, 03, 05 9,100 8,465 7,738 162 7,900 1,200
1944 NIH, Bldg 37, Stor freezer 11,200 - 946 8,354 9,300 1,900
1945 NIH, Bldg 37, Lab 2B13 33,800 - 5,074 19,726 24,800 9,000
1946 EDS 33,800 9,600 4,858 19,742 24,600 9,200
3688 Mt. Vernon High School 4,210,000 3,762,477 3,945,510 264,490 4,210,000 -
3704 Kent Street 4,100,000 3,751,307 2,078,788 921,212 3,000,000 1,100,000
3712 Tysons II, Bldg E 2,555,000 1,824,597 1,590,039 824,961 2,415,000 140,000
3714 DFAS 320,000 288,427 197,543 72,457 270,000 50,000
3721 Cry Mall 3, Lobby 43,400 28,202 19,908 18,392 38,300 5,100
3726 Cry Mall 2, EPA 27,500 27,487 21,567 1,433 23,000 4,500
3727 EPA , Mall 2 29,900 25,580 16,467 9,133 25,600 4,300
3728 PTO/Cry Pk 1, 8th floor 36,700 33,031 29,628 2,972 32,600 4,100
7290 Hamilton Square 2,300,000 922,734 1,030,481 1,188,519 2,219,000 81,000
7293 555 12th Street, NW 2,210,000 2,167,345 2,180,678 64,322 2,245,000 (35,000)
7296 Smithsonian - Discovery Center 2,000,000 1,531,987 1,001,486 863,514 1,865,000 135,000
7313 Union Square 6,200,000 4,165,860 3,156,678 2,318,322 5,475,000 725,000
7322 1717 Mass Ave 6,600 5,935 4,758 1,142 5,900 700
7323 Orioles Retail Store 37,100 29,076 29,307 893 30,200 6,900
7324 Charlie McBride 15,100 15,025 10,542 2,958 13,500 1,600
7325 City First Bank of DC 19,200 - - 16,600 16,600 2,600
7326 Eagle Legal Services 47,700 - 25,471 13,529 39,000 8,700
------------ ----------- ----------- ----------- ----------- ----------
$40,689,900 $22,640,909 $19,101,867 $18,647,233 $37,749,100 $2,940,800
============ =========== =========== =========== =========== ==========
<CAPTION>
Costs & Billings
Estimated In Excess Estimated
Earned Recorded Earnings Of Costs Loss On
% Of Profit Profit In Excess & Estimated Uncompleted
Job# Job Description Completion (Loss) (Loss) Of Billings Earnings Contracts
<S> <C> <C> <C> <C> <C> <C> <C>
1928 NIST 13.19% $ 34,287 $ 156,375 $ - $ 122,088 $ -
1929 Parc Somerset 52.67% 158,021 141,263 16,758 - -
1939 Newlands 12.72% 15,270 3,898 11,372 - -
1941 NIH, Bldg 35 56.44% 2,822 (2,162) 4,984 - -
1943 NIH, Bldg 37, Lab 2A01, 03, 05 97.95% 1,175 727 448 - -
1944 NIH, Bldg 37, Stor freezer 10.17% 193 (946) 1,139 - -
1945 NIH, Bldg 37, Lab 2B13 20.46% 1,841 (5,074) 6,915 - -
1946 EDS 19.75% 1,817 4,742 - 2,925 -
3688 Mt. Vernon High School 93.72% - (183,033) 183,033 - -
3704 Kent Street 69.29% 762,223 1,672,519 - 910,296 -
3712 Tysons II, Bldg E 65.84% 92,176 234,558 - 142,382 -
3714 DFAS 73.16% 36,582 90,884 - 54,302 -
3721 Cry Mall 3, Lobby 51.98% 2,651 8,294 - 5,643 -
3726 Cry Mall 2, EPA 93.77% 4,220 5,920 - 1,700 -
3727 EPA , Mall 2 64.32% 2,766 9,113 - 6,347 -
3728 PTO/Cry Pk 1, 8th floor 90.88% 3,726 3,403 323 - -
7290 Hamilton Square 46.44% 37,616 (107,747) 145,363 - -
7293 555 12th Street, NW 97.13% (35,000) (13,333) - 20,664 1,003
7296 Smithsonian - Discovery Center 53.70% 72,494 530,501 - 458,007 -
7313 Union Square 57.66% 418,008 1,009,182 - 591,174 -
7322 1717 Mass Ave 80.65% 565 1,177 - 612 -
7323 Orioles Retail Store 97.04% 6,696 (231) 6,927 - -
7324 Charlie McBride 78.10% 1,250 4,483 - 3,233 -
7325 City First Bank of DC 0.00% - - - - -
7326 Eagle Legal Services 65.31% 5,680 (25,471) 31,151 - -
---------- ---------- --------- ---------- ---------
$1,627,079 $3,539,042 $408,413 $2,319,373 $1,003
========== ========== ======== ========== =========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
<PAGE>
[LETTERHEAD OF LANIGAN, RYAN, MALCOLM & DOYLE, P.C. APPEARS HERE]
Kevin M. Doyle, CPA
Francis J. Lanigan, Jr., CPA
David R. Malcolm, CPA
Ralph R. Polachek, Esq.
Wm. Kelly Ryan, CPA
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in all registration statements of American Residential Services,
Inc. of our report dated November 13, 1998 included in American Residential
Services, Inc.'s Form 8-K/A filed November 14, 1998 (to be amended by the
enclosed financial statements), and to all references to our Firm included in
such Registration Statements.
LANIGAN, RYAN, MALCOLM & DOYLE, P.C.
By: /s/ Wm. Kelly Ryan CPA
---------------------------------
Wm. Kelly Ryan, CPA
February 4, 1999
<PAGE>
Exhibit 99.2
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED SEPTEMBER 30, 1998 BALANCE SHEETS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS ARS AND T.A. SUBSEQUENT AS
SUBSIDIARIES BEACH ACQUISITIONS ADJUSTMENTS ADJUSTED
------------ ------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,929 $2,202 $ 283 -- $ 5,414
Accounts receivable
Trade, net of allowance 67,366 6,192 4,988 (50) 78,496
Other 7,038 23 1 (23) 7,039
Costs and estimated earnings
in excess of billings on
uncompleted contracts 8,602 408 357 -- 9,367
Inventories 16,001 27 223 -- 16,251
Prepaid expenses and other
current assets 7,504 80 26 -- 7,610
-------- ------ ------ ------- --------
Total current assets $109,440 8,932 5,878 (73) $124,177
PROPERTY AND EQUIPMENT, net 33,237 376 275 -- 33,888
GOODWILL, net 224,480 -- -- 7,777 (a) 232,257
OTHER NONCURRENT ASSETS 8,214 133 17 -- 8,364
-------- ------ ------ ------- --------
Total assets $375,571 $9,441 $6,170 $ 7,704 $398,686
======== ====== ====== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 953 $ 348 $ 120 -- $ 1,421
Accounts payable and accrued
liabilities 59,621 5,460 2,392 -- 67,473
Unearned revenue on service and
warranty contracts 6,816 -- -- -- 6,816
Billings in excess of costs and
estimated earnings on uncompleted
contracts 5,059 2,320 239 (23) 7,595
-------- ------ ------ ------- --------
Total current liabilities 72,449 8,128 2,751 (23) 83,305
LONG-TERM DEBT, net of current
maturities 158,525 226 135 8,049 (a) 166,935
CONVERTIBLE SUBORDINATED NOTES -- -- -- 4,000 (a) 4,000
UNEARNED REVENUE ON EXTENDED
WARRANTY CONTRACTS 376 -- -- -- 376
COMMITMENTS AND CONTINGENCIES
DEFERRED INCOME TAXES -- 11 38 -- 49
STOCKHOLDERS' EQUITY:
Common Stock 16 10 13 (23) 16
Additional paid-in capital 158,362 -- -- -- 158,362
Retained earnings (deficit) (14,357) 1,066 3,233 (4,299) (14,357)
-------- ------ ------ ------- --------
Total stockholders' equity 144,021 1,076 3,246 (4,322) 144,021
-------- ------ ------ ------- --------
Total liabilities and
stockholders' equity $375,371 $9,441 $6,170 $ 7,704 $398,686
======== ====== ====== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
Exhibit 99.3
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
ARS AND T.A. SUBSEQUENT
SUBSIDIARIES BEACH ACQUISITIONS ADJUSTMENTS AS ADJUSTED
------------ --------- ------------ ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES $382,518 $16,624 $152,189 $ __ $551,331
COST OF SERVICES 276,225 15,210 102,451 __ 393,886
-------- ------- -------- --------- --------
Gross profit 106,293 1,414 49,738 __ 157,445
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 81,405 1,337 40,051 (4,277)(a) 118,516
(b)
SPECIAL CHARGE AND OTHER COSTS 24,194 __ __ __ (c) 24,194
-------- ------- -------- --------- --------
INCOME FROM OPERATIONS 694 77 9,687 4,277 14,735
OTHER INCOME (EXPENSE):
Interest expense (7,469) (30) (472) (2,357)(d) (10,328)
Interest income 227 __ 69 __ 296
Other 846 66 113 __ 1,025
-------- ------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME
TAXES (5,702) 113 9,397 1,920 (e) 5,728
PROVISION (BENEFIT) FOR INCOME
TAXES (1,001) 39 33 3,256 2,327
-------- ------- -------- --------- --------
NET INCOME (LOSS) $ (4,701) 74 9,364 (1,336) 3,401
======== ======= ======== ========= ========
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 14,330 1,526 (f) 15,856
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE $ (0.33) 0.22
</TABLE>
See accompanying notes to unaudited pro formas combined financial statements.
<PAGE>
EXHIBIT 99.4
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
ARS AND T.A. SUBSEQUENT
SUBSIDIARIES BEACH ACQUISITIONS ADJUSTMENTS AS ADJUSTED
------------ ------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $370,380 $15,420 $38,567 -- $424,367
COST OF SERVICES 278,345 13,961 27,738 -- 320,044
-------- ------- ------- ------- --------
Gross profit 92,035 1,459 10,829 -- 104,323
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 73,091 1,410 7,130 (475) (a) 81,156
(b)
SPECIAL CHARGE AND OTHER COSTS 1,270 -- -- -- (c) 1,270
-------- ------- ------- ------- --------
INCOME FROM OPERATIONS 17,674 49 3,699 475 21,897
OTHER INCOME (EXPENSE):
Interest expense (9,443) (45) (99) (1,078) (d) (10,665)
Interest income 201 -- 4 -- 205
Other, net 714 24 6 -- 744
-------- ------- ------- ------- --------
INCOME BEFORE INCOME TAXES 9,146 28 3,610 (603) 12,181
PROVISION FOR INCOME TAXES 4,768 1 -- 880 (e) 5,649
-------- ------- ------- ------- --------
NET INCOME BEFORE
EXTRAORDINARY ITEM $ 4,378 27 3,610 (1,483) 6,532
-------- ------- ------- ------- --------
EXTRAORDINARY ITEM -- LOSS ON REFINANCING
OF REVOLVING CREDIT FACILITY, NET OF
INCOME TAX BENEFIT (300) -- -- -- (300)
-------- ------- ------- ------- --------
NET INCOME 4,078 27 3,610 (1,483) 6,232
======== ======= ======= ======= ========
BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING 15,635 255 (f) 15,890
======== ======= ========
BASIC EARNINGS PER SHARE -- BEFORE
EXTRAORDINARY ITEM 0.28 0.41
EXTRAORDINARY ITEM (0.02) (0.02)
-------- --------
BASIC EARNINGS PER SHARE 0.26 0.39
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 15,683 284 (f) 15,967
-------- ------- --------
DILUTED EARNINGS PER SHARE -- BEFORE
EXTRAORDINARY ITEM 0.28 0.41
EXTRAORDINARY ITEM (0.02) (.02)
-------- --------
DILUTED EARNINGS SHARE 0.26 0.39
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
EXHIBIT 99.5
AMERICAN RESIDENTIAL SERVICES, INC.
Notes to Pro Forma Financial Statements
NOTE 1 BASIS OF PRESENTATION
The unaudited pro forma combined balance sheet presented herein consists of
the unaudited historical consolidated balance sheet of American Residential
Services, Inc. ("ARS" and, collectively with its subsidiaries, the "Company") as
of September 30, 1998 as set forth in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998 (the "Form 10-Q"), combined with
(i) the unaudited combined balance sheet of T.A. Beach Corporation ("T.A.
Beach") as of September 30, 1998 presented herein and (ii) the unaudited
combined balance sheet of four (4) additional businesses acquired by the Company
during the period from September 30, 1998 to November 13, 1998. For purposes
of the unaudited pro forma combined balance sheet as of September 30, 1998
presented herein the term "Subsequent Acquisitions" includes those acquisitions
described in clause (ii) of the preceding sentence.
The unaudited pro forma combined statement of operations for the year ended
December 31, 1997 presented herein consists of the audited historical
consolidated statement of operations of the Company as set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
combined with (i) the unaudited combined results of operations from January 1,
1997 to the respective effective acquisition dates of 44 businesses acquired by
the Company under the purchase method of accounting during 1997, (ii) the
unaudited combined results of operations from January 1, 1997 to the respective
effective acquisition dates of nine (9) businesses acquired by the Company
under the pooling-of-interests method of accounting, but for which the
historical financial statements of the Company were not restated, as the results
of operations of those acquisitions were not deemed by the Company to be
significant to its prior historical periods, (iii) the unaudited combined
results of operations for the year ended December 31, 1997 for sixteen (16)
additional businesses acquired by the Company under the purchase method of
accounting from January 1, 1998 through November 13, 1998, (iv) the unaudited
results of operations for the year ended December 31, 1997 of one business
acquired by the Company under the pooling-of-interests method of accounting
during the eleven months of 1998, but for which the historical financial
statements of the Company were not restated, as the results of operations of
that acquisition are not deemed by the Company to be significant to its prior
historical periods (the "1998 Non-Restated Pooling"), and (v) the audited
combined results of operations for the year ended December 31, 1997 for T.A.
Beach, which are reflected in the audited combined statement of income for the
year ended December 31, 1997 presented herein. For purposes of the unaudited
pro forma combined statement of operations for the year ended December 31, 1997
presented herein, the term "Subsequent Acquisitions" includes those acquisitions
described in clauses (i), (ii), (iii) and (iv) of the preceding sentence.
The unaudited pro forma combined statement of operations for the nine (9)
months ended September 30, 1998 presented herein consists of the unaudited
historical consolidated statement of operations of the Company for the nine (9)
months ended September 30, 1998, as set forth in the Form 10-Q, combined with
(i) the unaudited combined results of operations from January 1, 1998 to the
respective effective acquisition dates of sixteen (16) businesses acquired by
the Company under the purchase method of accounting from January 1, 1998 through
November 13, 1998,
<PAGE>
(ii) the unaudited combined results of operations from January 1, 1998 to the
effective acquisition date of the 1998 Non-Restated Pooling, and (iii) the
unaudited combined results of operations for the nine (9) months ended September
30, 1998 for T.A. Beach which are reflected in the unaudited combined statement
of income for the nine (9) months ended September 30, 1998 presented herein. For
purposes of the unaudited pro forma combined statement of operations for the
nine months ended September 30, 1998 presented herein, the term "Subsequent
Acquisitions" includes those acquisitions described in clauses (i), (ii) and
(iii) of the preceding sentence.
The pro forma combined financial statements presented herein have been
prepared based on certain assumptions and include adjustments as detailed in
Note 2. ARS has not completed all the evaluations necessary for the final
purchase price allocations related to certain of the acquired business;
accordingly, actual adjustments that reflect final evaluations of the purchased
assets and assumed liabilities may differ from the pro forma adjustments
reflected herein.
The pro forma results included herein are not necessarily indicative of
actual results that might have occurred had the operations and management teams
of ARS and the acquired businesses been combined during all periods presented.
NOTE 2 PRO FORMA ADJUSTMENTS
The pro forma adjustments to the accompanying pro forma combined balance
sheet as of September 30, 1998 are as follows:
(a) To record the borrowing of $8.0 million to fund the cash consideration
paid and the issuance by ARS of $4.0 million aggregate principal amount of
Convertible Senior Subordinated Notes, Series A.
The pro forma adjustments to the accompanying pro forma combined statements
of operation are as follows:
(a) To adjust compensation to the levels the owners of the acquired
businesses have agreed to receive subsequent to the acquisition of the acquired
businesses.
(b) To adjust rent expense on certain facilities leased from previous
owners to amounts which such owners agreed to following the acquisition of
certain of the businesses described above and adjusts for other nonrecurring
expenses.
(c) To adjust goodwill amortization expenses using a 40-year life.
(d) To record interest expense of funds borrowed to acquire the businesses
acquired.
(e) To record the incremental provision for federal and state income taxes
relating to compensation differential, S-corporation income and other pro forma
adjustments.
(f) To adjust the weighted average shares outstanding to reflect the pro
forma effect of the shares issued for the subsequent acquisitions during the
preacquisition period.
